EVER

ELECTRICAL

MANUFACTURING,

G.R. No. 194795

INC.,

(EEMI) and VICENTE GO,

Present:

Petitioners,

PERALTA, J., Acting Chairperson,

ABAD,
VILLARAMA, JR.,

- versus -

MENDOZA, and
PERLAS-BERNABE, JJ.
SAMAHANG
NG

EVER

NAMAWU
represented

PANGANIBAN,

MANGGAGAWA
ELECTRICAL/
LOCAL
by

224
FELIMON

Respondents.

Promulgated:

June 13, 2012

x -----------------------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:

This petition for review on certiorari1 under Rule 45 of the 1997 Rules
of Civil Procedure assails the August 31, 2010 Decision 2 and the December
16, 2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 108978.

1
2
3

Petitioner Ever Electrical Manufacturing, Inc. (EEMI) is a corporation

engaged in the business of manufacturing electrical parts and supplies. On
the other hand, the respondents are members of Samahang Manggagawa ng
Ever Electrical/NAMAWU Local 224 (respondents) headed by Felimon
Panganiban.

The controversy started when EEMI closed its business operations on

October 11, 2006 resulting in the termination of the services of its
employees. Aggrieved, respondents filed a complaint for illegal dismissal
with prayer for payment of 13th month pay, separation pay, damages, and
attorneys fees. Respondents alleged that the closure was made without any
warning, notice or memorandum and in full disregard of the requirements of
the Labor Code.

In its defense, EEMI explained that it had closed the business due to
various factors. In 1995, it invested in Orient Commercial Banking
Corporation (Orient Bank) the sum of P500,000,000.00 and during the Asian
Currency crises, various economies in the South East Asian Region were hurt
badly. EEMI was one of those who suffered huge losses. In November 1996, it
obtained a loan in the amount of P121,400,000.00 from United Coconut
Planters Bank (UCPB). As security for the loan, EEMIs land and its
improvements, including the factory, were mortgaged to UCPB.

EEMIs business suffered further losses due to the continued entry of

cheaper goods from China and other Asian countries. Adding to EEMIs
financial woes was the closure of Orient Bank where most of its resources

were invested. As a result, EEMI was not able to meet its loan obligations
with UCPB.

In an attempt to save the company, EEMI entered into a dacion en

pago arrangement with UCPB which, in effect, transferred ownership of the
companys property to UCPB as reflected in TCT No. 429159. Originally, EEMI
wanted to lease the premises to continue its business operation but under
UCPBs policy, a previous debtor who failed to settle its loan obligation was
not eligible to lease its acquired assets. Thus, UCPB agreed to lease it to an
affiliate corporation, EGO Electrical Supply Co, Inc. (EGO), for and in behalf of
EEMI. On February 2, 2002, a lease agreement was entered into between
UCPB and EGO.4 The said lease came to a halt when UCPB instituted an
unlawful detainer suit against EGO before the Metropolitan Trial Court,
Branch 5, Makati City (MeTC) docketed as Civil Case No. 88602. On August
11, 2006, the MeTC ruled in favor of UCPB and ordered EGO to vacate the
leased premises and pay rentals to UCPB in the amount of P21,473,843.65.5
On September 19, 2006, a writ of execution was issued. 6 Consequently, on
October 11, 2006, the Sheriff implemented the writ by closing the premises
and, as a result, EEMIs employees were prevented from entering the factory.

4
5
6

On April 25, 2007, the Labor Arbiter (LA) ruled that respondents were
not illegally dismissed. It, however, ordered EEMI and its President, Vicente
Go (Go), to pay their employees separation pay and 13 th month pay
respectively.7 The decretal portion of the LA decision, reads:

CONFORMABLY WITH THE FOREGOING, Judgment is hereby

rendered ordering the respondent[s] in solidum to pay the
complainants their separation pay, 13th month pay of the three
(3) workers and the balance of their 13 th month pay as computed
which computation is made a part of this disposition.

On September 15, 2008, the NLRC reversed and set aside the decision
of the LA. The NLRC dismissed the complaint for lack of merit and ruled that
since EEMIs cessation of business operation was due to serious business
losses, the employees were not entitled to separation pay.8

Respondents moved for reconsideration of the NLRC decision, but the

NLRC denied the motion in its March 23, 2009 Resolution.9

7
8
9

Unperturbed, respondents elevated the case before the CA via a

petition for certiorari under Rule 65.10

On August 31, 2010, the CA granted the petition. 11 It nullified the

decision of the NLRC and reinstated the LA decision. The dispositive portion
of the CA decision reads:

ACCORDINGLY, the petition is GRANTED. The Decision

dated September 15, 2008 and Resolution dated March 23, 2009
of the National Labor Relations Commission are NULLIFIED and
the Decision dated April 25, 2007 of Labor Arbiter Melquiades Sol
Del Rosario, REINSTATED.

The CA held that respondents were entitled to separation pay and 13 th

month pay because the closure of EEMIs business operation was effected by
the enforcement of a writ of execution and not by reason of business losses.
The CA, citing Restaurante Las Conchas v. Lydia Llego,12 upheld the solidary
liability of EEMI and Go, declaring that when the employer corporation is no
longer existing and unable to satisfy the judgment in favor of the employees,
the officers should be held liable for acting on behalf of the corporation.13

10
11
12
13

EEMI and Go filed a motion for reconsideration but it was denied in the
CA Resolution dated December 16, 2010.14

Hence, this petition.15

Issues:

1. Whether the CA erred in finding that the closure of EEMIs operation

was not due to business losses; and

2. Whether the CA erred in finding Vicente Go solidarily liable with

EEMI.

The petition is partly meritorious.

Article 283 of the Labor Code provides:

14
15

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 under taking not due
to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or 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.

Article 283 of the Labor Code identifies closure or cessation of

operation of the establishment as an authorized cause for terminating an
employee. Similarly, the said provision mandates that employees who are
laid off from work due to closures that are not due to business insolvency
should be paid separation pay equivalent to one-month pay or to at least

one-half month pay for every year of service, whichever is higher. A fraction
of at least six months shall be considered one whole year.

Although business reverses or losses are recognized by law as an

authorized cause, it is still essential that the alleged losses in the business
operations be proven convincingly; otherwise, this ground for termination of
employment would be susceptible to abuse by conniving employers, who
might be merely feigning business losses or reverses in their business
ventures in order to ease out employees.16

In this case, EEMI failed to establish that the main reason for its closure
was business reverses. As aptly observed by the CA, the cessation of EEMIs
business was not directly brought about by serious business losses or
financial reverses, but by reason of the enforcement of a judgment against it.
Thus, EEMI should be required to pay separation pay to its affected
employees.

As to whether or not Go should be held solidarily liable with EEMI, the

Court agrees with the petitioner.

As a general rule, corporate officers should not be held solidarily liable

with the corporation for separation pay for it is settled that a corporation is
invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it
16

may be related. Mere ownership by a single stockholder or by another

corporation of all or nearly all of the capital stock of a corporation is not of
itself sufficient ground for disregarding the separate corporate personality. 17

The LA was of the view that Go, as President of the corporation,

actively participated in the management of EEMIs corporate obligations, and,
accordingly, rendered judgment ordering EEMI and Go in solidum to pay the
complainants18 their due. He explained that [r]espondent Gos negligence in
not paying the lease rental of the plant in behalf of the lessee EGO Electrical
Supply, Inc., where EEMI was operating and reimburse expenses of UCPB for
real estate taxes and the like, prompted the bank to file an unlawful detainer
case against the lessee, EGO Electrical Supply Co. This evasion of an existing
obligation,

made

respondent

Go

as

liable

as

respondent

EEMI,

for

complainants money awards.19 Added the LA, being the President and the
one actively representing respondent EEMI, in major contracts i.e. Real
Estate Mortgage, loans, dacion en pago, respondent Go has to be liable in
the case.20 As earlier stated, the CA affirmed the LA decision citing the case
of Restaurante Las Conchas v. Llego,21 where it was held that when the
employer corporation is no longer existing and unable to satisfy the
judgment in favor of the employees, the officers should be held liable for
acting on behalf of the corporation.22
17
18
19
20
21
22

A study of Restaurante Las Conchas case, however, bares that it was

an application of the exception rather than the general rule. As stated in the
said case, as a rule, the officers and members of a corporation are not
personally liable for acts done in the performance of their duties. 23 The Court
therein explained that it applied the exception because of the peculiar
circumstances of the case. If the rule would be applied, the employees would
end up in an empty victory because as the restaurant had been closed for
lack of venue, there would be no one to pay its liability as the respondents
therein claimed that the restaurant was owned by a different entity, not a
party in the case.24

In two subsequent cases, the Courts ruling in Restaurante Las Conchas

was invoked but the Court refused to consider it reasoning out that it was the
exception rather than the rule. The two cases were Mandaue Dinghow
Dimsum House, Co., Inc. and/or Henry Uytengsu v. National Labor Relations
Commission25

and

Pantranco

Employees

Association

(PEA-PTGWO)

v.

National Labor Relations Commission.26

In Mandaue Dinghow Dimsum House, Co., Inc., the Court declined to

apply the ruling in Restaurante Las Conchas because there was no evidence
that the respondent therein, Henry Uytrengsu, acted in bad faith or in excess
23
24
25
26

of his authority. It stressed that a corporation is invested by law with a

personality separate and distinct from those of the persons composing it as
well as from that of any other legal entity to which it may be related. For said
reason, the doctrine of piercing the veil of corporate fiction must be
exercised with caution.27 Citing Malayang Samahan ng mga Manggagawa sa
M. Greenfield v. Ramos,28 the Court explained that corporate directors and
officers are solidarily liable with the corporation for the termination of
employees done with malice or bad faith. It stressed that bad faith does not
connote bad judgment or negligence; it imports a dishonest purpose or some
moral obliquity and conscious doing of wrong; it means breach of a known
duty through some motive or interest or ill will; it partakes of the nature of
fraud.

In Pantranco Employees Association, the Court also rejected the

invocation of Restaurante Las Conchas and refused to pierce the veil of
corporate fiction. It explained:
As between PNB and PNEI, petitioners want us to disregard
their

separate

personalities,

and

insist

that

because

the

company, PNEI, has already ceased operations and there is no

other way by which the judgment in favor of the employees can
be satisfied, corporate officers can be held jointly and severally
liable with the company. Petitioners rely on the pronouncement
of this Court in A.C. Ransom Labor Union-CCLU v. NLRC and
subsequent cases.

27
28

This reliance fails to persuade. We find the aforesaid

decisions inapplicable to the instant case.
For one, in the said cases, the persons made liable after
the companys cessation of operations were the officers and
agents of the corporation. The rationale is that, since the
corporation is an artificial person, it must have an officer who can
be presumed to be the employer, being the person acting in the
interest of the employer. The corporation, only in the technical
sense, is the employer. In the instant case, what is being made
liable is another corporation (PNB) which acquired the debtor
corporation (PNEI).
Moreover, in the recent cases Carag v. National Labor
Relations Commission and McLeod v. National Labor Relations
Commission, the Court explained the doctrine laid down in AC
Ransom relative to the personal liability of the officers and
agents of the employer for the debts of the latter. In AC Ransom,
the Court imputed liability to the officers of the corporation on
the strength of the definition of an employer in Article 212(c)
(now Article 212[e]) of the Labor Code. Under the said provision,
employer includes any person acting in the interest of an
employer, directly or indirectly, but does not include any labor
organization or any of its officers or agents except when acting
as employer. It was clarified in Carag and McLeod that Article
212(e) of the Labor Code, by itself, does not make a corporate
officer personally liable for the debts of the corporation. It added
that the governing law on personal liability of directors or officers
for debts of the corporation is still Section 31 of the Corporation
Code.

More importantly, as aptly observed by this Court in AC

Ransom, it appears that Ransom, foreseeing the possibility or
probability of payment of backwages to its employees, organized
Rosario to replace Ransom, with the latter to be eventually
phased out if the strikers win their case. The execution could not
be implemented against Ransom because of the disposition
posthaste of its leviable assets evidently in order to evade its just
and due obligations. Hence, the Court sustained the piercing of
the corporate veil and made the officers of Ransom personally
liable for the debts of the latter.
Clearly, what can be inferred from the earlier cases is that
the doctrine of piercing the corporate veil applies only in three
(3) basic areas, namely: 1) defeat of public convenience as when
the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is
used to justify a wrong, protect fraud, or defend a crime; or 3)
alter ego cases, where a corporation is merely a farce since it is a
mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation. In the absence of
malice, bad faith, or a specific provision of law making a
corporate officer liable, such corporate officer cannot be
made personally liable for corporate liabilities. 29 [Emphasis
supplied]

29

Similarly, in the case at bench, the records do not warrant an

application of the exception. The rule, which requires the presence of malice
or bad faith, must still prevail. In the recent case of Wensha Spa Center
and/or Xu Zhi Jie v. Yung,30 the Court absolved the corporations president
from liability in the absence of bad faith or malice. In the said case, the Court
stated:

In labor cases, corporate directors and officers may be held

solidarily liable with the corporation for the termination of
employment only if done with malice or in bad faith. 31 Bad faith
does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing
of wrong; it means breach of a known duty through some motive
or interest or ill will; it partakes of the nature of fraud.32

In the present case, Go may have acted in behalf of EEMI but the
companys failure to operate cannot be equated to bad faith. Cessation of
business operation is brought about by various causes like mismanagement,
lack of demand, negligence, or lack of business foresight. Unless it can be
shown that the closure was deliberate, malicious and in bad faith, the Court
must apply the general rule that a corporation has, by law, a personality
30
31
32

separate and distinct from that of its owners. As there is no evidence that
Go, as EEMIs President, acted maliciously or in bad faith in handling their
business affairs and in eventually implementing the closure of its business,
he cannot be held jointly and solidarily liable with EEMI.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 31,

2010 Decision of the Court of Appeals is AFFIRMED with MODIFICATION
that Vicente Go is not solidarily liable with Ever Electrical Manufacturing, Inc.

SO ORDERED.

G.R. No. 171118

September 10, 2012

PARK HOTEL, J's PLAYHOUSE BURGOS CORP., INC., and/or GREGG

HARBUTT, General Manager, ATTY. ROBERTO ENRIQUEZ, President,
and

BILL

PERCY,

Petitioners,

vs.
MANOLO SORIANO, LESTER GONZALES, and YOLANDA BADILLA,
Respondents.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to set aside the Decision 1 and the Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 67766.

The antecedents are as follows:

Petitioner Park Hotel3 is a corporation engaged in the hotel business.
Petitioners Gregg Harbutt4 (Harbutt) and Bill Percy5 (Percy) are the General
Manager and owner, respectively, of Park Hotel. Percy, Harbutt and Atty.
Roberto

Enriquez

are also

the officers

and stockholders

of

Burgos

Corporation (Burgos),6 a sister company of Park Hotel.

Respondent Manolo Soriano (Soriano) was hired by Park Hotel in July 1990 as
Maintenance Electrician, and then transferred to Burgos in 1992. Respondent
Lester Gonzales (Gonzales) was employed by Burgos as Doorman, and later
promoted as Supervisor. Respondent Yolanda Badilla (Badilla) was a
bartender of J's Playhouse operated by Burgos.
In October of 1997, Soriano, Gonzales and Badilla 7 were dismissed from work
for allegedly stealing company properties. As a result, respondents filed
complaints for illegal dismissal, unfair labor practice, and payment of moral
and exemplary damages and attorney's fees, before the Labor Arbiter (LA).
In their complaints, respondents alleged that the real reason for their
dismissal was that they were organizing a union for the company's
employees.
On the other hand, petitioners alleged that aside from the charge of theft,
Soriano and Gonzales have violated various company rules and regulations 8
contained

in

several

memoranda

issued

to

them.

After

dismissing

respondents, Burgos filed a case for qualified theft against Soriano and
Gonzales before the Makati City Prosecutor's Office, but the case was
dismissed for insufficiency of evidence.
In his Affidavit,9 Soriano claimed that on October 4, 1997, he was barred from
entering the company premises and that the following day, Harbutt shouted
at him for having participated in the formation of a union. He was later

dismissed from work. For his part, Gonzales averred that he was coerced to
resign by Percy and Harbutt in the presence of their goons. Badilla 10 claimed
that she was also forced by Percy and Harbutt to sign a resignation letter, but
she refused to do so because she was innocent of the charges against her.
She was nevertheless dismissed from service.
The three (3) respondents averred that they never received the memoranda
containing their alleged violation of company rules and they argued that
these memoranda were fabricated to give a semblance of cause to their
termination. Soriano and Gonzales further claimed that the complaint filed
against them was only an afterthought as the same was filed after
petitioners learned that a complaint for illegal dismissal was already
instituted against them.
On September 27, 1998, the LA rendered a Decision 11 finding that
respondents were illegally dismissed because the alleged violations they
were charged with were not reduced in writing and were not made known to
them, thus, denying them due process. The LA found that respondents did
not actually receive the memoranda allegedly issued by petitioners, and that
the same were mere afterthought to conceal the illegal dismissal. The
dispositive portion of the Decision reads:
WHEREFORE, premises all considered, respondents (petitioners herein) are
hereby ordered, jointly and severally:
a. To reinstate within ten (10) days herein complainants to their
former positions without loss of seniority rights with full
backwages from actual dismissal to actual reinstatement;
b. To declare the respondents (petitioners herein) guilty of unfair
labor practice for terminating complainants due to their union
activities, which is union-busting, and to pay a fine of Ten

Thousand Pesos (P 10,000.00) pursuant to Article 288 of the

Labor Code, as amended, payable to the Commission;
c. To pay the amount of One Hundred Fifty Thousand [Pesos] (P
150,000.00) each to complainants by way of moral and
exemplary damages, plus ten percent (10%) attorney's fees of
the total award, chargeable to the respondents (petitioners
herein).
SO ORDERED.12
Unsatisfied with the LA's decision, petitioners appealed to the National Labor
Relations Commission (NLRC). On August 31, 1999, the NLRC, First Division,
rendered a Decision13 remanding the case to the arbitration branch of origin
for further proceedings.14 On August 3, 2000, the LA rendered a new
Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises all considered, respondents (petitioners herein) are
hereby ORDERED, jointly and severally:
a. to reinstate within ten (10) days herein three (3) complainants
to their former positions without loss of seniority rights with full
backwages from actual dismissal to actual reinstatement; to pay
complainant Soriano his unpaid wages for seven (7) days in the
amount of P 1,680.00, his five (5) days incentive leave pay in the
amount of P 1,200,00 (P 240x5), unpaid proportionate 13th month
pay in the amount of P 4,992.00, plus other benefits;
b. to cease and desist from committing unfair labor practice
against the complainant and to pay a fine of Ten Thousand (P
10,000.00) Pesos pursuant to Art. 288 of the Labor Code, payable
to the Commission; and

c. to pay the amount of P 150,000.0015 each to the complainants

by way of moral and exemplary damages, plus ten percent (10%)
attorney's fees of the total award, chargeable to the respondents
(petitioners herein).
SO ORDERED.16
Discontented with the LA's decision, petitioners again appealed to the NLRC.
On February 1, 2001, the NLRC affirmed the LA's decision and dismissed the
appeal for lack of merit.17 Petitioners filed a motion for reconsideration, but it
was denied for lack of merit.18
Undaunted, Park Hotel, Percy, and Harbutt filed a petition for certiorari with
the CA ascribing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC in holding Park Hotel, Harbutt and Percy
jointly and severally liable to respondents.
On January 24, 2005, the CA rendered a Decision 19 dismissing the petition
and affirming with modification the ruling of the NLRC, the dispositive portion
of which states:
WHEREFORE, the instant Petition is DISMISSED for lack of merit and the
assailed Decision dated 1 February 2001 of the 1 st Division of the NLRC is
hereby AFFIRMED with MODIFICATION in that the award of damages is
reduced to P 100,000.00 in favor of each of the Private Respondents,
including 10% of the total amount of wages to be received as attorney's fees.
SO ORDERED.20
The CA ruled that petitioners failed to observe the mandatory requirements
provided by law in the conduct of terminating respondents, i.e., lack of due
process and just cause. The CA also found that petitioners' primary objective

in terminating respondents' employment was to suppress their right to selforganization.

Petitioners filed a Motion for Reconsideration, but was denied in the
Resolution21 dated January 13, 2006.
Hence, the instant petition assigning the following errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION AND ACTED WITHOUT AUTHORITY IN FINDING PARK
HOTEL, BILL PERCY AND [GREGORY] HARBUTT, TOGETHER WITH
BURGOS CORPORATION AND ITS PRESIDENT, AS ONE AND THE
SAME ENTITY.
II
THE HONORABLE COURT OF APPEALS COMMITTED ERROR WHEN
IT OVERLOOKED MATERIAL CIRCUMSTANCES AND FACTS, WHICH
IF TAKEN INTO ACCOUNT, WOULD ALTER THE RESULTS OF ITS
DECISION, PARTICULARLY IN FINDING [THAT] THE SAID ENTITIES
WERE FORMED IN PURSUANCE TO THE COMMISSION OF FRAUD.
III
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION AND ACTED WITHOUT AUTHORITY IN FINDING PARK
HOTEL, BILL PERCY AND GREGORY HARBUTT, TOGETHER WITH
BURGOS CORPORATION AND ITS PRESIDENT, GUILTY OF UNFAIR
LABOR PRACTICE.22
For brevity and clarity, the issues in this case may be re-stated and simplified
as follows: (1) whether the respondents were validly dismissed; and (2) if

petitioners are liable, whether Park Hotel, Percy and Harbutt are jointly and
severally liable with Burgos for the dismissal of respondents.
Park Hotel argued that it is not liable on the ground that respondents were
not its employees. On the other hand, Percy and Harbutt argued that the CA
committed error in piercing the corporate veil between them and respondent
corporations, thereby making them all solidarily liable to the respondents.
To begin with, it is significant to note that the LA, the NLRC and the CA were
unanimous in their findings that respondents were dismissed without just
cause and due process. They were also in agreement that unfair labor
practice was committed against respondents. We reiterate the rule that
findings of fact of the Court of Appeals, particularly where it is in absolute
agreement with that of the NLRC and the LA, as in this case, are accorded
not only respect but even finality and are deemed binding upon this Court so
long as they are supported by substantial evidence. 23 The function of this
Court is limited to the review of the appellate courts alleged errors of law. It
is not required to weigh all over again the factual evidence already
considered in the proceedings below.24 In any event, we found no compelling
reason to disturb the unanimous findings and conclusions of the CA, the
NLRC and the LA with respect to the finding of illegal dismissal.
The requisites for a valid dismissal are: (a) the employee must be afforded
due process, i.e., he must be given an opportunity to be heard and defend
himself; and (b) the dismissal must be for a valid cause as provided in Article
282 of the Labor Code, or for any of the authorized causes under Articles 283
and 284 of the same Code. 25 In the case before us, both elements are
completely lacking. Respondents were dismissed without any just or
authorized cause and without being given the opportunity to be heard and
defend themselves. The law mandates that the burden of proving the validity
of the termination of employment rests with the employer. Failure to
discharge this evidentiary burden would necessarily mean that the dismissal

was

not

justified

and,

therefore,

illegal.

Unsubstantiated

suspicions,

accusations, and conclusions of employers do not provide for legal

justification for dismissing employees. In case of doubt, such cases should be
resolved in favor of labor, pursuant to the social justice policy of labor laws
and the Constitution.26
Anent the unfair labor practice, Article 248 (a) of the Labor Code 27 considers
it an unfair labor practice when an employer interferes, restrains or coerces
employees in the exercise of their right to self-organization or the right to
form an association.28 In order to show that the employer committed unfair
labor practice under the Labor Code, substantial evidence is required to
support the claim. Substantial evidence has been defined as such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion.29 In the case at bar, respondents were indeed unceremoniously
dismissed from work by reason of their intent to form and organize a union.
As found by the LA:
The immediate impulse of respondents (petitioners herein), as in the case at
bar, was to terminate the organizers. Respondents (petitioners herein) have
to cripple the union at sight, to frustrate attempts of employees from joining
or supporting it, preventing them, at all cost and to frustrate the employees
bid to exercise their right to self-organization. x x x30
Having settled that respondents were illegally dismissed and were victims of
unfair labor practice, the question that comes to fore is who are liable for the
illegal dismissal and unfair labor practice?
A perusal of the records would show that Burgos is the respondents'
employer at the time they were dismissed. Notwithstanding, the CA held that
despite Soriano's transfer to Burgos in 1992, he was still an employee of Park
Hotel at the time of his dismissal in 1997. The Court, however, rules that the
CA's finding is clearly contrary to the evidence presented. From the

documents

presented

by

Soriano,

it

appears

that

Soriano's

payroll

passbook31 contained withdrawals and deposits, made in 1991, and that

Soriano's payslip32 issued by Park Hotel covered the period from September
to October 1990. Hence, these documents merely show that Soriano was
employed by Park Hotel before he was transferred to Burgos in 1992.
Nowhere in these documents does it state that Soriano continued to work for
Park Hotel in 1992 and onwards. Clearly therefore, Park Hotel cannot be
made liable for illegal dismissal as it no longer had Soriano in its employ at
the time he was dismissed from work.
As to whether Park Hotel may be held solidarily liable with Burgos, the Court
rules that before a corporation can be held accountable for the corporate
liabilities of another, the veil of corporate fiction must first be pierced. 33 Thus,
before Park Hotel can be held answerable for the obligations of Burgos to its
employees, it must be sufficiently established that the two companies are
actually a single corporate entity, such that the liability of one is the liability
of the other.34
A corporation is an artificial being invested by law with a personality
separate and distinct from that of its stockholders and from that of other
corporations to which it may be connected. 35 While a corporation may exist
for any lawful purpose, the law will regard it as an association of persons or,
in case of two corporations, merge them into one, when its corporate legal
entity is used as a cloak for fraud or illegality. This is the doctrine of piercing
the veil of corporate fiction. The doctrine applies only when such corporate
fiction is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, or when it is made as a shield to confuse the legitimate issues,
or where a corporation is the mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation. 36 To disregard the separate juridical

personality of a corporation, the wrongdoing must be established clearly and

convincingly. It cannot be presumed.37
In the case at bar, respondents utterly failed to prove by competent evidence
that Park Hotel was a mere instrumentality, agency, conduit or adjunct of
Burgos, or that its separate corporate veil had been used to cover any fraud
or illegality committed by Burgos against the respondents. Accordingly, Park
Hotel and Burgos cannot be considered as one and the same entity, and Park
Hotel cannot be held solidary liable with Burgos.
Nonetheless, although the corporate veil between Park Hotel and Burgos
cannot be pierced, it does not necessarily mean that Percy and Harbutt are
exempt from liability towards respondents. Verily, a corporation, being a
juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, while acting as corporate agents, are not their
personal liability but the direct accountability of the corporation they
represent.38 However, corporate officers may be deemed solidarily liable with
the corporation for the termination of employees if they acted with malice or
bad faith.39 In the present case, the lower tribunals unanimously found that
Percy and Harbutt, in their capacity as corporate officers of Burgos, acted
maliciously in terminating the services of respondents without any valid
ground and in order to suppress their right to self-organization.
Section 3140 of the Corporation Code makes a director personally liable for
corporate debts if he willfully and knowingly votes for or assents to patently
unlawful acts of the corporation. It also makes a director personally liable if
he is guilty of gross negligence or bad faith in directing the affairs of the
corporation.1wphi1 Thus, Percy and Harbutt, having acted in bad faith in
directing the affairs of Burgos, are jointly and severally liable with the latter
for respondents' dismissal.

In cases when an employee is unjustly dismissed from work, he shall be

entitled to reinstatement without loss of seniority rights and other privileges,
inclusive of allowances, and other benefits or their monetary equivalent from
the time the compensation was withheld up to the time of actual
reinstatement.41
In the case at bar, the Court finds that it would be best to award separation
pay instead of reinstatement, in view of the passage of a long period of time
since respondents' dismissal. In St. Luke's Medical Center, Inc. v. Notario,42
the Court held that if reinstatement proves impracticable, and hardly in the
best interest of the parties, due to the lapse of time since the employee's
dismissal, the latter should be awarded separation pay in lieu of
reinstatement.
In view of the foregoing, respondents are entitled to the payment of full
backwages, inclusive of allowances, and other benefits or their monetary
equivalent, and separation pay in lieu of reinstatement equivalent to one
month salary for every year of service. 43 The awards of separation pay and
backwages are not mutually exclusive, and both may be given to
respondents.44
The awards of moral and exemplary damages 45 in favor of respondents are
also in order. Moral damages may be recovered where the dismissal of the
employee was tainted by bad faith or fraud, or where it constituted an act
oppressive to labor, and done in a manner contrary to morals, good customs
or public policy, while exemplary damages are recoverable only if the
dismissal was done in a wanton, oppressive, or malevolent manner. 46 The
grant of attorney's fees is likewise proper. Attorney's fees may likewise be
awarded to respondents who were illegally dismissed in bad faith and were
compelled to litigate or incur expenses to protect their rights by reason of
the oppressive acts47 of petitioners. The unjustified act of petitioners had

obviously compelled respondents to institute an action primarily to protect

their rights and interests which warrants the granting of the award.
WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 67766, dated January 24, 2005 and January 13, 2006, respectively,
are AFFIRMED with the following MODIFICATIONS: (a) Petitioner Park Hotel
is exonerated from any liability to respondents; and (b) The award of
reinstatement is deleted, and in lieu thereof, respondents are awarded
separation pay.
The case is REMANDED to the Labor Arbiter for the purpose of computing
respondents' full backwages, inclusive of allowances, and other benefits or
their monetary equivalent, computed from the date of their dismissal up to
the finality of the decision, and separation pay in lieu of reinstatement
equivalent to one month salary for every year of service, computed from the
time of their engagement up to the finality of this Decision.
SO ORDERED:
G.R. No. 152642

November 13, 2012

HON. PATRICIA A. STO.TOMAS, ROSALINDA BALDOZ and LUCITA

LAZO,

Petitioners,

vs.
REY SALAC, WILLIE D. ESPIRITU, MARIO MONTENEGRO, DODGIE
BELONIO, LOLIT SALINEL and BUDDY BONNEVIE, Respondents.
x-----------------------x
G.R. No. 152710
HON. PATRICIA A. STO. TOMAS, in her capacity as Secretary of
Department of Labor and Employment (DOLE), HON. ROSALINDA D.

BALDOZ, in her capacity as Administrator, Philippine Overseas

Employment Administration (POEA), and the PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION GOVERNING BOARD, Petitioners,
vs.
HON. JOSE G. PANEDA, in his capacity as the Presiding Judge of
Branch 220, Quezon City, ASIAN RECRUITMENT COUNCIL PHILIPPINE
CHAPTER, INC. (ARCOPHIL), for itself and in behalf of its members:
WORLDCARE

PHILIPPINES

STEADFAST

SERVIZO

INTERNATIONAL

INTERNATIONALE,

RECRUITMENT

CORP.,

INC.,

VERDANT

MANPOWER MOBILIZATION CORP., BRENT OVERSEAS PERSONNEL,

INC., ARL MANPOWER SERVICES, INC., DAHLZEN INTERNATIONAL
SERVICES, INC., INTERWORLD PLACEMENT CENTER, INC., LAKAS TAO
CONTRACT

SERVICES

LTD.

CO.,

SSC

MULTI-SERVICES,

DMJ

INTERNATIONAL, and MIP INTERNATIONAL MANPOWER SERVICES,

represented

by

its

proprietress,

MARCELINA

I.

PAGSIBIGAN,

Respondents.
x-----------------------x
G.R. No. 167590
REPUBLIC OF THE PHILIPPINES, represented by the HONORABLE
EXECUTIVE SECRETARY, the HONORABLE SECRETARY OF LABOR AND
EMPLOYMENT

(DOLE),

ADMINISTRATION

the

(POEA),

PHILIPPINE
the

OVERSEAS

OVERSEAS

EMPLOYMENT

WORKERS

WELFARE

ADMINISTRATION (OWWA), the LABOR ARBITERS OF THE NATIONAL

LABOR

RELATIONS

COMMISSION

(NLRC),

the

HONORABLE

SECRETARY OF JUSTICE, the HONORABLE SECRETARY OF FOREIGN

AFFAIRS

and

the

COMMISSION

ON

AUDIT

(COA),

Petitioners,

vs.
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC. (P ASEI),
Respondent.

x-----------------------x
G.R. Nos. 182978-79
BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner,
vs.
SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of
daughter, Jasmin G. Cuaresma), WHITE FALCON SERVICES, INC., and
JAIME ORTIZ (President of White Falcon Services, Inc.), Respondents.
x-----------------------x
G.R. Nos. 184298-99
SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of
deceased

daughter,

Jasmin

G.

Cuaresma),

Petitioners,

vs.
WHITE FALCON SERVICES, INC. and BECMEN SERVICES EXPORTER
AND PROMOTION, INC., Respondents.
DECISION
ABAD, J.:
These consolidated cases pertain to the constitutionality of certain provisions
of Republic Act 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995.
The Facts and the Case
On June 7, 1995 Congress enacted Republic Act (R.A.) 8042 or the Migrant
Workers and Overseas Filipinos Act of 1995 that, for among other purposes,
sets the Governments policies on overseas employment and establishes a

higher standard of protection and promotion of the welfare of migrant

workers, their families, and overseas Filipinos in distress.
G.R. 152642 and G.R. 152710
(Constitutionality of Sections 29 and 30, R.A. 8042)
Sections 29 and 30 of the Act 1 commanded the Department of Labor and
Employment (DOLE) to begin deregulating within one year of its passage the
business of handling the recruitment and migration of overseas Filipino
workers and phase out within five years the regulatory functions of the
Philippine Overseas Employment Administration (POEA).
On January 8, 2002 respondents Rey Salac, Willie D. Espiritu, Mario
Montenegro, Dodgie Belonio, Lolit Salinel, and Buddy Bonnevie (Salac, et al.)
filed a petition for certiorari, prohibition and mandamus with application for
temporary restraining order (TRO) and preliminary injunction against
petitioners, the DOLE Secretary, the POEA Administrator, and the Technical
Education and Skills Development Authority (TESDA) Secretary-General
before the Regional Trial Court (RTC) of Quezon City, Branch 96. 2
Salac, et al. sought to: 1) nullify DOLE Department Order 10 (DOLE DO 10)
and POEA Memorandum Circular 15 (POEA MC 15); 2) prohibit the DOLE,
POEA, and TESDA from implementing the same and from further issuing rules
and regulations that would regulate the recruitment and placement of
overseas Filipino workers (OFWs); and 3) also enjoin them to comply with the
policy of deregulation mandated under Sections 29 and 30 of Republic Act
8042.
On March 20, 2002 the Quezon City RTC granted Salac, et al.s petition and
ordered the government agencies mentioned to deregulate the recruitment
and placement of OFWs.3 The RTC also annulled DOLE DO 10, POEA MC 15,

and all other orders, circulars and issuances that are inconsistent with the
policy of deregulation under R.A. 8042.
Prompted by the RTCs above actions, the government officials concerned
filed the present petition in G.R. 152642 seeking to annul the RTCs decision
and have the same enjoined pending action on the petition.
On April 17, 2002 the Philippine Association of Service Exporters, Inc.
intervened in the case before the Court, claiming that the RTC March 20,
2002 Decision gravely affected them since it paralyzed the deployment
abroad of OFWs and performing artists. The Confederated Association of
Licensed Entertainment Agencies, Incorporated (CALEA) intervened for the
same purpose.4
On May 23, 2002 the Court 5 issued a TRO in the case, enjoining the Quezon
City RTC, Branch 96, from enforcing its decision.
In a parallel case, on February 12, 2002 respondents Asian Recruitment
Council Philippine Chapter, Inc. and others (Arcophil, et al.) filed a petition for
certiorari and prohibition with application for TRO and preliminary injunction
against the DOLE Secretary, the POEA Administrator, and the TESDA
Director-General,6 before the RTC of Quezon City, Branch 220, to enjoin the
latter from implementing the 2002 Rules and Regulations Governing the
Recruitment and Employment of Overseas Workers and to cease and desist
from issuing other orders, circulars, and policies that tend to regulate the
recruitment and placement of OFWs in violation of the policy of deregulation
provided in Sections 29 and 30 of R.A. 8042.
On March 12, 2002 the Quezon City RTC rendered an Order, granting the
petition and enjoining the government agencies involved from exercising
regulatory functions over the recruitment and placement of OFWs. This
prompted the DOLE Secretary, the POEA Administrator, and the TESDA

Director-General to file the present action in G.R. 152710. As in G.R. 152642,

the Court issued on May 23, 2002 a TRO enjoining the Quezon City RTC,
Branch 220 from enforcing its decision.
On December 4, 2008, however, the Republic informed7 the Court that on
April 10, 2007 former President Gloria Macapagal-Arroyo signed into law R.A.
94228 which expressly repealed Sections 29 and 30 of R.A. 8042 and adopted
the policy of close government regulation of the recruitment and deployment
of OFWs. R.A. 9422 pertinently provides:
xxxx
SEC. 1. Section 23, paragraph (b.1) of Republic Act No. 8042, otherwise
known as the "Migrant Workers and Overseas Filipinos Act of 1995" is hereby
amended to read as follows:
(b.1) Philippine Overseas Employment Administration The Administration
shall regulate private sector participation in the recruitment and overseas
placement of workers by setting up a licensing and registration system. It
shall also formulate and implement, in coordination with appropriate entities
concerned, when necessary, a system for promoting and monitoring the
overseas employment of Filipino workers taking into consideration their
welfare and the domestic manpower requirements.
In addition to its powers and functions, the administration shall inform
migrant workers not only of their rights as workers but also of their rights as
human beings, instruct and guide the workers how to assert their rights and
provide the available mechanism to redress violation of their rights.
In the recruitment and placement of workers to service the requirements for
trained and competent Filipino workers of foreign governments and their
instrumentalities, and such other employers as public interests may require,
the administration shall deploy only to countries where the Philippines has

concluded bilateral labor agreements or arrangements: Provided, That such

countries shall guarantee to protect the rights of Filipino migrant workers;
and: Provided, further, That such countries shall observe and/or comply with
the international laws and standards for migrant workers.
SEC. 2. Section 29 of the same law is hereby repealed.
SEC. 3. Section 30 of the same law is also hereby repealed.
xxxx
On August 20, 2009 respondents Salac, et al. told the Court in G.R. 152642
that they agree9 with the Republics view that the repeal of Sections 29 and
30 of R.A. 8042 renders the issues they raised by their action moot and
academic. The Court has no reason to disagree. Consequently, the two
cases, G.R. 152642 and 152710, should be dismissed for being moot and
academic.
G.R. 167590
(Constitutionality of Sections 6, 7, and 9 of R.A. 8042)
On August 21, 1995 respondent Philippine Association of Service Exporters,
Inc. (PASEI) filed a petition for declaratory relief and prohibition with prayer
for issuance of TRO and writ of preliminary injunction before the RTC of
Manila, seeking to annul Sections 6, 7, and 9 of R.A. 8042 for being
unconstitutional. (PASEI also sought to annul a portion of Section 10 but the
Court will take up this point later together with a related case.)
Section 6 defines the crime of "illegal recruitment" and enumerates the acts
constituting the same. Section 7 provides the penalties for prohibited acts.
Thus:

SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean
any act of canvassing, enlisting, contracting, transporting, utilizing, hiring,
procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when
undertaken by a non-license or non-holder of authority contemplated under
Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as
the Labor Code of the Philippines: Provided, That such non-license or nonholder, who, in any manner, offers or promises for a fee employment abroad
to two or more persons shall be deemed so engaged. It shall likewise include
the following acts, whether committed by any person, whether a nonlicensee, non-holder, licensee or holder of authority:
xxxx
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer the
penalty of imprisonment of not less than six (6) years and one
(1) day but not more than twelve (12) years and a fine not less
than two hundred thousand pesos (P200,000.00) nor more than
five hundred thousand pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than
five hundred thousand pesos (P500,000.00) nor more than one
million

pesos

(P1,000,000.00)

shall

be

imposed

if

illegal

recruitment constitutes economic sabotage as defined herein.

Provided, however, That the maximum penalty shall be imposed if the
person illegally recruited is less than eighteen (18) years of age or
committed by a non-licensee or non-holder of authority.10
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising
from "illegal recruitment" before the RTC of the province or city where the

offense was committed or where the offended party actually resides at the
time of the commission of the offense.
The RTC of Manila declared Section 6 unconstitutional after hearing on the
ground that its definition of "illegal recruitment" is vague as it fails to
distinguish between licensed and non-licensed recruiters 11 and for that
reason gives undue advantage to the non-licensed recruiters in violation of
the right to equal protection of those that operate with government licenses
or authorities.
But "illegal recruitment" as defined in Section 6 is clear and unambiguous
and, contrary to the RTCs finding, actually makes a distinction between
licensed and non-licensed recruiters. By its terms, persons who engage in
"canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring
workers" without the appropriate government license or authority are guilty
of illegal recruitment whether or not they commit the wrongful acts
enumerated in that section. On the other hand, recruiters who engage in the
canvassing,

enlisting,

etc.

of

OFWs,

although

with

the

appropriate

government license or authority, are guilty of illegal recruitment only if they

commit any of the wrongful acts enumerated in Section 6.
The Manila RTC also declared Section 7 unconstitutional on the ground that
its sweeping application of the penalties failed to make any distinction as to
the seriousness of the act committed for the application of the penalty
imposed on such violation. As an example, said the trial court, the mere
failure to render a report under Section 6(h) or obstructing the inspection by
the Labor Department under Section 6(g) are penalized by imprisonment for
six years and one day and a minimum fine of P200,000.00 but which could
unreasonably go even as high as life imprisonment if committed by at least
three persons.

Apparently, the Manila RTC did not agree that the law can impose such grave
penalties upon what it believed were specific acts that were not as
condemnable as the others in the lists. But, in fixing uniform penalties for
each of the enumerated acts under Section 6, Congress was within its
prerogative to determine what individual acts are equally reprehensible,
consistent with the State policy of according full protection to labor, and
deserving of the same penalties. It is not within the power of the Court to
question the wisdom of this kind of choice. Notably, this legislative policy has
been further stressed in July 2010 with the enactment of R.A. 10022 12 which
increased even more the duration of the penalties of imprisonment and the
amounts of fine for the commission of the acts listed under Section 7.
Obviously, in fixing such tough penalties, the law considered the unsettling
fact that OFWs must work outside the countrys borders and beyond its
immediate protection. The law must, therefore, make an effort to somehow
protect them from conscienceless individuals within its jurisdiction who,
fueled by greed, are willing to ship them out without clear assurance that
their contracted principals would treat such OFWs fairly and humanely.
As the Court held in People v. Ventura,13 the State under its police power
"may prescribe such regulations as in its judgment will secure or tend to
secure the general welfare of the people, to protect them against the
consequence of ignorance and incapacity as well as of deception and fraud."
Police power is "that inherent and plenary power of the State which enables
it to prohibit all things hurtful to the comfort, safety, and welfare of society."14
The Manila RTC also invalidated Section 9 of R.A. 8042 on the ground that
allowing the offended parties to file the criminal case in their place of
residence would negate the general rule on venue of criminal cases which is
the place where the crime or any of its essential elements were committed.
Venue, said the RTC, is jurisdictional in penal laws and, allowing the filing of

criminal actions at the place of residence of the offended parties violates

their right to due process. Section 9 provides:
SEC. 9. Venue. A criminal action arising from illegal recruitment as defined
herein shall be filed with the Regional Trial Court of the province or city
where the offense was committed or where the offended party actually
resides at the time of the commission of the offense: Provided, That the court
where the criminal action is first filed shall acquire jurisdiction to the
exclusion of other courts: Provided, however, That the aforestated provisions
shall also apply to those criminal actions that have already been filed in
court at the time of the effectivity of this Act.
But there is nothing arbitrary or unconstitutional in Congress fixing an
alternative venue for violations of Section 6 of R.A. 8042 that differs from the
venue established by the Rules on Criminal Procedure. Indeed, Section 15(a),
Rule 110 of the latter Rules allows exceptions provided by laws. Thus:
SEC. 15. Place where action is to be instituted. (a) Subject to existing laws,
the criminal action shall be instituted and tried in the court of the
municipality or territory where the offense was committed or where any of its
essential ingredients occurred. (Emphasis supplied)
xxxx
Section 9 of R.A. 8042, as an exception to the rule on venue of criminal
actions is, consistent with that laws declared policy 15 of providing a criminal
justice system that protects and serves the best interests of the victims of
illegal recruitment.
G.R. 167590, G.R. 182978-79,16 and G.R. 184298-9917
(Constitutionality of Section 10, last sentence of 2nd paragraph)

G.R. 182978-79 and G.R. 184298-99 are consolidated cases. Respondent

spouses Simplicio and Mila Cuaresma (the Cuaresmas) filed a claim for death
and insurance benefits and damages against petitioners Becmen Service
Exporter and Promotion, Inc. (Becmen) and White Falcon Services, Inc.
(White Falcon) for the death of their daughter Jasmin Cuaresma while
working as staff nurse in Riyadh, Saudi Arabia.
The Labor Arbiter (LA) dismissed the claim on the ground that the Cuaresmas
had already received insurance benefits arising from their daughters death
from the Overseas Workers Welfare Administration (OWWA). The LA also
gave due credence to the findings of the Saudi Arabian authorities that
Jasmin committed suicide.
On appeal, however, the National Labor Relations Commission (NLRC) found
Becmen and White Falcon jointly and severally liable for Jasmins death and
ordered them to pay the Cuaresmas the amount of US$113,000.00 as actual
damages. The NLRC relied on the Cabanatuan City Health Offices autopsy
finding that Jasmin died of criminal violence and rape.
Becmen and White Falcon appealed the NLRC Decision to the Court of
Appeals (CA).18 On June 28, 2006 the CA held Becmen and White Falcon
jointly and severally liable with their Saudi Arabian employer for actual
damages, with Becmen having a right of reimbursement from White Falcon.
Becmen and White Falcon appealed the CA Decision to this Court.
On April 7, 2009 the Court found Jasmins death not work-related or workconnected since her rape and death did not occur while she was on duty at
the hospital or doing acts incidental to her employment. The Court deleted
the award of actual damages but ruled that Becmens corporate directors
and officers are solidarily liable with their company for its failure to
investigate the true nature of her death. Becmen and White Falcon
abandoned their legal, moral, and social duty to assist the Cuaresmas in

obtaining justice for their daughter. Consequently, the Court held the foreign
employer Rajab and Silsilah, White Falcon, Becmen, and the latters
corporate directors and officers jointly and severally liable to the Cuaresmas
for: 1) P2,500,000.00 as moral damages; 2) P2,500,000.00 as exemplary
damages; 3) attorneys fees of 10% of the total monetary award; and 4) cost
of suit.
On July 16, 2009 the corporate directors and officers of Becmen, namely,
Eufrocina Gumabay, Elvira Taguiam, Lourdes Bonifacio and Eddie De Guzman
(Gumabay, et al.) filed a motion for leave to Intervene. They questioned the
constitutionality of the last sentence of the second paragraph of Section 10,
R.A. 8042 which holds the corporate directors, officers and partners jointly
and solidarily liable with their company for money claims filed by OFWs
against their employers and the recruitment firms. On September 9, 2009
the Court allowed the intervention and admitted Gumabay, et al.s motion for
reconsideration.
The key issue that Gumabay, et al. present is whether or not the 2nd
paragraph of Section 10, R.A. 8042, which holds the corporate directors,
officers, and partners of recruitment and placement agencies jointly and
solidarily liable for money claims and damages that may be adjudged
against the latter agencies, is unconstitutional.
In

G.R.

167590

(the

PASEI

case),

the

Quezon

City

RTC

held

as

unconstitutional the last sentence of the 2nd paragraph of Section 10 of R.A.

8042. It pointed out that, absent sufficient proof that the corporate officers
and directors of the erring company had knowledge of and allowed the illegal
recruitment, making them automatically liable would violate their right to
due process of law.
The pertinent portion of Section 10 provides:

SEC. 10. Money Claims. x x x

The liability of the principal/employer and the recruitment/placement agency
for any and all claims under this section shall be joint and several. This
provision shall be incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the
workers. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership
for the aforesaid claims and damages. (Emphasis supplied)
But the Court has already held, pending adjudication of this case, that the
liability of corporate directors and officers is not automatic. To make them
jointly and solidarily liable with their company, there must be a finding that
they were remiss in directing the affairs of that company, such as sponsoring
or tolerating the conduct of illegal activities.19 In the case of Becmen and
White Falcon,20 while there is evidence that these companies were at fault in
not investigating the cause of Jasmins death, there is no mention of any
evidence in the case against them that intervenors Gumabay, et al.,
Becmens corporate officers and directors, were personally involved in their
companys particular actions or omissions in Jasmins case.
As a final note, R.A. 8042 is a police power measure intended to regulate the
recruitment and deployment of OFWs. It aims to curb, if not eliminate, the
injustices and abuses suffered by numerous OFWs seeking to work abroad.
The rule is settled that every statute has in its favor the presumption of
constitutionality. The Court cannot inquire into the wisdom or expediency of
the laws enacted by the Legislative Department. Hence, in the absence of a
clear and unmistakable case that the statute is unconstitutional, the Court
must uphold its validity.

WHEREFORE, in G.R. 152642 and 152710, the Court DISMISSES the petitions
for having become moot and academic.1wphi1
In G.R. 167590, the Court SETS ASIDE the Decision of the Regional Trial Court
ofManila dated December 8, 2004 and DECLARES Sections 6, 7, and 9 of
Republic Act 8042 valid and constitutional.
In G.R. 182978-79 and G.R. 184298-99 as well as in G.R. 167590, the Court
HOLDS the last sentence of the second paragraph of Section 10 of Republic
Act 8042 valid and constitutional. The Court, however, RECONSIDERS and
SETS ASIDE the portion of its Decision in G.R. 182978-79 and G.R. 184298-99
that held intervenors Eufrocina Gumabay, Elvira Taguiam, Lourdes Bonifacio,
and Eddie De Guzman jointly and solidarily liable with respondent Becmen
Services Exporter and Promotion, Inc. to spouses Simplicia and Mila
Cuaresma for lack of a finding in those cases that such intervenors had a
part in the act or omission imputed to their corporation.
SO ORDERED.
TIMOTEO H. SARONA,

G.R. No. 185280

Petitioner,
Present:

- versus -

CARPIO, J.,
Chairperson,
PEREZ,
SERENO,

NATIONAL LABOR RELATIONS

COMMISSION, ROYALE SECURITY
AGENCY (FORMERLY SCEPTRE
SECURITY AGENCY) and

REYES, and
BERNABE, JJ.

CESAR S. TAN,

Promulgated:

Respondents.
January 18, 2012

x-----------------------------------------------------------------------------------------x
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court from
the May 29, 2008 Decision1 of the Twentieth Division of the Court of Appeals
(CA) in CA-G.R. SP No. 02127 entitled Timoteo H. Sarona v. National Labor
Relations Commission, Royale Security Agency (formerly Sceptre Security
Agency) and Cesar S. Tan (Assailed Decision), which affirmed the National
Labor Relations Commissions (NLRC) November 30, 2005 Decision and
January 31, 2006 Resolution, finding the petitioner illegally dismissed but
limiting the amount of his backwages to three (3) monthly salaries. The CA
likewise affirmed the NLRCs finding that the petitioners separation pay
should be computed only on the basis of his length of service with
respondent Royale Security Agency (Royale). The CA held that absent any
showing that Royale is a mere alter ego of Sceptre Security Agency
(Sceptre), Royale cannot be compelled to recognize the petitioners tenure
with Sceptre. The dispositive portion of the CAs Assailed Decision states:
WHEREFORE, in view of the foregoing, the instant petition
is PARTLY GRANTED, though piercing of the corporate veil is
hereby denied for lack of merit. Accordingly, the assailed
Decision

and

Resolution

of

the

NLRC

respectively

dated

November 30, 2005 and January 31, 2006 are hereby AFFIRMED
as to the monetary awards.
SO ORDERED. 2

Factual Antecedents
On June 20, 2003, the petitioner, who was hired by Sceptre as a
security guard sometime in April 1976, was asked by Karen Therese Tan
(Karen), Sceptres Operation Manager, to submit a resignation letter as the
same was supposedly required for applying for a position at Royale. The
petitioner was also asked to fill up Royales employment application form,
which was handed to him by Royales General Manager, respondent Cesar
Antonio Tan II (Cesar).3
After several weeks of being in floating status, Royales Security
Officer, Martin Gono (Martin), assigned the petitioner at Highlight Metal Craft,
Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the
petitioner was transferred and assigned to Wide Wide World Express, Inc.
(WWWE, Inc.). During his assignment at Highlight Metal, the petitioner used
the

patches

and

agency

cloths

of

Sceptre

and

it

was

only

when he was posted at WWWE, Inc. that he started using those of Royale.4
On September 17, 2003, the petitioner was informed that his
assignment at WWWE, Inc. had been withdrawn because Royale had
allegedly been replaced by another security agency. The petitioner, however,
shortly discovered thereafter that Royale was never replaced as WWWE,
Inc.s security agency. When he placed a call at WWWE, Inc., he learned that
his fellow security guard was not relieved from his post.5

On September 21, 2003, the petitioner was once again assigned at

Highlight Metal, albeit for a short period from September 22, 2003 to
September 30, 2003. Subsequently, when the petitioner reported at Royales
office on October 1, 2003, Martin informed him that he would no longer be
given any assignment per the instructions of Aida Sabalones-Tan (Aida),
general manager of Sceptre. This prompted him to file a complaint for illegal
dismissal on October 4, 2003.6
In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA
Gutierrez) ruled in the petitioners favor and found him illegally dismissed.
For being unsubstantiated, LA Gutierrez denied credence to the respondents
claim that the termination of the petitioners employment relationship with
Royale was on his accord following his alleged employment in another
company. That the petitioner was no longer interested in being an employee
of Royale cannot be presumed from his request for a certificate of
employment, a claim which, to begin with, he vehemently denies. Allegation
of the petitioners abandonment is negated by his filing of a complaint for
illegal dismissal three (3) days after he was informed that he would no longer
be given any assignments. LA Gutierrez ruled:
In

short,

respondent

wanted

to

impress

before

us

that

complainant abandoned his employment. We are not however,

convinced.
There is abandonment when there is a clear proof showing that
one has no more interest to return to work. In this instant case,
the record has no proof to such effect. In a long line of decisions,
the Supreme Court ruled:
Abandonment of position is a matter of
intention

expressed

in

clearly

certain

and

unequivocal

acts,

however,

an

interim

employment does not mean abandonment.

(Jardine Davis, Inc. vs. NLRC, 225 SCRA 757).
In

abandonment,

there

must

be

concurrence of the intention to abandon and

some overt acts from which an employee may
be declared as having no more interest to
work. (C. Alcontin & Sons, Inc. vs. NLRC, 229
SCRA 109).
It is clear, deliberate and unjustified
refusal to severe employment and not mere
absence

that

is

required

to

constitute

abandonment. x x x (De Ysasi III vs. NLRC,

231 SCRA 173).
Aside from lack of proof showing that complainant has
abandoned his employment, the record would show that
immediate action was taken in order to protest his dismissal from
employment. He filed a complaint [for] illegal dismissal on
October 4, 2004 or three (3) days after he was dismissed. This
act, as declared by the Supreme Court is inconsistent with
abandonment,

as

held

in

the

case

of

Pampanga

Sugar

Development Co., Inc. vs. NLRC, 272 SCRA 737 where the
Supreme Court ruled:
The immediate filing of a complaint for
[i]llegal

[d]ismissal

by

an

employee

inconsistent with abandonment.7

is

The respondents were ordered to pay the petitioner backwages, which

LA Gutierrez computed from the day he was dismissed, or on October 1,
2003, up to the promulgation of his Decision on May 11, 2005. In lieu of
reinstatement,

the

respondents

were

ordered

to

pay

the

petitioner

separation pay equivalent to his one (1) month salary in consideration of his
tenure with Royale, which lasted for only one (1) month and three (3) days.
In

this

regard, LA Gutierrez refused to pierce Royales corporate veil for purposes of

factoring the petitioners length of service with Sceptre in the computation of
his separation pay. LA Gutierrez ruled that Royales corporate personality,
which is separate and distinct from that of Sceptre, a sole proprietorship
owned by the late Roso Sabalones (Roso) and later, Aida, cannot be pierced
absent clear and convincing evidence that Sceptre and Royale share the
same stockholders and incorporators and that Sceptre has complete control
and dominion over the finances and business affairs of Royale. Specifically:
To support its prayer of piercing the veil of corporate entity of
respondent Royale, complainant avers that respondent Royal
(sic) was using the very same office of SCEPTRE in C. Padilla St.,
Cebu City. In addition, all officers and staff of SCEPTRE are now
the same officers and staff of ROYALE, that all [the] properties of
SCEPTRE are now being owned by ROYALE and that ROYALE is
now occupying the property of SCEPTRE. We are not however,
persuaded.
It should be pointed out at this juncture that SCEPTRE, is a single
proprietorship. Being so, it has no distinct and separate
personality. It is owned by the late Roso T. Sabalones. After the
death of the owner, the property is supposed to be divided by
the heirs and any claim against the sole proprietorship is a claim

against Roso T. Sabalones. After his death, the claims should be

instituted against the estate of Roso T. Sabalones. In short, the
estate of the late Roso T. Sabalones should have been impleaded
as respondent of this case.
Complainant wanted to impress upon us that Sceptre was
organized into another entity now called Royale Security Agency.
There is however, no proof to this assertion. Likewise, there is no
proof that Roso T. Sabalones, organized his single proprietorship
business into a corporation, Royale Security Agency. On the
contrary, the name of Roso T. Sabalones does not appear in the
Articles of Incorporation. The names therein as incorporators are:
Bruno M. Kuizon [P]150,000.00
Wilfredo K. Tan 100,000.00
Karen Therese S. Tan 100,000.00
Cesar Antonio S. Tan 100,000.00
Gabeth Maria K. Tan 50,000.00
Complainant claims that two (2) of the incorporators are
the granddaughters of Roso T. Sabalones. This fact even give
(sic) us further reason to conclude that respondent Royal (sic)
Security Agency is not an alter ego or conduit of SCEPTRE. It is
obvious that respondent Royal (sic) Security Agency is not owned
by the owner of SCEPTRE.
It may be true that the place where respondent Royale hold
(sic) office is the same office formerly used by SCEPTRE.
Likewise, it may be true that the same officers and staff now
employed by respondent Royale Security Agency were the same
officers and staff employed by SCEPTRE. We find, however,

that these facts are not sufficient to justify to require respondent

Royale to answer for the liability of Sceptre, which was owned
solely by the late Roso T. Sabalones. As we have stated above,
the remedy is to address the claim on the estate of Roso T.
Sabalones.8

The respondents appealed LA Gutierrezs May 11, 2005 Decision to the

NLRC, claiming that the finding of illegal dismissal was attended with grave
abuse of discretion. This appeal was, however, dismissed by the NLRC in its
November 30, 2005 Decision,9 the dispositive portion of which states:
WHEREFORE, premises considered, the Decision of the
Labor Arbiter declaring the illegal dismissal of complainant is
hereby AFFIRMED.
However[,] We modify the monetary award by limiting the
grant of backwages to only three (3) months in view of
complainants very limited service which lasted only for one
month and three days.
1. Backwages - [P]15,600.00
2. Separation Pay - 5,200.00
3. 13th Month Pay - 583.34
[P]21,383.34 Attorneys Fees- 2,138.33
Total [P]23,521.67
The appeal of respondent Royal (sic) Security Agency is
hereby DISMISSED for lack of merit.
SO ORDERED.10

The NLRC partially affirmed LA Gutierrezs May 11, 2005 Decision. It

concurred with the latters finding that the petitioner was illegally dismissed
and the manner by which his separation pay was computed, but modified the
monetary award in the petitioners favor by reducing the amount of his
backwages from P95,600.00 to P15,600.00. The NLRC determined the
petitioners backwages as limited to three (3) months of his last monthly
salary, considering that his employment with Royale was only for a period for
one (1) month and three (3) days, thus:11
On the other hand, while complainant is entitled to backwages,
We are aware that his stint with respondent Royal (sic) lasted
only for one (1) month and three (3) days such that it is Our
considered view that his backwages should be limited to only
three (3) months.
Backwages:
[P]5,200.00 x 3 months = [P]15,600.0012

The petitioner, on the other hand, did not appeal LA Gutierrezs May 11,
2005 Decision but opted to raise the validity of LA Gutierrezs adverse
findings with respect to piercing Royales corporate personality and
computation of his separation pay in his Reply to the respondents
Memorandum of Appeal. As the filing of an appeal is the prescribed remedy
and no aspect of the decision can be overturned by a mere reply, the NLRC
dismissed the petitioners efforts to reverse LA Gutierrezs disposition of
these issues. Effectively, the petitioner had already waived his right to

question LA Gutierrezs Decision when he failed to file an appeal within the

reglementary period. The NLRC held:
On the other hand, in complainants Reply to Respondents
Appeal Memorandum he prayed that the doctrine of piercing the
veil of corporate fiction of respondent be applied so that his
services with Sceptre since 1976 [will not] be deleted. If
complainant assails this particular finding in the Labor Arbiters
Decision, complainant should have filed an appeal and not seek a
relief

by

merely

filing

Reply

to

Respondents

Appeal

Memorandum.13

Consequently, the petitioner elevated the NLRCs November 30, 2005

Decision to the CA by way of a Petition for Certiorari under Rule 65 of the
Rules of Court. On the other hand, the respondents filed no appeal from the
NLRCs finding that the petitioner was illegally dismissed.
The CA, in consideration of substantial justice and the jurisprudential
dictum that an appealed case is thrown open for the appellate courts
review, disagreed with the NLRC and proceeded to review the evidence on
record to determine if Royale is Sceptres alter ego that would warrant the
piercing of its corporate veil. 14 According to the CA, errors not assigned on
appeal may be reviewed as technicalities should not serve as bar to the full
adjudication of cases. Thus:
In Cuyco v. Cuyco, which We find application in the instant case,
the Supreme Court held:
In their Reply, petitioners alleged that their petition
only raised the sole issue of interest on the interest

due, thus, by not filing their own petition for review,

respondents waived their privilege to bring matters
for the Courts review that [does] not deal with the
sole issue raised.
Procedurally, the appellate court in deciding the case
shall consider only the assigned errors, however, it is
equally settled that the Court is clothed with ample
authority to review matters not assigned as errors in
an appeal, if it finds that their consideration is
necessary to arrive at a just disposition of the case.
Therefore, for full adjudication of the case, We have to primarily
resolve the issue of whether the doctrine of piercing the
corporate veil be justly applied in order to determine petitioners
length of service with private respondents.15 (citations omitted)

Nonetheless, the CA ruled against the petitioner and found the

evidence he submitted to support his allegation that Royale and Sceptre are
one and the same juridical entity to be wanting. The CA refused to pierce
Royales corporate mask as one of the probative factors that would justify
the application of the doctrine of piercing the corporate veil is stock
ownership by one or common ownership of both corporations and the
petitioner failed to present clear and convincing proof that Royale and
Sceptre are commonly owned or controlled. The relevant portions of the CAs
Decision state:
In the instant case, We find no evidence to show that
Royale Security Agency, Inc. (hereinafter Royale), a corporation
duly registered with the Securities and Exchange Commission

(SEC) and Sceptre Security Agency (hereinafter Sceptre), a

single proprietorship, are one and the same entity.
Petitioner, who has been with Sceptre since 1976 and, as
ruled by both the Labor Arbiter and the NLRC, was illegally
dismissed by Royale on October 1, 2003, alleged that in order to
circumvent labor laws, especially to avoid payment of money
claims and the consideration on the length of service of its
employees, Royale was established as an alter ego or business
conduit of Sceptre. To prove his claim, petitioner declared that
Royale is conducting business in the same office of Sceptre, the
latter being owned by the late retired Gen. Roso Sabalones, and
was managed by the latters daughter, Dr. Aida Sabalones-Tan;
that two of Royales incorporators are grandchildren [of] the late
Gen. Roso Sabalones; that all the properties of Sceptre are now
owned by Royale, and that the officers and staff of both business
establishments are the same; that the heirs of Gen. Sabalones
should have applied for dissolution of Sceptre before the SEC
before forming a new corporation.
On the other hand, private respondents declared that
Royale was incorporated only on March 10, 2003 as evidenced by
the Certificate of Incorporation issued by the SEC on the same
date; that Royales incorporators are Bruino M. Kuizon, Wilfredo
Gracia K. Tan, Karen Therese S. Tan, Cesar Antonio S. Tan II and
[Gabeth] Maria K. Tan.
Settled is the tenet that allegations in the complaint must
be duly proven by competent evidence and the burden of proof is
on the party making the allegation. Further, Section 1 of Rule
131 of the Revised Rules of Court provides:

SECTION 1. Burden of proof. Burden of

proof is the duty of a party to present evidence on
the facts in issue necessary to establish his claim or
defense by the amount of evidence required by law.
We believe that petitioner did not discharge the required
burden of proof to establish his allegations. As We see it,
petitioners claim that Royale is an alter ego or business conduit
of Sceptre is without basis because aside from the fact that there
is no common ownership of both Royale and Sceptre, no
evidence on record would prove that Sceptre, much less the late
retired Gen. Roso Sabalones or his heirs, has control or complete
domination of Royales finances and business transactions.
Absence of this first element, coupled by petitioners failure to
present clear and convincing evidence to substantiate his
allegations, would prevent piercing of the corporate veil.
Allegations must be proven by sufficient evidence. Simply stated,
he who alleges a fact has the burden of proving it; mere
allegation is not evidence.16 (citations omitted)

By way of this Petition, the petitioner would like this Court to revisit the
computation of his backwages, claiming that the same should be computed
from the time he was illegally dismissed until the finality of this decision. 17
The petitioner would likewise have this Court review and examine anew the
factual allegations and the supporting evidence to determine if the CA erred
in its refusal to pierce Royales corporate mask and rule that it is but a mere
continuation or successor of Sceptre. According to the petitioner, the
erroneous computation of his separation pay was due to the CAs failure, as
well as the NLRC and LA Gutierrez, to consider evidence conclusively

demonstrating that Royale and Sceptre are one and the same juridical entity.
The petitioner claims that since Royale is no more than Sceptres alter ego, it
should recognize and credit his length of service with Sceptre.18
The petitioner claimed that Royale and Sceptre are not separate legal
persons for purposes of computing the amount of his separation pay and
other benefits under the Labor Code. The piercing of Royales corporate
personality is justified by several indicators that Royale was incorporated for
the sole purpose of defeating his right to security of tenure and circumvent
payment of his benefits to which he is entitled under the law: (i) Royale was
holding office in the same property used by Sceptre as its principal place of
business;19 (ii) Sceptre and Royal have the same officers and employees; 20
(iii) on October 14, 1994, Roso, the sole proprietor of Sceptre, sold to Aida,
and her husband, Wilfredo Gracia K. Tan (Wilfredo), 21 the property used by
Sceptre as its principal place of business; 22 (iv) Wilfredo is one of the
incorporators of Royale;23 (v) on May 3, 1999, Roso ceded the license to
operate Sceptre issued by the Philippine National Police to Aida; 24 (vi) on July
28, 1999, the business name Sceptre Security & Detective Agency was
registered with the Department of Trade and Industry (DTI) under the name
of Aida;25 (vii) Aida exercised control over the affairs of Sceptre and Royale,
as she was, in fact, the one who dismissed the petitioner from employment; 26
(viii) Karen, the daughter of Aida, was Sceptres Operation Manager and is
one of the incorporators of Royale;27 and (ix) Cesar Tan II, the son of Aida was
one of Sceptres officers and is one of the incorporators of Royale.28
In their Comment, the respondents claim that the petitioner is barred
from questioning the manner by which his backwages and separation pay
were computed. Earlier, the petitioner moved for the execution of the NLRCs
November 30, 2005 Decision 29 and the respondents paid him the full amount
of the monetary award thereunder shortly after the writ of execution was
issued.30 The respondents likewise maintain that Royales separate and

distinct corporate personality should be respected considering that the

evidence presented by the petitioner fell short of establishing that Royale is
a mere alter ego of Sceptre.
The petitioner does not deny that he has received the full amount of
backwages and separation pay as provided under the NLRCs November 30,
2005 Decision.31 However, he claims that this does not preclude this Court
from modifying a decision that is tainted with grave abuse of discretion or
issued without jurisdiction.32
ISSUES
Considering the conflicting submissions of the parties, a judicious
determination of their respective rights and obligations requires this Court to
resolve the following substantive issues:
a. Whether Royales corporate fiction should be pierced for
the purpose of compelling it to recognize the petitioners length
of service with Sceptre and for holding it liable for the benefits
that have accrued to him arising from his employment with
Sceptre; and
b. Whether the petitioners backwages should be limited to
his salary for three (3) months.
OUR RULING
Because his receipt of the proceeds
of

the

award

November

30,

under
2005

the

NLRCs

Decision

is

qualified and without prejudice to

the CAs resolution of his petition for

certiorari,

the

petitioner

is

not

barred from exercising his right to

elevate the decision of the CA to this
Court.

Before this Court proceeds to decide this Petition on its merits, it is

imperative to resolve the respondents contention that the full satisfaction of
the award under the NLRCs November 30, 2005 Decision bars the petitioner
from questioning the validity thereof. The respondents submit that they had
paid the petitioner the amount of P21,521.67 as directed by the NLRC and
this constitutes a waiver of his right to file an appeal to this Court.
The respondents fail to convince.
The petitioners receipt of the monetary award adjudicated by the
NLRC is not absolute, unconditional and unqualified. The petitioners May 3,
2007 Motion for Release contains a reservation, stating in his prayer that: it
is respectfully prayed that the respondents and/or Great Domestic Insurance
Co. be ordered to RELEASE/GIVE the amount of P23,521.67 in favor of the
complainant TIMOTEO H. SARONA without prejudice to the outcome of the
petition with the CA.33
In Leonis Navigation Co., Inc., et al. v. Villamater, et al.,34 this Court
ruled that the prevailing partys receipt of the full amount of the judgment
award pursuant to a writ of execution issued by the labor arbiter does not
close or terminate the case if such receipt is qualified as without prejudice to
the outcome of the petition for certiorari pending with the CA.

Simply put, the execution of the final and executory

decision or resolution of the NLRC shall proceed despite the
pendency of a petition for certiorari, unless it is restrained by the
proper court. In the present case, petitioners already paid
Villamaters

widow,

Sonia,

the

amount

of

P3,649,800.00,

representing the total and permanent disability award plus

attorneys fees, pursuant to the Writ of Execution issued by the
Labor Arbiter. Thereafter, an Order was issued declaring the case
as "closed and terminated". However, although there was no
motion for reconsideration of this last Order, Sonia was,
nonetheless, estopped from claiming that the controversy had
already reached its end with the issuance of the Order closing
and terminating the case. This is because the Acknowledgment
Receipt she signed when she received petitioners payment was
without prejudice to the final outcome of the petition for
certiorari pending before the CA.35

The finality of the NLRCs decision does not preclude the filing of a
petition for certiorari under Rule 65 of the Rules of Court. That the NLRC
issues an entry of judgment after the lapse of ten (10) days from the parties
receipt of its decision36 will only give rise to the prevailing partys right to
move for the execution thereof but will not prevent the CA from taking
cognizance of a petition for certiorari on jurisdictional and due process
considerations.37 In turn, the decision rendered by the CA on a petition for
certiorari may be appealed to this Court by way of a petition for review on
certiorari under Rule 45 of the Rules of Court. Under Section 5, Article VIII of
the Constitution, this Court has the power to review, revise, reverse, modify,
or affirm on appeal or certiorari as the law or the Rules of Court may provide,
final judgments and orders of lower courts in x x x all cases in which only an
error or question of law is involved. Consistent with this constitutional

mandate, Rule 45 of the Rules of Court provides the remedy of an appeal by

certiorari from decisions, final orders or resolutions of the CA in any case,
i.e.,

regardless

of

the

nature

of

the

action

or

proceedings

involved, which would be but a continuation of the appellate process over

the original case.38 Since an appeal to this Court is not an original and
independent action but a continuation of the proceedings before the CA, the
filing of a petition for review under Rule 45 cannot be barred by the finality of
the NLRCs decision in the same way that a petition for certiorari under Rule
65 with the CA cannot.
Furthermore, if the NLRCs decision or resolution was reversed and set aside
for being issued with grave abuse of discretion by way of a petition for
certiorari to the CA or to this Court by way of an appeal from the decision of
the CA, it is considered void ab initio and, thus, had never become final and
executory.39
A

Rule

45

confined

to

Nevertheless,

Petition

should

questions

of

this

has

Court

be
law.
the

power to resolve a question of fact,

such as whether a corporation is a
mere alter ego of another entity or
whether the corporate fiction was
invoked for fraudulent or malevolent
ends,

if

the

findings

in

assailed

decision is not supported by the

evidence on record or based on a
misapprehension of facts.

The question of whether one corporation is merely an alter ego of

another is purely one of fact. So is the question of whether a corporation is a
paper company, a sham or subterfuge or whether the petitioner adduced the
requisite quantum of evidence warranting the piercing of the veil of the
respondents corporate personality.40
As a general rule, this Court is not a trier of facts and a petition for
review on certiorari under Rule 45 of the Rules of Court must exclusively
raise questions of law. Moreover, if factual findings of the NLRC and the LA
have been affirmed by the CA, this Court accords them the respect and
finality they deserve. It is well-settled and oft-repeated that findings of fact of
administrative agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when affirmed by the CA. 41
Nevertheless, this Court will not hesitate to deviate from what are
clearly procedural guidelines and disturb and strike down the findings of the
CA and those of the labor tribunals if there is a showing that they are
unsupported

by

the

evidence

on

record

or

there

was

patent

misappreciation of facts. Indeed, that the impugned decision of the CA is

consistent with the findings of the labor tribunals does not per se
conclusively demonstrate the correctness thereof. By way of exception to the
general rule, this Court will scrutinize the facts if only to rectify the prejudice
and injustice resulting from an incorrect assessment of the evidence
presented.
A resolution of an issue that has
supposedly
executory
raised

it

become
as

the

in

his

respondents

final

petitioner
reply

appeal

and
only

to

the

may

be

revisited by the appellate court if

such

is

necessary

for

just

disposition of the case.

As above-stated, the NLRC refused to disturb LA Gutierrezs denial of the

petitioners plea to pierce Royales corporate veil as the petitioner did not
appeal any portion of LA Gutierrezs May 11, 2005 Decision.
In this respect, the NLRC cannot be accused of grave abuse of discretion.
Under Section 4(c), Rule VI of the NLRC Rules, 42 the NLRC shall limit itself to
reviewing and deciding only the issues that were elevated on appeal. The
NLRC, while not totally bound by technical rules of procedure, is not licensed
to disregard and violate the implementing rules it implemented. 43
Nonetheless, technicalities should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.
Technical rules are not binding in labor cases and are not to be applied
strictly if the result would be detrimental to the working man. 44 This Court
may choose not to encumber itself with technicalities and limitations
consequent to procedural rules if such will only serve as a hindrance to its
duty to decide cases judiciously and in a manner that would put an end with
finality to all existing conflicts between the parties.
Royale

is

continuation

or

successor of Sceptre.

A corporation is an artificial being created by operation of law. It possesses

the right of succession and such powers, attributes, and properties expressly
authorized by law or incident to its existence. It has a personality separate

and distinct from the persons composing it, as well as from any other legal
entity to which it may be related. This is basic.45
Equally well-settled is the principle that the corporate mask may be
removed or the corporate veil pierced when the corporation is just an alter
ego of a person or of another corporation. For reasons of public policy and in
the interest of justice, the corporate veil will justifiably be impaled only when
it becomes a shield for fraud, illegality or inequity committed against third
persons.46
Hence, any application of the doctrine of piercing the corporate veil
should be done with caution. A court should be mindful of the milieu where it
is to be applied. It must be certain that the corporate fiction was misused to
such an extent that injustice, fraud, or crime was committed against another,
in disregard of rights. The wrongdoing must be clearly and convincingly
established; it cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.47
Whether the separate personality of the corporation should be pierced
hinges on obtaining facts appropriately pleaded or proved. However, any
piercing of the corporate veil has to be done with caution, albeit the Court
will not hesitate to disregard the corporate veil when it is misused or when
necessary in the interest of justice. After all, the concept of corporate entity
was not meant to promote unfair objectives.48
The doctrine of piercing the corporate veil applies only in three (3)
basic areas, namely: 1) defeat of public convenience as when the corporate
fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud,
or defend a crime; or 3) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of a person, or where

the
corporation is so organized and controlled and its affairs are so conducted as
to make it merely an instrumentality, agency, conduit or adjunct of another
corporation.49
In this regard, this Court finds cogent reason to reverse the CAs
findings. Evidence abound showing that Royale is a mere continuation or
successor of Sceptre and fraudulent objectives are behind Royales
incorporation and the petitioners subsequent employment therein. These
are plainly suggested by events that the respondents do not dispute and
which the CA, the NLRC and LA Gutierrez accept as fully substantiated but
misappreciated as insufficient to warrant the use of the equitable weapon of
piercing.
As correctly pointed out by the petitioner, it was Aida who exercised
control and supervision over the affairs of both Sceptre and Royale. Contrary
to the submissions of the respondents that Roso had been the only one in
sole control of Sceptres finances and business affairs, Aida took over as
early as 1999 when Roso assigned his license to operate Sceptre on May 3,
1999.50 As further proof of Aidas acquisition of the rights as Sceptres sole
proprietor, she caused the registration of the business name Sceptre
Security & Detective Agency under her name with the DTI a few months
after Roso abdicated his rights to Sceptre in her favor. 51 As far as Royale is
concerned, the respondents do not deny that she has a hand in its
management and operation and possesses control and supervision of its
employees, including the petitioner. As the petitioner correctly pointed out,
that Aida was the one who decided to stop giving any assignments to the
petitioner and summarily dismiss him is an eloquent testament of the power
she wields insofar as Royales affairs are concerned. The presence of actual
common control coupled with the misuse of the corporate form to perpetrate

oppressive

or

manipulative

conduct

or

evade

performance

of

legal

obligations is patent; Royale cannot hide behind its corporate fiction.

Aidas control over Sceptre and Royale does not, by itself, call for a
disregard of the corporate fiction. There must be a showing that a fraudulent
intent or illegal purpose is behind the exercise of such control to warrant the
piercing of the corporate veil. 52 However, the manner by which the petitioner
was made to resign from Sceptre and how he became an employee of Royale
suggest the perverted use of the legal fiction of the separate corporate
personality. It is undisputed that the petitioner tendered his resignation and
that he applied at Royale at the instance of Karen and Cesar and on the
impression they created that these were necessary for his continued
employment. They orchestrated the petitioners resignation from Sceptre and
subsequent employment at Royale, taking advantage of their ascendancy
over the petitioner and the latters lack of knowledge of his rights and the
consequences of his actions. Furthermore, that the petitioner was made to
resign from Sceptre and apply with Royale only to be unceremoniously
terminated shortly thereafter leads to the ineluctable conclusion that there
was intent to violate the petitioners rights as an employee, particularly his
right to security of tenure. The respondents scheme reeks of bad faith and
fraud and compassionate justice dictates that Royale and Sceptre be merged
as a single entity, compelling Royale to credit and recognize the petitioners
length of service with Sceptre. The respondents cannot use the legal fiction
of a separate corporate personality for ends subversive of the policy and
purpose behind its creation53 or which could not have been intended by law
to which it owed its being.54
For the piercing doctrine to apply, it is of no consequence if Sceptre is
a sole proprietorship. As ruled in Prince Transport, Inc., et al. v. Garcia, et
al.,55 it is the act of hiding behind the separate and distinct personalities of
juridical entities to perpetuate fraud, commit illegal acts, evade ones

obligations that the equitable piercing doctrine was formulated to address

and prevent:
A settled formulation of the doctrine of piercing the corporate
veil is that when two business enterprises are owned, conducted
and controlled by the same parties, both law and equity will,
when necessary to protect the rights of third parties, disregard
the legal fiction that these two entities are distinct and treat
them as identical or as one and the same. In the present case, it
may be true that Lubas is a single proprietorship and not a
corporation. However, petitioners attempt to isolate themselves
from and hide behind the supposed separate and distinct
personality of Lubas so as to evade their liabilities is precisely
what the classical doctrine of piercing the veil of corporate entity
seeks to prevent and remedy.56

Also, Sceptre and Royale have the same principal place of business. As early
as October 14, 1994, Aida and Wilfredo became the owners of the property
used by Sceptre as its principal place of business by virtue of a Deed of
Absolute

Sale

they

executed

with

Roso.57

Royale,

shortly

after

its

incorporation, started to hold office in the same property. These, the

respondents failed to dispute.
The respondents do not likewise deny that Royale and Sceptre share
the same officers and employees. Karen assumed the dual role of Sceptres
Operation Manager and incorporator of Royale. With respect to the
petitioner, even if he has already resigned from Sceptre and has been
employed by Royale, he was still using the patches and agency cloths of
Sceptre during his assignment at Highlight Metal.

Royale also claimed a right to the cash bond which the petitioner
posted when he was still with Sceptre. If Sceptre and Royale are indeed
separate entities, Sceptre should have released the petitioners cash bond
when he resigned and Royale would have required the petitioner to post a
new cash bond in its favor.
Taking the foregoing in conjunction with Aidas control over Sceptres
and Royales business affairs, it is patent that Royale was a mere subterfuge
for Aida. Since a sole proprietorship does not have a separate and distinct
personality from that of the owner of the enterprise, the latter is personally
liable. This is what she sought to avoid but cannot prosper.
Effectively, the petitioner cannot be deemed to have changed
employers as Royale and Sceptre are one and the same. His separation pay
should, thus, be computed from the date he was hired by Sceptre in April
1976 until the finality of this decision. Based on this Courts ruling in
Masagana Concrete Products, et al. v. NLRC, et al.,58 the intervening period
between the day an employee was illegally dismissed and the day the
decision finding him illegally dismissed becomes final and executory shall be
considered in the computation of his separation pay as a period of imputed
or putative service:
Separation pay, equivalent to one month's salary for every
year of service, is awarded as an alternative to reinstatement
when the latter is no longer an option. Separation pay is
computed from the commencement of employment up to the
time of termination, including the imputed service for which the
employee is entitled to backwages, with the salary rate
prevailing at the end of the period of putative service being the
basis for computation.59

It is well-settled, even axiomatic,

that if reinstatement is not possible,
the

period

covered

in

the

computation of backwages is from

the

time

unlawfully

the

employee

terminated

until

was
the

finality of the decision finding illegal

dismissal.

With respect to the petitioners backwages, this Court cannot subscribe to

the view that it should be limited to an amount equivalent to three (3)
months of his salary. Backwages is a remedy affording the employee a way
to recover what he has lost by reason of the unlawful dismissal. 60 In awarding
backwages, the primordial consideration is the income that should have
accrued to the employee from the time that he was dismissed up to his
reinstatement61 and the length of service prior to his dismissal is definitely
inconsequential.
As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62
clarified in no uncertain terms that if reinstatement is no longer possible,
backwages should be computed from the time the employee was terminated
until the finality of the decision, finding the dismissal unlawful.
Therefore, in accordance with R.A. No. 6715, petitioners are
entitled on their full backwages, inclusive of allowances and
other benefits or their monetary equivalent, from the time their
actual compensation was withheld on them up to the time of
their actual reinstatement.

As to reinstatement of petitioners, this Court has already ruled

that reinstatement is no longer feasible, because the company
would be adjustly prejudiced by the continued employment of
petitioners who at present are overage, a separation pay equal
to one-month salary granted to them in the Labor Arbiter's
decision was in order and, therefore, affirmed on the Court's
decision of 15 March 1996. Furthermore, since reinstatement
on this case is no longer feasible, the amount of
backwages shall be computed from the time of their
illegal termination on 25 June 1990 up to the time of
finality of this decision.63 (emphasis supplied)

A further clarification was made in Javellana, Jr. v. Belen:64

Article 279 of the Labor Code, as amended by Section 34 of
Republic Act 6715 instructs:
Art. 279. Security of Tenure. - In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or
when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.

Clearly, the law intends the award of backwages and similar

benefits to accumulate past the date of the Labor Arbiter's
decision until the dismissed employee is actually reinstated. But
if, as in this case, reinstatement is no longer possible, this Court
has consistently ruled that backwages shall be computed from
the time of illegal dismissal until the date the decision becomes
final.65 (citation omitted)

In case separation pay is awarded and reinstatement is no longer feasible,

backwages shall be computed from the time of illegal dismissal up to the
finality of the decision should separation pay not be paid in the meantime. It
is the employees actual receipt of the full amount of his separation pay that
will

effectively

terminate

the

employment

of

an

illegally

dismissed

employee.66 Otherwise, the employer-employee relationship subsists and the

illegally dismissed employee is entitled to backwages, taking into account
the increases and other benefits, including the 13 th month pay, that were
received by his co-employees who are not dismissed. 67 It is the obligation of
the employer to pay an illegally dismissed employee or worker the whole
amount

of

the

salaries

or

wages,

plus

all

other

benefits

and

bonuses and general increases, to which he would have been normally

entitled had he not been dismissed and had not stopped working.68
In fine, this Court holds Royale liable to pay the petitioner backwages
to be computed from his dismissal on October 1, 2003 until the finality of this
decision. Nonetheless, the amount received by the petitioner from the
respondents in satisfaction of the November 30, 2005 Decision shall be
deducted accordingly.
Finally, moral damages and exemplary damages at P25,000.00 each as
indemnity for the petitioners dismissal, which was tainted by bad faith and

fraud, are in order. Moral damages may be recovered where the dismissal of
the employee was tainted by bad faith or fraud, or where it constituted an
act oppressive to labor, and done in a manner contrary to morals, good
customs or public policy while exemplary damages are recoverable only if
the dismissal was done in a wanton, oppressive, or malevolent manner. 69
WHEREFORE, premises considered, the Petition is hereby GRANTED.
We REVERSE and SET ASIDE the CAs May 29, 2008 Decision in C.A.-G.R.
SP No. 02127 and order the respondents to pay the petitioner the following
minus the amount of (P23,521.67) paid to the petitioner in satisfaction of the
NLRCs November 30, 2005 Decision in NLRC Case No. V-000355-05:
a) full backwages and other benefits computed from October 1, 2003
(the date Royale illegally dismissed the petitioner) until the finality of
this decision;
b) separation pay computed from April 1976 until the finality of this decision
at the rate of one month pay per year of service;
c) ten percent (10%) attorneys fees based on the total amount of the
awards under (a) and (b) above;
d) moral damages of Twenty-Five Thousand Pesos (P25,000.00); and
5. exemplary damages of Twenty-Five Thousand Pesos (P25,000.00).
This case is REMANDED to the labor arbiter for computation of the
separation pay, backwages, and other monetary awards due the petitioner.
SO ORDERED.

G.R. No. 168208

June 13, 2012

VIVIAN T. RAMIREZ, ALBERTO B. DIGNO, DANILO M. CASQUITE,

JUMADIYA A. KADIL, FAUJIA SALIH, ANTONIO FABIAN, ROMEL DANAG,
GINA PANTASAN, ARTHUR MATUGAS, VIRGILIA OSARIO, ORLANDO
EBRADA, ROSANA CABATO, WILFREDO LUNA, LILIA BARREDO, ISABEL
ALBERTO, NORA BONIAO, PILAR OSARIO, LYDIA ESLIT, AMMAN SALI,
AKMAD AKIL, ROGELIO LAZARO, ISABEL CONCILLADO, MARLON
ABIAL,

HERMOCILLO

NAPALCRUZ,

WALTER

BUHIAN,

ELISEO

AMATORIO, JOSE CASTRO, JAMIL LAGBAY, MA. EVELYN SANTOS,

LEDENIA T. BARON, ELSA AMATORIO, SARAH F. BUCOY, EXPEDITO L.
RELUYA, ARNULFO ALFARO, EDGARDO F. BORGONIA, DANILO R.
MANINGO,

ABDUSAID

H.

DAMBONG,

LORINDA

M.

MUTIA,

DOMINADOR DEL ROSARIO, JOEL E. TRONO, HUSSIN A. JAWAJI, JULASNAM JAKARIA, LUZVIMINDA A. NOLASCO, VILMA G. GASCO,
MORITA S. MARMETO, PROCESA JUANICO, ANTONIO A. MONDRAGON,
JR., JESSICA F. QUIACHON, PACITA G. MEDINA, ARNEL S. SANTOS,
ANECITA T. TARAS, TOMINDAO T. TARAS, NULCA C. SABDANI, AKMAD
A. SABDANI, ROWENA J. GARCIA, LINA P. CASAS, MARLYN G.
FRANCISCO, MERCEDITA MAQUINANO, NICOLAS T. RIO, TERESITA A.
CASINAS, VIRGILIO F. IB-IB, PANTALEON S. ROJAS, JR., EVELYN V.
BEATINGO, MATILDE G. HUSSIN, ESPERANZA I. LLEDO, ADOLFINA
DELA MERCED, LAURA E. SANTOS, ROGACIANA MAQUILING, ALELIE
D. SAMSON, SHIRLEY L. ALVAREZ, MAGDALENA A. MARCOS, VIRGINIA
S.

ESPINOSA,

ANTONIO

C.

GUEVARA,

AUGUSTA

S.

DE

JESUS,

SERVILLA A. BANCALE, PROSERFINA GATINAO, RASMA A. FABRIGA,

ROLANDO D. GATINAO, ANALISA G. MEA, SARAH A. SALCEDO,
ALICIA M. JAYAG, FERNANDO G. CABEROY, ROMEO R. PONCE, EDNA S.
PONCE, TEODORA T. LUY, WALDERICO F. ARIO, MELCHOR S. BUCOY,
EDITA H. CINCO, RUDY I. LIMBAROC, PETER MONTOJO, MARLYN S.
ATILANO, REGIDOR MEDALLO, EDWIN O. DEMASUAY, DENNIS M.

SUICANO, ROSALINA Q. ATILANO, ESTRELLA FELICIANO, IMELDA T.

DAGALEA,

MARILYN

RUFINO,

JOSE

AGUSTIN,

EFREN

RIVERA,

CRISALDO VALERO, SAFIA HANDANG, LUCENA R. MEDINA, DANNY

BOY B. PANGASIAN, ABDURASA HASIL, ROEL ALTA, JOBERT BELTRAN,
EDNA FAUSTO, TAJMAHAR HADJULA, ELENA MAGHANOY, ERIC B.
QUITIOL, JESSE D. FLORES, GEMMA CANILLAS, ERNITO CANILLAS,
MARILOU JAVIER, MARGANI MADDIN, RICHARD SENA, FE D. CANOY,
GEORGE SALUD, EDGARDO BORGONIA, JR., ANTONIO ATILANO, JOSE
CASTRO,

and

LIBERATO

BAGALANON,

Petitioners,

vs.
MAR FISHING CO., INC., MIRAMAR FISHING CO., INC., ROBERT BUEHS
AND JEROME SPITZ. Respondents.
DECISION
SERENO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, seeking a review of the Court of Appeals (CA) 19
March 2004 and 12 May 2005 Resolutions in CA-G.R. SP NO. 82651. The
appellate court had dismissed the Petition for Review on the ground that it
lacked a Verification and Certification against forum shopping.
The pertinent facts are as follows:
On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Fishing), engaged in
the business of fishing and canning of tuna, sold its principal assets to corespondent Miramar Fishing Co., Inc. (Miramar) through public bidding. 1 The
proceeds of the sale were paid to the Trade and Investment Corporation of
the Philippines (TIDCORP) to cover Mar Fishings outstanding obligation in the
amount of P 897,560,041.26.2 In view of that transfer, Mar Fishing issued a
Memorandum dated 23 October 2001 informing all its workers that the

company would cease to operate by the end of the month. 3 On 29 October

2001 or merely two days prior to the months end, it notified the Department
of Labor and Employment (DOLE) of the closure of its business operations. 4
Thereafter, Mar Fishings labor union, Mar Fishing Workers Union NFL and
Miramar entered into a Memorandum of Agreement. 5 The Agreement
provided that the acquiring company, Miramar, shall absorb Mar Fishings
regular rank and file employees whose performance was satisfactory,
without loss of seniority rights and privileges previously enjoyed.6
Unfortunately, petitioners, who worked as rank and file employees, were not
hired or given separation pay by Miramar. 7 Thus, petitioners filed Complaints
for illegal dismissal with money claims before the Arbitration Branch of the
National Labor Relations Commission (NLRC).
In its 30 July 2002 Decision, the Labor Arbiter (LA) found that Mar Fishing had
necessarily closed its operations, considering that Miramar had already
bought the tuna canning plant.8 By reason of the closure, petitioners were
legally dismissed for authorized cause. 9 In addition, even if Mar Fishing
reneged on notifying the DOLE within 30 days prior to its closure, that failure
did not make the dismissals void. Consequently, the LA ordered Mar Fishing
to give separation pay to its workers.10
The LA held thus:11
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered in these cases:
1. Ordering Mar Fishing Company, Inc., through its president,
treasurer, manager or other proper officer or representative, to
pay the complainants their respective separation pay, as
computed in page 12 to 33 hereof, all totaling SIX MILLION

THREE HUNDRED THIRTY SIX THOUSAND FIVE HUNDRED EIGHTY

SEVEN & 77/100 PESOS (P 6,336,587.77);
2. Dismissing these case [sic] as against Miramar Fishing
Company, Inc., as well as against Robert Buehs and Jerome Spitz,
for lack of cause of action;
3. Dismissing all other charges and claims of the complainants,
for lack of merit.
SO ORDERED.
Aggrieved, petitioners pursued the action before the NLRC, which modified
the LAs Decision. Noting that Mar Fishing notified the DOLE only two days
before the business closed, the labor court considered petitioners dismissal
as ineffectual.12 Hence, it awarded, apart from separation pay, full back
wages to petitioners from the time they were terminated on 31 October 2001
until the date when the LA upheld the validity of their dismissal on 30 July
2002.13
Additionally, the NLRC pierced the veil of corporate fiction and ruled that Mar
Fishing and Miramar were one and the same entity, since their officers were
the same.14 Hence, both companies were ordered to solidarily pay the
monetary claims.15
On reconsideration, the NLRC modified its ruling by imposing liability only on
Mar Fishing. The labor court held that petitioners had no cause of action
against Miramar, since labor contracts cannot be enforced against the
transferee of an enterprise in the absence of a stipulation in the contract that
the transferee assumes the obligation of the transferor.16 Hence, the
dispositive portion reads:17

WHEREFORE, foregoing premises considered, the assailed resolution is

MODIFIED in that only Mar Fishing Company, Inc. through its responsible
officers, is ordered to pay complainants their separation pay, and full
backwages from the date they were terminated from employment until 30
July 2002, subject to computation during execution stage of proceedings at
the appropriate Regional Arbitration Branch.
SO ORDERED.
Despite the award of separation pay and back wages, petitioners filed a Rule
65 Petition before the CA. This time, they argued that both Mar Fishing and
Miramar should be made liable for their separation pay, and that their back
wages should be up to the time of their actual reinstatement. However,
finding that only 3 of the 228 petitioners18 signed the Verification and
Certification against forum shopping, the CA instantly dismissed the action
for certiorari against the 225 other petitioners without ruling on the
substantive aspects of the case.19
By means of a Manifestation with Omnibus Motion, 20 petitioners submitted a
Verification and Certification against forum shopping executed by 161
signatories. In the said pleading, petitioners asked the CA to reconsider by
invoking the rule that technical rules do not strictly apply to labor cases. 21
Still, the CA denied petitioners contentions and held thus:22
Anent the liberality in application of the rules, as alleged by petitioners, the
same deserves scant consideration. x x x.
xxx. While litigation is not a game of technicalities, and that the rules of
procedure should not be enforced strictly at the cost of substantial justice,
still it does not follow that the Rules of Court may be ignored at will and at
random to the prejudice of the orderly presentation, assessment and just
resolution of the issues. xxx.

Before this Court, 124 petitioners raise the issue of whether the CA gravely
erred in dismissing their Petition for Review on the ground that their pleading
lacked a Verification and Certification against forum shopping.23
The Rules of Court provide that a petition for certiorari must be verified and
accompanied by a sworn certification of non-forum shopping. 24 Failure to
comply with these mandatory requirements shall be sufficient ground for the
dismissal of the petition.25 Considering that only 3 of the 228 named
petitioners signed the requirement, the CA dismissed the case against them,
as they did not execute a Verification and Certification against forum
shopping.
Petitioners invoke substantial compliance with procedural rules when their
Manifestation already contains a Verification and Certification against forum
shopping executed by 161 signatories. They heavily rely on Jaro v. Court of
Appeals,26 citing Piglas-Kamao v. National Labor Relations Commission and
Cusi-Hernandez v. Diaz, in which we discussed that the subsequent
submission of the missing documentary attachments with the Motion for
Reconsideration amounted to substantial compliance.
However, this very case does not involve a failure to attach the Annexes.
Rather, the procedural infirmity consists of omission the failure to sign a
Verification and Certification against forum shopping. Addressing this defect
squarely, we have already resolved that because of noncompliance with the
requirements governing the certification of non-forum shopping, no error
could be validly attributed to the CA when it ordered the dismissal of the
special civil action for certiorari. 27 The lack of certification against forum
shopping is not curable by mere amendment of a complaint, but shall be a
cause for the dismissal of the case without prejudice. 28 Indeed, the general
rule is that subsequent compliance with the requirements will not excuse a
party's failure to comply in the first instance.29 Thus, on procedural aspects,
the appellate court correctly dismissed the case.

However, this Court has recognized that the merit of a case is a special
circumstance or compelling reason that justifies the relaxation of the rule
requiring verification and certification of non-forum shopping. 30 In order to
fully resolve the issue, it is thus necessary to determine whether technical
rules were brushed aside at the expense of substantial justice. 31 This Court
will then delve into the issue on (1) the solidary liability of Mar Fishing and
Miramar to pay petitioners monetary claims and (2) the reckoning period for
the award of back wages.
For a dismissal based on the closure of business to be valid, three (3)
requirements must be established. Firstly, the cessation of or withdrawal
from business operations must be bona fide in character. Secondly, there
must be payment to the employees of termination pay amounting to at least
one-half (1/2) month pay for each year of service, or one (1) month pay,
whichever is higher. Thirdly, the company must serve a written notice on the
employees and on the DOLE at least one (1) month before the intended
termination.32
In their Petition for Review on Certiorari, petitioners did not dispute the
conclusion of the LA and the NLRC that Mar Fishing had an authorized cause
to dismiss its workers. Neither did petitioners challenge the computation of
their separation pay.
Rather, they questioned the holding that only Mar Fishing was liable for their
monetary claims.33
Basing

their

conclusion

on

the

Memorandum

of

Agreement

and

Supplemental Agreement between Miramar and Mar Fishings labor union, as

well as the General Information Sheets and Company Profiles of the two
companies, petitioners assert that Miramar simply took over the operations
of Mar Fishing. In addition, they assert that these companies are one and the

same entity, given the commonality of their directors and the similarity of
their business venture in tuna canning plant operations.34
At the fore, the question of whether one corporation is merely an alter ego of
another is purely one of fact generally beyond the jurisdiction of this Court. 35
In any case, given only these bare reiterations, this Court sustains the ruling
of the LA as affirmed by the NLRC that Miramar and Mar Fishing are separate
and distinct entities, based on the marked differences in their stock
ownership.36 Also, the fact that Mar Fishings officers remained as such in
Miramar does not by itself warrant a conclusion that the two companies are
one and the same. As this Court held in Sesbreo v. Court of Appeals, the
mere showing that the corporations had a common director sitting in all the
boards without more does not authorize disregarding their separate juridical
personalities.37
Neither can the veil of corporate fiction between the two companies be
pierced by the rest of petitioners submissions, namely, the alleged take-over
by Miramar of Mar Fishings operations and the evident similarity of their
businesses. At this point, it bears emphasizing that since piercing the veil of
corporate fiction is frowned upon, those who seek to pierce the veil must
clearly establish that the separate and distinct personalities of the
corporations are set up to justify a wrong, protect a fraud, or perpetrate a
deception.38 This, unfortunately, petitioners have failed to do. In Indophil
Textile Mill Workers Union vs. Calica, we ruled thus:39
In the case at bar, petitioner seeks to pierce the veil of corporate entity of
Acrylic, alleging that the creation of the corporation is a devi[c]e to evade
the application of the CBA between petitioner Union and private respondent
company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to apply
the doctrine invoked by petitioner in granting the relief sought. The fact that
the businesses of private respondent and Acrylic are related, that some of

the employees of the private respondent are the same persons manning and
providing for auxiliary services to the units of Acrylic, and that the physical
plants, offices and facilities are situated in the same compound, it is our
considered opinion that these facts are not sufficient to justify the piercing of
the corporate veil of Acrylic. (Emphasis supplied.)
Having been found by the trial courts to be a separate entity, Mar Fishing
and not Miramar is required to compensate petitioners. Indeed, the back
wages and retirement pay earned from the former employer cannot be filed
against the new owners or operators of an enterprise.40
Evidently, the assertions of petitioners fail on both procedural and
substantive aspects.1wphi1 Therefore, no special reasons exist to reverse
the CAs dismissal of the case due to their failure to abide by the mandatory
procedure for filing a petition for review on certiorari. Given the correctness
of the appellate courts ruling and the lack of appropriate remedies, this
Court will no longer dwell on the exact computation of petitioners claims for
back wages, which have been sufficiently threshed out by the LA and the
NLRC. Judicial review of labor cases does not go beyond an evaluation of the
sufficiency of the evidence upon which labor officials' findings rest.41
While we sympathize with the situation of the workers in this case, we
cannot disregard, absent compelling reasons, the factual determinations and
the legal doctrines that support the findings of the courts a quo. Generally,
the findings of fact and the conclusion of the labor courts are not only
accorded great weight and respect, but are even clothed with finality and
deemed binding on this Court, as long as they are supported by substantial
evidence.42
On a final note, this Court reminds the parties seeking the ultimate relief of
certiorari to observe the rules, since nonobservance thereof cannot be
brushed aside as a "mere technicality." 43 Procedural rules are not to be

belittled or simply disregarded, for these prescribed procedures ensure an

orderly and speedy administration of justice.44
IN VIEW THEREOF, the assailed 19 March 2004 and 12 May 2005 Resolutions
of the Court of Appeals in CA-GR SP NO. 82651 are AFFIRMED. Hence, the 04
July 2005 Petition for Review filed by petitioners is hereby denied for lack of
merit.
SO ORDERED.

Republic

of

the

Philippines

SUPREME

COURT

Manila
SECOND DIVISION
G.R. No. 167291
PRINCE

TRANSPORT,

January 12, 2011

Inc.

and

Mr.

RENATO

CLAROS,

Petitioners,

vs.
DIOSDADO GARCIA, LUISITO GARCIA, RODANTE ROMERO, REX BARTOLOME, FELICIANO
GASCO, JR., DANILO ROJO, EDGAR SANFUEGO, AMADO GALANTO, EUTIQUIO LUGTU, JOEL
GRAMATICA, MIEL CERVANTES, TERESITA CABANES, ROE DELA CRUZ, RICHELO BALIDOY,
VILMA PORRAS, MIGUELITO SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO
TORRES, ESMAEL RAMBOYONG, ROBETO* MANO, ROGELIO BAGAWISAN, ARIEL SNACHEZ,
ESTAQULO VILLAREAL, NELSON MONTERO, GLORIA ORANTE, HARRY TOCA, PABLITO
MACASAET and RONALD GARCITA Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court praying

for the annulment of the Decision1 and Resolution2 of the Court of Appeals (CA) dated December
20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953. The assailed Decision
reversed and set aside the Resolutions dated May 30, 2003 3 and September 26, 20034 of the
National Labor Relations Commission (NLRC) in CA No. 029059-01, while the disputed Resolution
denied petitioners' Motion for Reconsideration.
The present petition arose from various complaints filed by herein respondents charging
petitioners with illegal dismissal, unfair labor practice and illegal deductions and praying for the
award of premium pay for holiday and rest day, holiday pay, service leave pay, 13th month pay,
moral and exemplary damages and attorney's fees.
Respondents alleged in their respective position papers and other related pleadings that they were
employees of Prince Transport, Inc. (PTI), a company engaged in the business of transporting
passengers by land; respondents were hired either as drivers, conductors, mechanics or
inspectors, except for respondent Diosdado Garcia (Garcia), who was assigned as Operations
Manager; in addition to their regular monthly income, respondents also received commissions
equivalent to 8 to 10% of their wages; sometime in October 1997, the said commissions were
reduced to 7 to 9%; this led respondents and other employees of PTI to hold a series of meetings
to discuss the protection of their interests as employees; these meetings led petitioner Renato
Claros, who is the president of PTI, to suspect that respondents are about to form a union; he made
known to Garcia his objection to the formation of a union; in December 1997, PTI employees
requested for a cash advance, but the same was denied by management which resulted in
demoralization on the employees' ranks; later, PTI acceded to the request of some, but not all, of
the employees; the foregoing circumstances led respondents to form a union for their mutual aid
and protection; in order to block the continued formation of the union, PTI caused the transfer of all
union members and sympathizers to one of its sub-companies, Lubas Transport (Lubas); despite
such transfer, the schedule of drivers and conductors, as well as their company identification
cards, were issued by PTI; the daily time records, tickets and reports of the respondents were also
filed at the PTI office; and, all claims for salaries were transacted at the same office; later, the
business of Lubas deteriorated because of the refusal of PTI to maintain and repair the units being
used therein, which resulted in the virtual stoppage of its operations and respondents' loss of

employment.
Petitioners, on the other hand, denied the material allegations of the complaints contending that
herein respondents were no longer their employees, since they all transferred to Lubas at their
own request; petitioners have nothing to do with the management and operations of Lubas as well
as the control and supervision of the latter's employees; petitioners were not aware of the
existence of any union in their company and came to know of the same only in June 1998 when
they were served a copy of the summons in the petition for certification election filed by the union;
that before the union was registered on April 15, 1998, the complaint subject of the present
petition was already filed; that the real motive in the filing of the complaints was because PTI
asked respondents to vacate the bunkhouse where they (respondents) and their respective
families were staying because PTI wanted to renovate the same.
Subsequently, the complaints filed by respondents were consolidated.
On October 25, 2000, the Labor Arbiter rendered a Decision, 5 the dispositive portion of which reads
as follows:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaints for Unfair Labor Practice, non-payment of holiday pay and
holiday premium, service incentive leave pay and 13th month pay;
Dismissing the complaint of Edgardo Belda for refund of boundary-hulog;
2. Dismissing the complaint for illegal dismissal against the respondents Prince
Transport, Inc. and/or Prince Transport Phils. Corporation, Roberto Buenaventura, Rory
Bayona, Ailee Avenue, Nerissa Uy, Mario Feranil and Peter Buentiempo;
3. Declaring that the complainants named below are illegally dismissed by Lubas
Transport; ordering said Lubas Transport to pay backwages and separation pay in lieu
of reinstatement in the following amount:

Complainants

Backwages

Separation Pay

(1) Diosdado Garcia

P222,348.70

P79,456.00

(2) Feliciano Gasco, Jr.

203,350.00

54,600.00

(3) Pablito Macasaet

145,250.00

13,000.00

(4) Esmael Ramboyong

221,500.00

30,000.00

(5) Joel Gramatica

221,500.00

60,000.00

(6) Amado Galanto

130,725.00

29,250.00

(7) Miel Cervantes

265,800.00

60,000.00

(8) Roberto Mano

221,500.00

50,000.00

(9) Roe dela Cruz

265,800.00

60,000.00

(10) Richelo Balidoy

130,725.00

29,250.00

(11) Vilma Porras

221,500.00

70,000.00

(12) Miguelito Salcedo

265,800.00

60,000.00

(13) Cristina Garcia

130,725.00

35,100.00

(14) Luisito Garcia

145,250.00

19,500.00

(15) Rogelio Bagawisan

265,800.00

60,000.00

(16) Rodante H. Romero

221,500.00

60,000.00

(17) Dindo Torres

265,800.00

50,000.00

(18) Edgar Sanfuego

221,500.00

40,000.00

(19) Ronald Gacita

221,500.00

40,000.00

(20) Harry Toca

174,300.00

23,400.00

(21) Amado Galanto

130,725.00

17,550.00

(22) Teresita Cabaes

130,725.00

17,550.00

(23) Rex Bartolome

301,500.00

30,000.00

(24) Mario Nazareno

221,500.00

30,000.00

(25) Eustaquio Villareal

145,250.00

19,500.00

(26) Ariel Sanchez

265,800.00

60,000.00

(27) Gloria Orante

263,100.00

60,000.00

(28) Nelson Montero

264,600.00

60,000.00

(29) Rizal Beato

295,000.00

40,000.00

(30) Eutiquio Lugtu

354,000.00

48,000.00

(31) Warlito Dickensomn

295,000.00

40,000.00

(32) Edgardo Belda

354,000.00

84,000.00

(33) Tita Go

295,000.00

70,000.00

(34) Alex Lodor

295,000.00

50,000.00

(35) Glenda Arguilles

295,000.00

40,000.00

(36) Erwin Luces

354,000.00

48,000.00

(37) Jesse Celle

354,000.00

48,000.00

(38) Roy Adorable

295,000.00

40,000.00

(39) Marlon Bangcoro

295,000.00

40,000.00

(40)Edgardo Bangcoro

354,000.00

36,000.00

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of the total
monetary award; and
6. Ordering the dismissal of the claim for moral and exemplary damages for lack merit.
SO ORDERED.6
The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of
evidence to show that they violated respondents right to self-organization. The Labor Arbiter also
held that Lubas is the respondents employer and that it (Lubas) is an entity which is separate,
distinct and independent from PTI. Nonetheless, the Labor Arbiter found that Lubas is guilty of
illegally dismissing respondents from their employment.
Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be
held equally liable as Lubas.
In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and
disposed as follows:
WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED. Accordingly, the
Decision appealed from is SUSTAINED subject to the modification that Complainant-Appellant

Edgardo Belda deserves refund of his boundary-hulog in the amount of P446,862.00; and that
Complainants-Appellants Danilo Rojo and Danilo Laurel should be included in the computation of
Complainants-Appellants claim as follows:
Complainants

Backwages

Separation Pay

41. Danilo Rojo

P355,560.00

P48,000.00

42. Danilo Laurel

P357,960.00

P72,000.00

As regards all other aspects, the Decision appealed from is SUSTAINED.

SO ORDERED.7
Respondents filed a Motion for Reconsideration, but the NLRC denied it in its Resolution 8 dated
September 26, 2003.
Respondents then filed a special civil action for certiorari with the CA assailing the Decision and
Resolution of the NLRC.
On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents'
petition. The CA ruled that petitioners are guilty of unfair labor practice; that Lubas is a mere
instrumentality, agent conduit or adjunct of PTI; and that petitioners act of transferring
respondents employment to Lubas is indicative of their intent to frustrate the efforts of
respondents to organize themselves into a union. Accordingly, the CA disposed of the case as
follows:
WHEREFORE, the Petition for Certiorari is hereby GRANTED. Accordingly, the subject decision is
hereby REVERSED and SET ASIDE and another one ENTERED finding the respondents guilty of
unfair labor practice and ordering them to reinstate the petitioners to their former positions
without loss of seniority rights and with full backwages.
With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in the
computation of petitioner's claim for backwages and with respect to the portion ordering the
refund of Edgardo Belda's boundary-hulog in the amount of P446,862.00, the NLRC decision is

affirmed and maintained.

SO ORDERED.9
Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution 10 dated
February 24, 2005.
Hence, the instant petition for review on certiorari based on the following grounds:
A
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE COURSE TO
THE RESPONDENTS' PETITION FOR CERTIORARI
1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS OF THE
LABOR ARBITER AND AFFIRMED BY THE NLRC
2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION
3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE
PETITION WITH RESPECT TO RESPONDENTS REX BARTOLOME, FELICIANO GASCO,
DANILO ROJO, EUTIQUIO LUGTU, AND NELSON MONTERO AS THEY FAILED TO FILE
AN APPEAL TO THE NLRC
B
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE TRANSPORT,
INC. AND MR. RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION
AND THUS, LIABLE IN SOLIDUM TO RESPONDENTS.
C
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE
REINSTATEMENT OF RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS NOT ONE OF THE

ISSUES RAISED IN RESPONDENTS' PETITION FOR CERTIORARI. 11

Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC
are accorded not only respect but even finality; that the CA should have outrightly dismissed the
petition filed before it because in certiorari proceedings under Rule 65 of the Rules of Court it is not
within the province of the CA to evaluate the sufficiency of evidence upon which the NLRC based
its determination, the inquiry being limited essentially to whether or not said tribunal has acted
without or in excess of its jurisdiction or with grave abuse of discretion. Petitioners assert that the
CA can only pass upon the factual findings of the NLRC if they are not supported by evidence on
record, or if the impugned judgment is based on misapprehension of facts which circumstances
are not present in this case. Petitioners also emphasize that the NLRC and the Labor Arbiter
concurred in their factual findings which were based on substantial evidence and, therefore, should
have been accorded great weight and respect by the CA.
Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed
error in re-evaluating the NLRCs factual findings since such findings are not in accord with the
evidence on record and the applicable law or jurisprudence.
The Court agrees with respondents.
The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the
Rules of Court has been settled as early as this Courts decision in St. Martin Funeral Homes v.
NLRC.12 In said case, the Court held that the proper vehicle for such review is a special civil action
for certiorari under Rule 65 of the said Rules, and that the case should be filed with the CA in strict
observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section
9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA pursuant to the
exercise of its original jurisdiction over petitions for certiorari is specifically given the power to
pass upon the evidence, if and when necessary, to resolve factual issues.13 Section 9 clearly states:
xxxx
The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and

perform any and all acts necessary to resolve factual issues raised in cases falling within its
original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings. x x x
However, equally settled is the rule that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. 14 But these
findings are not infallible. When there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the courts. 15 The CA can grant the
petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual
finding not supported by substantial evidence. 16 It is within the jurisdiction of the CA, whose
jurisdiction over labor cases has been expanded to review the findings of the NLRC. 17
In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are
generally binding on the appellate court, unless there was a showing that they were arrived at
arbitrarily or in disregard of the evidence on record. In respondents' petition for certiorari with the
CA, these factual findings were reexamined and reversed by the appellate court on the ground that
they were not in accord with credible evidence presented in this case. To determine if the CA's
reexamination of factual findings and reversal of the NLRC decision are proper and with sufficient
basis, it is incumbent upon this Court to make its own evaluation of the evidence on record. 18
After a thorough review of the records at hand, the Court finds that the CA did not commit error in
arriving at its own findings and conclusions for reasons to be discussed hereunder.
Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached
verification and certificate against forum shopping was signed only by respondent Garcia.
The Court does not agree.
While the general rule is that the certificate of non-forum shopping must be signed by all the
plaintiffs in a case and the signature of only one of them is insufficient, the Court has stressed that

the rules on forum shopping, which were designed to promote and facilitate the orderly
administration of justice, should not be interpreted with such absolute literalness as to subvert its
own ultimate and legitimate objective.19 Strict compliance with the provision regarding the
certificate of non-forum shopping underscores its mandatory nature in that the certification cannot
be altogether dispensed with or its requirements completely disregarded. 20 It does not, however,
prohibit substantial compliance therewith under justifiable circumstances, considering especially
that although it is obligatory, it is not jurisdictional.21
In a number of cases, the Court has consistently held that when all the petitioners share a common
interest and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the rules. 22 In the present case,
there is no question that respondents share a common interest and invoke a common cause of
action. Hence, the signature of respondent Garcia is a sufficient compliance with the rule
governing certificates of non-forum shopping. In the first place, some of the respondents actually
executed a Special Power of Attorney authorizing Garcia as their attorney-in-fact in filing a petition
for certiorari with the CA.23
The Court, likewise, does not agree with petitioners' argument that the CA should not have given
due course to the petition filed before it with respect to some of the respondents, considering that
these respondents did not sign the verification attached to the Memorandum of Partial Appeal
earlier filed with the NLRC. Petitioners assert that the decision of the Labor Arbiter has become
final and executory with respect to these respondents and, as a consequence, they are barred from
filing a petition for certiorari with the CA.
With respect to the absence of some of the workers signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly
have sufficient knowledge and belief to swear to the truth of the allegations in the petition had
signed the same. Such verification is deemed a sufficient assurance that the matters alleged in the
petition have been made in good faith or are true and correct, and not merely speculative.
Moreover, respondents' Partial Appeal shows that the appeal stipulated as complainants-appellants
"Rizal Beato, et al.", meaning that there were more than one appellant who were all workers of

petitioners.
In any case, the settled rule is that a pleading which is required by the Rules of Court to be
verified, may be given due course even without a verification if the circumstances warrant the
suspension of the rules in the interest of justice. 24 Indeed, the absence of a verification is not
jurisdictional, but only a formal defect, which does not of itself justify a court in refusing to allow
and act on a case. 25 Hence, the failure of some of the respondents to sign the verification attached
to their Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.
Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil
with respect to Lubas, because the said doctrine is applicable only to corporations and Lubas is not
a corporation but a single proprietorship; that Lubas had been found by the Labor Arbiter and the
NLRC to have a personality which is separate and distinct from that of PTI; that PTI had no hand in
the management and operation as well as control and supervision of the employees of Lubas.
The Court is not persuaded.
On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of
PTI. A settled formulation of the doctrine of piercing the corporate veil is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will,
when necessary to protect the rights of third parties, disregard the legal fiction that these two
entities are distinct and treat them as identical or as one and the same. 26 In the present case, it
may be true that Lubas is a single proprietorship and not a corporation. However, petitioners
attempt to isolate themselves from and hide behind the supposed separate and distinct
personality of Lubas so as to evade their liabilities is precisely what the classical doctrine of
piercing the veil of corporate entity seeks to prevent and remedy.
Thus, the Court agrees with the observations of the CA, to wit:
As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was
Prince Transport who made the decision to transfer its employees to the former? Besides, Prince
Transport never regarded Lubas Transport as a separate entity. In the aforesaid letter, it referred to

said entity as "Lubas operations." Moreover, in said letter, it did not transfer the employees; it
"assigned" them. Lastly, the existing funds and 201 file of the employees were turned over not to a
new company but a "new management."27
The Court also agrees with respondents that if Lubas is indeed an entity separate and independent
from PTI why is it that the latter decides which employees shall work in the former?
What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner
company admitted that Lubas is one of its sub-companies. 28 In addition, PTI, in its letters to its
employees who were transferred to Lubas, referred to the latter as its "New City Operations Bus." 29
Moreover, petitioners failed to refute the contention of respondents that despite the latters
transfer to Lubas of their daily time records, reports, daily income remittances of conductors,
schedule of drivers and conductors were all made, performed, filed and kept at the office of PTI. In
fact, respondents identification cards bear the name of PTI.
It may not be amiss to point out at this juncture that in two separate illegal dismissal cases
involving different groups of employees transferred by PTI to other companies, the Labor Arbiter
handling the cases found that these companies and PTI are one and the same entity; thus, making
them solidarily liable for the payment of backwages and other money claims awarded to the
complainants therein.30
Petitioners likewise aver that the CA erred and committed grave abuse of discretion when it
ordered petitioners to reinstate respondents to their former positions, considering that the issue of
reinstatement was never brought up before it and respondents never questioned the award of
separation pay to them.
The Court is not persuaded.
It is clear from the complaints filed by respondents that they are seeking reinstatement. 31
In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the
relief sought, but may add a general prayer for such further or other reliefs as may be deemed just

and equitable. Under this rule, a court can grant the relief warranted by the allegation and the
proof even if it is not specifically sought by the injured party; the inclusion of a general prayer may
justify the grant of a remedy different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant.321avvphi1
Moreover, in BPI Family Bank v. Buenaventura,33 this Court ruled that the general prayer is broad
enough "to justify extension of a remedy different from or together with the specific remedy
sought." Even without the prayer for a specific remedy, proper relief may be granted by the court if
the facts alleged in the complaint and the evidence introduced so warrant. The court shall grant
relief warranted by the allegations and the proof even if no such relief is prayed for. The prayer in
the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not
otherwise specifically prayed for. 34 In the instant case, aside from their specific prayer for
reinstatement, respondents, in their separate complaints, prayed for such reliefs which are
deemed just and equitable.
As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent reason to
depart from the findings of the CA that respondents transfer of work assignments to Lubas was
designed by petitioners as a subterfuge to foil the formers right to organize themselves into a
union. Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor
practice if it interferes with, restrains or coerces its employees in the exercise of their right to selforganization or if it discriminates in regard to wages, hours of work and other terms and conditions
of employment in order to encourage or discourage membership in any labor organization.
Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after
respondents' transfer to Lubas, petitioners left them high and dry insofar as the operations of
Lubas was concerned. The Court finds no error in the findings and conclusion of the CA that
petitioners "withheld the necessary financial and logistic support such as spare parts, and repair
and maintenance of the transferred buses until only two units remained in running condition." This
left respondents virtually jobless.
WHEREFORE, the instant petition is denied. The assailed Decision and Resolution of the Court of

Appeals, dated December 20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953,
are AFFIRMED.
SO ORDERED.
G.R. No. 179015
UNITED

June 13, 2012

COCONUT

PLANTERS

BANK,

Petitioner,

vs.
PLANTERS PRODUCTS, INC., JANET LAYSON and GREGORY GREY, Respondents.
DECISION
ABAD, J.:
This case is about the liability of the bank for a transaction entered into by its branch manager in
connivance with a client.
The Facts and the Case
Respondent Planters Products, Incorporated (PPI), a fertilizer manufacturer, entered into an
arrangement with respondent Janet Layson for the delivery of fertilizers to her, payable from the
proceeds of the loan that petitioner United Coconut Planters Bank (UCPB) extended to her. On
February 11, 1980 Layson executed a document called "pagares," written on the dorsal side of a
UCPB promissory note.1 The pagares stated that Layson had an approved loan with UCPB-Iloilo
Branch for P200,000.00. The second portion of the pagares, signed by that branchs manager
respondent Gregory Grey, stated that the "assignment has been duly accepted and payment duly
guaranteed within 60 days from PPIs Invoice." Specifically, the pagares said:
I/We irrevocably assign the proceeds of this Promissory Note to Planters Products, Inc., for the
account of Janet Layson as payment for my fertilizer/agchemicals withdrawals covered by Invoice
Nos. _______ for application to my fertilizer line.

I/We hereby attest and affirm that I/We have an approved loan with United Coconut Planters Bank,
Iloilo Branch, in the amount of Pesos "TWO HUNDRED THOUSAND (P200,000.00) which is allotted
for fertilizer.
Sgd.
JANET LAYSON
Feb. 11, 1980
Assignment accepted and payment unconditionally guaranteed within sixty (60) days from Planters
Products, Inc. Invoice date up to Pesos: Two Hundred Thousand (P200,000.00) only.
Sgd.
GREGORY

GREY

Manager
Subsequently, Layson executed a third document "Letter Guarantee by the Dealer," stating that
she binds herself to pay PPI the face value of the pagares in case UCPB did not pay the same at
maturity. But contrary to her undertakings, on the following day, February 12, 1980, Layson
withdrew with branch manager Greys connivance the P200,000.00 loan that UCPB granted her.
On the strength of the three documents, PPI delivered quantities of fertilizers to Layson. Layson
and Grey duplicated their transactions with PPI on February 18 and 27, 1980 covering two loans of
P100,000.00 each.
On April 28, 1980 PPI presented the documents of the financed transactions to UCPB for collection.
But the bank denied the claim on the ground that it neither authorized the transactions nor the
execution of the documents which were not part of its usual banking transactions. UCPB claimed
that branch manager Grey exceeded his authority in guaranteeing payment of Laysons purchases
on credit. The pagares, said UCPB, were illegal and void since banking laws prohibit bank officers
from guaranteeing loans of bank clients.
Consequently, in April 1980 PPI sued Layson, UCPB, and Grey for breach of contract with damages

before the Regional Trial Court (RTC) of Makati.2 Grey died while the case was on trial. Although the
RTC ordered Greys substitution by any of his heirs, no one came to substitute him. Trial proceeded
without prejudice to the claims against his estate.
On April 28, 1999 the RTC rendered a decision, absolving UCPB from liability for the value of the
fertilizer products that PPI sold to Layson on credit. Since Grey acted in excess of his authority in
guaranteeing the payment of the pagares and in involving himself in the transaction, UCPB cannot
be bound by the same. Further, the promissory notes, on the dorsal side of which appeared the
pagares, were not in negotiable form. They had neither a fixed date of maturity nor a fixed amount
of obligation. The pagares is also void under the Civil Code because the prestation, Greys act of
guaranteeing the loan, is prohibited under Section 83 of the General Banking Act.
The court held Layson liable to PPI a) for P399,966.25 with 6% interest from the time it filed its
complaint until fully paid and b) for attorneys fees of P30,000.00. Since Grey impliedly admitted3
having no authority on his own to grant Layson the credit accommodation and UCPBs guarantee
to pay for the fertilizers she bought, the court found him subsidiarily liable for the principal
amount. PPI appealed the decision to the Court of Appeals (CA).
On March 22, 2007 the CA rendered a decision, reversing that of the RTC and declaring UCPB
jointly and severally liable with Layson for the latters obligation to PPI to the extent of
P200,000.00 covering the February 11, 1980 credit accommodation. The court deleted the award
for attorneys fees. As regard to the second and third pagares, the CA ruled that PPI failed to prove
the subsequent assignments. Essentially, the CA ruled
that Laysons pagares were in the nature of assignment of credit, consisting in the proceeds of the
loan that UCPB granted her. Since UCPB, acting through Grey, undertook to deliver those proceeds
to PPI in payment of the fertilizers she was going to buy, UCPB is bound by such undertaking.
UCPB brings the present petition for review of the CA decision.
Issues Presented

The case presents the following issues:

1. Whether or not UCPB is bound by Greys undertaking on its behalf to deliver to PPI the proceeds
of the banks loan to Layson in payment of the fertilizers she bought; and
2. In the negative, whether or not UCPB is entitled to an award of attorneys fees.
The Ruling of the Court
One. The CA held that, in executing the pagares, Layson simply assigned to PPI the P200,000.00
proceeds of her approved loan with UCPB in payment of the fertilizers that she wanted to buy from
PPI. She wrote the pagares at the back of the pro forma promissory note that she executed in
UCPBs favor. The CA did not consider the pagares as a guaranty, a contract, or a negotiable
promissory note.
The CA also held that Laysons assignment to PPI of the P200,000.00 coming to her from UCPB,
with respect to which UCPB may be regarded as an obligor, is binding on the bank.4 A formal
notice is not required to bind the bank regarding its undertaking to make good the assignment.
UCPB may be deemed to have acted in bad faith when it delivered the proceeds of the loan to
Layson, despite its undertaking to turn them over to PPI.
True, a corporation like UCPB is liable to innocent third persons where it knowingly permits its
officer, or any other agent, to perform acts within the scope of his general or apparent authority,
holding him out to the public as possessing power to do those acts.5
But, here, it is plain from the guarantee Grey executed that he was acting for himself, not in
representation of UCPB. Grey wrote that undertaking at the bottom of the pagares as follows:
Assignment accepted and payment unconditionally guaranteed within sixty (60) days from Planters
Products, Inc. Invoice date up to Pesos: Two Hundred Thousand (P200,000.00) only.
Sgd.
GREGORY

GREY

Manager
UCPB cannot be bound by Greys above undertaking since he appears to have made it in his
personal capacity. He signed it under his own name, not in UCPBs name or as its branch manager.
Indeed, the wordings of the undertaking do not at all make any allusion to UCPB.
Besides, by its tenor, Greys undertaking was a guarantee. It says, "payment unconditionally
guaranteed within sixty (60) days from Planters Products, Inc. Invoice date up to Pesos: Two
Hundred Thousand (P200,000.00) only." As it happens, bank guarantees are highly regulated
transactions under the law.6 They are undertakings that are not so casually issued by banks or by
their branch managers at the dorsal side of a clients promissory note as if an afterthought. A bank
guarantee is a contract that binds the bank and so may be entered into only under authority
granted by its board of directors. Such authority does not appear on any document. Indeed, PPI
had no right to expect branch manager Grey to issue one without such authorization.
Notably, the evidence shows that on February 11, 1980, claiming that UCPB had already approved
her loan of P200,000.00, Layson assigned all the proceeds of such loan to PPI in payment of
fertilizers she wanted to buy from it. For his part, Grey agreed to the assignment and, apparently
without authority from the bank, undertook to guarantee the payment of the pagares.
Notwithstanding this undertaking, however, Grey released the P200,000.00 proceeds of the loan to
Layson the next day, February 12, 1980. It is evident that Grey connived with Layson to lure PPI to
deliver to her fertilizers worth P200,000.00 on credit.
UCPB also adduced evidence that Grey lent Layson that P200,000.00 without proper authorization
from the bank.1wphi1 The authority the bank gave him for unilaterally extending unsecured loans
has a ceiling of P10,000.00 only. Grey needed under UCPBs Revised Branch Lending Authority7 the
unanimous approval8 of the Branch Credit Committee,9 of which he was only a member, before he
can grant a higher loan of the kind.
With UCPB absolved of any liability, the Court affirms the ruling of the RTC of Makati that finds
Layson primarily liable to PPI with the latter having the right of recourse to Grey in the event that it
could not recover from her. Importantly, Layson never denied her business dealings with PPI and

her receipt of PPIs fertilizer products. This admission cements her liability for the fertilizers she got
from it.
Two. The CA properly deleted the award of attorneys fees in favor of UCPB. Such fees may be
awarded when one was compelled to litigate and incurred expenses to protect his interests or
when the suit filed was baseless or when the defendant acted in bad faith in filing or impleading
the litigant. Here, however, PPI had good reason to implead UCPB since, after all, its branch
manager played a pivotal role in facilitating the anomalous transaction. Thus, it cannot be said that
PPI acted in bad faith in impleading the bank.
WHEREFORE, the Court GRANTS the petition, REVERSES the decision of the Court of Appeals in CAG.R. CV 67364 dated March 22, 2007, and REINSTATES in toto the decision of the Regional Trial
Court of Makati.
SO ORDERED.
G.R. Nos. 174941
ANTONIO

P.

SALENGA

February 1, 2012
and

NATIONAL

LABOR

RELATIONS

COMMISSION,

Petitioners,

vs.
COURT OF APPEALS and CLARK DEVELOPMENT CORPORATION, Respondents.
DECISION
SERENO, J.:
The present Petition for Certiorari under Rule 65 assails the Decision1 of the Court of Appeals (CA)
promulgated on 13 September 2005, dismissing the Complaint for illegal dismissal filed by
petitioner Antonio F. Salenga against respondent Clark Development Corporation (CDC). The
dispositive portion of the assailed Decision states:
WHEREFORE, premises considered, the original and supplemental petitions are GRANTED. The
assailed resolutions of the National Labor Relations Commission dated September 10, 2003 and

January 21, 2004 are ANNULLED and SET ASIDE. The complaint filed by Antonio B. Salenga against
Clark Development is DISMISSED. Consequently, Antonio B. Salenga is ordered to restitute to Clark
Development Corporation the amount of P3,222,400.00, which was received by him as a
consequence of the immediate execution of said resolutions, plus interest thereon at the rate of
6% per annum from date of
such receipt until finality of this judgment, after which the interest shall be at the rate of 12% per
annum until said amount is fully restituted.
SO ORDERED.2
The undisputed facts are as follows:
On 22 September 1998, President/Chief Executive Officer (CEO) Rufo Colayco issued an Order
informing petitioner that, pursuant to the decision of the board of directors of respondent CDC, the
position of head executive assistant the position held by petitioner was declared redundant.
Petitioner received a copy of the Order on the same day and immediately went to see Colayco. The
latter informed him that the Order had been issued as part of the reorganization scheme approved
by the board of directors. Thus, petitioners employment was to be terminated thirty (30) days
from notice of the Order.
On 17 September 1999, petitioner filed a Complaint for illegal dismissal with a claim for
reinstatement and payment of back wages, benefits, and moral and exemplary damages against
respondent CDC and Colayco. The Complaint was filed with the National Labor Relations
Commission-Regional Arbitration Branch (NLRC-RAB) III in San Fernando, Pampanga. In defense,
respondents, represented by the Office of the Government Corporate Counsel (OGCC), alleged that
the NLRC had no jurisdiction to entertain the case on the ground that petitioner was a corporate
officer and, thus, his dismissal was an intra-corporate matter falling properly within the jurisdiction
of the Securities and Exchange Commission (SEC).
On 29 February 2000, labor arbiter (LA) Florentino R. Darlucio issued a Decision3 in favor of
petitioner Salenga. First, the LA held that the NLRC had jurisdiction over the Complaint, considering

that petitioner was not a corporate officer but a managerial employee. He held the position of head
executive assistant, categorized as a Job Level 12 position, not subject to election or appointment
by the board of directors.
Second, the LA pointed out that respondent CDC and Colayco failed to establish a valid cause for
the termination of petitioners employment. The evidence presented by respondent CDC failed to
show that the position of petitioner was superfluous as to be classified "redundant." The LA further
pointed out that respondent corporation had not disputed the argument of petitioner Salenga that
his position was that of a regular employee. Moreover, the LA found that petitioner had not been
accorded the right to due process. Instead, the latter was dismissed without the benefit of an
explanation of the grounds for his termination, or an opportunity to be heard and to defend
himself.
Finally, considering petitioners reputation and contribution as a government employee for 40
years, the LA awarded moral damages amounting to P2,000,000 and exemplary damages of
P500,000. The dispositive portion of the LAs Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring respondent Clark
Development Corporation and Rufo Colayco guilty of illegal dismissal and for which they are
ordered, as follows:
1. To reinstate complainant to his former or equivalent position without loss of seniority rights and
privileges;
2. To pay complainant his backwages reckoned from the date of his dismissal on September 22,
1998 until actual reinstatement or merely reinstatement in the payroll which as of this date is in
the amount of P722,400.00;
3. To pay complainant moral damages in the amount of P2,000,000.00; and,
4. To pay complainant exemplary damages in the amount of P500,000.00.

SO ORDERED.4
At the time the above Decision was rendered, respondent CDC was already under the leadership of
Sergio T. Naguiat. When he received the Decision on 10 March 2000, he subsequently instructed
Atty. Monina C. Pineda, manager of the Corporate and Legal Services Department and concurrent
corporate board secretary, not to appeal the Decision and to so inform the OGCC.5
Despite these instructions, two separate appeals were filed before LA Darlucio on 20 March 2000.
One appeal6 was from the OGCC on behalf of respondent CDC and Rufo Colayco. The OGCC
reiterated its allegation that petitioner was a corporate officer, and that the termination of his
employment was an intra-corporate matter. The Memorandum of Appeal was verified and certified
by Hilana Timbol-Roman, the executive vice president of respondent CDC. The Memorandum was
accompanied by a UCPB General Insurance Co., Inc. supersedeas bond covering the amount due to
petitioner as adjudged by LA Darlucio. Timbol-Roman and OGCC lawyer Roy Christian Mallari also
executed on 17 March 2000 a Joint Affidavit of Declaration wherein they swore that they were the
"respective authorized representative and counsel" of respondent corporation. However, the
Memorandum of Appeal and the Joint Affidavit of Declaration were not accompanied by a board
resolution from respondents board of directors authorizing either Timbol-Roman or Atty. Mallari, or
both, to pursue the case or to file the appeal on behalf of respondent.
It is noteworthy that Naguiat, who was president/CEO of respondent CDC from 3 February 2000 to
5 July 2000, executed an Affidavit on 20 March 2002,7 wherein he stated that without his
knowledge, consent or approval, Timbol-Roman and Atty. Mallari filed the above-mentioned appeal.
He further alleged that their statements were false.
The second appeal, meanwhile, was filed by former CDC President/CEO Rufo Colayco. Colayco
alleged that petitioner was dismissed not on 22 September 1998, but twice on 9 March 1999 and
23 March 1999. The dismissal was allegedly approved by respondents CDC board of directors
pursuant to a new organizational structure. Colayco likewise stated that he had posted a
supersedeas bond the same bond taken out by Timbol-Roman issued by the UCPB General
Insurance Co. dated 17 March 2000 in order to secure the monetary award, exclusive of moral and

exemplary damages.
Petitioner thereafter opposed the two appeals on the grounds that both appellants, respondent
CDC as allegedly represented by Timbol-Roman and Atty. Mallari and Rufo Colayco had failed to
observe Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure; and that appellants had not been
authorized by respondents board of directors to represent the corporation and, thus, they were
not the "employer" whom the Rules referred to. Petitioner also alleged that appellants failed to
refute the findings of LA Darlucio in the previous Decision.
In the meantime, while the appeal was pending, on 19 October 2000, respondents board
chairperson and concurrent President/CEO Rogelio L. Singson ordered the reinstatement of
petitioner to the latters former position as head executive assistant, effective 24 October 2000.8
On 28 May 2001, respondent CDCs new President/CEO Emmanuel Y. Angeles issued a
Memorandum,

which

offered

all

managers

of

respondent

corporation

an

early

separation/redundancy program. Those who wished to avail themselves of the program were to be
given the equivalent of their 1.25-month basic salary for every year of service and leave credits
computed on the basis of the same 1.25-month equivalent of their basic salary.9
In August 2001, respondent CDC offered another retirement plan granting higher benefits to the
managerial employees. Thus, on 12 September 2001, petitioner filed an application for the early
retirement program, which Angeles approved on 3 December 2001.
Meanwhile, in the proceedings of the NLRC, petitioner received on 12 September 2001 its 30 July
2001 Decision10 on the appeal filed by Timbol-Roman and Colayco. It is worthy to note that the
said Decision referred to the reports of reviewer arbiters Cristeta D. Tamayo and Thelma M.
Concepcion, who in turn found that petitioner Salenga was a corporate officer of CDC.
Nevertheless, the First Division of the NLRC upheld LA Darlucios ruling that petitioner Salenga was
indeed a regular employee. It also found that redundancy, as an authorized cause for dismissal,
has not been sufficiently proven, rendering the dismissal illegal. However, the NLRC held that the
award of exemplary and moral damages were unsubstantiated. Moreover, it also dropped Colayco
as a respondent to the case, since LA Darlucio had failed to provide any ground on which to anchor

the formers solidary liability.

Petitioner Salenga thereafter moved for a partial reconsideration of the above-mentioned Decision.
He sought the reinstatement of the award of exemplary and moral damages. He likewise insisted
that the NLRC should not have entertained the appeal on the following grounds: (1) respondent
CDC did not file an appeal and did not post the required cash or surety bond; (2) both TimbolRoman and Colayco were admittedly not real parties-in-interest; (3) they were not the employer or
the employers authorized representative and, thus, had no right to appeal; and (4) both appeals
had not been perfected for failure to post the required cash or surety bond. In other words,
petitioners theory revolved on the fact that neither Timbol-Roman nor Colayco was authorized to
represent the corporation, so the corporation itself did not appeal LA Darlucios Decision. As a
result, that Decision should be considered as final and executory.
For its part, the OGCC also filed a Motion for Reconsideration11 of the NLRCs 30 July 2001 Decision
insofar as the finding of illegal dismissal was concerned. It no longer questioned the commissions
finding that petitioner was a regular employee, but instead insisted that he had been dismissed as
a consequence of his redundant position. The motion, however, was not verified by the duly
authorized representative of respondent CDC.
On 5 December 2002, the NLRC denied petitioner Salengas Motion for Partial Reconsideration and
dismissed the Complaint. The dispositive portion of the Resolution12 reads as follows:
WHEREFORE, complainants partial motion for reconsideration is denied. As recommended by
Reviewer Arbiters Cristeta D. Tamayo in her August 2, 2000 report and Thelma M. Concepcion in
her November 25, 2002 report, the decision of Labor Arbiter Florentino R. Darlucio dated 29
February 2000 is set aside.
The complaint below is dismissed for being without merit.
SO ORDERED.13
Meanwhile, pending the Motions for Reconsideration of the NLRCs 30 July 2001 Decision, another

issue arose with regard to the computation of the retirement benefits of petitioner. Respondent
CDC did not immediately give his requested retirement benefits, pending clarification of the
computation of these benefits. He claimed that the computation of his retirement benefits should
also include the forty (40) years he had been in government service in accordance with Republic
Act No. (R.A.) 8291, or the GSIS Act, and should not be limited to the length of his employment
with respondent corporation only, as the latter insisted.
In a letter dated 14 March 2003, petitioner Salengas counsel wrote to the board of directors of
respondent to follow up the payment of the retirement benefits allegedly due to petitioner.14
Pursuant to the NLRCs dismissal of the Complaint of petitioner Salenga, Angeles subsequently
denied the formers request for his retirement benefits, to wit:15
Please be informed that we cannot favorably grant your clients claim for retirement benefits
considering that Clark Development Corporation's dismissal of Mr. Antonio B. Salenga had been
upheld by the National Labor Relations Commission through a Resolution dated December 5,
2002...
xxx

xxx

xxx

As it is, the said Resolution dismissed the Complaint filed by Mr. Salenga for being without merit.
Consequently, he is not entitled to receive any retirement pay from the corporation.
Meanwhile, petitioner Salenga filed a second Motion for Reconsideration of the 5 December 2002
Resolution of the NLRC, reiterating his claim that it should not have entertained the imperfect
appeal, absent a proper verification and certification against forum-shopping from the duly
authorized representative of respondent CDC. Without that authority, neither could the OGCC act
on behalf of the corporation.
The OGCC, meanwhile, resurrected its old defense that the NLRC had no jurisdiction over the case,
because petitioner Salenga was a corporate officer.
The parties underwent several hearings before the NLRC First Division. During these times,

petitioner Salenga demanded from the OGCC to present a board resolution authorizing it or any
other person to represent the corporation in the proceedings. This, the OGCC failed to do.
After giving due course to the Motion for Reconsideration filed by petitioner Salenga, the NLRC
issued a Resolution16 on 10 September 2003, partially granting the motion. This time, the First
Division of the NLRC held that, absent a board resolution authorizing Timbol-Roman to file the
appeal on behalf of respondent CDC, the appeal was not perfected and was thus a mere scrap of
paper. In other words, the NLRC had no jurisdiction over the appeal filed before it.
The NLRC further held that respondent CDC had failed to show that petitioner Salengas dismissal
was pursuant to a valid corporate reorganization or board resolution. It also deemed respondent
estopped from claiming that there was indeed a redundancy, considering that petitioner Salenga
had been reinstated to his position as head executive assistant. While it granted the award of
moral damages, it nevertheless denied exemplary damages. Thus, the dispositive portion of its
Decision reads:
WHEREFORE, premises considered, the complainants Motion for Reconsideration is GRANTED and
We set aside our Resolution of December 5, 2002. The Decision of the Labor Arbiter dated February
29, 2000 is REINSTATED with the MODIFICATION that:
1.) Being a nominal party, respondent Rufo Colayco is declared to be not jointly and severally liable
with respondent Clark Development Corporation;
2.) Respondent Clark Development Corporation is ordered to pay the complainant his full
backwages and other monetary claims to which he is entitled under the decision of the Labor
Arbiter;
3.) Respondent CDC is likewise ordered to pay the complainant moral and exemplary damages as
provided under the Labor Arbiters Decision; and
4.) All other money claims are DENIED for lack of merit.
In the meantime, respondent CDC is ordered to pay the complainant his retirement benefits

without further delay.

SO ORDERED.17
On 3 October 2003, the OGCC filed a Motion for Reconsideration18 despite the absence of a
verification and the certification against forum shopping.
On 21 January 2004, the motion was denied by the NLRC for lack of merit.19
On 5 February 2004, the executive clerk of the NLRC First Division entered the judgment on the
foregoing case. Thereafter, on 9 February 2004, the NLRC forwarded the entire records of the case
to the NLRC-RAB III Office in San Fernando, Pampanga for appropriate action.
On 4 March 2004, petitioner Salenga filed a Motion for Issuance of Writ of Execution before the
NLRC-RAB III, Office of LA Henry D. Isorena. The OGCC opposed the motion on the ground that it
had filed with the CA a Petition for Certiorari seeking the reversal of the NLRC Decision dated 30
July 2001 and the Resolutions dated 10 September 2003 and 21 January 2004, respectively. It is
noteworthy that, again, there was no board resolution attached to the Petition authorizing its filing.
Despite the pending Petition with the CA, LA Isorena issued a Writ of Execution enforcing the 10
September 2003 Resolution of the NLRC. On 1 April 2004, the LA issued an Order20 to the
manager of the Philippine National Bank, Clark Branch, Angeles City, Pampanga, to immediately
release in the name of NLRC-RAB III the amount of P3,222,400 representing partial satisfaction of
the judgment award, including the execution fee of P31,720.
Respondent CDC filed with the CA in February 2004 a Petition for Certiorari with a prayer for the
issuance of a temporary restraining order and/or a writ of preliminary injunction. However, the
Petition still lacked a board resolution from the board of directors of respondent corporation
authorizing its then President Angeles to verify and certify the Petition on behalf of the board. It
was only on 16 March 2004 that counsel for respondent filed a Manifestation/Motion21 with an
attached Secretarys Certificate containing the boards Resolution No. 86, Series of 2001. The
Resolution authorized Angeles to represent respondent corporation in prosecuting, maintaining, or

compromising any lawsuit in connection with its business.

Meanwhile, in the proceedings before LA Isorena, both respondent CDCs legal department and the
OGCC on 6 April 2004 filed their respective Motions to Quash Writ of Execution.22 They both cited
the failure to afford to respondent due process in the issuance of the writ. They claimed that the
pre-conference hearing on the execution of the judgment had not pushed through. They also
reiterated that the Petition for Certiorari dated 11 February 2004 was still pending with the CA.
Both motions were denied by LA Isorena for lack of factual and legal bases.
On 6 May 2004, respondent filed with LA Isorena another Motion to Quash Writ of Execution, again
reiterating the pending Petition with the CA.
This active exchange of pleadings and motions and the delay in the payment of his money claims
eventually led petitioner Salenga to file an Omnibus Motion23 before LA Isorena. In his motion, he
recomputed the amount due him representing back wages, other benefits or allowances, legal
interests and attorneys fees. He also prayed for the computation of his retirement benefits plus
interests in accordance with R.A. 829124 and R.A. 1616.25 He insisted that since respondent CDC
was a government-owned and -controlled corporation (GOCC), his previous government service
totalling 40 years must also be credited in the computation of his retirement pay. Thus, he
demanded the payment of the total amount of P23,920,772.30, broken down as follows:
a. From the illegal dismissal suit: (In Philippine peso)
a. Recomputed award 3,758,786
b. Legal interest 5,089,342.58
c. Attorneys fees 1,196,052.80
d. Litigation expenses 250,000
b. Retirement pay

a. Retirement gratuity 6,987,944

b. Unused vacation and sick leave 1,440,328
c. Legal interest 4,050,544.96
d. Attorneys fees 1,147,781.90
On 11 May 2004, the CA issued a Resolution26 ordering petitioner Salenga to comment on the
Petition and holding in abeyance the issuance of a temporary restraining order.
The parties thereafter filed their respective pleadings.
On 19 July 2004, the CA temporarily restrained the NLRC from enforcing the Decision dated 29
February 2000 for a period of 60 days.27 After the lapse of the 60 days, LA Isorena issued a Notice
of Hearing/Conference scheduled for 1 October 2004 on petitioners Omnibus Motion dated 7 May
2004.
Meanwhile, on 24 September 2004, the CA issued another Resolution,28 this time denying the
application for the issuance of a writ of preliminary injunction, after finding that the requisites for
the issuance of the writ had not been met.
Respondent CDC subsequently filed a Supplemental Petition29 with the CA, challenging the
computation petitioner Salenga made in his Omnibus Motion filed with the NLRC. Respondent
alleged that the examiner had erred in including the other years of government service in the
computation of retirement benefits. It claimed that, since respondent corporation was created
under the Corporation Code, petitioner Salenga was not covered by civil service laws. Hence, his
retirement benefits should only be limited to the number of years he had been employed by
respondent.
Subsequently, respondent CDC filed an Omnibus Motion30 to admit the Supplemental Petition and
to reconsider the CAs Resolution denying the issuance of a writ of preliminary injunction. In the
motion, respondent alleged that petitioner Salenga had been more than sufficiently paid the

amounts allegedly due him, including the award made by LA Darlucio. On 12 March 2002,
respondent CDC had issued a check amounting to P852,916.29, representing petitioners
retirement pay and terminal pay. Meanwhile, on 2 April 2004, P3,254,120 representing the initial
award was debited from the account of respondent CDC.
On 7 February 2005, respondent CDC filed a Motion31 once again asking the CA to issue a writ of
preliminary injunction in the light of a scheduled 14 February 2005 conference called by LA
Mariano Bactin, who had taken over the case from LA Isorena.
At the 14 February 2005 hearing, the parties failed to reach an amicable settlement and were thus
required to submit their relevant pleadings and documents in support of their respective cases.
On 16 February 2005, the CA issued a Resolution32 admitting the Supplemental Petition filed by
respondent, but denying the prayer for the issuance of an injunctive writ.
Thereafter, on 8 March 2005, LA Bactin issued an Order33 resolving the Omnibus Motion filed by
petitioner Salenga for the recomputation of the monetary claims due him. In the Order, LA Bactin
denied petitioners Motion for the recomputation of the award of back wages, benefits, allowances
and privileges based on the 29 February 2000 Decision of LA Darlucio. LA Bactin held that since
the Decision had become final and executory, he no longer had jurisdiction to amend or to alter
the judgment.
Anent the second issue of the computation of retirement benefits, LA Bactin also denied the claim
of petitioner Salenga, considering that the latters retirement benefits had already been paid. The
LA, however, did not rule on whether petitioner was entitled to retirement benefits, either under
the Government Service Insurance System (GSIS) or under the Social Security System (SSS), and
held that this issue was beyond the expertise and jurisdiction of a LA.
Petitioner Salenga thereafter appealed to the NLRC, which granted the appeal in a Resolution34
dated 22 July 2005. First, it was asked to resolve the issue of the propriety of having the Laguesma
Law Office represent respondent CDC in the proceedings before the LA. The said law firm entered
its appearance as counsel for respondent during the pre-execution conference/hearing on 1

October 2004. On this issue, the NLRC held that respondent corporations legal department, which
had previously been representing the corporation, was not validly substituted by the Laguesma
Law Office. In addition, the NLRC held that respondent had failed to comply with Memorandum
Circular No. 9, Series of 1998, which strictly prohibits the hiring of lawyers of private law firms by
GOCCs without the prior written conformity and acquiescence of the Office of Solicitor General, as
the case may be, and the prior written concurrence of the Commission on Audit (COA). Thus, the
NLRC held that all actions and submissions undertaken by the Laguesma Law Office on behalf of
respondent were null and void.
The second issue raised before the NLRC was whether LA Bactin acted without jurisdiction in
annulling and setting aside the formers final and executory judgment contained in its 10
September 2003 Resolution, wherein it held that the appeal had not been perfected, absent the
necessary board resolution allowing or authorizing Timbol-Roman and Atty. Mallari to file the
appeal. On this issue, the NLRC stated:
The final and executory judgment in this case is clearly indicated in the dispositive portion of Our
Resolution

promulgated

on

September

10,

2003

GRANTING

complainants

motion

for

reconsideration, SETTING ASIDE Our Resolution of December 5, 2002, and REINSTATING the
Decision of the Labor Arbiter dated February 29, 2000 with the following modification[s]: (1)
declaring respondent Rufo Colayco not jointly and severally liable with respondent Clark
Development Corporation; (2) ordering respondent CDC to pay the complainant his full backwages
and other monetary claims to which he is entitled under the decision of the Labor Arbiter; (3)
ordering respondent CDC to pay complainant moral and exemplary damages as provided under the
Labor Arbiters Decision; and (4) ordering respondent CDC to pay the complainant his retirement
benefits without further delay. This was entered in the Book of Entry of Judgment as final and
executory effective as of February 2, 2004.
Implementing this final and executory judgment, Arbiter Isorena issued an Order dated May 24,
2004, DENYING respondents Motion to Quash the Writ of Execution dated March 22, 2004,
correctly stating thusly:

"Let it be stressed that once a decision has become final and executory, it becomes the ministerial
duty of this Office to issue the corresponding writ of execution. The rationale behind it is based on
the fact that the winning party has suffered enough and it is the time for him to enjoy the fruits of
his labor with dispatch. The very purpose of the pre-execution conference is to explore the
possibility for the parties to arrive at an amicable settlement to satisfy the judgment award
speedily, not to delay or prolong its implementation."
Thus, when Arbiter Bactin, who took over from Arbiter Isorena upon the latters filing for leave of
absence due to poor health in January 2005, issued the appealed Order nullifying, instead of
implementing, the final and executory judgment of this Commission, the labor arbiter a quo acted
WITHOUT JURISDICTION.35
xxx

xxx

xxx

WHEREFORE, premises considered, the appeal of herein complainant is hereby GRANTED, and We
declare NULL AND VOID the appealed Order of March 8, 2005 and SET ASIDE said Order; We direct
the immediate issuance of the corresponding Alias Writ of Execution to enforce the final and
executory judgment of this Commission as contained in Our September 10, 2003 Resolution.
SO ORDERED.36
Unwilling to accept the above Resolution of the NLRC, the Laguesma Law Office filed a Motion for
Reconsideration dated 29 August 2005 with the NLRC. Again, the motion lacked proper verification
and certification against non-forum shopping.
In the meantime, the OGCC also filed with the CA a Motion for the Issuance of a Writ of Preliminary
Injunction dated 30 August 200537 against the NLRCs 22 July 2005 Resolution. The OGCC alleged
that the issues in the Resolution addressed monetary claims that were raised by petitioner Salenga
only in his Omnibus Motion dated 7 May 2004 or after the issuance of the 10 September 2003
Decision of LA Darlucio. Thus, the OGCC insisted that the NLRC had no jurisdiction over the issue,
for the matter was still pending with the CA.

The OGCC likewise filed another Motion for Reconsideration38 dated 31 August 2005 with the
NLRC. The OGCC maintained that it was only acting in a collaborative manner with the legal
department of respondent CDC, for which the former remained the lead counsel. The OGCC
reiterated that, as the statutory counsel of GOCCs, it did not need authorization from them to
maintain a case, and thus, LA Bactin had jurisdiction over that case. Finally, it insisted that
petitioner Salenga was not covered by civil service laws on retirement, the CDC having been
created under the Corporation Code.
On 13 September 2005, the CA promulgated the assailed Decision. Relying heavily on the reports
of Reviewer Arbiters Cristeta D. Tamayo and Thelma M. Concepcion, it held that petitioner Salenga
was a corporate officer. Thus, the issue before the NLRC was an intra-corporate dispute, which
should have been lodged with the Securities and Exchange Commission (SEC), which had
jurisdiction over the case at the time the issue arose. The CA likewise held that the NLRC
committed grave abuse of discretion when it allowed and granted petitioner Salengas second
Motion for Reconsideration, which was a prohibited pleading.
Petitioner subsequently filed a Motion for Reconsideration on 7 October 2005, alleging that the CA
committed grave abuse of discretion in reconsidering the findings of fact, which had already been
found to be conclusive against respondent; and in taking cognizance of the latters Petition which
had not been properly verified.
The CA, finding no merit in petitioners allegations, denied the motion in its 17 August 2006
Resolution.
On 4 September 2006, petitioner Salenga filed a Motion for Extension of Time to File a Petition for
Review on Certiorari under Rule 45, praying for an extension of fifteen (15) days within which to
file the Petition. The motion was granted through this Courts Resolution dated 13 September
2006. The case was docketed as G.R. No. 174159.
On 25 September 2006, however, petitioner filed a Manifestation39 withdrawing the motion. He
manifested before us that he would instead file a Petition for Certiorari under Rule 65, which was
eventually docketed as G.R. No. 174941. On 7 July 2008, this Court, through a Resolution,

considered the Petition for Review in G.R. No. 174159 closed and terminated.
Petitioner raises the following issues for our resolution:
I.
The Court of Appeals acted without jurisdiction in reviving and re-litigating the factual issues and
matters of petitioners illegal dismissal and retirement benefits.
II.
The Court of Appeals had no jurisdiction to entertain the original Petition as a remedy for an appeal
that had actually not been filed, absent a board resolution allowing the appeal.
III.
The Court of Appeals acted with grave abuse of discretion when it did the following:
a. It failed to dismiss the original and supplemental Petitions despite the lack of a board resolution
authorizing the filing thereof.
b. It failed to dismiss the Petitions despite the absence of a proper verification and certification
against non-forum shopping.
c. It failed to dismiss the Petitions despite respondents failure to inform it of the pending
proceedings before the NLRC involving the same issues.
d. It failed to dismiss the Petitions on the ground of forum shopping.
e. It did not dismiss the Petition when respondent failed to attach to it certified true copies of the
assailed NLRC 30 July 2001 Decision; 10 September 2003 Resolution; 21 January 2004 Resolution;
copies of material portions of the record as are referred to therein; and copies of pleadings and
documents relevant and pertinent thereto.

f. It did not act on respondents failure to serve on the Office of the Solicitor General a copy of the
pleadings, motions and manifestations the latter had filed before the Court of Appeals, as well as
copies of pertinent court resolutions and decisions, despite the NLRC being a party to the present
case.
g. It disregarded the findings of fact and conclusions of law arrived at by LA Darlucio, subjecting
them to a second analysis and evaluation and supplanting them with its own findings.
h. It granted the Petition despite respondents failure to show that the NLRC committed grave
abuse of discretion in rendering the latters 30 July 2001 Decision, 10 September 2003 Resolution
and 21 January 2004 Resolution.
i. It dismissed the complaint for illegal dismissal and ordered the restitution of the P3,222,400
already awarded to petitioner, plus interest thereon.
In its defense, private respondent insists that the present Petition for Certiorari under Rule 65 is an
improper remedy to question the Decision of the CA, and thus, the case should be dismissed
outright. Nevertheless, it reiterates that private petitioner was a corporate officer whose
employment was dependent on board action. As such, private petitioners employment was an
intra-corporate controversy cognizable by the SEC, not the NLRC. Private respondent also asserts
that it has persistently sought the reversal of LA Darlucios Decision by referring to the letters sent
to the OGCC, as well as Verification and Certificate against forum-shopping. However, these
documents were signed only during Angeles time as private respondents president/CEO, and not
of the former presidents. Moreover, private respondent contends that private petitioner is not
covered by civil service laws, thus, his years in government service are not creditable for the
purpose of determining the total amount of retirement benefits due him. In relation to this, private
respondent enumerates the amounts already paid to private petitioner.
The Courts Ruling
The Petition has merit.

This Court deigns it proper to collapse the issues in this Petition to simplify the matters raised in
what appears to be a convoluted case. First, we need to determine whether the NLRC and the CA
committed grave abuse of discretion amounting to lack or excess of jurisdiction, when they
entertained respondents so-called appeal of the 29 February 2000 Decision rendered by LA
Darlucio.
Second, because of the turn of events, a second issue the computation of retirement benefits
cropped up while the first case for illegal dismissal was still pending. Although the second issue
may be considered as separate and distinct from the illegal dismissal case, the issue of the proper
computation of the retirement benefits was nevertheless considered by the relevant administrative
bodies, adding more confusion to what should have been a simple case to begin with.
The
to

NLRC
entertain

Timbol-Roman

had

no

the

appeal
and

jurisdiction
filed

by
former

CDC CEO Colayco.

To recall, on 29 February 2000, LA Darlucio rendered a Decision in favor of petitioner, stating as
follows:
xxxComplainant cannot be considered as a corporate officer because at the time of his
termination, he was holding the position of Head Executive Assistant which is categorized as a Job
Level 12 position that is not subject to the election or appointment by the Board of Directors. The
approval of Board Resolution Nos. 200 and 214 by the Board of Directors in its meeting held on
February 11, 1998 and March 25, 1998 clearly refers to the New CDC Salary Structure where the
pay adjustment was based and not to complainants relief as Vice-President, Joint Ventures and
Special Projects. While it is true that his previous positions are classified as Job Level 13 which are
subject to board confirmation, the status of his appointment was permanent in nature. In fact, he
had undergone a six-month probationary period before having acquired the permanency of his
appointment. However, due to the refusal of the board under then Chairman Victorino Basco to
confirm his appointment, he was demoted to the position of Head Executive Assistant. Thus,

complainant correctly postulated that he was not elected to his position and his tenure is not
dependent upon the whim of the boardxxx
xxx

xxx

xxx

Anent the second issue, this Office finds and so holds that respondents have miserably failed to
show or establish the valid cause in terminating the services of complainant.
xxx

xxx

xxx

In the case at bar, respondents failed to adduce any evidence showing that the position of Head
Executive Assistant is superfluous. In fact, they never disputed the argument advanced by
complainant that the position of Head Executive Assistant was classified as a regular position in
the Position Classification Study which is an essential component of the Organizational Study that
had been approved by the CDC board of directors in 1995 and still remains intact as of the end of
1998. Likewise, studies made since 1994 by various management consultancy groups have
determined the need for the said position in the Office of the President/CEO in relation to the
vision, mission, plans, programs and overall corporate goals and objectives of respondent CDC.
There is no evidence on record to show that the position of Head Executive Assistant was abolished
by the Board of Directors in its meeting held in the morning of September 22, 1998. The minutes of
the meeting of the board on said date, as well as its other three meetings held in the month of
September 1998 (Annexes "B", "C", "D" and "E", Complainants Reply), clearly reveal that no
abolition or reorganization plan was discussed by the board. Hence, the ground of redundancy is
merely a device made by respondent Colayco in order to ease out the complainant from the
respondent corporation.
Moreover, the other ground for complainants dismissal is unclear and unknown to him as
respondent did not specify nor inform the complainant of the alleged recent developmentsxxx
This Office is also of the view that complainant was not accorded his right to due process prior to
his termination. The law requires that the employer must furnish the worker sought to be
dismissed with two (2) written notices before termination may be validly effected: first, a notice

apprising the employee of the particular acts or omissions for which his dismissal is sought and,
second, a subsequent notice informing the employee of the decision to dismiss him. In the case at
bar, complainant was not apprised of the grounds of his termination. He was not given the
opportunity to be heard and defend himselfxxx40
The OGCC, representing respondent CDC and former CEO Colayco separately appealed from the
above Decision. Both alleged that they had filed the proper bond to cover the award granted by LA
Darlucio.
It is clear from the NLRC Rules of Procedure that appeals must be verified and certified against
forum-shopping by the parties-in-interest themselves. In the case at bar, the parties-in-interest are
petitioner Salenga, as the employee, and respondent Clark Development Corporation as the
employer.
A corporation can only exercise its powers and transact its business through its board of directors
and through its officers and agents when authorized by a board resolution or its bylaws. The power
of a corporation to sue and be sued is exercised by the board of directors. The physical acts of the
corporation, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate bylaws or by a specific act of the board. The purpose of
verification is to secure an assurance that the allegations in the pleading are true and correct and
have been filed in good faith.41
Thus, we agree with petitioner that, absent the requisite board resolution, neither Timbol-Roman
nor Atty. Mallari, who signed the Memorandum of Appeal and Joint Affidavit of Declaration allegedly
on behalf of respondent corporation, may be considered as the "appellant" and "employer"
referred to by Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure, which state:
SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal shall be filed within the
reglementary period as provided in Section 1 of this Rule; shall be verified by appellant himself in
accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of the required
appeal fee and the posting of a cash or surety bond as provided in Section 6 of this Rule; shall be
accompanied by memorandum of appeal in three (3) legibly typewritten copies which shall state

the grounds relied upon and the arguments in support thereof; the relief prayed for; and a
statement of the date when the appellant received the appealed decision, resolution or order and a
certificate of non-forum shopping with proof of service on the other party of such appeal. A mere
notice of appeal without complying with the other requisites aforestated shall not stop the running
of the period for perfecting an appeal.
(b) The appellee may file with the Regional Arbitration Branch or Regional Office where the appeal
was filed, his answer or reply to appellant's memorandum of appeal, not later than ten (10)
calendar days from receipt thereof. Failure on the part of the appellee who was properly furnished
with a copy of the appeal to file his answer or reply within the said period may be construed as a
waiver on his part to file the same.
(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with these
Rules, the Commission shall limit itself to reviewing and deciding specific issues that were elevated
on appeal.
SECTION 5. APPEAL FEE. -The appellant shall pay an appeal fee of one hundred fifty pesos
(P150.00) to the Regional Arbitration Branch or Regional Office, and the official receipt of such
payment shall be attached to the records of the case.
SECTION 6. BOND. - In case the decision of the Labor Arbiter or the Regional Director involves a
monetary award, an appeal by the employer may be perfected only upon the posting of a cash or
surety bond. The appeal bond shall either be in cash or surety in an amount equivalent to the
monetary award, exclusive of damages and attorneys fees.
In case of surety bond, the same shall be issued by a reputable bonding company duly accredited
by the Commission or the Supreme Court, and shall be accompanied by:
(a) a joint declaration under oath by the employer, his counsel, and the bonding company,
attesting that the bond posted is genuine, and shall be in effect until final disposition of the case.
(b) a copy of the indemnity agreement between the employer-appellant and bonding company;

and
(c) a copy of security deposit or collateral securing the bond.
A certified true copy of the bond shall be furnished by the appellant to the appellee who shall
verify the regularity and genuineness thereof and immediately report to the Commission any
irregularity.
Upon verification by the Commission that the bond is irregular or not genuine, the Commission
shall cause the immediate dismissal of the appeal.
No motion to reduce bond shall be entertained except on meritorious grounds and upon the
posting of a bond in a reasonable amount in relation to the monetary award.
The filing of the motion to reduce bond without compliance with the requisites in the preceding
paragraph shall not stop the running of the period to perfect an appeal. (Emphasis supplied)
The OGCC failed to produce any valid authorization from the board of directors despite petitioner
Salengas repeated demands. It had been given more than enough opportunity and time to
produce the appropriate board resolution, and yet it failed to do so. In fact, many of its pleadings,
representations, and submissions lacked board authorization.
We cannot agree with the OGCCs attempt to downplay this procedural flaw by claiming that, as
the statutorily assigned counsel for GOCCs, it does not need such authorization. In ConstantinoDavid v. Pangandaman-Gania,42 we exhaustively explained why it was necessary for government
agencies or instrumentalities to execute the verification and the certification against forumshopping through their duly authorized representatives. We ruled thereon as follows:
But the rule is different where the OSG is acting as counsel of record for a government agency. For
in such a case it becomes necessary to determine whether the petitioning government body has
authorized the filing of the petition and is espousing the same stand propounded by the OSG.
Verily, it is not improbable for government agencies to adopt a stand different from the position of
the OSG since they weigh not just legal considerations but policy repercussions as well. They have

their respective mandates for which they are to be held accountable, and the prerogative to
determine whether further resort to a higher court is desirable and indispensable under the
circumstances.
The verification of a pleading, if signed by the proper officials of the client agency itself, would
fittingly serve the purpose of attesting that the allegations in the pleading are true and correct and
not the product of the imagination or a matter of speculation, and that the pleading is filed in good
faith. Of course, the OSG may opt to file its own petition as a "People's Tribune" but the
representation would not be for a client office but for its own perceived best interest of the State.
The case of Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., is not also a precedent
that may be invoked at all times to allow the OSG to sign the certificate of non-forum shopping in
place of the real party-in-interest. The ruling therein mentions merely that the certification of nonforum shopping executed by the OSG constitutes substantial compliance with the rule since "the
OSG is the only lawyer for the petitioner, which is a government agency mandated under Section
35, Chapter 12, Title III, Book IV, of the 1987 Administrative Code (Reiterated under Memorandum
Circular No. 152 dated May 17, 1992) to be represented only by the Solicitor General."
By its very nature, "substantial compliance" is actually inadequate observance of the requirements
of a rule or regulation which are waived under equitable circumstances to facilitate the
administration of justice there being no damage or injury caused by such flawed compliance. This
concept is expressed in the statement "the rigidity of a previous doctrine was thus subjected to an
inroad under the concept of substantial compliance." In every inquiry on whether to accept
"substantial compliance," the focus is always on the presence of equitable conditions to administer
justice effectively and efficiently without damage or injury to the spirit of the legal obligation.
xxx

xxx

xxx

The fact that the OSG under the 1987 Administrative Code is the only lawyer for a government
agency wanting to file a petition, or complaint for that matter, does not operate per se to vest the
OSG with the authority to execute in its name the certificate of non-forum shopping for a client
office. For, in many instances, client agencies of the OSG have legal departments which at times

inadvertently take legal matters requiring court representation into their own hands without the
intervention of the OSG. Consequently, the OSG would have no personal knowledge of the history
of a particular case so as to adequately execute the certificate of non-forum shopping; and even if
the OSG does have the relevant information, the courts on the other hand would have no way of
ascertaining the accuracy of the OSG's assertion without precise references in the record of the
case. Thus, unless equitable circumstances which are manifest from the record of a case prevail, it
becomes necessary for the concerned government agency or its authorized representatives to
certify for non-forum shopping if only to be sure that no other similar case or incident is pending
before any other court.
We recognize the occasions when the OSG has difficulty in securing the attention and signatures of
officials in charge of government offices for the verification and certificate of non-forum shopping
of an initiatory pleading. This predicament is especially true where the period for filing such
pleading is non-extendible or can no longer be further extended for reasons of public interest such
as in applications for the writ of habeas corpus, in election cases or where sensitive issues are
involved. This quandary is more pronounced where public officials have stations outside Metro
Manila.
But this difficult fact of life within the OSG, equitable as it may seem, does not excuse it from
wantonly executing by itself the verification and certificate of non-forum shopping. If the OSG is
compelled by circumstances to verify and certify the pleading in behalf of a client agency, the OSG
should at least endeavor to inform the courts of its reasons for doing so, beyond instinctively citing
City Warden of the Manila City Jail v. Estrella and Commissioner of Internal Revenue v. S.C. Johnson
and Son, Inc.
Henceforth, to be able to verify and certify an initiatory pleading for non-forum shopping when
acting as counsel of record for a client agency, the OSG must (a) allege under oath the
circumstances that make signatures of the concerned officials impossible to obtain within the
period for filing the initiatory pleading; (b) append to the petition or complaint such authentic
document to prove that the party-petitioner or complainant authorized the filing of the petition or
complaint and understood and adopted the allegations set forth therein, and an affirmation that no

action or claim involving the same issues has been filed or commenced in any court, tribunal or
quasi-judicial agency; and, (c) undertake to inform the court promptly and reasonably of any
change in the stance of the client agency.
Anent the document that may be annexed to a petition or complaint under letter (b) hereof, the
letter-endorsement of the client agency to the OSG, or other correspondence to prove that the
subject-matter of the initiatory pleading had been previously discussed between the OSG and its
client, is satisfactory evidence of the facts under letter (b) above. In this exceptional situation
where the OSG signs the verification and certificate of non-forum shopping, the court reserves the
authority to determine the sufficiency of the OSG's action as measured by the equitable
considerations discussed herein. (Emphasis ours, italics provided)
The ruling cited above may have pertained only to the Office of the Solicitor Generals
representation of government agencies and instrumentalities, but we see no reason why this
doctrine cannot be applied to the case at bar insofar as the OGCC is concerned.
While in previous decisions we have excused transgressions of these rules, it has always been in
the context of upholding justice and fairness under exceptional circumstances. In this case,
though, respondent failed to provide any iota of rhyme or reason to compel us to relax these
requirements. Instead, what is clear to us is that the so-called appeal was done against the
instructions of then President/CEO Naguiat not to file an appeal. Timbol-Roman, who signed the
Verification

and

the

Certification

against

forum-shopping,

was

not

even

an

authorized

representative of the corporation. The OGCC was equally remiss in its duty. It ought to have
advised respondent corporation, the proper procedure for pursuing an appeal. Instead, it
maintained the appeal and failed to present any valid authorization from respondent corporation
even after petitioner had questioned OGCCs authority all throughout the proceedings. Thus, it is
evident that the appeal was made in bad faith.
The unauthorized and overzealous acts of officials of respondent CDC and the OGCC have led to a
waste of the governments time and resources. More alarmingly, they have contributed to the
injustice done to petitioner Salenga. By taking matters into their own hands, these officials let the

case drag on for years, depriving him of the enjoyment of property rightfully his. What should have
been a simple case of illegal dismissal became an endless stream of motions and pleadings.
Time and again, we have said that the perfection of an appeal within the period prescribed by law
is jurisdictional, and the lapse of the appeal period deprives the courts of jurisdiction to alter the
final judgment.43 Thus, there is no other recourse but to respect the findings and ruling of the
labor arbiter. Clearly, therefore, the CA committed grave abuse of discretion in entertaining the
Petition filed before it after the NLRC had dismissed the case based on lack of jurisdiction. The
assailed CA Decision did not even resolve petitioner Salengas consistent and persistent claim that
the NLRC should not have taken cognizance of the appeal in the first place, absent a board
resolution. Thus, LA Darlucios Decision with respect to the liability of the corporation still stands.
However, we note from that Decision that Rufo Colayco was made solidarily liable with respondent
corporation. Colayco thereafter filed his separate appeal. As to him, the NLRC correctly held in its
30 July 2001 Decision that he may not be held solidarily responsible to petitioner. As a result, it
dropped him as respondent. Notably, in the case at bar, petitioner does not question that ruling.
Based on the foregoing, all other subsequent proceedings regarding the issue of petitioners
dismissal are null and void for having been conducted without jurisdiction. Thus, it is no longer
incumbent upon us to rule on the other errors assigned in the matter of petitioner Salengas
dismissal.
CDC is not under the civil service laws on retirement.
While the case was still persistently being pursued by the OGCC, a new issue arose when petitioner
Salenga reached retirement age: whether his retirement benefits should be computed according to
civil service laws.
To recall, the issue of how to compute the retirement benefits of petitioner was raised in his
Omnibus Motion dated 7 May 2004 filed before the NLRC after it had reinstated LA Darlucios
original Decision. The issue was not covered by petitioners Complaint for illegal dismissal, but was
a different issue altogether and should have been properly addressed in a separate Complaint. We

cannot fault petitioner, though, for raising the issue while the case was still pending with the NLRC.
If it were not for the "appeal" undertaken by Timbol-Roman and the OGCC through Atty. Mallari, the
issue would have taken its proper course and would have been raised in a more appropriate time
and manner. Thus, we deem it proper to resolve the matter at hand to put it to rest after a decade
of litigation.
Petitioner Salenga contends that respondent CDC is covered by the GSIS Law. Thus, he says, the
computation of his retirement benefits should include all the years of actual government service,
starting from the original appointment forty (40) years ago up to his retirement.
Respondent CDC owes its existence to Executive Order No. 80 issued by then President Fidel V.
Ramos. It was meant to be the implementing and operating arm of the Bases Conversion and
Development Authority (BCDA) tasked to manage the Clark Special Economic Zone (CSEZ).
Expressly, respondent was formed in accordance with Philippine corporation laws and existing
rules and regulations promulgated by the SEC pursuant to Section 16 of Republic Act (R.A.)
7227.44 CDC, a government-owned or -controlled corporation without an original charter, was
incorporated under the Corporation Code. Pursuant to Article IX-B, Sec. 2(1), the civil service
embraces only those government-owned or -controlled corporations with original charter. As such,
respondent CDC and its employees are covered by the Labor Code and not by the Civil Service
Law, consistent with our ruling in NASECO v. NLRC,45 in which we established this distinction.
Thus, in Gamogamo v. PNOC Shipping and Transport Corp.,46 we held:
Retirement results from a voluntary agreement between the employer and the employee whereby
the latter after reaching a certain age agrees to sever his employment with the former.
Since the retirement pay solely comes from Respondent's funds, it is but natural that Respondent
shall disregard petitioner's length of service in another company for the computation of his
retirement benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979. Ordinarily, his
creditable service shall be reckoned from such date. However, since Respondent took over the
shipping business of LUSTEVECO and agreed to assume without interruption all the service credits

of petitioner with LUSTEVECO, petitioner's creditable service must start from 9 November 1977
when he started working with LUSTEVECO until his day of retirement on 1 April 1995. Thus,
petitioner's creditable service is 17.3333 years.
We cannot uphold petitioner's contention that his fourteen years of service with the DOH should be
considered because his last two employers were government-owned and controlled corporations,
and fall under the Civil Service Law. Article IX(B), Section 2 paragraph 1 of the 1987 Constitution
states
Sec. 2. (1)The civil service embraces all branches, subdivisions, instrumentalities, and agencies of
the Government, including government-owned or controlled corporations with original charters.
It is not at all disputed that while Respondent and LUSTEVECO are government-owned and
controlled corporations, they have no original charters; hence they are not under the Civil Service
Law. In Philippine National Oil Company-Energy Development Corporation v. National Labor
Relations Commission, we ruled:
xxx "Thus under the present state of the law, the test in determining whether a governmentowned or controlled corporation is subject to the Civil Service Law are [sic] the manner of its
creation, such that government corporations created by special charter(s) are subject to its
provisions while those incorporated under the General Corporation Law are not within its
coverage." (Emphasis supplied)
Hence, petitioner Salenga is entitled to receive only his retirement benefits based only on the
number of years he was employed with the corporation under the conditions provided under its
retirement plan, as well as other benefits given to him by existing laws.1wphi1
WHEREFORE, in view of the foregoing, the Petition in G.R. No. 174941 is partially GRANTED. The
Decision of LA Darlucio is REINSTATED insofar as respondent corporations liability is concerned.
Considering that petitioner did not maintain the action against Rufo Colayco, the latter is not
solidarily liable with respondent Clark Development Corporation.

The case is REMANDED to the labor arbiter for the computation of petitioners retirement benefits
in accordance with the Social Security Act of 1997 otherwise known as Republic Act No. 8282,
deducting therefrom the sums already paid by respondent CDC. If any, the remaining amount shall
be subject to the legal interest of 6% per annum from the filing date of petitioners Omnibus
Motion on 11 May 2004 up to the time this judgment becomes final and executory. Henceforth, the
rate of legal interest shall be 12% until the satisfaction of judgment.
SO ORDERED.

G.R. No. 183573

DIZON

COPPER

July 16, 2012

SILVER

MINES,

INC.,

Petitioner,

vs.
DR. LUIS D. DIZON, Respondent.
DECISION
PEREZ, J.:
For review1 are the Decision2 dated 9 May 2008 and Resolution 3 dated 1 July
2008 of the Court of Appeals in CA-G.R. SP No. 99947. In the assailed
decision, the Court of Appeals declared as void ab initio petitioners
applications for Mineral Production Sharing Agreements (MPSA) but held as
valid a similar application of the respondent. The decision was a reversal of
the ruling4 of the Office of the President (OP) in O.P. Case No. 06-C-113 and a
reinstatement of the previous orders5 issued by the Secretary of the
Department of Environment and Natural Resources (DENR). The decretal
portion of the decision of the appellate court accordingly reads:6
WHEREFORE, the petition is GRANTED. The assailed decision dated
December 4, 2006 and resolution dated June 20, 2007 of the Office of the

President are hereby REVERSED and SET ASIDE. The orders dated December
29, 2005 and February 14, 2006 issued by the Secretary of the Department
of Environment and Natural Resources are REINSTATED.
The antecedents are as follows:
The 57 Mining Claims
On 13 November 1935, Celestino M. Dizon (Celestino) filed with the Office of
the Mining Recorder,7 Declarations of Location8 over fifty-seven (57) mining
claims in San Marcelino, Zambales. The 57 mining claims, with an aggregate
area of 513 hectares, were thereby recorded in the following manner:9
1. Twenty-nine (29) mining claims were registered in the name of
Celestino.
2. Twelve (12) mining claims were registered in the name of
Maria D. Dizon, the wife of
3. Eleven (11) mining claims were registered in the name of
Helen D. Dizon, a daughter of Celestino.
4. Three (3) mining claims were registered in the name of the
heirs of Eustaquio L. Dizon, who was the father of Celestino.
5. Two (2) mining claims were registered in the name of the heirs
of Tiburcia M. Dizon, who was the mother of Celestino.
In 1966, herein petitioner Dizon Copper-Silver Mines, Inc. was organized. 10
Among its incorporators were Celestino and his son, herein respondent Dr.
Luis D. Dizon.11

On 27 January 1967, Celestino, for himself and as attorney-in-fact of the

other

registered

claim-owners,

assigned

their

57

mining

claims

to

petitioner.12
On 6 September 1975, petitioner entered into an Operating Agreement13 with
Benguet Corporation14 (Benguet). In such agreement, petitioner authorized
Benguet to, among others, "explore, equip, develop and operate" the 57
mining claims.15
In 1977, Celestino died.
In 1978, the 57 mining claims became the subject of a mining lease
application16 with the Bureau of Mines. 17 Consequently, on 1 February 1980,
the government issued five (5) Mining Lease Contracts (MLCs) covering six
(6) out of the 57 mining claims. They are:18
1. MLC No. MRD-211 issued in favor of the heirs of Celestino;
2. MLC No. MRD-212 issued in favor of the heirs of Celestino;
3. MLC No. MRD-213 issued in favor of Maria D. Dizon;
4. MLC No. MRD-219 issued in favor of Helen D. Dizon;
5. MLC No. MRD-222 issued in favor of the heirs of Celestino.
The MLCs were issued for a term of twenty-five (25) years, or up to 31
January 2005.19
The MPSA Applications
On 4 July 1991, Benguet filed an MPSA application with the DENR. 20 The
application, designated as MPSA-P-III-16,21 seeks to place all existing mining

claims and interests then operated by Benguet under production sharing

agreements in line with Executive
Order No. 279 of 25 July 1987.22 Specifically, MPSA-P-III-16 covers the
following mining interests:23
1. Forty-two (42) mining claims24 of the Sagittarius Alpha Realty
Corporation;
2. Two (2) prospecting permits over two (2) parcels of land 25 of
the Camalca Mining Corporation; and
3. The remaining 51 mining claims of petitioner are not under
MLCs.
On 3 March 1995, Republic Act No. 7942, or the Philippine Mining Act of
1995, was enacted.
On 12 December 1997, Benguet and petitioner terminated their Operating
Agreement. In 2004, Benguet assigned MPSA-P-III-16 in favor of the latter. 26
On 22 October 2004, the DENR Mines and Geosciences Bureau (MGB)
Regional Office III signified its acquiescence and recorded MPSA-P-III-16 in
the name of petitioner.27
On 16 December 2004, petitioner sent a letter to the DENR MGB Regional
Office III, requesting the said office to include the 6 mining claims under
MLCs in MPSA-P-III-16.28 On 4 January 2005, the DENR MGB Regional Office III
informed29 the petitioner of its approval of the request and manifested that
the 6 mining claims under the MLCs will now be included in MPSA-P-III-16.
Despite the pendency of MPSA-P-III-16, petitioner nonetheless filed with the
DENR another MPSA application on 31 January 2005. This time, petitioners

application was designated as MPSA-P-III-03- 05 30 and covers all 57 of its

mining claims, inclusive of the 6 under MLCs.31
On 28 February 2005, respondent filed with the DENR his MPSA-P-III-05-05 32
an MPSA application covering 281.9544 hectares of mineral location in San
Marcelino, Zambales. It includes the 6 mining claims under MLCs. 33
Subsequently, the DENR MGB Regional Office III verified that several areas
applied for by respondent in MPSA-P-III-05-05 overlaps with those in
petitioners MPSA-P-III-16 and MPSA-III-05-05.34
The DENR Orders
On 29 December 2005, the DENR Secretary issued an Order 35 declaring
petitioners MPSA-P-III-16 and MPSA-P-III-03-05 void ab initio. In contrast, the
order held respondents MPSA-P-III-05-05 as a valid MPSA application worthy
of due course.36 The dispositive portion of the order thus reads:37
WHEREFORE, in view of the foregoing considerations, Benguet Corporation
MPSA-III-P-16 [sic] application and Dizon Copper Silver Mines Incorporated
Application MP-P-III-03-05 [sic] are declared, as they are, declared VOID ABINITIO, while Dr. Luis D. Dizons MA-P-III-05-05 [sic] (APSA-0001389-III) is
hereby, as it is declared VALID and EXISTING and can be given due course,
subject to strict compliance with the provision of the Philippine Mining Act of
1995 and its Implementing Rules and Regulations.
In nullifying petitioners applications, the DENR Secretary echoed the findings
of the DENR MGB Regional Office III that:
1. With respect to MPSA-P-III-16. Benguet has no personality to
file MPSA-P-III-16.38 Benguet, by itself, has no legal personality to
file such application because it is a mere operator of petitioner. 39

Moreover, MPSA-P-III-16 was denied area status and clearance by

the Forest Management Services of DENR Region III.40
2. With respect to MPSA-P-III-03-05. MPSA-P-III-03-05 was filed at
a time when several areas included therein were still closed to
mining applications.41 Such areas refer to those subject to the
MLCs that, as it turned out, were not yet expired when MPSA-P-III03-05 was filed.42
On 17 January 2006, petitioner filed before the DENR a Motion for
Reconsideration43 of the 29 December 2005 order. Petitioner also submitted a
Supplemental Motion for Reconsideration44 on 31 January 2006.
On 14 February 2006, the DENR Acting Secretary issued an Order 45 denying
petitioners motion for reconsideration. The motion for reconsideration of the
petitioner was dismissed for being moot and academic, on account of the
fact that on the day before such motion was filed, or on 17 January 2006, the
DENR already approved MPSA-P-III-05-05 and a full-fledged MPSA, designated
as MPSA No. 227-2006-III,46 was already issued in favor of the respondent.47
Petitioner promptly filed an appeal48 to the Office of the President.
The OP Ruling
On appeal, the OP completely reversed the DENR Secretary. In its Decision 49
dated 4 December 2006, the OP: (1) overturned the 29 December 2005 and
14 February 2006 orders of the DENR Secretary, (2) cancelled the approval of
MPSA-P-III-05-05 into MPSA No. 227-2006-III, and (3) revived petitioners
MPSA-P-III-03-05 for further re-evaluation by the DENR. The fallo of the OP
ruling reads:50
WHEREFORE, premises considered, the DENR Order dated December 29,
2005 declaring MPSA-P-III-16 and MA-P-III-03-05 void ab initio and declaring

MA-P-III-05-05 as valid and existing, and the DENR ORDER dismissing

DCSMIs petitioners motion for reconsideration, are hereby REVERSED and
SET ASIDE. The issuance of MPSA No. 227-2006-III in favor of Dr. Dizon
respondent is likewise SET ASIDE. The Mineral Production Agreement
Application of DCMI petitioner, denominated as MA-P-III-03-05, is hereby
REMANDED to the DENR for REEVALUATION if the same is compliant with the
requirements of the law.
Aggrieved, respondent appealed51 to the Court of Appeals.
The Decision of the Court of Appeals and This Petition
As earlier intimated, the Court of Appeals reversed the ruling of the OP and
reinstated the 29 December 2005 and 14 February 2006 Orders of the DENR
Secretary.52 In doing so, the appellate court substantially agreed with the
findings of the DENR.
Hence, the present appeal53 raising the core issue of whether the Court of
Appeals erred in reinstating the 29 December 2005 and 4 February 2006
Orders of the DENR Secretary.
The petitioner, for its part, would like this Court to answer in the affirmative.
Petitioner maintains that MPSA-P-III-16 and MPSA-P-III-03-05 were valid MPSA
applications.54 In support thereof, petitioner contradicts the findings of the
DENR, as concurred in by the Court of Appeals, and argues that:
1. Benguet has the personality to file MPSA-P-III-16. 55 The
authority of Benguet to file mining applications on behalf of
petitioner is justified by
a. Sections 1.01(b), 1.03, 7.01(j) and 9.04 of the Operating
Agreement between petitioner and Benguet:

i. Section 1.01(b)56 gives Benguet authority for the

"acquisition of other real rights xxx."
ii. Section 1.0357 grants Benguet authority to "apply
for patent or lease and/or patent or lease surveys"
with respect to the 57 mining claims.
iii. Section 7.01(j)58 gives Benguet authority to "xxx
enter into contracts, agreements xxx."
iv. Section 9.0459 constitutes Benguet as attorney-infact of petitioner, authorized "to prepare, execute,
amend,

correct,

supplement

and

register

any

document relating to or affecting" the 57 mining

claims "which may be necessary to be executed,
amended,

corrected,

supplemented,

filed

or

registered."
b. Letter dated 14 June 1991 of petitioner to Benguet, 60
which was appended in MPSA-P-III-16. In the said letter,
petitioner, thru its then president Mr. Juvencio D. Dizon,
signified its conformity with the proposal of Benguet to file
a production sharing agreement application covering the
57 mining claims.61
2. Benguet, by submitting the complete requirements for an
MPSA application in MPSA-P-III-16, fully complied with the
requirements of Sections 112 and 113 of Republic Act No. 7942.62
Thus, petitioner still has the preferential right over any other
similar applicants to pursue the area covered by the subject 57
mining claims.63

3. While MPSA-P-III-03-05 was filed during the subsistence of the

MLCs, such fact does not suffice to totally nullify said application.
The claims under the MLCs, which are supposedly not open to
mining applications, all but occupy only a small portion of the
area covered in MPSA-P-III-03-05.64
Petitioner also accuses the DENR Secretary of "hastily" approving MPSA-P-III05-05 into MPSA No. 227-2006-III.65 Petitioner alleges that MPSA-P-III-05-05
was approved despite non- compliance by the respondent with the
"mandatory" requirements under Sections 37 and 38 of the Implementing
Rules and Regulations (IRR) of Republic Act No. 7942.66
OUR RULING
We deny the appeal.
MPSA-P-III-16 is Not a Valid MPSA Application
Before discussing the merits of MPSA-P-III-16 as an MPSA application, it is
significant to point out that as of 22 December 2005, the DENR Secretary
had already issued a Memorandum67 sustaining the denial by the Forest
Management Service of DENR Region III to issue an area status and
clearance for MPSA-P-III-16. Among the reasons set forth by the DENR in
refusing to issue such clearance were:68
1. x x x.
2. The application for clearance was denied two times by the
Technical Director of the Forest Management Service of DENR
Region III which is the "Government Agency concerned" with the
authority in the regions which has jurisdiction over the applied
for as far as Forest management is concern [sic]. The first denial
was on November 9, 1998 and the second on February 25, 1999.

3. The area is within both a "DENR Project Area" The President

Ramon Magsaysay Reforestation Project of CENRO Olongapo;
and, "The Southern Zambales Forest Reserve established under
Republic Act No. 3092" with the latter encompassing most of the
entire area of the MPSA application. (Emphasis supplied).
Verily, the DENR Secretary excluded "most of the entire area" originally
covered by MPSA-P-III-16 as closed to mining applications for being within the
"President Ramon Magsaysay Reforestation Project of CENROOlongapo" and
"The Southern Zambales Forest Reserve."69 The Memorandum, as the Court
takes it, effectively leaves the mining claims of petitioner as the only point of
contention left in MPSA-P-III-16.
Now, to the issue at hand.
As can be culled from the facts, Benguet filed MPSA-P-III-16 in order to place
the mining claims and interests operated by it, which includes those of the
petitioner, under MPSAs. The application, in effect, seeks to enforce a right 70
belonging to holders of existing mining claims and others interests to enter
into mineral agreements with the government. As mere operator, therefore,
Benguet cannot file MPSA-P-III-16 in its name without authorization from the
holders of the mining claims and interests included therein.
Petitioner argues in favor of the validity of MPSA-P-III-16, at least insofar as
its mining claims are concerned, on the assertion that it duly authorized
Benguet to file the application under their Operating Agreement and its
Letter dated 14 June 1991.71
We are not convinced.
First. It must be clarified at the outset that the inclusion of the 6 mining
claims under MLCs in MPSA-P-III-16 is not valid. The records of this case are
definite that the MLCs covering 6 of the

subject claims were actually issued by the government in the names of Maria
Dizon, Helen Dizon and the heirs of Celestinonot in favor of the petitioner. 72
Hence, such mining leases could not be included in MPSA-P-III-16 for possible
conversion into MPSAs without securing the individual consent of the
recognized lessees thereof. Needless to state, authorization by the petitioner
in connection with the mining claims covered by the MLCs, if there was any,
would not be material.
Second. With respect to the remaining 51 mining claims not under MLCs, this
Court finds absolutely nothing in the Operating Agreement between
petitioner and Benguet that can reasonably be construed as giving the latter
authority to file an MPSA application thereon. After perusal of the records,
this Court finds that the provisions of the Operating Agreement relied upon
by petitioner in arguing otherwise, were taken out of context:
1. Benguets authority "to acquire real rights" under Section
1.01(b) is actually limited only to such rights "as indicated in the
Development

Program"

of

the

Operating

Agreement. 73

Unfortunately, an MPSA was never shown to have been

contemplated by, much less included in, such Development
Program.
2. Section 1.03 only grants Benguet authority to "apply for
patent or lease and/or patent or lease surveys." 74 However, as
will be discussed below, a mining patent, lease or any survey
thereof is substantially different from an MPSA.
3. Section 7.01(j), on the other hand, premises the authority of
Benguet to "enter into contracts, agreements" on Section 7.03 of
the

Operating

Agreement

that

actually

requires

prior

authorization from petitioner in the event the former enters into

any "major contracts."75 An MPSA may be considered as falling

under the term "major contracts" for the simple reason that it will
re-define the very relations between the owners of the existing
mining claims and the government with respect to such claims.
In connection with the foregoing, the Letter dated 14 June 1991,
appended in MPSA-P-III-16, cannot be considered as valid
authorization from petitioner. There was no showing that the
board of directors of petitioner approved of Benguets proposal to
file an MPSA application.
4. Neither can Section 9.04, which constituted Benguet as
attorney-in-fact

of

petitioner,

be

construed

as

sufficient

authorization. The said section confines the authority of Benguet

"to prepare, execute, amend, correct, supplement and register
any document"relating to the 57 mining claims, only to those
documents "necessary to carry out the intents and purposes" of
the Operating Agreement.76
Entering into MPSAs, however, could not have been included in the "intents
and purposes" of the Operating Agreement. It must be pointed out that the
Operating Agreement was executed way back in 1975, during which
Presidential Decree No. 463 still governed mining operations in the country.
Presidential Decree No. 463, as previous mining laws before it, sanctioned a
system of exploitation of natural resources based on "license, concession or
lease."77 MPSAs, on the other hand, deviate drastically from this system.
An MPSA is one of the mineral agreements innovated by the 1987
Constitution by which the State takes on a broader and more dynamic role in
the exploration, development and utilization of the countrys mineral
resources.78 By such agreements, the government does not become a mere
licensor, concessor or lessor of mining resourcesbut actually assumes "full
control and supervision" in the exploration, development and utilization of

the concerned mining claims in consonance with Section 2, Article XII of the
Constitution.79 The policy introduced by the 1987 Constitution, therefore,
represents a significant shift in the hitherto existing relations between the
government and mining claimants. This considerable change in the former
system of mining leases under previous mining laws, in turn, makes it
difficult for this Court to fathom that petitioner and Benguet contemplated
the execution of MPSAs as part of their Operating Agreement. To hold
otherwise, would simply stretch the limits of reason and human foresight.
Accordingly, this Court agrees with the finding of the DENR and the Court of
Appeals that MPSA-P-III-16 was filed by Benguet without any valid
authorization and, therefore, cannot be considered as a valid MPSA
application.
Effect of the Invalidity of MPSA-P-III-16
In order to fully understand the effect of the invalidity of MPSA-P-III-16 on the
mining claims of the petitioner and its rights thereto, the relevant provisions
of Republic Act No. 7942 as well as its IRR must be considered.
In so far as the 6 mining claims under MLCs are concerned, Section 112 of
Republic Act No. 7942 applies. The provision provides for the non-impairment
and continued recognition of existing valid mining leases, which means that
the subject leases will remain valid until their expiration, i.e. on 31 January
2005.80
On the other hand, the 51 mining claims not covered by MLCs are subject to
Section 113 of Republic Act No. 7942. The said section gives "holders of
existing mining claims, lease or quarry applications" with "preferential rights
to enter into any mode of mineral agreement with the government" within
two (2) years from the promulgation of the rules and regulations
implementing said law.81

Section 113 was further clarified by Section 273 of the IRR 82 of Republic Act
No. 7942 and by DENR Memorandum Order (M.O.) No. 97-07. The pertinent
provisions of DENR M.O. 97-07 states:
Section 4. Date of Deadline Under Sections 272 and 273 of the IRR
Consistent with pertinent national policy, the September 13, 1997 deadline
under Section 272 of the IRR and the September 14, 1997 deadline under
Section 273 of the IRR, which fall on a Saturday and Sunday, respectively,
shall be imposed on September 15, 1997.
xxxx
Section 8. Claimants/Applicants Required to File Mineral Agreement
Only holders of mining claims and lease/quarry applications filed prior to the
effectivity of the Act which are valid and existing as defined in Section 5
hereof who have not filed any Mineral Agreement applications over areas
covered by such mining claims and lease/quarry applications are required to
file Mineral Agreement applications pursuant to Section 273 of the IRR on or
before September 15, 1997; Provided, that the holder of such a mining claim
or lease/quarry application involved in a mining dispute/ease shall instead
file on or before said deadline a Letter of Intent to file the necessary Mineral
Agreement application; Provided, further, That if the mining claim or
lease/quarry application is not determined to be invalid in the dispute/case,
the claimant or applicant shall have thirty (30) days from the final resolution
of the dispute/case to filed the necessary Mineral Agreement application;
Provided, finally, that failure by the claimant or applicant to file the
necessary Mineral Agreement application within said thirty (30)-day period
shall result in the abandonment of such claim or application, after which, any
area covered by the same shall be opened for Mining Applications.

Holders of such valid and existing mining claims and lease/quarry

applications who had filed or been granted applications other than those for
Mineral Agreements prior to September 15, 1997 shall have until such date
to file/convert to Mineral Agreement applications, otherwise, such previously
filed or granted applications shall be cancelled. (Emphasis and underscoring
supplied).
Per the above-cited provisions of DENR M.O. No. 97-07, holders of existing
mining claims or lease/quarry applications have only until the 15th of
September 1997 to file an appropriate mineral agreement application in the
exercise of their "preferential rights to enter into mineral agreements with
the government" involving their claims. DENR M.O. No. 97-07 also provides
that failure of the said holders to exercise such preferential right is deemed
an abandonment of their existing mining claims or applications.
In the instant case, MPSA-P-III-16 was the only MPSA application that was
filed before the mandatory deadline. Aside from it, petitioner filed no other
valid MPSA application covering its mining claims before 15 September 1997.
Given the foregoing, it becomes clear that a finding of invalidity of MPSA-PIII-16 has a profound effect on petitioners rights as to the 51 mining claims
not covered by MLCs:
First. The invalidity of MPSA-P-III-16 necessarily meant that petitioner was not
able to validly exercise its preferential rights under Section 113 of Republic
Act No. 7942. As a result, petitioner
is already deemed to have abandoned its mining claims as of 15 September
1997.
Second. The assignment of MPSA-P-III-16 in favor of petitioner has also been
rendered of no consequence. Such assignment was made by Benguet, and
then approved by the DENR, only in

2004which is well beyond the 15 September 1997 deadline. 83 At that time,

petitioner had already lost any legal vested interest it had in the subject
mining claims.
Third. Petitioners MPSA-P-III-03-05, filed on 31 January 2005, is considered as
a new application insofar as the subject 51 mining claims are concerned.
Petitioner thereby enjoys no preference regarding the said applications
approval.
We now come to the final issue raised.
MPSA-P-III-05-05 over MPSA-P-III-03-05
Petitioner next argues that the Court of Appeals erred in sustaining the
DENRs approval of respondents MPSA-P-III-05-05 into MPSA No. 227-2006III.84 Petitioner alleges that the appellate court failed to recognize that the
DENR Secretary had adopted a "hasty" procedure in assessing the merits of
respondents MPSA-P-III-05-05 and had approved the same without requiring
the latter to comply with Sections 37 and 38 of the IRR of Republic Act No.
7942.85
Petitioner thus asks this Court to set aside MPSA No. 227-2006-III and to
order the DENR to instead make a re-evaluation of its own application, MPSAP-III-03-05.86
We are not persuaded.
To begin with, petitioners postulation that respondent did not comply with
Sections 37 and 38 of the IRR of Republic Act No. 7942, 87 raises a factual
issue that was never raised in the proceedings a quo. The procedural norm is
that factual issues are barred in appeals by certiorari, with more reason if
such issues are only being raised for the first time before this Court.88

Anent the issue regarding the approval of MPSA-P-III-05-05, it must be

emphasized herein that under Republic Act No. 7942, the DENR Secretary
has been conferred with the exclusive and primary jurisdiction to approve
mineral agreements, such as MPSAs. 89 In the seminal case Celestial Nickel
Mining

Exploration

Corporation

v.

Macroasia

Corporation,

this

Court

described such function as purely administrative in nature and one that is

fully within the DENR Secretarys competence and discretion.1wphi1
Concededly, it is the DENR Secretary, thru the MGB, who is in the best
position to determine to whom mineral agreements are granted.90
Accordingly, the doctrine of primary jurisdiction finds application to the case
at bench. Celestial captures the doctrine in the context of mining
applications in this wise:
Settled is the rule that the courts will defer to the decisions of the
administrative offices and agencies by reason of their expertise and
experience in the matters assigned to them pursuant to the doctrine of
primary

jurisdiction.

Administrative

decisions

on

matter

within

the

jurisdiction of administrative bodies are to be respected and can only be set

aside on proof of grave abuse of discretion, fraud, or error of law. Unless it is
shown that the then DENR Secretary has acted in a wanton, whimsical, or
oppressive manner, giving undue advantage to a party or for an illegal
consideration and similar reasons, this Court cannot look into or review the
wisdom of the exercise of such discretion.91 (Emphasis supplied).
In the case at bench, this Court finds no such arbitrariness on the part of the
DENR Secretary in approving respondents MPSA-P-III-05-05 at the expense
of petitioners MPSA-P-III-03-05. Contrary to the allegations of petitioner,
there was never any "hasty" approval of MPSA-P-III-05-05. The records attest
that the approval of MPSA-P-III-05-05 by the DENR Secretary came a full ten
(10) months after such application was filed92 and was, in fact, based from
the evaluation of the DENR MGB Regional Office III that petitioners MPSA-P-

III-03-05 was filed at a time when the 6 mining claims covered therein were
still under subsisting MLCs in favor of the Dizons 93 and, hence, still closed to
mining applications.94
In choosing to act favorably on MPSA-P-III-05-05, the DENR Secretary merely
exercised its rightful discretion to determine who among competing mining
applicants is more qualified for a mining agreement. This consideration,
aside from the fact that petitioners MPSA-P-III-03-05 covers areas still closed
to mining applications when it was filed, underscores the reasonableness of
the orders of the DENR Secretary. This Court finds itself heavy-handed to
disturb them.
WHEREFORE, the instant petition is DENIED. The appealed Decision dated 9
May 2008 and Resolution dated 1 July 2008 of the Court of Appeals in CAG.R. SP No. 99947 are hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.

MARC II MARKETING, INC. and

G.R. No. 171993

LUCILA V. JOSON,
Petitioners,

Present:

CARPIO, J.,
Chairperson,

- versus -

BRION,
PEREZ,
SERENO, and
REYES, JJ.

ALFREDO M. JOSON,

Promulgated:

Respondent.

December 12, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PEREZ, J.:

In this Petition for Review on Certiorari under Rule 45 of the Rules of

Court, herein petitioners Marc II Marketing, Inc. and Lucila V. Joson assailed
the Decision33 dated 20 June 2005 of the Court of Appeals in CA-G.R. SP No.
76624 for reversing and setting aside the Resolution 34 of the National Labor
Relations Commission (NLRC) dated 15 October 2002, thereby affirming the
Labor Arbiters Decision35 dated 1 October 2001 finding herein respondent
Alfredo M. Josons dismissal from employment as illegal. In the questioned
Decision, the Court of Appeals upheld the Labor Arbiters jurisdiction over the
case on the basis that respondent was not an officer but a mere employee of
petitioner Marc II Marketing, Inc., thus, totally disregarding the latters
allegation of intra-corporate controversy. Nonetheless, the Court of Appeals
remanded the case to the NLRC for further proceedings to determine the
proper amount of monetary awards that should be given to respondent.

Assailed as well is the Court of Appeals Resolution36 dated 7 March

2006 denying their Motion for Reconsideration.

Petitioner Marc II Marketing, Inc. (petitioner corporation) is a corporation duly

organized and existing under and by virtue of the laws of the Philippines. It is
primarily engaged in buying, marketing, selling and distributing in retail or
wholesale for export or import household appliances and products and other
items.37 It took over the business operations of Marc Marketing, Inc. which
was made non-operational following its incorporation and registration with
33
34
35
36

the Securities and Exchange Commission (SEC). Petitioner Lucila V. Joson

(Lucila) is the President and majority stockholder of petitioner corporation.
She was also the former President and majority stockholder of the defunct
Marc Marketing, Inc.

Respondent Alfredo M. Joson (Alfredo), on the other hand, was the General
Manager, incorporator, director and stockholder of petitioner corporation.

The controversy of this case arose from the following factual milieu:
Before petitioner corporation was officially incorporated,38 respondent
has already been engaged by petitioner Lucila, in her capacity as President
of Marc Marketing, Inc., to work as the General Manager of petitioner
corporation. It was formalized through the execution of a Management
Contract39 dated 16 January 1994 under the letterhead of Marc Marketing,
Inc.40 as petitioner corporation is yet to be incorporated at the time of its
execution. It was explicitly provided therein that respondent shall be entitled
to 30% of its net income for his work as General Manager. Respondent will
also be granted 30% of its net profit to compensate for the possible loss of
opportunity to work overseas.41

37
38
39
40
41

Pending incorporation of petitioner corporation, respondent was

designated as the General Manager of Marc Marketing, Inc., which was then
in the process of winding up its business. For occupying the said position,
respondent was among its corporate officers by the express provision of
Section 1, Article IV42 of its by-laws.43

On 15 August 1994, petitioner corporation was officially incorporated and

registered with the SEC. Accordingly, Marc Marketing, Inc. was made nonoperational. Respondent continued to discharge his duties as General
Manager but this time under petitioner corporation.

Pursuant to Section 1, Article IV 44 of petitioner corporations by-laws, 45

its corporate officers are as follows: Chairman, President, one or more VicePresident(s), Treasurer and Secretary. Its Board of Directors, however, may,
from time to time, appoint such other officers as it may determine to be
necessary or proper.

Per an undated Secretarys Certificate,46 petitioner corporations Board

of Directors conducted a meeting on 29 August 1994 where respondent was
appointed as one of its corporate officers with the designation or title of
42
43
44
45
46

General Manager to function as a managing director with other duties and

responsibilities that the Board of Directors may provide and authorized. 47

Nevertheless, on 30 June 1997, petitioner corporation decided to stop

and cease its operations, as evidenced by an Affidavit of Non-Operation 48
dated 31 August 1998, due to poor sales collection aggravated by the
inefficient management of its affairs. On the same date, it formally informed
respondent of the cessation of its business operation. Concomitantly,
respondent was apprised of the termination of his services as General
Manager since his services as such would no longer be necessary for the
winding up of its affairs.49

Feeling aggrieved, respondent filed a Complaint for Reinstatement and

Money Claim against petitioners before the Labor Arbiter which was docketed
as NLRC NCR Case No. 00-03-04102-99.

In his complaint, respondent averred that petitioner Lucila dismissed

him from his employment with petitioner corporation due to the feeling of
hatred she harbored towards his family. The same was rooted in the filing by
petitioner Lucilas estranged husband, who happened to be respondents
brother, of a Petition for Declaration of Nullity of their Marriage.50
47
48
49
50

For the parties failure to settle the case amicably, the Labor Arbiter
required them to submit their respective position papers. Respondent
complied but petitioners opted to file a Motion to Dismiss grounded on the
Labor Arbiters lack of jurisdiction as the case involved an intra-corporate
controversy, which jurisdiction belongs to the SEC [now with the Regional
Trial Court (RTC)].51 Petitioners similarly raised therein the ground of
prescription of respondents monetary claim.

On 5 September 2000, the Labor Arbiter issued an Order 52 deferring

the resolution of petitioners Motion to Dismiss until the final determination of
the case. The Labor Arbiter also reiterated his directive for petitioners to
submit position paper. Still, petitioners did not comply. Insisting that the
Labor Arbiter has no jurisdiction over the case, they instead filed an Urgent
Motion to Resolve the Motion to Dismiss and the Motion to Suspend Filing of
Position Paper.

In an Order53 dated 15 February 2001, the Labor Arbiter denied both

motions and declared final the Order dated 5 September 2000. The Labor
Arbiter then gave petitioners a period of five days from receipt thereof within
which to file position paper, otherwise, their Motion to Dismiss will be treated
as their position paper and the case will be considered submitted for
decision.
51
52
53

Petitioners, through counsel, moved for extension of time to submit

position paper. Despite the requested extension, petitioners still failed to
submit the same. Accordingly, the case was submitted for resolution.

On 1 October 2001, the Labor Arbiter rendered his Decision in favor of

respondent. Its decretal portion reads as follows:

WHEREFORE, premises considered, judgment is hereby

rendered

declaring

[respondents]

dismissal

from

employment illegal. Accordingly, [petitioners] are hereby

ordered:

1.

To reinstate [respondent] to his former or equivalent

position without loss of seniority rights, benefits, and
privileges;

2.

Jointly and severally liable to pay [respondents]

unpaid wages in the amount of P450,000.00 per month
from [26 March 1996] up to time of dismissal in the total
amount of P6,300,000.00;

3.

Jointly and severally liable to pay [respondents] full

backwages in the amount of P450,000.00 per month
from date of dismissal until actual reinstatement which
at

the

time

P21,600,000.00;

of

promulgation

amounted

to

4.

Jointly and severally liable to pay moral damages in

the amount of P100,000.00 and attorneys fees in the
amount of 5% of the total monetary award. 54 [Emphasis
supplied.]

In the aforesaid Decision, the Labor Arbiter initially resolved petitioners

Motion to Dismiss by finding the ground of lack of jurisdiction to be without
merit. The Labor Arbiter elucidated that petitioners failed to adduce evidence
to prove that the present case involved an intra-corporate controversy. Also,
respondents money claim did not arise from his being a director or
stockholder of petitioner corporation but from his position as being its
General Manager. The Labor Arbiter likewise held that respondent was not a
corporate officer under petitioner corporations by-laws. As such, respondents
complaint clearly arose from an employer-employee relationship, thus,
subject to the Labor Arbiters jurisdiction.

The

Labor

Arbiter

then

declared

respondents

dismissal

from

employment as illegal. Respondent, being a regular employee of petitioner

corporation, may only be dismissed for a valid cause and upon proper
compliance with the requirements of due process. The records, though,
revealed

that

petitioners

failed

to

present

any

evidence

to

justify

respondents dismissal.

Aggrieved, petitioners appealed the aforesaid Labor Arbiters Decision

to the NLRC.

54

In its Resolution dated 15 October 2002, the NLRC ruled in favor of

petitioners by giving credence to the Secretarys Certificate, which evidenced
petitioner corporations Board of Directors meeting in which a resolution was
approved appointing respondent as its corporate officer with designation as
General Manager. Therefrom, the NLRC reversed and set aside the Labor
Arbiters Decision dated 1 October 2001 and dismissed respondents
Complaint for want of jurisdiction.55

The NLRC enunciated that the validity of respondents appointment and

termination from the position of General Manager was made subject to the
approval of petitioner corporations Board of Directors. Had respondent been
an ordinary employee, such board action would not have been required. As
such, it is clear that respondent was a corporate officer whose dismissal
involved a purely intra-corporate controversy. The NLRC went further by
stating that respondents claim for 30% of the net profit of the corporation
can only emanate from his right of ownership therein as stockholder, director
and/or corporate officer. Dividends or profits are paid only to stockholders or
directors of a corporation and not to any ordinary employee in the absence
of any profit sharing scheme. In addition, the question of remuneration of a
person who is not a mere employee but a stockholder and officer of a
corporation is not a simple labor problem. Such matter comes within the
ambit of corporate affairs and management and is an intra-corporate
controversy in contemplation of the Corporation Code.56

55
56

When respondents Motion for Reconsideration was denied in another

Resolution57 dated 23 January 2003, he filed a Petition for Certiorari with the
Court of Appeals ascribing grave abuse of discretion on the part of the NLRC.

On 20 June 2005, the Court of Appeals rendered its now assailed

Decision declaring that the Labor Arbiter has jurisdiction over the present
controversy. It upheld the finding of the Labor Arbiter that respondent was a
mere employee of petitioner corporation, who has been illegally dismissed
from

employment

without

valid

cause

and

without

due

process.

Nevertheless, it ordered the records of the case remanded to the NLRC for
the determination of the appropriate amount of monetary awards to be given
to respondent. The Court of Appeals, thus, decreed:

WHEREFORE, the petition is by us PARTIALLY GRANTED. The

Labor Arbiter is DECLARED to have jurisdiction over the
controversy. The records are REMANDED to the NLRC for further
proceedings to determine the appropriate amount of monetary
awards to be adjudged in favor of [respondent]. Costs against
the [petitioners] in solidum.58

Petitioners moved for its reconsideration but to no avail.59

57
58
59

Petitioners are now before this Court with the following assignment of
errors:

I.
THE COURT OF APPEALS ERRED AND COMMITTED GRAVE ABUSE
OF

DISCRETION

JURISDICTION

IN

IN

DECIDING

RESOLVING

THAT
A

THE

PURELY

NLRC

HAS

THE

INTRA-CORPORATE

MATTER WHICH IS COGNIZABLE BY THE SECURITIES AND

EXCHANGE COMMISSION/REGIONAL TRIAL COURT.

II.

ASSUMING,

GRATIS

ARGUENDO,

THAT

THE

NLRC

HAS

JURISDICTION OVER THE CASE, STILL THE COURT OF APPEALS

SERIOUSLY ERRED IN NOT RULING THAT THERE IS NO EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN [RESPONDENT] ALFREDO M.
JOSON

AND

CORPORATION].

III.

MARC

II

MARKETING,

INC.

[PETITIONER

ASSUMING

GRATIS

ARGUENDO

THAT

THE

NLRC

HAS

JURISDICTION OVER THE CASE, THE COURT OF APPEALS ERRED

IN NOT RULING THAT THE LABOR ARBITER COMMITTED GRAVE
ABUSE OF DISCRETION IN AWARDING MULTI-MILLION PESOS IN
COMPENSATION AND BACKWAGES BASED ON THE PURPORTED
GROSS INCOME OF [PETITIONER CORPORATION].

IV.

THE COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED

GRAVE ABUSE OF DISCRETION IN NOT MAKING ANY FINDINGS
AND RULING THAT [PETITIONER LUCILA] SHOULD NOT BE HELD
SOLIDARILY LIABLE IN THE ABSENCE OF EVIDENCE OF MALICE
AND BAD FAITH ON HER PART.60

Petitioners fault the Court of Appeals for having sustained the Labor
Arbiters finding that respondent was not a corporate officer under petitioner
corporations by-laws. They insist that there is no need to amend the
corporate by-laws to specify who its corporate officers are. The resolution
issued by petitioner corporations Board of Directors appointing respondent
as General Manager, coupled with his assumption of the said position,
positively made him its corporate officer. More so, respondents position,
being a creation of petitioner corporations Board of Directors pursuant to its
by-laws, is a corporate office sanctioned by the Corporation Code and the
doctrines previously laid down by this Court. Thus, respondents removal as
60

petitioner corporations General Manager involved a purely intra-corporate

controversy over which the RTC has jurisdiction.

Petitioners further contend that respondents claim for 30% of the net
profit of petitioner corporation was anchored on the purported Management
Contract dated 16 January 1994. It should be noted, however, that said
Management Contract was executed at the time petitioner corporation was
still nonexistent and had no juridical personality yet. Such being the case,
respondent cannot invoke any legal right therefrom as it has no legal and
binding effect on petitioner corporation. Moreover, it is clear from the Articles
of Incorporation of petitioner corporation that respondent was its director
and stockholder. Indubitably, respondents claim for his share in the profit of
petitioner corporation was based on his capacity as such and not by virtue of
any employer-employee relationship.

Petitioners further avow that even if the present case does not pose an
intra-corporate controversy, still, the Labor Arbiters multi-million peso
awards in favor of respondent were erroneous. The same was merely based
on the latters self-serving computations without any supporting documents.

Finally, petitioners maintain that petitioner Lucila cannot be held

solidarily liable with petitioner corporation. There was neither allegation nor
iota of evidence presented to show that she acted with malice and bad faith
in her dealings with respondent. Moreover, the Labor Arbiter, in his Decision,
simply concluded that petitioner Lucila was jointly and severally liable with
petitioner corporation without making any findings thereon. It was, therefore,

an error for the Court of Appeals to hold petitioner Lucila solidarily liable with
petitioner corporation.

From the foregoing arguments, the initial question is which between

the Labor Arbiter or the RTC, has jurisdiction over respondents dismissal as
General Manager of petitioner corporation. Its resolution necessarily entails
the determination of whether respondent as General Manager of petitioner
corporation is a corporate officer or a mere employee of the latter.

While Article 217(a)261 of the Labor Code, as amended, provides that it

is the Labor Arbiter who has the original and exclusive jurisdiction over cases
involving termination or dismissal of workers when the person dismissed or
terminated is a corporate officer, the case automatically falls within the
province of the RTC. The dismissal of a corporate officer is always regarded
as a corporate act and/or an intra-corporate controversy.62
Under Section 563 of Presidential Decree No. 902-A, intra-corporate
controversies are those controversies arising out of intra-corporate or
partnership relations, between and among stockholders, members or
associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and
the State insofar as it concerns their individual franchise or right to exist as
such
61
62
63

entity.

It

also

includes

controversies

in

the

election

or

appointments of directors, trustees, officers or managers of such

corporations, partnerships or associations.64

Accordingly, in determining whether the SEC (now the RTC) has

jurisdiction over the controversy, the status or relationship of the parties and
the nature of the question that is the subject of their controversy must be
taken into consideration.65

In Easycall Communications Phils., Inc. v. King, this Court held that in

the context of Presidential Decree No. 902-A, corporate officers are those
officers of a corporation who are given that character either by the
Corporation Code or by the corporations by-laws. Section 2566 of the
Corporation Code specifically enumerated who are these corporate officers,
to wit: (1) president; (2) secretary; (3) treasurer; and (4) such other
officers as may be provided for in the by-laws.67

The aforesaid Section 25 of the Corporation Code, particularly the

phrase such other officers as may be provided for in the by-laws, has been
clarified and elaborated in this Courts recent pronouncement in Matling
Industrial and Commercial Corporation v. Coros, where it held, thus:

64
65
66
67

Conformably with Section 25, a position must be

expressly mentioned in the [b]y-[l]aws in order to be
considered as a corporate office. Thus, the creation of an
office pursuant to or under a [b]y-[l]aw enabling provision
is not enough to make a position a corporate office. [In]
Guerrea v. Lezama [citation omitted] the first ruling on the
matter, held that the only officers of a corporation were
those given that character either by the Corporation Code
or by the [b]y-[l]aws; the rest of the corporate officers
could be considered only as employees or subordinate
officials. Thus, it was held in Easycall Communications Phils.,
Inc. v. King [citation omitted]:

An "office" is created by the charter of the

corporation and the officer is elected by the directors or
stockholders. On the other hand, an employee occupies
no office and generally is employed not by the action
of the directors or stockholders but by the managing
officer of the corporation who also determines the
compensation to be paid to such employee.

xxxx

This interpretation is the correct application of

Section 25 of the Corporation Code, which plainly states that
the corporate officers are the President, Secretary, Treasurer and
such other officers as may be provided for in the [b]y-[l]aws.

Accordingly, the corporate officers in the context of PD

No. 902-A are exclusively those who are given that
character either by the Corporation Code or by the
corporations [b]y[l]aws.

A different interpretation can easily leave the way

open for the Board of Directors to circumvent the
constitutionally guaranteed security of tenure of the
employee by the expedient inclusion in the [b]y-[l]aws of
an enabling clause on the creation of just any corporate
officer position.

It is relevant to state in this connection that the SEC, the

primary agency administering the Corporation Code,
adopted a similar interpretation of Section 25 of the
Corporation Code in its Opinion dated November 25, 1993
[citation omitted], to wit:

Thus, pursuant to the above provision (Section 25 of

the Corporation Code), whoever are the corporate
officers enumerated in the by-laws are the exclusive
Officers of the corporation and the Board has no
power to create other Offices without amending first
the corporate [b]y-laws. However, the Board may
create appointive positions other than the positions
of corporate Officers, but the persons occupying
such positions are not considered as corporate

officers within the meaning of Section 25 of the

Corporation Code and are not empowered to exercise the
functions of the corporate Officers, except those functions
lawfully delegated to them. Their functions and duties are
to be determined by the Board of Directors/Trustees.68
[Emphasis supplied.]

A careful perusal of petitioner corporations by-laws, particularly

paragraph 1, Section 1, Article IV, 69 would explicitly reveal that its corporate
officers are composed only of: (1) Chairman; (2) President; (3) one or more
Vice-President; (4) Treasurer; and (5) Secretary. 70 The position of General
Manager was not among those enumerated.

Paragraph 2, Section 1, Article IV of petitioner corporations by-laws,

empowered its Board of Directors to appoint such other officers as it may
determine necessary or proper.71 It is by virtue of this enabling provision that
petitioner corporations Board of Directors allegedly approved a resolution to
make the position of General Manager a corporate office, and, thereafter,
appointed respondent thereto making him one of its corporate officers. All of
these acts were done without first amending its by-laws so as to include the
General Manager in its roster of corporate officers.

68
69
70
71

With the given circumstances and in conformity with Matling Industrial

and Commercial Corporation v. Coros, this Court rules that respondent was
not a corporate officer of petitioner corporation because his position as
General Manager was not specifically mentioned in the roster of corporate
officers

in

its

corporate

by-laws.

The

enabling

clause

in

petitioner

corporations by-laws empowering its Board of Directors to create additional

officers, i.e., General Manager, and the alleged subsequent passage of a
board resolution to that effect cannot make such position a corporate office.
Matling clearly enunciated that the board of directors has no power to create
other corporate offices without first amending the corporate by-laws so as to
include therein the newly created corporate office. Though the board of
directors may create appointive positions other than the positions of
corporate officers, the persons occupying such positions cannot be viewed as
corporate officers under Section 25 of the Corporation Code.72 In view
thereof, this Court holds that unless and until petitioner corporations by-laws
is amended for the inclusion of General Manager in the list of its corporate
officers, such position cannot be considered as a corporate office within the
realm of Section 25 of the Corporation Code.

This Court considers that the interpretation of Section 25 of the

Corporation Code laid down in Matling safeguards the constitutionally
enshrined right of every employee to security of tenure. To allow the creation
of a corporate officer position by a simple inclusion in the corporate by-laws
of an enabling clause empowering the board of directors to do so can result
in the circumvention of that constitutionally well-protected right.73

72
73

It is also of no moment that respondent, being petitioner corporations

General Manager, was given the functions of a managing director by its
Board of Directors. As held in Matling, the only officers of a corporation are
those given that character either by the Corporation Code or by the
corporate by-laws. It follows then that the corporate officers enumerated in
the by-laws are the exclusive officers of the corporation while the rest could
only be regarded as mere employees or subordinate officials. 74 Respondent,
in this case, though occupying a high ranking and vital position in petitioner
corporation but which position was not specifically enumerated or mentioned
in the latters by-laws, can only be regarded as its employee or subordinate
official. Noticeably, respondents compensation as petitioner corporations
General Manager was set, fixed and determined not by the latters Board of
Directors but simply by its President, petitioner Lucila. The same was not
subject to the approval of petitioner corporations Board of Directors. This is
an indication that respondent was an employee and not a corporate officer.

To prove that respondent was petitioner corporations corporate officer,

petitioners presented before the NLRC an undated Secretarys Certificate
showing that corporations Board of Directors approved a resolution making
respondents position of General Manager a corporate office. The submission,
however, of the said undated Secretarys Certificate will not change the fact
that respondent was an employee. The certification does not amount to an
amendment of the by-laws which is needed to make the position of General
Manager a corporate office.

Moreover, as has been aptly observed by the Court of Appeals, the

board resolution mentioned in that undated Secretarys Certificate and the
74

latter itself were obvious fabrications, a mere afterthought. Here we quote

with conformity the Court of Appeals findings on this matter stated in this
wise:

The board resolution is an obvious fabrication. Firstly, if it

had been in existence since [29 August 1994], why did not
[herein petitioners] attach it to their [M]otion to [D]ismiss filed on
[26 August 1999], when it could have been the best evidence
that [herein respondent] was a corporate officer? Secondly, why
did they report the [respondent] instead as [herein petitioner
corporations] employee to the Social Security System [(SSS)] on
[11 October 1994] or a later date than their [29 August 1994]
board resolution? Thirdly, why is there no indication that the
[respondent], the person concerned himself, and the [SEC] were
furnished with copies of said board resolution? And, lastly, why is
the corporate [S]ecretarys [C]ertificate not notarized in keeping
with the customary procedure? That is why we called it
manipulative evidence as it was a shameless sham meant to be
thrown in as a wild card to muddle up the [D]ecision of the Labor
Arbiter to the end that it be overturned as the latter had firmly
pointed out that [respondent] is not a corporate officer under
[petitioner

corporations

by-laws].

Regrettably,

the

[NLRC]

swallowed the bait hook-line-and sinker. It failed to see through

its nature as a belatedly manufactured evidence. And even on
the

assumption

that

it

were

an

authentic

board

resolution, it did not make [respondent] a corporate

officer as the board did not first and properly create the
position of a [G]eneral [M]anager by amending its bylaws.

(2) The scope of the term officer in the phrase and

such other officers as may be provided for in the by-laws[]
(Sec. 25, par. 1), would naturally depend much on the
provisions of the by-laws of the corporation. (SEC Opinion,
[4 December 1991.]) If the by-laws enumerate the officers
to be elected by the board, the provision is conclusive, and
the board is without power to create new offices
without amending the by-laws. (SEC Opinion, [19
October 1971.])

(3) If, for example, the general manager of a

corporation is not listed as an officer, he is to be classified
as an employee although he has always been considered
as one of the principal officers of a corporation [citing De
Leon, H. S., The Corporation Code of the Philippines
Annotated, 1993 Ed., p. 215.]75 [Emphasis supplied.]

That respondent was also a director and a stockholder of petitioner

corporation will not automatically make the case fall within the ambit of
intra-corporate controversy and be subjected to RTCs jurisdiction. To reiterate,
not all conflicts between the stockholders and the corporation are classified as
intra-corporate. Other factors such as the status or relationship of the parties
and the nature of the question that is the subject of the controversy 76 must
75
76

be considered in determining whether the dispute involves corporate matters so

as to regard them as intra-corporate controversies.77 As previously discussed,
respondent was not a corporate officer of petitioner corporation but a mere
employee thereof so there was no intra-corporate relationship between them.
With regard to the subject of the controversy or issue involved herein, i.e.,
respondents dismissal as petitioner corporations General Manager, the same did
not present or relate to an intra-corporate dispute. To note, there was no
evidence submitted to show that respondents removal as petitioner
corporations General Manager carried with it his removal as its director and
stockholder. Also, petitioners allegation that respondents claim of 30% share
of petitioner corporations net profit was by reason of his being its director
and stockholder was without basis, thus, self-serving. Such an allegation was
tantamount to a mere speculation for petitioners failure to substantiate the
same.

In addition, it was not shown by petitioners that the position of General

Manager was offered to respondent on account of his being petitioner
corporations director and stockholder. Also, in contrast to NLRCs findings,
neither petitioner corporations by-laws nor the Management Contract stated
that respondents appointment and termination from the position of General
Manager was subject to the approval of petitioner corporations Board of
Directors. If, indeed, respondent was a corporate officer whose termination
was subject to the approval of its Board of Directors, why is it that his
termination was effected only by petitioner Lucila, President of petitioner
corporation? The records are bereft of any evidence to show that
respondents

dismissal

was

done

with

the

conformity

of

petitioner

corporations Board of Directors or that the latter had a hand on respondents

dismissal. No board resolution whatsoever was ever presented to that effect.
77

With all the foregoing, this Court is fully convinced that, indeed,
respondent, though occupying the General Manager position, was not a
corporate officer of petitioner corporation rather he was merely its employee
occupying a high-ranking position.

Accordingly, respondents dismissal as petitioner corporations General

Manager did not amount to an intra-corporate controversy. Jurisdiction
therefor properly belongs with the Labor Arbiter and not with the RTC.

Having established that respondent was not petitioner corporations

corporate

officer

but

merely

its

employee,

and

that,

consequently,

jurisdiction belongs to the Labor Arbiter, this Court will now determine if
respondents dismissal from employment is illegal.

It was not disputed that respondent worked as petitioner corporations

General Manager from its incorporation on 15 August 1994 until he was
dismissed on 30 June 1997. The cause of his dismissal was petitioner
corporations cessation of business operations due to poor sales collection
aggravated by the inefficient management of its affairs.

In termination cases, the burden of proving just and valid cause for
dismissing an employee from his employment rests upon the employer. The

latter's failure to discharge that burden would necessarily result in a finding

that the dismissal is unjustified.78

Under Article 283 of the Labor Code, as amended, one of the

authorized causes in terminating the employment of an employee is
the closing or cessation of operation of the establishment or
undertaking. Article 283 of the Labor Code, as amended, reads, thus:

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

undertaking

operation
unless

the

of

the

closing

is

establishment
for

the

purpose

or
of

circumventing the provisions of this Title, by serving a written

notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date
thereof. x x x 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 financial 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. [Emphasis supplied.]

78

From the afore-quoted provision, the closure or cessation of

operations of establishment or undertaking may either be due to
serious business losses or financial reverses or otherwise. If the
closure or cessation was due to serious business losses or financial reverses,
it is incumbent upon the employer to sufficiently and convincingly prove the
same. If it is otherwise, the employer can lawfully close shop anytime as long
as it was bona fide in character and not impelled by a motive to defeat or
circumvent the tenurial rights of employees and as long as the terminated
employees were paid in the amount corresponding to their length of
service.79

Accordingly, under Article 283 of the Labor Code, as amended, there

are three requisites for a valid cessation of business operations: (a)
service of a written notice to the employees and to the Department of
Labor and Employment (DOLE) at least one month before the
intended date thereof; (b) the cessation of business must be bona fide 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 this case, it is obvious that petitioner corporations cessation of

business operations was not due to serious business losses. Mere poor sales
collection, coupled with mismanagement of its affairs does not amount to
serious business losses. Nonetheless, petitioner corporation can still validly
cease or close its business operations because such right is legally allowed,
so long as it was not done for the purpose of circumventing the provisions on

79

termination of employment embodied in the Labor Code. 80 As has been

stressed by this Court in Industrial Timber Corporation v. Ababon, thus:
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.81

A careful perusal of the records revealed that, indeed, petitioner corporation

has stopped and ceased business operations beginning 30 June 1997. This
was evidenced by a notarized Affidavit of Non-Operation dated 31 August
1998. There was also no showing that the cessation of its business
operations was done in bad faith or to circumvent the Labor Code.
Nevertheless, in doing so, petitioner corporation failed to comply with the
one-month prior written notice rule. The records disclosed that respondent,
being petitioner corporations employee, and the DOLE were not given a
written notice at least one month before petitioner corporation ceased its
business operations. Moreover, the records clearly show that respondents
dismissal was effected on the same date that petitioner corporation decided
to stop and cease its operation. Similarly, respondent was not paid
separation pay upon termination of his employment.

80
81

As respondents dismissal was not due to serious business losses,

respondent is entitled to payment of separation pay equivalent to one month
pay or at least one-half month pay for every year of service, whichever is
higher. The rationale for this was laid down in Reahs Corporation v. National
Labor Relations Commission,82 thus:

The grant of separation pay, as an incidence of

termination

of

employment

under

Article

283,

is

statutory obligation on the part of the employer and a

demandable right on the part of the employee, except only
where the closure or cessation of operations was due to serious
business losses or financial reverses and there is sufficient proof
of this fact or condition. In the absence of such proof of
serious

business

losses

or

financial

reverses,

the

employer closing his business is obligated to pay his

employees and workers their separation pay.

The rule, therefore, is that in all cases of business

closure or cessation of operation or undertaking of the
employer, the affected employee is entitled to separation
pay. This is consistent with the state policy of treating
labor as a primary social economic force, affording full
protection to its rights as well as its welfare. The exception
is when the closure of business or cessation of operations is due
to serious business losses or financial reverses duly proved, in

82

which case, the right of affected employees to separation pay is

lost for obvious reasons.83 [Emphasis supplied.]

As previously discussed, respondents dismissal was due to an

authorized

cause,

however,

petitioner

corporation

failed

to

observe

procedural due process in effecting such dismissal. In Culili v. Eastern

Telecommunications Philippines, Inc.,84 this Court made the following
pronouncements, thus:

x x x there are two aspects which characterize the concept

of due process under the Labor Code: one is substantive
whether the termination of employment was based on the
provision of the Labor Code or in accordance with the prevailing
jurisprudence; the other is procedural the manner in which the
dismissal was effected.

Section 2(d), Rule I, Book VI of the Rules Implementing the Labor

Code provides:

(d) In all cases of termination of employment, the

following

standards

substantially observed:

83
84

of

due

process

shall

be

xxxx

For termination of employment as defined in

Article 283 of the Labor Code, the requirement of
due process shall be deemed complied with
upon

service

of

written

notice

to

the

employee and the appropriate Regional Office

of the Department of Labor and Employment at
least

thirty

days

before

effectivity

of

the

termination, specifying the ground or grounds

for termination.

In Mayon Hotel & Restaurant v. Adana, [citation omitted] we observed:

The requirement of law mandating the giving of

notices

was

intended

not

only

to

enable

the

employees to look for another employment and

therefore ease the impact of the loss of their jobs and
the corresponding income, but more importantly, to
give the Department of Labor and Employment
(DOLE) the opportunity to ascertain the verity of the
alleged authorized cause of termination. 85 [Emphasis
supplied].

85

The records of this case disclosed that there was absolutely no written
notice given by petitioner corporation to the respondent and to the DOLE
prior to the cessation of its business operations. This is evident from the fact
that petitioner corporation effected respondents dismissal on the same date
that it decided to stop and cease its business operations. The necessary
consequence of such failure to comply with the one-month prior written
notice rule, which constitutes a violation of an employees right to statutory
due process, is the payment of indemnity in the form of nominal damages. 86
In Culili v. Eastern Telecommunications Philippines, Inc., this Court further
held:

In Serrano v. National Labor Relations Commission [citation

omitted], we noted that a job is more than the salary that it
carries.

There

is

psychological

effect

or

stigma

in

immediately finding ones self laid off from work. This is exactly
why our labor laws have provided for mandating procedural due
process clauses. Our laws, while recognizing the right of
employers to terminate employees it cannot sustain, also
recognize the employees right to be properly informed of
the impending severance of his ties with the company he
is working for. x x x.

86

x x x Over the years, this Court has had the opportunity to

reexamine the sanctions imposed upon employers who fail to
comply with the procedural due process requirements in
terminating its employees. In Agabon v. National Labor Relations
Commission [citation omitted], this Court reverted back to the
doctrine in Wenphil Corporation v. National Labor Relations
Commission

[citation omitted] and held

that

where

the

dismissal is due to a just or authorized cause, but without

observance

of

the

due

process

requirements,

the

dismissal may be upheld but the employer must pay an

indemnity to the employee. The sanctions to be imposed
however, must be stiffer than those imposed in Wenphil to
achieve a result fair to both the employers and the employees.

In Jaka Food Processing Corporation v. Pacot [citation

omitted], this Court, taking a cue from Agabon, held that since
there is a clear-cut distinction between a dismissal due to a just
cause and a dismissal due to an authorized cause, the legal
implications for employers who fail to comply with the notice
requirements must also be treated differently:

Accordingly, it is wise to hold that: (1) if 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.87 [Emphasis supplied.]

Thus, in addition to separation pay, respondent is also entitled to an

award of nominal damages. In conformity with this Courts ruling in Culili v.
Eastern Telecommunications Philippines, Inc. and Shimizu Phils. Contractors,
Inc. v. Callanta, both citing Jaka Food Processing Corporation v. Pacot,88 this
Court fixed the amount of nominal damages to P50,000.00.

With respect to petitioners contention that the Management Contract

executed between respondent and petitioner Lucila has no binding effect on
petitioner corporation for having been executed way before its incorporation,
this Court finds the same meritorious.

Section 19 of the Corporation Code expressly provides:

Sec. 19. Commencement of corporate existence. - A

private corporation formed or organized under this Code
commences to have corporate existence and juridical
87
88

personality and is deemed incorporated from the date the

Securities and Exchange Commission issues a certificate
of incorporation under its official seal; and thereupon the
incorporators, stockholders/members and their successors shall
constitute a body politic and corporate under the name stated in
the articles of incorporation for the period of time mentioned
therein, unless said period is extended or the corporation is
sooner dissolved in accordance with law. [Emphasis supplied.]

Logically, there is no corporation to speak of prior to an entitys

incorporation. And no contract entered into before incorporation can bind the
corporation.

As can be gleaned from the records, the Management Contract dated

16 January 1994 was executed between respondent and petitioner Lucila
months before petitioner corporations incorporation on 15 August 1994.
Similarly, it was done when petitioner Lucila was still the President of Marc
Marketing, Inc. Undeniably, it cannot have any binding and legal effect on
petitioner corporation. Also, there was no evidence presented to prove that
petitioner corporation adopted, ratified or confirmed the Management
Contract. It is for the same reason that petitioner corporation cannot be
considered estopped from questioning its binding effect now that respondent
was invoking the same against it. In no way, then, can it be enforced against
petitioner

corporation,

much

less,

its

provisions

fixing

respondents

compensation as General Manager to 30% of petitioner corporations net

profit. Consequently, such percentage cannot be the basis for the

computation of respondents separation pay. This finding, however, will not

affect the undisputed fact that respondent was, indeed, the General Manager
of petitioner corporation from its incorporation up to the time of his
dismissal.

Accordingly, this Court finds it necessary to still remand the present

case to the Labor Arbiter to conduct further proceedings for the sole purpose
of determining the compensation that respondent was actually receiving
during the period that he was the General Manager of petitioner corporation,
this, for the proper computation of his separation pay.
As regards petitioner Lucilas solidary liability, this Court affirms the
same.

As a rule, corporation has a personality separate and distinct from its

officers, stockholders and members such that corporate officers are not
personally liable for their official acts unless it is shown that they
have exceeded their authority. However, this corporate veil can be
pierced when the notion of the legal entity is used as a means to perpetrate
fraud, an illegal act, as a vehicle for the evasion of an existing obligation, and
to confuse legitimate issues. Under the Labor Code, for instance, when a
corporation violates a provision declared to be penal in nature, the penalty
shall be imposed upon the guilty officer or officers of the corporation.89

Based on the prevailing circumstances in this case, petitioner Lucila,

being the President of petitioner corporation, acted in bad faith and with
89

malice in effecting respondents dismissal from employment. Although

petitioner corporation has a valid cause for dismissing respondent due to
cessation of business operations, however, the latters dismissal therefrom
was done abruptly by its President, petitioner Lucila. Respondent was not
given the required one-month prior written notice that petitioner corporation
will already cease its business operations. As can be gleaned from the
records, respondent was dismissed outright by petitioner Lucila on the same
day that petitioner corporation decided to stop and cease its business
operations. Worse, respondent was not given separation pay considering that
petitioner corporations cessation of business was not due to business losses
or financial reverses.

WHEREFORE, premises considered, the Decision and Resolution dated

20 June 2005 and 7 March 2006, respectively, of the Court of Appeals in CAG.R. SP No. 76624 are hereby AFFIRMED with the MODIFICATION finding
respondents dismissal from employment legal but without proper observance
of due process. Accordingly, petitioner corporation, jointly and solidarily
liable with petitioner Lucila, is hereby ordered to pay respondent the
following; (1) separation pay equivalent to one month pay or at least onehalf month pay for every year of service, whichever is higher, to be
computed from the commencement of employment until termination; and (2)
nominal damages in the amount of P50,000.00.

This Court, however, finds it proper to still remand the records to the
Labor Arbiter to conduct further proceedings for the sole purpose of
determining the compensation that respondent was actually receiving during
the period that he was the General Manager of petitioner corporation for the
proper computation of his separation pay.

Costs against petitioners.

SO ORDERED.