if they were validly terminated for having completed the phases of work for which they were hired. The appellate court stated that had respondents been given prior notice, they would not have reported for work on October 14, 1998. It cited Agabon v. NLRC, 13 which held that where the dismissal is for a just cause, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual, but the employer should indemnify the employee for the violation of his statutory rights by paying nominal damages. Hence, the Court of Appeals ordered petitioner and David M. Consunji to pay respondents P20,000.00 each as nominal damages for lack of advance notice of their termination. Petitioner and David M. Consunji filed a partial motion for reconsideration and prayed that the Decision of the Court of Appeals be partially reconsidered by deleting the award of nominal damages to each respondent. It pointed out that under Department Order No. 19, series of 1993, which is the construction industry's governing law, there is no provision requiring administrative hearing/investigation before a project employee may be terminated on account of completion of phase of work or the project itself. Petitioner also argued that prior notice of termination is not required in this case, and that Agabon is not applicable here, because the termination in Agabon was for cause, while herein respondents were terminated due to the completion of the phases of work for which their services were engaged. In a Resolution14 dated August 2, 2005, the Court of Appeals denied the partial motion for reconsideration. It held that the case of Agabon v. NLRC is the one controlling and in point. The appellate court stated that in Agabon, the Court ruled that if the dismissal is legal, the employer should still indemnify the employee for the violation of his statutory rights. It added that no distinction was made in Agabon whether the employee is engaged in a construction project or not. Petitioner D.M Consunji, Inc, filed this petition raising this question of law: WHETHER OR NOT THERE IS BASIS FOR THE COURT OF APPEALS IN ORDERING HEREIN PETITIONER TO PAY RESPONDENTS EACH THE SUM OF p20,000.00 AS NOMINAL DAMAGES FOR "ALLEGED" NON-COMPLIANCE WITH THE STATUTORY DUE PROCESS. 15 Petitioner contends that the award of nominal damages in the amount of P20,000.00 to each respondent is unwarranted under Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code, which states, "if the termination is brought about by the completion of the contract or phase thereof, no prior notice is required."16 Petitioner also contends that Agabon v. NLRC is not applicable to this case. The termination therein was for just cause due to abandonment of work, while in this case, respondents were terminated due to completion of the phases of work. In support of its argument, petitioner cited Cioco, Jr. c. C.E. Construction Corporation, 17which held: **** More importantly, Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code provides that no prior notice of termination is required if the termination is brought about by completion of the contract or phase thereof for which the worker has been engaged. This is because completion of the work or project automatically terminates the employment, in which case, the employer is, under the law, only obliged to render a report to the DOLE on the termination of the employment. 18 The petition is meritorious. Respondents were found to be project employees by the Labor Arbiter, the NLRC and the Court of Appeals. Their unanimous finding that respondents are project employees is binding on the Court. It must also be pointed out that respondents have not appealed from such finding by the Court of Appeals. It is also the petitioner that appealed from the decision of the Court of Appeals. 13 485 Phil. 248 (2004). 14 Rollo, pp. 47-49. 15 Id. at 18. 16 Emphasis supplied. 17 481 Phil. 270 (2004). (Emphasis and underscoring supplied.) 18 Id. at 277-278. The main issue is whether or not respondents, as project employees, are entitled to nominal damages for lack of advance notice of their dismissal. A project employee is defined under Article 280 of the Labor Code as one whose "employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season."19 In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents, as project employees, were validly terminated due to the completion of the phases of work for which their services were engaged. However, the Court of Appeals held that respondents were entitled to nominal damages, because petitioner failed to give them advance notice of their termination. The appellate court cited the case of Agabon v. NLRC as basis for the award of nominal damages. The Court holds that Agabon v. NLRC not applicable to this case, because it involved the dismissal of regular employees for abandonment of work, which is a just cause for dismissal under Article 282 of the Labor Code. 20 Although the dismissal was 19 See Saberola v. Suarez, G.R. No. 151227, July 14, 2008, 558 SCRA 135, 142. 20 Art. 282. Termination by employer-An employer may terminate an employment for any of the following causes: a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; b. Gross and habitual neglect by the employee of his duties; c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; d. Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his daily authorized representative; and e. Other causes analogous to the foregoing. for a cause, the employer therein was required to observed the standard of due process for termination of employment based on just causes under Article 282 of the Labor Code, which procedural due process requirements are enumerated in section 2, Rule 1, Book VI21 of the Omnibus Rules Implementing the Labor Code.22 Since the employer therein failed to comply with the twin requirements of notice and hearing, the Court ordered the employer to pay the employees involved nominal damages in the amount of P30,000.00 for failure to observe procedural due process. Unlike in Agabon, respondents, in this case, were not terminated for just cause under Article 282 of the Labor Code. Dismissal based on just causes contemplate acts or omission attributable to the employee.23 Instead, respondents were terminated due to the completion of the phases of work for which their services were engaged. As project employees, respondent's termination is governed by Section 1 (c) and Section 2 (III), Rule XXIII (Termination of Employment), Book V of the Omnibus Rules Implementing the Labor Code. 21 Section 2. Security of Tenure.*** (d) In all cases of termination of employment, the following standards of due process shall be substantially observed: for terminations of employment based on just causes as defined in Article 282 of the Code: (i) A writing notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side. (ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him. (iii) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstance, grounds have been established to justify his termination. 22 Agabon V. National Labor Relations Commissions, supra note 13, at 284. 23 Id. Section 1 (c), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor states: SECTION 1. Security of tenure. - (a) In cases of regular employment, the employer shall terminate the services of an employee except for just or authorized causes as provided by law, and subject to the requirements of due process. **** (c) In cases of project employment or employment covered by legitimate contracting or sub-contracting arrangements, no employee shall be dismissed prior to the completion of the project or phase thereof for which the employee was engaged, or prior to the expiration of the contract between the principal and contractor, unless the dismissal is for just or authorized cause subject to the requirements of due process or prior notice, or is brought about the completion of the phase of the project or contract for which the employee was engaged.24 Records show that respondents were dismissed after the expiration of their respective project employment contract, and due to the completion of the phases of work respondents were engaged for. Hence, the cited provision's requirements of due process or notice when an employee is dismissed for just or authorized cause (under Articles 282 and 283 of the Labor code) prior to the completion of the project or phase thereof for which the employee was engaged do not apply to this case. Further, Section 2 (III), Rule XXII, Book V of the Omnibus Rules Implementing the Labor Code provides: SEC. 2. Standard of due process; requirements of notice. In all cases of termination of employment, the following standards of due process shall be substantially observed. 1. For termination of employment based on just causes as defined in Article 282 of the Code: (a) a written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and 24 Emphasis and underscoring supplied. (c) A written notice (of) termination served on the employee indicating that upon due consideration of all the circumstance, grounds have been established to justify his termination. In case of termination, the foregoing notices shall served on the employee's last know address. II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the requirements of due process shall be deemed complied with upon service of a written notice of the due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department at least thirty (30) days before the effectivity of the termination, specifying the ground or grounds for termination. III. If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the termination is brought about by the failure of an employee to meet the standards of the employer in the case of probationary employment, it shall be sufficient that a written notice I served the employee within a reasonable time from the effective date of termination.25 In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents were validly terminated due to the completion of the phases of work for which respondents' services were engaged. The above rule clearly states, "If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required." Cioco, Jr. v. C.E. Construction Corporation 26 explained that this because completion of the work or project automatically terminates the employment, in which case, the employer is, under the law, only obliged to render a report to the DOLE on the termination of the employment. Hence, prior or advance notice of termination is not part of procedural due process if the termination is brought about by the completion of the contract or phase thereof for which the employee was engaged. Petitioner, therefore, did not violate any requirement of procedural due process b failing to give respondents advance notice of their termination; thus, there is no basis for the payment of nominal damages. 25 Emphasis and underscoring supplied. [G.R. No. 159355. August 09, 2010] EN BANC GABRIEL C. SINGSON, ANDRE NAVATO, EDGARDO P. ZIALCITA, ARACELI Е. VILLANUEVA, TYRONE M. REYES, JOSE CLEMENTE, JR., FEDERICO PASCUAL, ALEJANDRA C. CLEMENTE, ALBERT P. FENIX, JR., and MELPIN A. GONZAGA, Petitioners, vs. COMMISSION ON AUDIT, Respondent. SYLLABUS of the Ruling of the Court 1. MERCANTILE LAW; CORPORATION CODE; BOARD OF DIRECTORS; COMPENSATION OF DIRECTORS; INSTANCES WHERE THE DIRECTORS ARE TO BE ENTITLED TO COMPENSATION.-Section 30 of the Corporation Code, which authorizes the stockholders to grant compensation to its directors, states: "Sec. 30. Compensation of Directors. In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable per diems; Provided, however, that any such compensation (other than per diems) may be granted to directors by the vote of the stockholders representing at least majority of the outstanding capital stock at a regular or special stockholders' meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year." In construing the said provision, it bears stressing that the directors of a corporation shall not receive any compensation for being members of the board of directors, except for reasonable per diems. The two instances where the directors are to be entitled to compensation shall be when it is fixed by the corporation's by-laws or when the stockholders, representing at least a majority of the outstanding capital stock, vote to grant the same at a regular or special stockholder's meeting, subject to the qualification that, in any of the two situations, the total yearly compensation of directors, as such directors, shall in no case exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year. 2. POLITICAL LAW; ADMINISTRATIVE LAW; 3. ID.; CONSTITUTIONAL COMMISSIONS; CIVIL TRANSPORTATION ALLOWANCE, |