Doctrine of Piercing Veil Cases

8/19/2019 Doctrine of Piercing Veil Cases

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CONCEPT BUILDERS, INC., petitioner , vs. THE NATIONAL LABORRELATIONS COMMISSION, (First Division); an Nor!"rtoMara!", Roo#$o Ra%&"#, Cristo!a# Ri"'o, Man&"# i##"'o,Pa#ronio i&os, P"ro A!oi'ar, Nor!"rto Co*"naor,

Ro'"##o Sa#&t, E*i#io aria, +r., Mariano Rio, Pa&#ina Bas"a,Ai$r"o A#!"ra, Pa%&ito Sa#&t, Do*in'o &arino, Ro*"o a#v",Do*inaor Sa!ina, F"#i" Raiana, avino S&a#i!io, Mor"noEsar"s, F"rinan Torr"s, F"#i" Basi#an, an R&!"nRo!a#os, respondents.

D E C I S I O N

HERMOSISIMA, +R., J.:

The corporate mask may be lifted and the corporate veil may be piercedwhen a corporation is just but the alter ego of a person or of another corporation. Where badges of fraud exist; where public convenience isdefeated; where a wrong is sought to be justified thereby, the corporate fictionor the notion of legal entity should come to naught. The law in these instanceswill regard the corporation as a mere association of persons and, in case of two corporations, merge them into one.

Thus, where a sister corporation is used as a shield to evade acorporations subsidiary liability for damages, the corporation may not beheard to say that it has a personality separate and distinct from the other

corporation. The piercing of the corporate veil comes into play.

This special civil action ostensibly raises the question of whether theational !abor "elations #ommission committed grave abuse of discretionwhen it issued a break$open order to the sheriff to be enforced againstpersonal property found in the premises of petitioners sister company.

%etitioner #oncept &uilders, 'nc., a domestic corporation, with principaloffice at 355 (aysan "oad, )alen*uela, (etro (anila, is engaged in theconstruction business. %rivate respondents were employed by said companyas laborers, carpenters and riggers.

+n ovember, -, private respondents were served individual writtennotices of termination of employment by petitioner, effective on ovember /0,-. 't was stated in the individual notices that their contracts of employmenthad expired and the project in which they were hired had been completed.

%ublic respondent found it to be, the fact, however, that at the time of thetermination of private respondents employment, the project in which they were



hired had not yet been finished and completed. %etitioner had to engage theservices of sub$contractors whose workers performed the functions of privaterespondents.

1ggrieved, private respondents filed a complaint for illegal dismissal,

unfair labor practice and non$payment of their legal holiday pay, overtime payand thirteenth$month pay against petitioner.

+n 2ecember -, -3, the !abor 1rbiter rendered judgment orderingpetitioner to reinstate private respondents and to pay them back wagesequivalent to one year or three hundred working days.

+n ovember 45, 1985, the ational !abor "elations #ommission 6!"#7dismissed the motion for reconsideration filed by petitioner on the ground thatthe said decision had already become final and executory.4

+n +ctober 8, -8, the !"# "esearch and 'nformation 2epartmentmade the finding that private respondents backwages amounted to%--,00.00./

+n +ctober 4-, -8, the !abor 1rbiter issued a writ of execution directingthe sheriff to execute the 2ecision, dated 2ecember -, -3. The writ waspartially satisfied through garnishment of sums from petitioners debtor, the(etropolitan Waterworks and 9ewerage 1uthority, in the amount of %,/:./3. 9aid amount was turned over to the cashier of the !"#.

+n ebruary , --, an 1lias Writ of <xecution was issued by the !abor 1rbiter directing the sheriff to collect from herein petitioner the sum of %5,33.58, representing the balance of the judgment award, and toreinstate private respondents to their former positions.

+n =uly /, --, the sheriff issued a report stating that he tried to servethe alias writ of execution on petitioner through the security guard on duty butthe service was refused on the ground that petitioner no longer occupied thepremises.

+n 9eptember 48, -8, upon motion of private respondents, the !abor 1rbiter issued a second alias writ of execution.

The said writ had not been enforced by the special sheriff because, asstated in his progress report, dated ovember 4, -->

1. All the employees inside petitioners premises at 355 Maysan Road, Valenzuela,

Metro Manila, claimed that they were employees of Hydro Pipes Philippines, Inc.

(HPPI and not !y respondent"

http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn1








#. $e%y was made upon personal properties he found in the premises"

&. 'ecurity uards with hih)powered uns pre%ented him from remo%in the

properties he had le%ied upon.*

The said special sheriff recommended that a break$open order be issuedto enable him to enter petitioners premises so that he could proceed with thepublic auction sale of the aforesaid personal properties on ovember 5, --.

+n ovember 8, --, a certain 2ennis #uyegkeng filed a third$partyclaim with the !abor 1rbiter alleging that the properties sought to be leviedupon by the sheriff were owned by ?ydro 6%hils.7, 'nc. 6?%%'7 of which he isthe )ice$%resident.

+n ovember 4/, --, private respondents filed a (otion for 'ssuance of a &reak$+pen +rder, alleging that ?%%' and petitioner corporation were

owned by the same incorporator@ stockholders. They also alleged thatpetitioner temporarily suspended its business operations in order to evade itslegal obligations to them and that private respondents were willing to post anindemnity bond to answer for any damages which petitioner and ?%%' maysuffer because of the issuance of the break$open order.

'n support of their claim against ?%%', private respondents presented dulycertified copies of the Aeneral 'nformations 9heet, dated (ay :, -5,submitted by petitioner to the 9ecurities and <xchange #ommission 69<#7and the Aeneral 'nformation 9heet, dated (ay 15, -5, submitted by ?%%'

to the 9ecurities and <xchange #ommission.The Aeneral 'nformation 9heet submitted by the petitioner revealed the

following>

1. +readown of 'u!scri!ed -apital

ame of 'tocholder Amount 'u!scri!ed

HPPI P/,000,22.22

Antonio 3. $im #,022,222.22

4ennis '. -uyeen &22.22

5lisa -. $im 122,222.22

6eodulo R. 4ino 122.22





Virilio 7. -asino 122.22

#. +oard of 4irectors

Antonio 3. $im -hairman

4ennis '. -uyeen Mem!er

5lisa -. $im Mem!er

6eodulo R. 4ino Mem!er

Virilio 7. -asino Mem!er

&. -orporate 7fficers

Antonio 3. $im President

4ennis '. -uyeen Assistant to the President

5lisa 2. $im 6reasurer

Virilio 7. -asino -orporate 'ecretary

*. Principal 7ffice

& Maysan Road

Valenzuela, Metro Manila.

+n the other hand, the Aeneral 'nformation 9heet of ?%%' revealed thefollowing>

1. +readown of 'u!scri!ed -apital

ame of 'tocholder Amount 'u!scri!ed

Antonio 3. $im P*22,222.22

5lisa -. $im 8,822.22

A3$ 6radin *,222.22





4ennis '. -uyeen *2,122.22

6eodulo R. 4ino 122.22

Virilio 7. -asino 122.22

#. +oard of 4irectors

Antonio 3. $im -hairman

5lisa -. $im Mem!er

4ennis '. -uyeen Mem!er

Virilio 7. -asino Mem!er

6eodulo R. 4ino Mem!er

&. -orporate 7fficers

Antonio 3. $im President

4ennis '. -uyeen Assistant to the President

5lisa 7. $im 6reasurer

Virilio 7. -asino -orporate 'ecretary

*. Principal 7ffice

& Maysan Road, Valenzuela, Metro Manila./

+n ebruary , --0, ?%%' filed an +pposition to private respondentsmotion for issuance of a break$open order, contending that ?%%' is acorporation which is separate and distinct from petitioner. ?%%' also allegedthat the two corporations are engaged in two different kinds of businesses,

i.e., ?%%' is a manufacturing firm while petitioner was then engaged inconstruction.

+n (arch 4, --0, the !abor 1rbiter issued an +rder which denied privaterespondents motion for break$open order.

%rivate respondents then appealed to the !"#. +n 1pril 4/, --4, the!"# set aside the order of the !abor 1rbiter, issued a break$open order and





directed private respondents to file a bond. Thereafter, it directed the sheriff toproceed with the auction sale of the properties already levied upon. 'tdismissed the third$party claim for lack of merit.

%etitioner moved for reconsideration but the motion was denied by the

!"# in a "esolution, dated 2ecember /, --4.?ence, the resort to the present petition.

%etitioner alleges that the !"# committed grave abuse of discretionwhen it ordered the execution of its decision despite a third$party claim on thelevied property. %etitioner further contends, that the doctrine of piercing thecorporate veil should not have been applied, in this case, in the absence of any showing that it created ?%%' in order to evade its liability to privaterespondents. 't also contends that ?%%' is engaged in the manufacture andsale of steel, concrete and iron pipes, a business which is distinct and

separate from petitioners construction business. ?ence, it is of noconsequence that petitioner and ?%%' shared the same premises, the same%resident and the same set of officers and subscribers.5

We find petitioners contention to be unmeritorious.

't is a fundamental principle of corporation law that a corporation is anentity separate and distinct from its stockholders and from other corporationsto which it may be connected. &ut, this separate and distinct personality of acorporation is merely a fiction created by law for convenience and to promote

justice.- 9o, when the notion of separate juridical personality is used to defeat

public convenience, justify wrong, protect fraud or defend crime, or is used asa device to defeat the labor laws, 0 this separate personality of the corporationmay be disregarded or the veil of corporate fiction pierced. This is truelikewise when the corporation is merely an adjunct, a business conduit or analter ego of another corporation.4

The conditions under which the juridical entity may be disregarded varyaccording to the peculiar facts and circumstances of each case. o hard andfast rule can be accurately laid down, but certainly, there are some probativefactors of identity that will justify the application of the doctrine of piercing the

corporate veil, to wit>

1. 'toc ownership !y one or common ownership of !oth corporations.

#. Identity of directors and officers.

&. 6he manner of eepin corporate !oos and records.















*. Methods of conductin the !usiness.1&

The 9<# en banc explained the instrumentality rule which the courts haveapplied in disregarding the separate juridical personality of corporations asfollows>

Where one corporation is so organized and controlled and its affairs are conducted so

that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the

corporate entity of the instrumentality may be disregarded. The control necessary to

invoke the rule is not majority or even complete stock control but such domination of

finances, policies and practices that the controlled corporation has, so to speak, no

separate mind, will or eistence of its own, and is but a conduit for its principal. !t

must be kept in mind that the control must be shown to have been eercised at the time

the acts complained of took place. "oreover, the control and breach of duty must

proimately cause the injury or unjust loss for which the complaint is made.

The test in determining the applicability of the doctrine of piercing the veilof corporate fiction is as follows>

#. $ontrol, not mere majority or complete stock control, but complete domination, not

only of finances but of policy and business practice in respect to the transaction

attacked so that the corporate entity as to this transaction had at the time no separate

mind, will or eistence of its own%

&. 'uch control must have been used by the defendant to commit fraud or wrong, to

perpetuate the violation of a statutory or other positive legal duty, or dishonest andunjust act in contravention of plaintiffs legal rights% and

3. The aforesaid control and breach of duty must proimately cause the injury or

unjust loss complained of.

The absence of any one of these elements prevents piercing the corporate veil. in

applying the instrumentality or alter ego doctrine, the courts are concerned with

reality and not form, with how the corporation operated and the individual defendants

relationship to that operation. 1*

Thus, the question of whether a corporation is a mere alter ego, a meresheet or paper corporation, a sham or a subterfuge is purely one of fact.:

'n this case, the !"# noted that, while petitioner claimed that it ceasedits business operations on 1pril 4-, -8, it filed an 'nformation 9heet with the9ecurities and <xchange #ommission on (ay :, -5, stating that its officeaddress is at 355 (aysan "oad, )alen*uela, (etro (anila. +n the other









hand, ?%%', the third$party claimant, submitted on the same day, a similar information sheet stating that its office address is at 355 (aysan "oad,)alen*uela, (etro (anila.

urthermore, the !"# stated that>

(oth information sheets were filed by the same )irgilio *. $asino as the corporate

secretary of both corporations. !t would also not be amiss to note that both

corporations had the same president, the same board of directors, the same corporate

officers, and substantially the same subscribers.

+rom the foregoing, it appears that, among other things, the respondent herein

petitioner- and the thirdparty claimant shared the same address and/or premises.

0nder this circumstances, sic- it cannot be said that the property levied upon by the

sheriff were not of respondents.1/

#learly, petitioner ceased its business operations in order to evade thepayment to private respondents of backwages and to bar their reinstatementto their former positions. ?%%' is obviously a business conduit of petitioner corporation and its emergence was skillfully orchestrated to avoid the financialliability that already attached to petitioner corporation.

The facts in this case are analogous to Claparols v. Court of Industrial Relations5 where we had the occasion to rule>

1espondent courts findings that indeed the $laparols 'teel and 2ail lant, which

ceased operation of 4une 3, #657, was '0$$88989 by the $laparols 'teel$orporation effective the net day, 4uly #, #657, up to 9ecember 7, #6:&, when the

latter finally ceased to operate, were not disputed by petitioner. it is very clear that

the latter corporation was a continuation and successor of the first entity . (oth

predecessors and successor were owned and controlled by petitioner 8duardo

$laparols and there was no break in the succession and continuity of the same

business. This avoidingtheliability scheme is very patent, considering that 6; of

the subscribed shares of stock of the $laparols 'teel $orporation the second

corporation- was owned by respondent $laparols himself, and all the assets of

the dissolved $laparols 'teel and 2ail lant were turned over to the emerging

$laparols 'teel $orporation.

't is very obvious that the second corporation seeks the protective shield of a corporate fiction whose veil in the present case could, and should, bepierced as it was deliberately and maliciously designed to evade its financialobligation to its employees.







'n view of the failure of the sheriff, in the case at bar, to effect a levy uponthe property subject of the execution, private respondents had no other recourse but to apply for a break$open order after the third$party claim of ?%%'was dismissed for lack of merit by the !"#. This is in consonance with9ection /, "ule )'' of the !"# (anual of <xecution of =udgment whichprovides that>

'hould the losing party, his agent or representative, refuse or prohibit the 'heriff or

his representative entry to the place where the property subject of eecution is located

or kept, the judgment creditor may apply to the $ommission or <abor =rbiter

concerned for a breakopen order.

urthermore, our perusal of the records shows that the twin requirementsof due notice and hearing were complied with. %etitioner and the third$partyclaimant were given the opportunity to submit evidence in support of their

claim.

?ence, the !"# did not commit any grave abuse of discretion when itaffirmed the break$open order issued by the !abor 1rbiter.

inally, we do not find any reason to disturb the rule that factual findings of quasi$judicial agencies supported by substantial evidence are binding on this#ourt and are entitled to great respect, in the absence of showing of graveabuse of a discretion.

-HEREFORE, the petition is 2'9('99<2 and the assailed resolutions of

the !"#, dated 1pril 4/, --4 and 2ecember /, --4, are 1'"(<2.SO ORDERED.

Concept Builders Inc. vs. NLRC Case DigestCon"t B&i#"rs In. vs. Nationa# La!or R"#ations Co**issionR /01234, 56 Ma7 /6689

Fats: #oncept &uilders, 'nc., 6#&'7 a domestic corporation, with principal office at /:: (aysan "oad,)alen*uela, (etro (anila, is engaged in the construction business while orberto (arabe; "odolfo "aquel,#ristobal "iego, (anuel Aillego, %alcronio Aiducos, %edro 1boigar, orberto #omendador, "ogelio 9alut,<milio Aarcia, =r., (ariano "io, %aulina &asea, 1lfredo 1lbera, %aquito 9alut, 2omingo Auarino, "omeo Aalve,2ominador 9abina, elipe "adiana, Aavino 9ualibio, (oreno <scares, erdinand Torres, elipe &asilan, and"uben "obalos were employed by said company as laborers, carpenters and riggers. +n ovember -,

(arabe, et. al. were served individual written notices of termination of employment by #&', effective on /0ovember -. 't was stated in the individual notices that their contracts of employment had expired and theproject in which they were hired had been completed. The ational !abor "elations #ommission 6!"#7 foundit to be, the fact, however, that at the time of the termination of (arabe, et.al.Bs employment, the project inwhich they were hired had not yet been finished and completed. #&' had to engage the services of sub$contractors whose workers performed the functions of (arabe, et. al. 1ggrieved, (arabe, et. al. filed acomplaint for illegal dismissal, unfair labor practice and non$payment of their legal holiday pay, overtime payand thirteenth$month pay against #&'. +n - 2ecember -3, the !abor 1rbiter rendered judgment ordering#&' to reinstate (arabe et. al. and to pay them back wages equivalent to year or /00 working days. +n 45





ovember -:, the !"# dismissed the motion for reconsideration filed by #&' on the ground that the saiddecision had already become final and executory.

+n 8 +ctober -8, the !"# "esearch and 'nformation 2epartment made the finding that (arabe, et. al.Bsback wages amounted to %--,00.00. +n 4- +ctober -8, the !abor 1rbiter issued a writ of executiondirecting the sheriff to execute the 2ecision, dated - 2ecember -3. The writ was partially satisfied throughgarnishment of sums from #&'Bs debtor, the (etropolitan Waterworks and 9ewerage 1uthority, in the amount of

%,/:./3. 9aid amount was turned over to the cashier of the !"#. +n ebruary --, an 1lias Writ of <xecution was issued by the !abor 1rbiter directing the sheriff to collect from #&' the sum of %5,33.58,representing the balance of the judgment award, and to reinstate (arabe, et. al. to their former positions. +n/ =uly --, the sheriff issued a report stating that he tried to serve the alias writ of execution on petitioner through the security guard on duty but the service was refused on the ground that #&' no longer occupied thepremises. +n 48 9eptember -8, upon motion of (arabe, et. al., the !abor 1rbiter issued a second alias writof execution. The said writ had not been enforced by the special sheriff because, as stated in his progressreport dated 4 ovember --, that all the employees inside #&'Bs premises claimed that they were employeesof ?ydro %ipes %hilippines, 'nc. 6?%%'7 and not by #&'; that levy was made upon personal properties he foundin the premises; and that security guards with high$powered guns prevented him from removing the propertieshe had levied upon. The said special sheriff recommended that a Cbreak$open orderC be issued to enable him toenter #&'Bs premises so that he could proceed with the public auction sale of the aforesaid personal propertieson 5 ovember --. +n 8 ovember --, a certain 2ennis #uyegkeng filed a third$party claim with the!abor 1rbiter alleging that the properties sought to be levied upon by the sheriff were owned by ?%%', of which

he is the )ice$%resident. +n 4/ ovember --, (arabe, et. al. filed a C(otion for 'ssuance of a &reak$+pen+rder,C alleging that ?%%' and #&' were owned by the same incorporatorDstockholders. They also alleged thatpetitioner temporarily suspended its business operations in order to evade its legal obligations to them and that(arabe, et. al. were willing to post an indemnity bond to answer for any damages which #&' and ?%%' maysuffer because of the issuance of the break$open order. +n 4 (arch --0, the !abor 1rbiter issued an +rder which denied (arabe, et. al.Bs motion for break$open order.

(arabe, et. al. then appealed to the !"#. +n 4/ 1pril --4, the !"# set aside the order of the !abor 1rbiter, issued a break$open order and directed (arabe, et. al. to file a bond. Thereafter, it directed the sheriff to proceed with the auction sale of the properties already levied upon. 't dismissed the third$party claim for lackof merit. #&' moved for reconsideration but the motion was denied by the !"# in a "esolution, dated /2ecember --4. ?ence, the petition.

Iss&": Whether the !"# was correct in issuing the break$open order to levy the E?%%' propertiesF located at

#&' amdDor ?%%'Gs premises at /:: (aysan "oad, )alen*uela, (etro (anila.

H"#: 't is a fundamental principle of corporation law that a corporation is an entity separate and distinct fromits stockholders and from other corporations to which it may be connected. &ut, this separate and distinctpersonality of a corporation is merely a fiction created by law for convenience and to promote justice. 9o, whenthe notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, this separate personality of the corporation maybe disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely anadjunct, a business conduit or an alter ego of another corporation. The conditions under which the juridicalentity may be disregarded vary according to the peculiar facts and circumstances of each case. o hard andfast rule can be accurately laid down, but certainly, there are some probative factors of identity that will justifythe application of the doctrine of piercing the corporate veil, to wit> 67 9tock ownership by one or commonownership of both corporations; 647 'dentity of directors and officers; 6/7 The manner of keeping corporatebooks and records; and 637 (ethods of conducting the business. The 9<# en banc explained the

Cinstrumentality ruleC which the courts have applied in disregarding the separate juridical personality of corporations as CWhere one corporation is so organi*ed and controlled and its affairs are conducted so that itis, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of theCinstrumentalityC may be disregarded. The control necessary to invoke the rule is not majority or even completestock control but such domination of instances, policies and practices that the controlled corporation has, so tospeak, no separate mind, will or existence of its own, and is but a conduit for its principal. 't must be kept inmind that the control must be shown to have been exercised at the time the acts complained of took place.(oreover, the control and breach of duty must proximately cause the injury or unjust loss for which thecomplaint is made.C The test in determining the applicability of the doctrine of piercing the veil of corporatefiction is as 67 #ontrol, not mere majority or complete stock control, but complete domination, not only of



finances but of policy and business practice in respect to the transaction attacked so that the corporate entityas to this transaction had at the time no separate mind, will or existence of its own; 647 9uch control must havebeen used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positivelegal duty or dishonest and unjust act in contravention of plaintiffBs legal rights; and 6/7 The aforesaid controland breach of duty must proximately cause the injury or unjust loss complained of. The absence of any one of these elements prevents Cpiercing the corporate veil.C 'n applying the CinstrumentalityC or Calter egoC doctrine,the courts are concerned with reality and not form, with how the corporation operated and the individual

defendantBs relationship to that operation. Thus the question of whether a corporation is a mere alter ego, amere sheet or paper corporation, a sham or a subterfuge is purely one of fact. ?ere, while #&' claimed that itceased its business operations on 4- 1pril -8, it filed an 'nformation 9heet with the 9ecurities and <xchange#ommission on : (ay -5, stating that its office address is at /:: (aysan "oad, )alen*uela, (etro (anila.+n the other hand, ?%%', the third$party claimant, submitted on the same day, a similar information sheetstating that its office address is at /:: (aysan "oad, )alen*uela, (etro (anila. urther, both informationsheets were filed by the same )irgilio +. #asiHo as the corporate secretary of both corporations. &othcorporations had the same president, the same board of directors, the same corporate officers, andsubstantially the same subscribers. rom the foregoing, it appears that, among other things, the #&' and the?%%' shared the same address andDor premises. Inder these circumstances, it cannot be said that theproperty levied upon by the sheriff were not of #&'Bs. #learly, #&' ceased its business operations in order toevade the payment to (arabe, et. al. of back wages and to bar their reinstatement to their former positions.?%%' is obviously a business conduit of #&' and its emergence was skillfully orchestrated to avoid the financialliability that already attached to #&'.

ENRIQUEZ SECURITYG.R. No. 147993

SERVICES, INC.,

Petitioner,

Present:

PUNO, J.,Chairperson,

- v e r s u s - SANDOVAL-GUTIERREZ,CORONA,

AZCUNA and

GARCIA, JJ.

VICTOR A. CABOTAJE,

Respondent. Promulgated:

July 21, 2006

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

D E C I S I O N



CORONA,J.:

Sometime in January 1979, respondent Victor A. Cabotaje wasemployed as a security guard by Enriquez Security and

Investigation Agency (ESIA). On November 13, 1985, petitioner

Enriquez Security Services, Inc. (ESSI) was incorporated.

Respondent continued to work as security guard in petitioners

agency.

On reaching the age of 60 in July 1997,[1] respondent applied for

retirement.

Petitioner acknowledged that respondent was entitled to

retirement benefits but opposed his claim that the computation of

such benefits must be reckoned from January 1979 when he

started working for ESIA. It claimed that the benefits must becomputed only from November 13, 1985 when ESSI was

incorporated.

Respondent consequently filed a complaint in the National Labor

Relations Commission (NLRC) seeking the payment of retirement

benefits under Republic Act No. (RA) 7641, otherwise known as the

Retirement Pay Law.[2]

On January 15, 1999, labor arbiter Eduardo Carpio decided in

respondents favor:

http://sc.judiciary.gov.ph/jurisprudence/2006/july2006/G.R.%20No.%20147993.htm#_ftn1






#omplainant is entitled to retirement pay. This entitlementwas not denied by respondents. xxx The computation of thisbenefits shall cover the entire period of his employment from=anuary -5- up to =uly 8, --5 based on his latest monthlysalary of %:,//.: per the payroll sheet submitted byrespondents. While respondents claim that respondentcorporation was merely registered with the 2+T# on ovember /, -:, they did not deny however that complainant was anemployee of the then <nrique* 9ecurity and 'nvestigation 1gency,and that complainants services with the said security agency upto the present respondent corporation was uninterrupted. Theobligation of the new company involves not only to absorb theworkers of the dissolved company, but also to include the lengthof service earned by the absorbed employee with their former employer as well.To rule otherwise would be manifestly less thanfair, certainly less than just and equitable.

xxx xxx xxx

W?<"<+"<, judgment is hereby rendered orderingrespondents to pay complainant the grand total amountof %44,:.00 representing his retirement benefits and other money claims.

9+ +"2<"<2.J/K

On appeal, the NLRC set aside the labor arbiters award of one-

month salary for every year of service for being excessive. It ruled

that under RA 7641, respondent Cabotaje was entitled to retirement

pay equivalent only to one-half month salary for every year of

service. Thus: W?<"<+"<, the assailed decision is hereby set aside

and a new one entered ordering respondents to pay complainantthe amount of %58,50.80 representing his retirement benefits.





9+ +"2<"<2.J3K

On March 15, 2000, the NLRC denied petitioners motion for

reconsideration.[5]

On May 25, 2000, petitioner filed a special civil action for

certiorari[6] with the Court of Appeals.

On September 26, 2000, the appellate court affirmed the NLRC

decision.[7] It also denied the motion for reconsideration on May 8,

2001.[8]

Hence, this petition for review on certiorari[9] on the following

issues: . JwKhether or not the "etirement J%ayK !aw has retroactive

effect. 4. JwKhether the whole : days service incentive leave or just

a portion thereof equivalent to D4 should be included in the

month salary for purposes of computing the retirement pay. /. JwKhether or not the length of service of a retired employee in

a dissolved company 6his former employer7 should beincluded in his length of service with his last employer for purposes of computing the retirement pay.J0K

We find no merit in the petition.

First.Petitioners contention that RA 7641 cannot be applied

retroactively has long been settled in the Guidelines for Effective

Implementation of RA 7641 issued on October 24, 1996 by the

















Department of Labor and Employment. Paragraph B of the

guidelines provides:'n reckoning the length of service, the period of employment withthe same employer before the effectivity date of the law on=anuary 5, --/ should be included.

Thus, inRufina Patis Factory v. Lucas, Sr.,[11] we held:

"1 583 is undoubtedly a social legislation. The law has beenenacted as a labor protection measure and as a curative statutethat absent a retirement plan devised by, an agreement with, or a

voluntary grant from, an employer can respond, in part at least, tothe financial well$being of workers during their twilight years soonfollowing their life of labor. There should be little doubt about thefact that t" #a< an a#7 to #a!or ontrats sti## "=istin' att" ti*" t" stat&t" as ta>"n "$$"t, and that its !"n"$its an!" r">on" not on#7 $ro* t" at" o$ t" #a<s "nat*"nt!&t r"troativ"#7 to t" ti*" sai "*#o7*"nt ontrats av"start".(emphasis ours)

Second.Petitioners insistence that only 1/12 of the service

incentive leave (SIL) should be included in the computation of the

retirement benefit has no basis. Section 1, RA 7641 provides:

x x x Inless the parties provide for broader inclusions, the

term one$half 6D47 month salary shall mean fifteen 6:7 days plusone$twelfth 6D47 of the /th month pay and the cash equivalentof not more than five 6:7 days of service incentive leave. x x x

Section 5.2, Rule II of the Implementing Rules of Book VI of

the Labor Code further clarifies what comprises the 1/2 month

salary due a retiring employee:





:.4 Components of One-half (1!) "onth #alar$. or thepurpose of determining the minimum retirement pay due anemployee under this "ule, the term one$half month salary shallinclude all the following>

6a7 ifteen 6:7 days salary of the employee based on his

latest salary rate. x x x; (!) T" as "%&iva#"nt o$ not *or" tan $iv" (?) a7s

o$ s"rvi" in"ntiv" #"av"; 6c7 +ne$twelfth of the /th month pay due an employee; 6d7 1ll other benefits that the employer and employee may

agree upon that should be included in the computation of theemployees retirement pay.

The foregoing rules are clear that the whole 5 days of SIL are

included in the computation of a retiring employees pay.

Third. It is a well-entrenched doctrine that the Supreme Court

does not pass upon questions of fact in an appeal by certiorari

under Rule 45.[12] It is not our function to assess and evaluate the

evidence all over again[13] where the findings of the quasi-judicial

agency and the appellate court on the matter coincide.

The consistent rulings of the labor arbiter, the NLRC and the

appellate court should be respected and petitioners veil of corporate

fiction should likewise be pierced.These are based on the following

uncontroverted facts: (1) respondent worked with ESIA and

petitioner ESSI; (2) his employment with both security agencies was

continuous and uninterrupted; (3) both agencies were owned by the







Enriquez family and (4) petitioner ESSI maintained its office in the

same place where ESIA previously held office.[14]

The attempt to make the security agencies appear as two

separate entities, when in reality they were but one, was a devise to

defeat the law and should not be permitted.Although respect for

corporate personality is the general rule, there are exceptions. In

appropriate cases, the veil of corporate fiction may be pierced as

when it is used as a means to perpetrate a social injustice or as a

vehicle to evade obligations. Petitioner was thus correctly ordered topay respondents retirement under RA 7641, computed from

January 1979 up to the time he applied for retirement in July

1997.

WHEREFORE, the petition is herebyDENIED. The assailed

decision and resolution of the Court of Appeals are AFFIRMED.

Costs against petitioner.

SO ORDERED.THE HEIRS OF THE LATE

PANFILO V. PAJARILLO,

Petitioners,

versus )

THE HON. COURT OF

APPEALS, NATIONAL LABOR

RELATIONS COMMISSION

and SAMAHAN NG MGA

MANGGAGAWA NG PANFILO

G.R. No. 1550565!

Present:

9AR5')'A6IA:7, 4.,

-hairperson,AUSTRIA-MARTINEZ,

CHICO-NAZARIO,





V. PAJARILLO, ALFRE"O

HO#OHO#, HERMINIO

CASTILLO, BERNAR"O

ROCO, RO"OLFO TORRES,

JULIAN JORVINA, LOUR"ES

ROCO, FLORITA #APOC,

MARLON AL"ANA,

PARALUMAN ULANG,

TOLENTINO SANHI, JOHNN#

SORIANO, AN"RES

CALA$UE, ROBERTO

LAVARE%, FRANCISCO

MORALES, SALVACION

PERINA, ANTONIO ABALA,

ROMEO SALONGA, AUGUR M. MANIPOL, BIENVENI"A

TE$UIL, MARIO ELEP,

ALA"INO LATIGO,

BERNAR"INE BANSAL,

PE"RO "E BAGUIO,

RICAR"O CALICA, LAURA

CO, VICENTE RECANA,

ELENA TOLLE"O, ALFRE"O

PLA%A, SR., HERMINIOBAL"ONO, FELIPE #APOC,

ARISTON NIPA, and ALFONSO

C. BAL"OMAR,

Respondents.

NACHURA, and

REYES, JJ.



Promulated:

O!to"er #$, %&&'

( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- -(

) E C I S I O N

CHICO-NAZARIO, J.:

In t*+s Pet+t+on or Re+e on Certiorari under Rule /0 o t*eRules o Court,1#2 3et+t+oners, *e+rs o Pan4lo 5. Pa6ar+llo, see7 toset as+de t*e )e!+s+on,1%2 and Resolut+on,182 dated #% Mar!* %&&%and %9 Auust %&&%, res3e!t+el, o t*e Court o A33eals +n CA-;.R. SP No. 0/88& and CA-;.R. SP No. 0/88#, reers+n t*eto Per Curiam Orders dated %9 O!to"er #$$< and #& =anuar

http://sc.judiciary.gov.ph/jurisprudence/2007/october2007/155056-57.htm#_ftn1








#$$',1/2 o t*e Nat+onal >a"or Relat+ons Comm+ss+on ?N>RC@ +nN>RC NCR Cases No. &9-&8&#8-9' and &#-&&88#-99.

Str+33ed o t*e non-essent+als, t*e a!ts are as ollos:

Pan4lo 5. Pa6ar+llo ?Pan4lo@ as t*e oner and o3erator o seeral "uses 3l+n !erta+n routes +n Metro Man+la. He used t*ename PVP Liner +n *+s "uses. Pr+ate res3ondents ereem3loed as dr+ers, !ondu!tors and !ondu!tresses " Pan4lo.

)ur+n t*e+r em3loment +t* Pan4lo, 3r+ate res3ondentsor7ed at least our t+mes a ee7 or or an aerae o 4teenor7+n das 3er mont*. T*e ere reu+red to o"sere a or7s!*edule start+n rom /:&& +n t*e morn+n u3 to #&:&& +n t*eeen+n on a stra+*t t+me "as+s. Pr+ate res3ondent dr+ers ere3a+d a da+l !omm+ss+on o #&B, *+le 3r+ate res3ondent!ondu!tors and !ondu!tresses re!e+ed a da+l !omm+ss+on o 'B.In sum, ea!* o t*e 3r+ate res3ondents earned an aeraeda+l !omm+ss+on o a"out P#0&.&& a da. T*e ere not +enemeren! !ost o l++n alloan!e ?ECO>A@, #8 t* mont* 3a, leal*ol+da 3a and ser+!e +n!ent+e leae 3a.102

T*e ollo+n ere dedu!ted rom t*e 3r+ate res3ondentsda+l !omm+ss+ons: ?a@ !osts o as*+n t*e ass+ned "uses ?"@term+nal ees ?!@ ees or see3+n t*e ass+ned "uses ?d@ ees3a+d to t*e barangay tanod at "us term+nals and ?e@ rental eesor t*e use o stereo +n t*e ass+ned "uses. An em3loee *oreused su!* dedu!t+ons ere e+t*er "arred rom or7+n ord+sm+ssed rom or7.1<2

T*ereater, 3r+ate res3ondents and seeral !o-em3loeesormed a un+on !alled SAMAHAN NG MGA MANGGAGAWA NGPANFILO V. PAJARILLO ?res3ondent un+on@. T*e )e3artment o >a"or and Em3loment ?)O>E@ +ssued a Cert+4!ate o Re+strat+on+n aor o t*e res3ondent un+on.1'2











U3on learn+n o t*e ormat+on o res3ondent un+on, Pan4loand *+s !*+ldren ordered some o t*e 3r+ate res3ondents to s+na do!ument aDrm+n t*e+r trust and !on4den!e +n Pan4lo and

den+n an +rreular+t+es on *+s 3art. Ot*er 3r+ate res3ondentsere d+re!ted to s+n a "lan7 do!ument *+!* turned out to "e ares+nat+on letter. Pr+ate res3ondents reused to s+n t*e sa+ddo!uments, *en!e, t*e ere "arred rom or7+n or ered+sm+ssed +t*out *ear+n and not+!e. Pan4lo and *+s !*+ldren andrelat+es also ormed a !om3an un+on *ere t*e a!ted as +tsd+re!tors and oD!ers.192

On %0 Auust #$9', res3ondent un+on and seeralem3loees 4led a Com3la+nt or una+r la"or 3ra!t+!e and +llealdedu!t+on "eore t*e >a"or Ar"+ter +t* Panflo V. PajarilloLiner as 3art-res3ondent. T*+s as do!7eted as N>RCNCR CaseNo. 00-08-03013-87.1$2 On %9 Se3tem"er #$9', t*e res3ondentun+on 4led an Amended Com3la+nt alle+n t*+s t+me not onluna+r la"or 3ra!t+!e and +lleal dedu!t+on "ut also +lleald+sm+ssal.1#&2

On %& =anuar #$99, res3ondent un+on and seeralem3loees 4led anot*er Com3la+nt or +olat+on o la"or standardlas !la+m+n non-3ament o ?#@ ECO>A, ?%@ #8 t* mont* 3a, ?8@oert+me 3a, ?/@ leal *ol+da 3a, ?0@ 3rem+um 3a, and ?<@ser+!e +n!ent+e leae. T*e 3art-res3ondents +n t*+s !om3la+ntere PVP LINER INC. and PANFILO V. PAJARILLO, a i!"eneral #ana$er%O&era!or. T*+s as do!7eted as N>RC CaseNo. 00-01-00331-88.1##2

Not+4!at+ons and summons +t* res3e!t to N>RCNCR CaseNo. 00-08-03013-87 ere addressed and sent to PANFILO V.PAJARILLO, Preiden!%#ana$er, Panflo V. PajarilloLiner, Pai$ Line '!., '!a. Ana, #anila on 8# Auust#$9'. T*e Re+str Return Re!e+3t dated / Se3tem"er #$9' as











addressed to Panflo V. Pajarillo, and a s+nature t*ere+na33ears on to3 o t*e s+nature o t*e name o t*e addressee.1#%2 F+t* reard to N>RC Case No. 00-01-00331-88, not+4!at+onsand summonses ere addressed and sent to ()E

PRE'I*EN(%#ANA"ER, PVP Liner In+. and Panflo V.Pajarillo, 17 a/ora '!ree!, '!a. Ana, #anila on %0 =anuar #$99. T*e Re+str Return Re!e+3t dated / Ge"ruar#$99 as addressed to PVP Liner In+. and as s+ned " a!erta+n Irene ". Pajarillo as t*e addressees aent.13

Pan4lo den+ed t*e !*ares +n t*e !om3la+nts. He ma+nta+nedt*at 3r+ate res3ondents ere not d+sm+ssed rom or7 ona!!ount o t*e+r un+on a!t++t+es t*at 3r+ate res3ondents andseeral o t*e+r !o-em3loees e+t*er res+ned or ere se3aratedrom or7, or s+m3l a"andoned t*e+r em3loment lon "eoret*e res3ondent un+on as oran+ed and re+stered +t* t*e)O>E t*at t*e 3r+ate res3ondents are not ent+tled to ECO>A and#8t* mont* 3a "e!ause t*e re!e+ed aes a"oe t*e m+n+mum3ro+ded " la t*at t*e 3r+ate res3ondents are not ent+tled tooert+me and leal *ol+da 3a "e!ause t*ese are alread+n!luded +n t*e+r da+l !omm+ss+ons t*at t*e 3r+ate res3ondentsare not ent+tled to 4e das +n!ent+e leae 3a "e!ause t*e

or7 onl our das a ee7 t*at no dedu!t+ons ere made +n t*eda+l !omm+ss+ons o t*e 3r+ate res3ondents t*at t*e 3r+ateres3ondents oluntar+l and d+re!tl 3a+d !erta+n +nd++dualsor barangay 3rote!t+on and or t*e !lean+n o t*e ass+ned"uses t*at *e *ad no 3art+!+3at+on +n t*esea!t++t+esarranements t*at t*e 3r+ate res3ondents ere notd+sm+ssed rom or7 and t*at t*e 3r+ate res3ondents e+t*era"andoned t*e+r 6o"s or oluntar+l res+ned rom or7.1#/2

U3on mot+on o Pan4lo, t*e !om3la+nts +n N>RCNCR CaseNo. 00-08-03013-87 and N>RC Case No. 00-01-00331-88 ere!onsol+dated.1#02 On %$ =anuar #$$#, Pan4lo d+ed.1#<2













Ater *ear+n and su"m+ss+on " "ot* 3art+es o t*e+rres3e!t+e 3os+t+on 3a3ers and memoranda, >a"or Ar"+ter ManuelP. Asun!+on ?Ar"+ter Asun!+on@ rendered a )e!+s+on1#'2 dated %9)e!em"er #$$%, d+sm+ss+n t*e !onsol+dated !om3la+nts or la!7

o mer+t. T*us:

IN THE >I;HT OG A>> THE GORE;OIN;

CONSI)ERATIONS, t*e !om3la+nt s*ould "e as +t +s *ere"

d+sm+ssed or la!7 o mer+t.

Res3ondent un+on a33ealed to t*e N>RC. On #9 =une #$$<,t*e N>RC reersed t*e de!+s+on o Ar"+ter Asun!+on and orderedt*e re+nstatement o, and 3ament o "a!7aes, ECO>A, #8t* mont* 3a, leal *ol+da 3a and ser+!e+n!ent+e leae 3a to, 3r+ate res3ondents.1#92 T*e d+s3os+t+e3ort+on o t*e N>RC de!+s+on reads:

F*ereore, t*e a33ealed de!+s+on +s *ere" setas+de. A!!ord+nl, 6udment +s *ere" rendered

d+re!t+n:

?#@ T*e res3ondent, P5P >+ner, In!. to

re+nstate to t*e+r ormer 3os+t+ons, +t*out loss

o sen+or+t r+*ts and ot*er "ene4ts, t*e

ollo+n !om3la+nants: Alredo 1Hoo*o2,

ernardo Ro!o, Rodolo Torres, =ul+an =or+na,

Glor+ta Ya3o!, Marlon Aldana, Paraluman Ulan,

Tolent+no San*+, =o*nn Sor+ano, Andres

Calaue, Ro"erto >aare, Gran!+s!o Morales,

Sala!+on Per+na, Anton+o A"ala, Alonso

aldomar, =r., Romeo Salona, Auur Man+3ol,







+enen+da Teu+l, Mar+o Ele3, Alad+no >at+o,

ernard+ne ansal, Pedro de au+o, R+!ardo

Cal+!a, >aura Co, 5+!ente Re!ana, Elena

Tolledo, Alredo Plaa, Sr., Herm+n+o aldono,

Gel+oe Ya3o!, Ar+ston N+3a and Herm+n+a Cast+lloand to 3a t*em t*e+r "a!7aes

!orres3ond+n to a 3er+od o t*ree ?8@ ears

+t*out ual+4!at+ons and dedu!t+ons

?%@ T*e same res3ondent P5P >+ner, In!.

to 3a amounts to "e !om3uted +n a *ear+n

!alled or sa+d 3ur3ose " t*e Ar"+trat+onran!* o Or++n, t*e aoresa+d !om3la+nants

t*e+r !la+ms or emeren! !ost o l++n

alloan!e ?ECO>A@, #8t* mont* 3a, leal

*ol+da 3a and ser+!e +n!ent+e leae

"ene4ts su"6e!t to t*e t*ree-ear 3res!r+3t+e

3er+od 3ro+ded under Art+!le %$# o t*e >a"or

Code, as amended

?8@ T*e d+sm+ssal o t*e !la+ms on alleed

+lleal dedu!t+ons o t*e res3ondents or la!7 o

mer+ts and

?/@ T*e d+sm+ssal o t*e !ase o >ourdes

Ro!o due to 3res!r+3t+on.

All ot*er !la+ms o t*e !om3la+nants and t*e

res3ondents are l+7e+se )ISMISSE), or "e+n +t*out

mer+t.



T*e Ar"+trat+on ran!* o Or++n +s *ere" d+re!ted to

enor!e t*+s de!+s+on.

Pan4los !ounsel 4led a mot+on or re!ons+derat+on *+!* as3art+all ranted " t*e N>RC +n +ts Order dated %9 O!to"er #$$<,to +t:

)+!tated, *oeer, " t*e +m3erat+es o due

3ro!ess, e 4nd +t more 6ud+!+ous to 6ust remand t*+s !ase

or urt*er *ear+n on 7e uest+ons o:

#@ *et*er or not P5P >+ner In!. as 3ro3erl

+m3leaded as 3art res3ondent +n t*e

!onsol+dated !ases "elo

%@ *et*er or not summons as 3ro3erl

sered on sa+d !or3orat+on "elo and

8@ *et*er or not t*e su"6e!t !ases !an "e

!ons+dered as 3r+n!+3all mone !la+ms *+!*

*ae to "e l+t+ated +n +ntestatetestate

3ro!eed+ns +nol+n t*e estate o t*e latePan4lo 5. Pa6ar+llo.



FHEREGORE, our de!+s+on dated =une #9, #$$< +s *ere"

set as+de. >et t*+s !ase "e remanded to t*e NCR

Ar"+trat+on ran!* or urt*er *ear+n on t*e uest+ons

a"oe-ment+oned.1#$2

Res3ondent un+on 4led a mot+on or re!ons+derat+on o t*ea"oe-stated Order, "ut t*+s as den+ed " t*e N>RC +n +ts Orderdated #& =anuar #$$'.1%&2 T*us, res3ondent un+on 4led a Pet+t+onor Certiorari under Rule <0 "eore t*+s Court. Pursuant, *oeer,to our rul+n +n St. Martin Funera Home ! . Nationa Labor

Reation" Commi""ion,1%#2

e remanded t*e 3et+t+on to t*e Courto A33eals or 3ro3er d+s3os+t+on.

On #% Mar!* %&&%, t*e Court o A33eals rendered a )e!+s+onrant+n t*e res3ondent un+ons 3et+t+on and null++n t*e Ordersdated %9 O!to"er #$$< and #& =anuar #$$' o t*e N>RC. It alsore+nstated t*e )e!+s+on dated #9 =une #$9< o t*e N>RC.1%%2 T*ea33ellate !ourt de!reed:

FHEREGORE, 3rem+ses !ons+dered, t*e PETITION

GOR CERTIORARI +s *ere" ;RANTE). A!!ord+nl, t*e

Order dated O!to"er %9 #$$< and =anuar #&, #$$' o t*e

N>RC are *ere" NU>>IGIE) and +ts )e!+s+on dated #9

=une #$9< "e REINSTATE).

Pan4los !ounsel 4led a mot+on or re!ons+derat+on o t*e sa+dde!+s+on "ut t*+s as den+ed " t*e a33ellate !ourt +n +tsResolut+on dated %9 Auust %&&%.1%82













Here+n 3et+t+oners, as *e+rs o Pan4lo, 4led t*e +nstant3et+t+on "eore t*+s Court ass+n+n t*e ollo+n errors:

I. THE HONORA>E COURT OG APPEA>S SERIOUS>Y ERRE)

IN ARRI5IN; AT THE CONC>USION THAT P5P >INER INC.

FAS PROPER>Y MISP>EA)E), FHICH IS A NON-EJISTIN;

CORPORATION.

II.

THE HONORA>E COURT OG APPEA>S SERIOUS>Y ERRE)

IN NOT CONSI)ERIN; THAT THERE FAS NO PROPER AN)

EGGECTI5E SER5ICE OG SUMMONS.

III.


IN PIERCIN; THE 5EI> OG CORPORATE ENTITY OG P5P

PA=ARI>>O >INER INC.

I5.




IN REINSTATIN; THE OR)ER OG THE N>RC )ATE) =UNE

#9, #$$<, FHICH )EC>ARE) THAT PRI5ATE

RESPON)ENTS FERE I>>E;A>>Y )ISMISSE).1%/2

Anent t*e 4rst +ssue, 3et+t+oners alleed t*at t*e )e!+s+ondated #9 =une #$$< o t*e N>RC, ordered PVP Liner In+. tore+nstate 3r+ate res3ondents and 3a t*e+r "a!7aes,ECO>A, #8t* mont* 3a, leal *ol+da 3a and ser+!e +n!ent+eleae 3a t*at t*ere as no su!* ent+t as PVP Liner

In+. oran+ed and e(+st+n +n t*e P*+l+33+nes t*at +t as not3oss+"le or Ar"+ter Asun!+on and t*e N>RC to a!u+re 6ur+sd+!t+onoer a non-e(+st+n !om3an t*at t*ere !an neer "e a ser+!e o summons or not+!e to a non-e(+stent ent+t t*at t*e trueem3loer o 3r+ate res3ondents as Pan4lo as t*e sole3ro3r+etoro3erator o 3assener "uses do+n "us+ness under t*etradename, PVP Liner, and not PVP Liner In+. *+!* as non-e(+stent t*at Pan4lo neer used PVP Liner In+. as *+stradename t*at t*e 3resent o3erator o P5P >+ner "uses+s P.V. PAJARILLO LINER, a !or3orat+on dul re+stered +t* t*e

Se!ur+t+es and E(!*ane Comm+ss+on t*at at t*e t+me t*e +nstant!ase as 4led "eore Ar"+ter Asun!+on +n 1287, t*e latter d+d not*ae 6ur+sd+!t+on oer P.V. PAJARILLO LINER"e!ause +t asoran+ed and dul re+stered onl on %% =anuar 1220t*at P.V. PAJARILLO LINER *as a se3arate and d+st+n!t3ersonal+t rom Pan4lo as t*e sole o3erator o P5P >+ner "usest*at, t*ereore, P.V.PAJARILLO LINER !annot "e made a 3art or+m3leaded +n t*e 3resent !ase t*at t*e amended !om3la+nt +nN>RCNCR Case No. 00-08-03013-87 +m3leaded as 3art-

res3ondent PANFILO V. PAJARILLO LINER and PANFILO V.PAJARILLO, a o&era!or and re&onile o4+er5 t*at PVPLiner In+. as not +m3leaded +n t*e +nstant !ase and t*at nosummons as eer sered on PVP Liner In+. +n N>RCNCR CaseNo. 00-08-03013-87.1%02







T*e !ontent+ons are "eret o mer+t.

In t*e Com3la+nt dated %& =anuar #$99, PVP Liner In+. and

Pan4lo ere +m3leaded as 3art-res3ondents, t*us:

(6a! re&onden! PVP Liner, In+., i a &ria!e

ine en!i!9, enaed +n trans3ortat+on o

3asseners, dul oran+ed and e(+st+n 3ursuant to la

and or t*+s 3ur3ose ma+nta+ns +ts 3r+n!+3al oD!e at %#'0,

Zamora Street, Sta. Ana, Man+la :6ile indiidal

re&onden! Panflo i !6e "eneral

#ana$er%O&era!or and /a9 e ered :i!6

//on, no!i+e and o!6er &ro+ee a! !6e

a;ore/en!ioned &rin+i&al o4+e.1%<2

Pan4lo d+d not uest+on +n *+s 3os+t+on 3a3er or +n *+s mot+onor !onsol+dat+on o t*e !om3la+nts t*e oreo+n

alleat+ons. Ne+t*er d+d *e assa+l t*e +n!lus+on o PVP Liner In+.as 3art-res3ondent +n res3ondent un+ons 3os+t+on 3a3er dated <

=une #$99.

In Pan4los 3os+t+on 3a3er as ell as +n t*e re!ords o t*e3ro!eed+ns "eore Ar"+ter Asun!+on, t*ere +s not*+n t*at s*ost*at Pan4lo !*allened t*e 6ur+sd+!t+on o Ar"+ter Asun!+onoer PVP Liner In+. F*en Ar"+ter Asun!+on de!+ded +n aor o

Pan4lo, t*e latter sa+d not*+n a"out t*e +n!lus+on o PVP LinerIn+. as 3art res3ondent and t*e la!7 o 6ur+sd+!t+on o Ar"+terAsun!+on oer t*e same. It as onl *en t*e N>RC rendered a)e!+s+on aderse to Pan4lo t*at t*e latter alleed t*e non-e(+sten!e o PVP Liner In+. and t*e a!t t*at Ar"+ter Asun!+onand t*e N>RC *ad no 6ur+sd+!t+on oer +t.





Pet+t+oners are no 3re!luded rom uest+on+n t*e +n!lus+ono PVP Liner In+. as 3art-res3ondent as ell as t*e 6ur+sd+!t+ono Ar"+ter Asun!+on and t*e N>RC oer t*em under t*e 3r+n!+3le

o e"to##e. It +s settled t*at t*e a!t+e 3art+!+3at+on o a 3artaa+nst *om t*e a!t+on as "rou*t, !ou3led +t* *+s a+lure too"6e!t to t*e 6ur+sd+!t+on o t*e !ourt or uas+-6ud+!+al "od *eret*e a!t+on +s 3end+n, +s tantamount to an +no!at+on o t*at

6ur+sd+!t+on and a +ll+nness to a"+de " t*e resolut+on o t*e!ase and +ll "ar sa+d 3art rom later on +m3un+n t*e !ourt or"ods 6ur+sd+!t+on.1%'2 T*+s Court *as t+me and aa+n roned u3ont*e undes+ra"le 3ra!t+!e o a 3art su"m+tt+n *+s !ase orde!+s+on and t*en a!!e3t+n t*e 6udment onl + aora"le, and

atta!7+n +t or la!7 o 6ur+sd+!t+on *en aderse.1%92

It +s a33arent t*at Panflo V. Pajarillo Liner and PVP LinerIn+. are one and t*e same ent+t "elon+n to one and t*e same3erson, Pan4lo. F*en PVP Liner In+. and Panflo V. PajarilloLiner ere +m3leaded as 3art-res3ondents, +t as Pan4lo,t*rou* !ounsel, *o ansered t*e !om3la+nts and 4led t*e3os+t+on 3a3ers, mot+ons or re!ons+derat+on and a33eals. It as

also Pan4lo, t*rou* !ounsel, *o 3art+!+3ated +n t*e *ear+nsand 3ro!eed+ns. In a!t, A"el Pa6ar+llo ?A"el@, son o Pan4lo,test+4ed "eore Ar"+ter Asun!+on t*at *e as t*e o3erat+onsmanaer o PVP Liner In+.1%$2 Gurt*er, "ot* Pan4loand PVP Liner In+. ere !*ared 6o+ntl and seerall +n t*eaoresa+d !om3la+nts.

A#ro#o" t*e se!ond +ssue, 3et+t+oners alleed t*at t*enot+!es and summons ere re!e+ed " a !erta+n Irene ;. Pa6ar+llo?Irene@ or and +n "e*al o t*e P5P >+ner In!. t*at Irene asne+t*er and !ould not *ae "een t*e Pres+dentManaer o P5P>+ner In!., t*e latter "e+n non-e(+stent and t*at Irene as not anoD!er o P.5. Pa6ar+llo >+ner.18&2











Se!t+ons / and 0 o Rule I5 o t*e Re+sed Rules o Pro!edureo t*e N>RC 3ro+des t*e rule or t*e ser+!e o summonses andnot+!es +n N>RC !ases, !i$ :

Se!. /. Ser+!e o not+!es and resolut+ons. a@ Not+!es

or summons and !o3+es o orders, resolut+ons or de!+s+ons

s*all "e sered 3ersonall " t*e "a+l+K or t*e dul

aut*or+ed 3u"l+! oD!er or " re+stered ma+l on t*e

3art+es to t*e !ase +t*+n 4e ?0@ das rom re!e+3t

t*ereo " t*e ser+n oD!er.

Se!. 0. Proo and !om3leteness o ser+!e. T*e

return +s #rima %a&ie 3roo o t*e a!ts +nd+!ated t*ere+n.

Ser+!e " re+stered ma+l +s !om3lete u3on re!e+3t "

t*e addressee or *+s aent.18#2

Re!ords s*o t*at Irene re!e+ed t*e summons or N>RCCase No. 00-01-00331-88 on / Ge"ruar #$99 +n "e*al o P5P>+ner In!. T*ese summonses ere addressed and sent to ()EPRE'I*EN(%#ANA"ER, PVP Liner In+. and Panflo V.Pajarillo, 17 a/ora '!ree!, '!a. Ana, #anila on %0

=anuar #$99. T*e Re+str Return Re!e+3t dated / Ge"ruar#$99 as addressed to PVP Liner In+. and as s+ned " Ireneas t*e addressees aent.18%2 A"el, one o t*e *e+rs o Pan4lo andt*e O3erat+ons Manaer o P5P >+ner In!., test+4ed dur+n t*e*ear+n "eore Ar"+ter Asun!+on t*at Irene as one o t*e

se!retar+es o P5P >+ner In!.1882 Hen!e, t*ere as a al+d ser+!e o summons.

Reard+n t*e t*+rd +ssue, 3et+t+oners 3os+ted t*at P.V.Pajarillo Liner In+. +s an +nde3endent !or3orat+on and !annot "e









!ons+dered as an ad6un!t or e(tens+on o Pan4lo as t*e soleo3erator o P5P >+ner "uses and t*at at t*e t+me P.V. PajarilloLiner In+. as esta"l+s*ed, +t *ad no l+a"+l+t or o"l+at+on *+!* +ttr+ed to s*+eld or !+r!ument.18/2

It +s a undamental 3r+n!+3le o !or3orat+on la t*at a!or3orat+on +s an ent+t se3arate and d+st+n!t rom +ts sto!7*oldersand rom ot*er !or3orat+ons to *+!* +t ma "e!onne!ted. Hoeer, t*+s se3arate and d+st+n!t 3ersonal+t o a!or3orat+on +s merel a 4!t+on !reated " la or !onen+en!e andto 3romote 6ust+!e. Hen!e, *en t*e not+on o se3arate 6ur+d+!al3ersonal+t +s used to deeat 3u"l+! !onen+en!e, 6ust+ ron,3rote!t raud or deend !r+me, or +s used as a de+!e to deeatla"or las, t*+s se3arate 3ersonal+t o t*e !or3orat+on ma "ed+srearded or t*e e+l o t*e !or3orate 4!t+on 3+er!ed. T*+s +s truel+7e+se *en t*e !or3orat+on +s merel an ad6un!t, a "us+ness!ondu+t or an alter eo o anot*er !or3orat+on. T*e !or3oratemas7 ma "e l+ted and t*e !or3orate e+l ma "e 3+er!ed *en a!or3orat+on +s "ut t*e alter eo o a 3erson or anot*er!or3orat+on.1802

It +s a33arent t*at Pan4lo started *+s trans3ortat+on "us+nessas t*e sole oner and o3erator o 3assener "uses ut+l++n t*ename PVP Liner or *+s "uses. Ater "e+n !*ared " res3ondentun+on o una+r la"or 3ra!t+!e, +lleal dedu!t+ons, +lleal d+sm+ssaland +olat+on o la"or standard las, Pan4lo transormed *+strans3ortat+on "us+ness +nto a am+l !or3orat+on, namel, P.V.Pajarillo Liner In+. He and 3et+t+oners ere t*e +n!or3orators,sto!7*olders and oD!ers t*ere+n. P.V. Pajarillo In+. and t*e sole3ro3r+etors*+3 o Pan4lo *ae t*e same "us+ness address. P.V.

Pajarillo In+. also uses t*e name PVP Liner +n +ts "uses. Gurt*er,t*e l+!ense to o3erate or ran!*+se o t*e sole 3ro3r+etors*+3 asmerel transerred to P.V. Pajarillo Liner In+. T*e test+mon o A"el dur+n t*e *ear+n "eore Ar"+ter Asun!+on +s reeal+n, t*us:







L: Mr. Pa6ar+llo, *en d+d ou start assum+n t*e un!t+ons

o o3erat+ons manaer o P5P >+ner

A: Seen ears rom no, somet+me +n t*e ear #$9/ or

#$90, s+r.

L: )o ou *ae an r+tten a33o+ntment as O3erat+ons

Manaer

A: No, s+r.

L: I not+!ed t*at our surname +s Pa6ar+llo ou are onea or anot*er related to Mr. Pan4lo 5. Pa6ar+llo, +s

t*at !orre!t

F+tness:

A: I am t*e son o Pan4lo Pa6ar+llo, s+r.

L: In so ar as P5P >+ner +s !on!erned and "e+n t*e

o3erat+ons manaer, are ou aare + +t +s a s+nle

3ro3r+etor or a !or3orat+on

A: A! !6e !ar! i! :a a in$le &ro&rie!or6i&, la!el9,

i! 6a e+o/e a ;a/il9 +or&ora!ion.

Att. Glores, =r. ?to +tness@



L: F*en ou "e!ame t*e O3erat+ons Manaer o P5P

>+ner, +s +t a s+nle 3ro3r+etor or a am+l

Cor3orat+on

A: It as a s+nle 3ro3r+etors*+3.

L: Mr. F+tness, s+n!e P5P >+ner +s a trans3ortat+on

"us+ness +t *as a l+!ense to o3erate t*ese "uses

A: Yes, t*ere +s, s+r.

Att. Glores, =r. ?to +tness@

L: In :6oe na/e :a i! re$i!ered

A: <e;ore i! :a :i!6 /9 ;a!6er Panflo V. Pajarillo,

s+r.

L: *o I nder!and !6a! !6e li+enin$ o; !6i!ran&or!a!ion +o/&an9 :a !ran;erred !o

ano!6er &eron=

A: I! :a neer !ran;erred !o ano!6er &eron,

e>+e&! no:, !6a! i! 6a een !ran;erred !o a

+or&ora!ion.18<2

It +s !lear rom t*e oreo+n t*at P.V. Pajarillo Liner In+.as a mere !ont+nuat+on and su!!essor o t*e sole 3ro3r+etors*+3o Pan4lo. It +s also u+te o"+ous t*at Pan4lo transormed *+s sole3ro3r+etors*+3 +nto a am+l !or3orat+on +n a surre3t+t+ous attem3tto eade t*e !*ares o res3ondent un+on. ;+en t*ese





!ons+derat+ons, Pan4lo and P.V. Pajarillo Liner In+. s*ould "etreated as one and t*e same 3erson or 3ur3oses o l+a"+l+t.18'2

G+nall, 3et+t+oners aerred t*at no una+r la"or 3ra!t+!e as!omm+tted, and t*at 3r+ate res3ondents ere not +llealld+sm+ssed rom or7.

In +ts )e!+s+on dated #9 =une #$$<, t*e N>RC made ane(*aust+e d+s!uss+on o t*e alleat+ons and e+den!e o "ot*3art+es as reards una+r la"or 3ra!t+!e and +lleal d+sm+ssal. It!on!luded t*at 3r+ate res3ondents, oD!ers and mem"ers o

res3ondent un+on ere d+sm+ssed " reason o t*e+r un+ona!t++t+es and t*at t*ere as no !om3l+an!e +t* su"stant+al and3ro!edural due 3ro!ess +n term+nat+n t*e+r ser+!es. It also *eldt*at t*e 3r+ate res3ondents *o ere not mem"ers o t*eres3ondent un+on ere also d+sm+ssed +t*out 6ust or al+d !ause,and t*at t*e ere den+ed due 3ro!ess. T*ese a!tual 4nd+nsand !on!lus+ons ere su33orted " su"stant+al e+den!e!om3r+sed o aDda+ts, sorn statements, test+mon+es o +tnesses dur+n *ear+ns "eore Ar"+ter Asun!+on, and ot*erdo!umentar e+den!e. T*ese 4nd+ns ere susta+ned " t*e

Court o A33eals.

T*e rule +s t*at 4nd+ns o a!t o uas+-6ud+!+al aen!+es l+7et*e N>RC are a!!orded " t*+s Court not onl res3e!t "ut een4nal+t + t*e are su33orted " su"stant+al e+den!e, or t*atamount o releant e+den!e *+!* a reasona"le m+nd m+*ta!!e3t as adeuate to 6ust+ a !on!lus+on.1892 Fe 4nd no!om3ell+n reason to de+ate rom su!* 4nd+ns o t*e N>RC as

aDrmed " t*e Court o A33eals.

Conseuentl, t*e 3r+ate res3ondents are ent+tled tore+nstatement, "a!7aes and ot*er 3r++lees and "ene4tsunder Art+!le %'$ o t*e >a"or Code. Se3arat+on 3a ma "e +en







+n l+eu o re+nstatement + t*e em3loee !on!erned o!!u3+es a3os+t+on o trust and !on4den!e. In t*e !ase at "ar, *oeer, t*e3r+ate res3ondents, as ormer "us dr+ers, !ondu!tors and!ondu!tresses o 3et+t+oners, do no! *old t*e 3os+t+on o trust and

!on4den!e.

18$2

Nonet*eless, +t a33ears rom t*e re!ords t*at some o t*e3r+ate res3ondents, namel, Auur Man+3ol, Rodolo Torres,R+!ardo Cal+!a, Paraluman Ulan, Ed+t* C*ua, Alredo Hoo*o,

=o*nn Sor+ano, ernardo Ro!o, Tolent+no San*+, Sala!+on Per+na,Pedro >. de au+o, Ar+ston N+3a, Gel+3e Ya3o!, >aura Co,+enen+da Teu+l, Ro"erto >aare, Gran!+s!o Morales andHerm+n+o Cast+llo, *ad e(e!uted a Lu+t!la+mRelease d+s!*ar+n3et+t+oners %rom any and a &aim" by 'ay o% un#aid 'age"("e#aration #ay( o!ertime #ay( di)erentia #ay( *COLA( +, t- mont-

#ay( -oiday #ay( "er!i&e in&enti!e ea!e #ay or ot-er'i"e.1/&2

;enerall, deeds o release, a+ers, or u+t!la+ms !annot"ar em3loees rom demand+n "ene4ts to *+!* t*e are leallent+tled or rom !ontest+n t*e leal+t o t*e+r d+sm+ssal, s+n!eu+t!la+ms are loo7ed u3on +t* d+saor and are roned u3on as

!ontrar to 3u"l+! 3ol+!. F*ere, *oeer, t*e 3erson ma7+n t*ea+er *as done so oluntar+l, +t* a ull understand+n t*ereo,and t*e !ons+derat+on or t*e u+t!la+m +s !red+"le and reasona"le,t*e transa!t+on must "e re!on+ed as "e+n a al+d and "+nd+nunderta7+n.1/#2

T*ere +s no s*o+n t*at t*e e(e!ut+ons o t*ese u+t!la+msere ta+nted +t* de!e+t or !oer!+on. On t*e !ontrar, ea!* o t*e

3r+ate res3ondents Sinum#aang Saay"ay( *+!* a!!om3an+edt*e u+t!la+ms, e+n!es oluntar+ness and ull understand+n o t*e e(e!ut+on and !onseuen!e o t*e u+t!la+m. In t*e+rsa+d Sinum#aang Saay"ay , t*e 3r+ate res3ondents stated t*att*e+r laer *ad e(tens+el e(3la+ned to t*em t*e !om3utat+onand t*e a!tual amount o !ons+derat+on t*e ould re!e+e t*att*e ere not or!ed or tr+!7ed " t*e+r laer +n a!!e3t+n t*e









same and t*at t*e alread re!e+ed t*e amount o !ons+derat+on.1/%2

Gurt*er, t*e !ons+derat+ons re!e+ed " t*e 3r+ateres3ondents ere !red+"le and reasona"le "e!ause t*e ere notrossl d+s3ro3ort+onate to t*e !om3utat+on " t*e N>RC o t*eamount o "a!7aes and ot*er mone !la+ms. 1/82

;+en t*ese !+r!umstan!es, t*e u+t!la+ms s*ould "e!ons+dered as "+nd+n on t*e 3r+ate res3ondents *o e(e!utedt*em. It +s settled t*at a le+t+mate a+er *+!* re3resents a

oluntar and reasona"le settlement o a or7ers !la+m s*ould "eres3e!ted as t*e la "eteen t*e 3art+es.1//2 A!!ord+nl, t*e3r+ate res3ondents *o made su!* u+t!la+ms are alread3re!luded rom !la+m+n re+nstatement, "a!7aes, ECO>A,#8 THmont* 3a, leal *ol+da 3a, ser+!e +n!ent+e leae 3a,and ot*er monetar !la+ms.

F+t* reard to t*e ot*er 3r+ate res3ondents *o d+d note(e!ute su!* u+t!la+ms, t*e are ent+tled to re+nstatement,"a!7aes, ECO>A, #8 TH mont* 3a, leal *ol+da 3a and ser+!e+n!ent+e leae 3a +n a!!ordan!e +t* t*e !om3utat+on o t*eN>RC.

?)EREFORE, t*e 3et+t+on +s *ere" *ENIE*. T*e )e!+s+onand Resolut+on dated #% Mar!* %&&% and %9 Auust %&&%,res3e!t+el, o t*e Court o A33eals +n CA-;.R. SP No. 0/88& andCA-;.R. SP No. 0/88#, are *ere" AFFIR#E* +t* t*eollo+n #O*IFICA(ION': @1 Pria!e re&onden! AuurMan+3ol, Rodolo M. Torres, R+!ardo Cal+!a, Paraluman Ulan, Ed+t*C*ua, Alredo Hoo*o, =o*nn Sor+ano, ernardo Ro!o, Tolent+noSan*+, Sala!+on Per+na, Pedro >. de au+o, Ar+ston N+3a, Gel+3e

Ya3o!, >aura Co, +enen+da Teu+l, Ro"erto >aare, Gran!+s!oMorales and Herm+n+o Cast+llo are *ere" &re+lded ;ro/









+lai/in$ re+nstatement, "a!7aes, ECO>A, #8 TH mont* 3a,leal *ol+da 3a and ser+!e +n!ent+e leae 3a " reason o t*e+r res3e!t+e u+t!la+ms @ Pe!i!ioner are 6ere9 ordered!o rein!a!e &ria!e re&onden! =ul+an =or+na, Glor+ta Ya3o!,

Marlon Aldana, Andres Calaue, Anton+o A"ala, Alonso aldomar,Romeo Salona, Mar+o Ele3, Alad+no >at+o, ernard+ne ansal,5+!ente Re!ana, Elena Tolledo and Alredo Plaa, Sr., and !o&a9 t*ese res3ondents "a!7aes rom t*e t+me o t*e+rd+sm+ssal u3 to t*e 4nal+t o t*+s )e!+s+on. Pet+t+oners are aloordered !o &a9 t*e oreo+n 3r+ate res3ondents ECO>A,#8 TH mont* 3a, leal *ol+da 3a and ser+!e +n!ent+e leae 3a+n a!!ordan!e +t* t*e !om3utat+on o t*e N>RC. Costs aa+nst3et+t+oners.

SO OR"ERE".

TOMAS LAO CONSTRUCTION, L@M CONSTRUCTION CORPORATION,THOMAS an +AMES DE@ELOPERS (PHIL.), INC., petitioners,vs. NATIONAL LABOR RELATIONS COMMISSION, MARIO O.LABENDIA, SR., ROBERTO LABENDIA, NARCISO ADAN,FLORENCIO OME, ERNESTO BAATSOLON, SAL@ADORBABON, PATERNO BISNAR, CIPRIANO BERNALES, ANEL

MABULA, SR., LEO SURIAO, an ROUEMORILLO, respondents.

D E C I S I O N

BELLOSILLO, J .:

rom +ctober to 2ecember --0 private respondents individually filedcomplaints for illegal dismissal against petitioners with the ational !abor "elations #ommission "egional 1rbitration &ranch o. )''' 6!"# $ "1&)'''7, Tacloban #ity. 1lleging that they were hired for various periods as

construction workers in different capacities they described their contractualterms as follows> 6a7 "oberto !abendia, general construction foreman, from-5 to 5 +ctober --0 at%/,500Dmonth; 6b7 arciso 1dan, tireman, from+ctober - to ovember --0 at %5:.00Dday; 6c7 lorencio Aome*, welder,from =uly -/ to =uly --0 at %80.00Dday; 6d7 <rnesto &agatsolonleadmanDchecker, from =une -4 to +ctober --0 at %4,00Dmonth; 6e79alvador &abon, clerkDtimekeeperDpaymaster, from =une -4 to +ctober



--0 at %/,400Dmonth; 6f7 %aterno &isnar, road grader operator, from =anuary-5- to +ctober --0 at %0:Dday; 6g7 #ipriano &ernales, instrument man,from ebruary -0 to ovember --0 at %/,400Dmonth; 6h7 1ngel (abulay,9r., dump truck driver, from 1ugust -53 to +ctober --0 at %-0Dday; 6'7 !eo9urigao, payloader operator, from (arch -5: to =anuary -5 at%00Dday;6=7 (ario !abendia, 9r. surveyorDforeman, from 1ugust -5 to =uly --0at %4,-00Dmonth; and, 6k7 "oque (orillo, company watchman, from 1ugust-/ to +ctober --0 at %/,400Dmonth.JK

Within the periods of their respective employments, they alternatelyworked for petitioners Tomas !ao #orporation 6T!#7, Thomas and =ames2evelopers 6TL=7 and !)( #onstruction #orporation 6!)(7, altogether informally referred to as the !ao Aroup of #ompanies, the three 6/7 entitiescomprising a business conglomerate exclusively controlled and managed bymembers of the !ao family.

T!#, TL= and !)( are engaged in the construction of public roads andbridges. Inder joint venture agreements they entered into among each other,they would undertake their projects either simultaneously or successively sothat, whenever necessary, they would lease tools and equipment to oneanother. <ach one would also allow the utili*ation of their employees by theother two 647. With this arrangement, workers were transferred whenever necessary to on$going projects of the same company or of the others, or wererehired after the completion of the project or project phase to which they wereassigned. 9oon after, however, T!# ceased its operations J4K

while TL= and !)(

stayed on.9ometime in -- 1ndres !ao, (anaging 2irector of !)( and %resident of

TL=,J/K issued a memorandumJ3K requiring all workers and company personnel tosign employment contract forms and clearances which were issued on =uly-- but antedated 0 =anuary --. These were to be used allegedly for audit purposes pursuant to a joint venture agreement between !)( andTL=. To ensure compliance with the directive, the company ordered thewithholding of the salary of any employee who refused to sign. Muite notably,the contracts expressly described the construction workers as pro%e&t emplo$ees whose employments were for a definite period, i.e., upon the

expiration of the contract period or the completion of the project for which theworkers was hired.

<xcept for lorencio Aome*J:K all private respondents refused to signcontending that this scheme was designed by their employer to downgradetheir status from regular employees to mere project employees. "esultantly,their salaries were withheld. They were also required to explain why their

http://sc.judiciary.gov.ph/jurisprudence/1997/sep1997/116781.htm#_edn1













services should not be terminated for violating company rules and warned thatfailure to satisfactorily explain would be construed as disinterest in continuedemployment with the company. 9ince the workers stood firm in their refusal tocomply with the directives their services were terminated.

!"# "1& )''' dismissed the complaints lodged before it, finding thatprivate respondents were project employees whose employments could beterminated upon completion of the projects or project phase for which theywere hired. 't upheld petitioners contention that the execution of their employment contracts was to forestall the eventuality of being compelled topay the workers their salaries even if there was no more work to be done dueto the completion of the projects or project phases. The labor court however granted each employee a separation pay of %8,3/:.00 computed at one$half 6D47 month salary for every year of service, uniformly rounded at five 6:7years. J8K

The decision of !abor 1rbiter Aabino 1. )elasque*, =r., was reversed onappeal by the ourth 2ivision of the ational !abor "elations #ommission6!"#7 of #ebu #ity which found that private respondents were regular employees who were dismissed without just cause and denied dueprocess. The !"# also overruled the fixing by the !abor 1rbiter of the termof employment of complainants uniformly at five 6:7 years since the periods of employment of the construction workers as alleged in their complaints werenever refuted by petitioners. 'n granting monetary awards to complainants,!"# disregarded the veil of corporate fiction and treated the three 6/7

corporations as forming only one entity on the basis of the admission of petitioners that the three 6/7 operated as one 67, intermingling andcommingling all its resources, including manpower facility.J5K

%etitioners now lay their cause before us and assign the followingerrors> 6a7 !"# erred in classifying the employees as regular instead of project employees; 6b7 assuming that the workers were regular employees,!"# failed to consider that they were terminated for cause; 6c7 assumingfurther that the employees were illegally dismissed, !"# erred in awardingback wages in excess of three 6/7 years; and, 6d7 assuming finally that thedecision is correct, !"# erred when it pierced the veil of corporate

personality of petitioner$corporations.

The main thrust of petitioners expostulation is that respondents have novalid cause to complain about their employment contracts since thesedocuments merely formali*ed their status as project employees. They cite%olicy 'nstruction o. 40 of the 2epartment of !abor which defines projectemployees as those employed in connection with a particular construction







project, adding that the ruling in #andoval #hip$ards, In&. v. 'RC JK appliessquarely to the instant case because there the #ourt declared that theemployment of project employees is co$terminous with the completion of theproject regardless of the number of projects in which they have worked. 1ndas their employment is one for a definite period, they are not entitled toseparation pay nor is their employer required to obtain clearance from the9ecretary of !abor in connection with their termination. %etitioners thus arguethat their dismissal from the service of private respondents was legal since theprojects for which they were hired had already been completed. 1s additionalground, they claim that (ario !abendia and "oberto !abendia had absentedthemselves without leave giving management no choice but to sever their employment.

We are not convinced. The principal test in determining whether particular employees are project employees distinguished from regular employees is

whether the project employees are assigned to carry out specific project or undertaking, the duration 6and scope7 of which are specified at the time theemployees are engaged for the project. %roject in the realm of business andindustry refers to a particular job or undertaking that is within the regular or usual business of employer, but which is distinct and separate and identifiableas such from the undertakings of the company. 9uch job or undertakingbegins and ends at determined or determinable times.J-K

While it may be allowed that in the instant case the workers were initiallyhired for specific projects or undertakings of the company and hence can be

classified as project employees, the repeated re$hiring and the continuingneed for their services over a long span of time 6the shortest, at seven J5Kyears7 have undeniably made them regular employees. Thus, we held thatwhere the employment of project employees is extended long after thesupposed project has been finished, the employees are removed from thescope of project employees and considered regular employees.J0K

While length of time may not be a controlling test for project employment,it can be a strong factor in determining whether the employee was hired for aspecific undertaking or in fact tasked to perform functions which are vital,necessary and indispensable to the usual business or trade of the

employer. 'n the case at bar, private respondents had already gone throughthe status of project employees. &ut their employments became non$coterminous with specific projects when they started to be continuously re$hired due to the demands of petitioners business and were re$engaged for many more projects without interruption. We note petitioners own admission $









;t<hese construction pro=ects ha%e !een prosecuted !y either of the three petitioners,

either indi%idually or in a =oint %enture with one another. $iewise, these construction

pro=ects ha%e !een prosecuted !y either of the three petitioners, either simultaneously,

one construction pro=ect o%erlappin another and>or one pro=ect commencin

immediately after another pro=ect has !een completed or terminated. Perhaps !ecause

of their capacity to prosecute o%ernment pro=ects and their ood record and performance, at least one of the three petitioners had an on)oin construction pro=ect

and>or one of the three petitioners construction pro=ect o%erlapped that of another. ;11<

The denial by petitioners of the existence of a work pool in the companybecause their projects were not continuous is amply belied by petitionersthemselves who admit that $

All the employees of either of the three petitioners were actually assined to a

particular pro=ect to remain in said pro=ect until the completion or termination of that

pro=ect. Howe%er, after the completion of that particular pro=ect or when their ser%icesare no loner needed in the pro=ect or particular phase of the pro=ect where they were

assined, they were transferred and rehired in another on)oin pro=ect. ;1#<

1 work pool may exist although the workers in the pool do not receivesalaries and are free to seek other employment during temporary breaks inthe business, provided that the worker shall be available when called to reportfor a project.1lthough primarily applicable to regular seasonal workers, thisset$up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both theemployer and employee for it prevents the unjust situation of coddling labor atthe expense of capital and at the same time enables the workers to attain thestatus of regular employees. #learly, the continuous rehiring of the same setof employees within the framework of the !ao Aroup of #ompanies is stronglyindicative that private respondents were an integral part of a work pool fromwhich petitioners drew its workers for its various projects.

'n a final attempt to convince the #ourt that private respondents wereindeed project employees, petitioners point out that the workers were notregularly maintained in the payroll and were free to offer their services to other

companies when there were no on$going projects. This argument however cannot defeat the workers status of regularity. We apply by analogy the caseof Industrial-Commer&ial-*ri&ultural +orers Or*aniation v. CIR J/K whichdeals with regular seasonal employees. There we held $

6hat durin the temporary layoff the la!orers are free to see other employment is

natural, since the la!orers are not !ein paid, yet must find means of support. A period









durin which the -entral is forced to suspend or cease operation for a time ??? should

not mean starvation for employees and their families (emphasis supplied.

Truly, the cessation of construction activities at the end of every project isa foreseeable suspension of work. +f course, no compensation can be

demanded from the employer because the stoppage of operations at the endof a project and before the start of a new one is regular and expected by bothparties to the labor relations. 9imilar to the case of regular seasonalemployees, the employment relation is not severed by merely beingsuspended. J3K The employees are, strictly speaking, not separated fromservices but merely on leave of absence without pay until they arereemployed. J:K Thus we cannot affirm the argument that non$payment of salary or non$inclusion in the payroll and the opportunity to seek other employment denote project employment.

#ontrary to petitioners assertion, our ruling in #andoval #hip$ards isinapplicable considering the special circumstances attendant to the presentcase. 'n #andoval , the hiring of construction workers, unlike in the instantcase, was intermittent and not continuous for the shipyard merely acceptscontracts for shipbuilding or for repair of vessels from third parties and, onlyon occasions when it has work contract of this nature that it hires workers todo the job which, needless to say, lasts only for less than a year or longer. J8K

(oreover, if private respondents were indeed employed as projectemployees, petitioners should have submitted a report of termination to thenearest public employment office every time their employment was terminateddue to completion of each construction project. J5K The records show that theydid not. %olicy 'nstruction o. 40 is explicit that employers of projectemployees are exempted from the clearance requirement but not from thesubmission of termination report. We have consistently held that failure of theemployer to file termination reports after every project completion proves thatthe employees are not project employees. JK owhere in the ew !abor #odeis it provided that the reportorial requirement is dispensed with. The fact is that2epartment +rder o. - superseding %olicy 'nstruction o. 40 expresslyprovides that the report of termination is one of the indicators of project

employment.J-K

We agree with the !"# that the execution of the project employmentcontracts was farcical. J40K +bviously, the contracts were a scheme of petitionersto prevent respondents from being considered as regular employees. 'timposed time frames into an otherwise flexible employment period of privaterespondents some of whom were employed as far back as -8-. #learly, herewas an attempt to circumvent labor laws on tenurial security. 9ettled is the rule

















that when periods have been imposed to preclude the acquisition of tenurialsecurity by the employee, they should be struck down as contrary to publicmorals, good customs or public order. J4K Worth noting is that petitioners hadengaged in various joint venture agreements in the past without having todraft project employment contracts. That they would require execution of employment contracts and waivers at this point, ostensibly to be used for auditpurposes, is a suspect excuse, considering that petitioners enforced thedirective by withholding the salary of any employee who spurned the order.

We likewise reject petitioners justification in re$hiring privaterespondents i.e., that it is much cheaper and economical to re$hire or re$employ the same workers than to train a new set of employees. 't is preciselybecause of this cost$saving benefit to the employer that the law deems it fair that the employees be given a regular status. We need not belabor this point.

The !"# was correct in finding that the workers were illegallydismissed. The rule is that in effecting a valid dismissal, the mandatoryrequirements of substantive and procedural due process must be strictlycomplied with. These were wanting in the present case. %rivate respondentswere dismissed allegedly because of insubordination or blatant refusal tocomply with a lawful directive of their employer. &ut willful disobedience of theemployers lawful orders as a just cause for the dismissal of the employeesenvisages the concurrence of at least two 647 requisites> 6a7 the employeesassailed conduct must have been willful or intentional, the willfulness beingcharacteri*ed by a wrongful and perverse attitude; and,6b7 the order violated

must have been reasonable, lawful, made known to the employee and mustpertain to the duties which he has been engaged to discharge. J44K The refusalof private respondents was willful but not in the sense of plain and perverseinsubordination. 't was dictated by necessity and justifiable reasons $ for whatappeared to be an innocent memorandum was actually a veiled attempt todeny them their rightful status as regular employees. The workers thereforehad no option but to disobey the directive which they deemed unreasonableand unlawful because it would result in their being downsi*ed to mere projectworkers. This act of self$preservation should not merit them the extremepenalty of dismissal.

The allegation of petitioners that private respondents are guilty of abandonment of duty is without merit. The elements of abandonment are> 6a7failure to report for work or absence without valid or justifiable reason, and, 6b7a clear intention to sever the employer$employee relationship, with the secondelement as the more determinative factor manifested by some overt acts. J4/K 'nthis case, private respondents "oberto !abendia and (ario !abendia wereforced to leave their respective duties because their salaries were









withheld. They could not simply sit idly and allow their families to starve. Theyhad to seek employment elsewhere, albeit temporarily, in order to survive. +nthe other hand, it would be the height of injustice to validate abandonment inthis particular case as a ground for dismissal of respondents thereby makingpetitioners benefit from a gross and unjust situation which they themselvescreated. J43K %rivate respondents did not intend to sever ties with petitioner andpermanently abandon their jobs; otherwise, they would not have filed thiscomplaint for illegal dismissal. J4:K

%etitioners submit that since private respondents were only projectemployees, they are not entitled to security of tenure. This isincorrect. 'n r&huild "asters and Constru&tion, In&. v. 'RC J48K we held $

? ? ? a pro=ect employee hired for a specific tas also en=oys security of tenure. A

termination of his employment must !e for a lawful cause and must !e done in a

manner which affords him the proper notice and hearin ? ? ? ? To allow employersto eercise their prerogative to terminate a project workers employment based on

gratuitous assertions of project completion would destroy the constitutionally

protected right of labor to security of tenure (emphasis supplied.

The burden of proving that an employee has been lawfully dismissedtherefore lies with the employer. 'n the case at bar, the assertions of petitioners were self$serving and insufficient to substantiate their claim of proximate project completion. The services of the employees were terminatednot because of contract expiration but as sanction for their refusal to sign the

project employment forms and quitclaims.

inding that the dismissal was without just cause, we find it unnecessaryto dwell on the non$observance of procedural due process. 9uffice it to statethat private respondents were not priorly notified of their impending dismissaland that they were not provided ample opportunity to defend themselves.

%etitioners charge as erroneous the grant to private respondents by !"#of back wages in excess of three 6/7 years or, in the alternative, to an award of separation pay if reinstatement is no longer feasible.

We disagree. 9ince the illegal dismissal was made in --0 or after theeffectivity of the amendatory provision of "1 o. 85: on 4 (arch --,private respondents back wages should be computed on the basis of 1rt. 45-of the !abor #ode which states that (a)n emplo$ee /ho is un%ustl$ dismissed from /or shall e entitled to reinstatement /ithout loss of seniorit$ ri*hts and other privile*es and to his full a& /a*es, in&lusive of allo/an&es, and to hisother enefits or their monetar$ e0uivalent &omputed from the time his









&ompensation /as /ithheld from him up to the time of his a&tual reinstatement.

#onformably with our ruling in ustamante v. 'RC J45K the illegallydismissed employees are entitled to full back wages, undiminished by

earnings derived elsewhere during the period of their illegal dismissal. 'n theevent that reinstatement is no longer feasible, back wages shall be computedfrom the time of illegal termination until the time of the finality of thedecision. J4K The award shall be based on the documents submitted by privaterespondents, i.e. affidavits, 999 and (edicare documents, since petitionersfailed to adduce competent evidence to the contrary. The separation pay shallbe equivalent to Cat least one 67 month salary or to one 67 month salary for every year of service, whichever is higher, a fraction of at least six 687 monthsbeing considered as one whole year.C J4-K

inally, public respondent !"# did not err in disregarding the veil of separate corporate personality and holding petitioners jointly and severallyliable for private respondents back wages and separation pay. The recordsdisclose that the three 6/7 corporations were in fact substantially owned andcontrolled by members of the !ao family composed of !ao ?ian &eng aliasTomas !ao, #hiu 9iok !ian 6wife of Tomas !ao7, 1ndrew #. !ao, !ao N. ?eng,)icente !ao #hua, !ao <. Tin, <mmanuel !ao and 'smaelita (aluto. 1majority of the outstanding shares of stock in !)( and TL= is owned by the!ao family. TL= is 00O owned by the !aos as reflected in its 1rticles of 'ncorporation. The !ao Aroup of #ompanies therefore is a closed corporation

where the incorporators and directors belong to a single family. !ao ?ian&eng is the same Tomas !ao who owns Tomas !ao #orporation and is themajority stockholder of TL=. 1ndrew #. !ao is the (anaging 2irector of !)(#onstruction, and %resident and (anaging 2irector of the !ao Aroup of #ompanies. %etitioners are engaged in the same line of business under onemanagement and use the same equipment including manpower services. Where it appears that JthreeK business enterprises are owned,conducted and controlled by the same parties, both law and equity will, whennecessary to protect the rights of third persons, disregard the legal fiction thatthe JthreeK corporations are distinct entities, and treat them as identical. J/0K

#onsonant with our earlier ruling, J/K we hold that the liability of petitionersextends to the responsible officers acting in the interest of the corporations. 'nview of the peculiar circumstances of this case, we disregard the separatepersonalities of the three 6/7 corporations and at the same time declare themembers of the corporations jointly and severally liable with the corporationsfor the monetary awards due to private respondents. 't should always beborne in mind that the fiction of law that a corporation as a juridical entity has













a distinct and separate personality was envisaged for convenience and toserve justice; therefore it should not be used as a subterfuge to commitinjustice and circumvent labor laws.

-HEREFORE, the petition is 2<'<2 and the decision of the ational

!abor "elations #ommission dated 0: 1ugust --3 is 1'"(<2. %etitionersare ordered to reinstate private respondents to their former positions withoutloss of seniority rights and other privileges with full back wages, inclusive of allowances, computed from the time compensation was withheld up to thetime of actual reinstatement. 'n the event that reinstatement is no longer feasible, petitioners are directed to pay private respondents separation payequivalent to one month salary for every year of service, a fraction of at leastsix 687 months being considered one 67 year in the computation thereof, andfull back wages computed from the time compensation was withheld until thefinality of this decision. 1ll other claims of the parties are 2'9('99<2 for lack

of merit. #osts against petitioners.

SO ORDERED.

"ENERAL CRE*I(

CORPORA(ION @no: PEN(A

CAPI(AL FINANCE

CORPORA(ION,

Pe!i!ioner,

- er -

AL'ON' *EVELOP#EN( and

INVE'(#EN( CORPORA(IONand CCC EBI(D

CORPORA(ION,

Re&onden!.

".R. No. 127

Present:

PUNO, C.J., C-air#er"on(

SAN)O5A>-;UTIERREZ,

CORONA,

AZCUNA, and

;ARCIA, JJ.

Promulated:



=anuar %$, %&&'

(---------------------------------------------------------------------------------------(

* E C I ' I O N

"ARCIA, J.

In t*+s 3et+t+on or re+e on !ert+orar+ under Rule /0 o t*e Rules

o Court, 3et+t+oner ;eneral Cred+t Cor3orat+on, no 7non asPenta Ca3+tal G+nan!e Cor3orat+on, see7s to annul and set as+det*e )e!+s+on1#2 and Resolut+on1%2 dated A3r+l ##, %&&% and Auust%&, %&&%, res3e!t+el, o t*e Court o A33eals ?CA@ +n CAG.R. CV No. ,+/0+( aDrm+n t*e Noem"er 9, #$$& de!+s+on o t*eRe+onal Tr+al Court ?RTC@ o Ma7at+ C+t +n +ts C++l Case No.#%'&', an a!t+on or a sum o mone t*ereat +nst+tuted " t*e*ere+n res3ondent Alsons )eelo3ment and InestmentCor3orat+on aa+nst t*e 3et+t+oner and res3ondent CCC Eu+tCor3orat+on.

T*e a!ts:

S*ortl ater +ts +n!or3orat+on +n #$0' as a 4nan!e and +nestment!om3an, 3et+t+oner ;eneral Cred+t Cor3orat+on ?;CC, or s*ort@,t*en 7non as Commer!+al Cred+t Cor3orat+on ?CCC@, esta"l+s*ed

CCC ran!*+se !om3an+es +n d+Kerent ur"an !enters o t*e !ountr.182 In urt*eran!e o +ts "us+ness, ;CC *ad, as earl as #$'/,a33l+ed or and as a"le to se!ure l+!ense rom t*e t*en Centralan7 ?C@ o t*e P*+l+33+nes and t*e Se!ur+t+es and E(!*aneComm+ss+on ?SEC@ to enae also +n uas+-"an7+n a!t++t+es. 1/2 Ont*e ot*er *and, res3ondent CCC Eu+t Cor3orat+on ?ELUITY, or"re+t@ as oran+ed +n Noem"er #$$/ " ;CC or t*e 3ur3ose

http://sc.judiciary.gov.ph/jurisprudence/2007/jan2007/154975.htm#_ftn1










o, amon ot*er t*+ns, ta7+n oer t*e o3erat+ons andmanaement o t*e ar+ous ran!*+se !om3an+es. At a t+memater+al *ereto, res3ondent Alsons )eelo3ment and InestmentCor3orat+on ?A>SONS, *ere+nater@ and Conrado, N+!as+o, Ed+t*a

and >ad+slaa, all surnamed Al!antara, and Alredo de or6a?*ere+nater t*e Al!antara am+l, or !onen+en!e@, ea!* oned, 6ust l+7e ;CC, s*ares +n t*e aoresa+d ;CC ran!*+se!om3an+es, e.g., CCC )aao and CCC Ce"u.

In )e!em"er #$9&, A>SONS and t*e Al!antara am+l, or a!ons+derat+on o To M+ll+on ?P%,&&&,&&&.&&@ Pesos, sold t*e+rs*are*old+ns a total o #&#,$08 s*ares, more or less +n t*e CCC

ran!*+se !om3an+es to ELUITY.

[5]

On =anuar %, #$9#, ELUITY+ssued A>SONS et a., a "earer 3rom+ssor noteor P%,&&&,&&&.&& +t* a one-ear matur+t date, at #9B +nterest3er annum, +t* 3ro+s+ons or damaes and l+t+at+on !osts +n!ase o deault.1<2

Some our ears later, t*e Al!antara am+l ass+ned +ts r+*ts and+nterests oer t*e "earer note to A>SONS *+!* t*en!eort*"e!ame t*e *older t*ereo.1'2 ut een "eore t*e e(e!ut+on o t*eass+nment deal aorestated, letters o demand or +nterest3ament ere alread sent to ELUITY, t*rou* +ts Pres+dent,F+lredo >a"aen, *o 3leaded +na"+l+t to 3a t*e st+3ulated+nterest, ELUITY no loner t*en *a+n assets or 3ro3ert to settle+ts o"l+at+on nor "e+n e(tended 4nan!+al su33ort " ;CC.

F*at *a33ened ne(t, as narrated +n t*e assa+led )e!+s+on o t*eCA, ma "e summar+ed, as ollos:

#. On =anuar #/, #$9<, "eore t*e RTC o Ma7at+,

A>SONS, *a+n a+led to !olle!t on t*e "earer note

aorement+oned, 4led a !om3la+nt or a sum o

mone192 aa+nst ELUITY and ;CC. T*e !ase, do!7eted as











C++l Case No. #%'&', as eentuall raed to ran!* 09

o t*e !ourt. As stated +n 3ar. / o t*e !om3la+nt, ;CC +s

"e+n +m3leaded as 3art-deendant or an 6udment

A>SONS m+*t se!ure aa+nst ELUITY and, under t*e

do!tr+ne o 3+er!+n t*e e+l o !or3orate 4!t+on, aa+nst;CC,ELUITY *a+n "een oran+ed as a tool and mere

!ondu+t o ;CC.

%. Anser+n +t* a !ross-!la+m aa+nst ;CC, ELUITY

stated " a o s3e!+al and aDrmat+e deenses t*at +t

?ELUITY@:

a@ as 3ur3osel oran+ed " ;CC or t*e

latter to ao+d C Rules and Reulat+ons on

)OSRI ?)+re!tors, OD!ers, Sto!7*olders and

Related Interest@ l+m+tat+ons, and t*at +t a!ted

merel as +ntermed+ar or "r+de or loan

transa!t+ons and ot*er deal+ns o ;CC to +ts

ran!*+ses and t*e +nest+n 3u"l+! and

"@ +s solel de3endent u3on ;CC or +ts und+n

reu+rements, to settle, amon ot*ers, eu+t

3ur!*ases made " +nestors on t*e

ran!*+ses *en!e, ;CC +s solel and d+re!tl

l+a"le to A>SONS, t*e ormer *a+n a+led to

3ro+de ELUITY t*e ne!essar unds to meet +ts

o"l+at+ons to A>SONS.



8. ;CC 4led +ts ANSW*R to Cro""&aim( stress+n t*at +t +s

a d+st+n!t and se3arate ent+t rom ELUITY and alle+n,

+n essen!e t*at t*e "us+ness relat+ons*+3s +t* ea!* ot*er

ere alas at arms lent*. And ollo+n t*e den+al o

+ts mot+on to d+sm+ss A>SONS !om3la+nt, on t*e round o la!7 o 6ur+sd+!t+on and ant o !ause o a!t+on, ;CC 4led

+ts An"'er t*ereto and set u3 aDrmat+e deenses +t*

!ounter!la+m or e(em3lar damaes and attornes ees.

Issues *a+n "een 6o+ned, tr+al ensued. Presented " A>SONS, "ut

test++n as aderse +tnesses, ere C and ;CC oD!ers. Amonot*er t*+ns, A>SONS e+den!e, *+!* +n!luded t*e ELUITY-+ssued"earer 3rom+ssor note mar7ed as E(*+"+t and oer s+(t ?<&@ot*er mar7ed and su"seuentl adm+tted do!uments, 1$2 ere tot*e eKe!t t*at 4e ?0@ +n!or3orators, ea!*!ontr+"ut+n P#&&,&&&.&& as t*e +n+t+al 3a+d u3 !a3+tal o t*e!om3an, oran+ed ELUITY to manae, as +t d+d manae, ar+ous;CC ran!*+ses t*rou* manaement !ontra!ts. eore ELUITYs+n!or3orat+on, *oeer, ;CC as alread +nto t*e 4nan!+n

"us+ness as +t as +n a!t mana+n and o3erat+n ar+ous CCCran!*+ses. Presented +n e+den!e, too, as t*e Se3tem"er %$,#$9% letter-re3l o one ;. 5+llanuea, t*en ;CC Pres+dent, toELUITY Pres+dent F+lredo >a"aen, "ear+n on t*e sale o ELUITYs*ares to t*+rd 3art+es, 3art o t*e 3ro!eeds o *+!* t*eAl!antaras anted a33l+ed to l+u+date t*e 3rom+ssor note +nuest+on. In sa+d letter, Mr. 5+llanuea e(3la+ned t*at t*e ;CCoard den+ed t*e Al!antaras reuest to "e 3a+d out o su!*3ro!eeds, "ut nonet*eless aut*or+ed ELUITY to 3a t*em+nterest out o ELUITYs o3erat+on +n!ome, +n 3reeren!e oer *atas due ;CC.1#&2

Al!eit 5@I69 presented its president, it opted to adopt the testimony of

some of A$'7' witnesses, inclusi%e of the documentary e?hi!its testified to !y

each of them, as its e%idence.







Bor its part, :-- called only 3ilfredo $a!ayen to testify. It stuc to its

underlyin defense of separateness and presented documentary e%idence detailin

the oranizational structures of !oth :-- and 5@I69. And in a !id to neate the

notion that it was conductin its !usiness illeally, :-- presented -+ and '5-)issued licenses authorin it to enae in financin and Cuasi)!anin acti%ities. It

also adduced e%idence to pro%e that it was ne%er a party to any of the actiona!le

documents A$'7' and its predecessors)in)interest had in their possession and

that the o%em!er #8, 10D deed of assinment of rihts o%er the promissory note

was unenforcea!le.

5%entually, the trial court, on its findin that 5@I69 was !ut an

instrumentality or ad=unct of :-- and considerin the leal conseCuences

and implications of such relationship, came out with its decision ono%em!er D,

1002, renderin =udment for A$'7', to witE

FHEREGORE, t*e oreo+n 3rem+ses !ons+dered,

6udment +s *ere" rendered +n aor o 3la+nt+K 1A>SONS2

and aa+nst t*e deendants 1ELUITY and ;CC2 *o are

*ere" ordered, 6o+ntl and seerall, to 3a 3la+nt+K:

#. t*e 3r+n!+3al sum o To M+ll+on Pesos ?P%,&&&,&&&.&&@toet*er +t* t*e +nterest due t*ereon at t*e rate o

e+*teen 3er!ent ?#9B@ annuall !om3uted rom =an. %,

#$9# unt+l t*e o"l+at+on +s ull 3a+d

%. l+u+dated damaes due t*ereon eu+alent to t*ree

3er!ent ?8B@ mont*l !om3uted rom =anuar %,

#$9% unt+l t*e o"l+at+on +s ull 3a+d

8. attornes ees +n an amount eu+alent to tent our

3er!ent ?%/B@ o t*e total o"l+at+on due and



/. t*e !osts o su+t.

IT IS SO OR)ERE). ?Fords +n "ra!7ets added.@

T*ererom, ;CC ent on a33eal to t*e CA *ere +ts a33ellatere!ourse as do!7eted as CAG.R. CV No. ,+/0+( as!r+"+n to t*etr+al !ourt t*e !omm+ss+on o t*e ollo+n errors:

#. In *old+n t*at t*ere +s a Parent-Su"s+d+ar!or3orate relat+ons*+3 "eteen ELUITY and ;CC

%. In not *old+n t*at ELUITY and ;CC are d+st+n!t

and se3arate !or3orate ent+t+es

8. In a33l+n t*e do!tr+ne o P+er!+n t*e 5e+l o Cor3orate G+!t+on +n t*e !ase at "ar and

/. In not *old+n A>SONS +n esto33el to uest+on t*e

!or3orate 3ersonal+t o ELUITY.

On A3r+l ##, %&&%, t*e a33ellate !ourt rendered t*e *ere+nassa+led )e!+s+on,1##2 aDrm+n t*at o t*e tr+al !ourt, t*us:

3H5R5B7R5, premises considered, the 4ecision of the Reional 6rial

-ourt, +ranch D, Maati in -i%il -ase o. 1#828 is here!y

ABBIRM54.

'7 7R45R54.





In t+me, ;CC moed or re!ons+derat+on olloed " a mot+on ororal arument, "ut "ot* mot+ons ere den+ed " t*e CA +n +tseuall assa+led Resolut+on o Auust %&, %&&%.1#%2

Hen!e, ;CCs 3resent re!ourse an!*ored on t*e ollo+n

aruments, +ssues andor su"m+ss+ons:

#. T*e mot+on or oral arument +t* mot+on or

re!ons+derat+on and +ts su33lement ere 3erun!tor+l

den+ed " t*e CA +t*out 6ust+4a"le "as+s

#. 6here is a!solutely no !asis for piercin the %eil of corporate fiction"

&. Respondent Alsons is not a real party)in)interest as the promissory

note paya!le to !earer su!=ect of the collection suit is !ut a simulated

document and>or refers to another party. Moreo%er, the su!=ect

promissory note is not admissi!le in e%idence !ecause it has not !een

duly authenticated and it is an altered document"

/. T*e a!t o ull 3ament stated +n t*e ten ?#&@

deeds o sale o t*e s*ares o sto!7 +s !on!lus+e on t*e

sellers, and " t*e 3atrol e+den!e rule, t*e alleed a!t

o +ts non-3ament !annot "e +ntrodu!ed +n e+den!ed

and

0. T*e !ounter-!la+m 4led " ;CC aa+nst Alsons

s*ould "e ranted +n t*e +nterest o 6ust+!e.





T*e 3et+t+on and t*e aruments andor +ssues *old+n +ttoet*er are +t*out mer+t. T*e des+red reersal o t*e assa+ledde!+s+on and resolut+on o t*e a33ellate !ourt +sa!!ord+nl *ENIE*.

Instead o ra+s+n d+st+n!tl ormulated uest+ons o la, as +se(3e!ted o one see7+n a re+e under Rule /0 o t*e Rules o Court o a 4nal CA 6udment,1#82 3et+t+oner ;CC starts oK "o+!+n d+sa33o+ntment oer t*e 3erun!tor den+al " t*e CA o +ts t+n mot+ons or re!ons+derat+on and oral arument. Pet+t+oner,to "e sure, !annot 3laus+"l e(3e!t a reersal a!t+on 3rem+sed ont*e !ursor a +ts mot+ons ere den+ed, + su!* +ndeed ere t*e!ase. Su!* manner o den+al, *+le 3er*a3s ar rom +deal, +s noteen a re!on+ed round or a33eal " !ert+orar+, unless a den+al

o due 3ro!ess ensues, *+!* +s not t*e !ase *ere. And lest +t "eoerloo7ed, t*e CA 3rea!ed +ts assa+led den+al resolut+on +t* t*e!lause: 1F2inding no re!er"ibe error &ommitted to 'arrant t-emodi3&ation and4or re!er"a o% t-e A#ri ++(5005 6e&i"ion( suest+n t*at t*e a33ellate !ourt ae t*e3et+t+oners mot+on or re!ons+derat+on t*e attent+on +t desered.At t*e er least, t*e 3et+t+oner as dul a33r+sed o t*e reasons* re!ons+derat+on !ould not "e aora"l !ons+dered. Ane(tended resolut+on as not reall ne!essar to d+s3ose o t*emot+on or re!ons+derat+on +n uest+on.

Pet+t+oners lament a"out "e+n de3r+ed o 3ro!edural due3ro!ess o+n to t*e den+al o +ts mot+on or oral arument +ss+m3l s3e!+ous. Under t*e CA Internal Rules, t*e a33ellate !ourtma ta3 an o t*e t*ree ?8@ alternat+es t*ere+n 3ro+ded to a+dt*e !ourt +n resol+n a33ealed !ases "eore +t. It ma rel onaa+la"le re!ords alone, reu+re t*e su"m+ss+on o memoranda orset t*e !ase or oral arument. T*e o3t+on t*e Internal Rules t*us

+es t*e CA ne!essar+l suests t*at t*e a33ellate !ourt ma, at+ts sound d+s!ret+on, d+s3ense +t* a ted+ous oral arumente(er!+se. Rule 5I, Se!t+on < o t*e %&&% Internal Rules o t*e CA,3ro+des:





'EC. G Judicial Action on Certain Petitions.- ?a@

In 3et+t+ons or re+e, ater t*e re!e+3t o t*e

res3ondents !omment on t*e 3et+t+on, t*e Court 1o

A33eals2 ma d+sm+ss t*e 3et+t+on + +t 4nds t*e same to

"e 3atentl +t*out mer+t , ot*er+se, +ts*all +e due!ourse to +t.

((( ((( (((

I t*e 3et+t+on +s +en due !ourse, t*e Court ma

!ons+der t*e !ase su"m+tted or de!+s+on or reu+re t*e

3art+es to su"m+t t*e+r memorandum or set t*e !ase or

oral arument. (((. Ater t*e oral arument or u3onsu"m+ss+on o t*e memoranda t*e !ase s*all "e deemed

su"m+tted or de!+s+on.

In t*e !ase at "en!*, re!ords reeal t*at t*e a33ellate !ourt,+n l+ne +t* t*e 3res!r+3t+on o +ts on rules, reu+red t*e 3art+esto 6ust su"m+t, as t*e d+d, t*e+r res3e!t+e memoranda to3ro3erl ent+late t*e+r se3arate !auses. Under t*+s s!enar+o, t*e3et+t+oner !annot "e al+dl *eard, *a+n "een de3r+ed o due3ro!ess.

=ust l+7e t*e 4rst, t*e last t*ree ?8@ aruments set ort* +n t*e3et+t+on +ll not !arr t*e da or t*e 3et+t+oner. In relat+ont*ere+t*, t*e Court notes t*at t*ese aruments and t*e +ssues"e*+nd t*em ere not ra+sed "eore t*e tr+al !ourt. T*+s a33ellatemaneuer !annot "e alloed. Gor, ell-settled +s t*e rule t*at

+ssues or rounds not ra+sed "elo !annot "e resoled on re+e+n *+*er !ourts.1#/2 S3r+n+n sur3r+ses on t*e o33os+n 3art +sant+t*et+!al to t*e s3ort+n +dea o a+r 3la, 6ust+!e and due3ro!ess *en!e, t*e 3ros!r+3t+on aa+nst a 3art s*+t+n rom onet*eor at t*e tr+al !ourt to a ne and d+Kerent t*eor +n t*ea33ellate leel. On t*e same rat+onale, 3o+nts o la, t*eor+es,





+ssues not "rou*t to t*e attent+on o t*e loer !ourt or, +n 4ne,not +nter3osed dur+n t*e tr+al !annot "e ra+sed or t*e 4rst t+meon a33eal.1#02

T*ere are, to "e sure, e(!e3t+ons to t*e rule res3e!t+n *atma "e ra+sed or t*e 4rst t+me on a33eal. >a!7 o 6ur+sd+!t+onoer *en t*e +ssues ra+sed 3resent a matter o 3u"l+!3ol+!1#<2 !omes +mmed+atel to m+nd. None o t*e ell-re!on+ede(!e3t+ons o"ta+n +n t*+s !ase, *oeer.

>est +t "e oerloo7ed !i"!i" t*e same last t*ree aruments

t*us 3ressed, "ot* t*e tr+al !ourt and t*e CA, "ased on t*ee+den!e addu!ed, ad6uded t*e 3et+t+oner and res3ondentELUITY 6o+ntl and seerall l+a"le to 3a *at res3ondentA>SONS +s ent+tled to under t*e "earer 3rom+ssor note. T*e

6udment arues aa+nst t*e not+on o t*e note "e+n s+mulatedor altered or t*at res3ondent A>SONS *as no stand+n to sue ont*e note, not "e+n t*e 3aee o t*e "earer note. Gor, t*ede!larat+on o l+a"+l+t not onl 3resu33oses t*e dul esta"l+s*edaut*ent+!+t and due e(e!ut+on o t*e 3rom+ssor note oer *+!*A>SONS, as t*e *older +n due !ourse t*ereo, *as +nterest, "ut

also t*e untena"+l+t o t*e 3et+t+oners !ounter!la+m or attornesees and e(em3lar damaes aa+nst A>SONS. At "ottom, t*e3et+t+oner 3red+!ated su!* !ounter-!la+m on t*e 3ostulate t*atres3ondent A>SONS *ad no !ause o a!t+on, t*e su33osed3rom+ssor note "e+n, a!!ord+n to t*e 3et+t+oner, e+t*er as+mulated or an altered do!ument.

In net eKe!t, t*e de4n+t+e !on!lus+on o t*e a33ellate !ourt

aDrmator o t*at o t*e tr+al !ourt as t*at t*e "earer3rom+ssor note ?E(*. @ as a enu+ne and aut*ent+! +nstrument3aa"le to t*e *older t*ereo. T*+s a!tual determ+nat+on, as amatter o lon and sound a33ellate 3ra!t+!e, deseres reate+*t and s*all not "e d+stur"ed on a33eal, sae or t*e most!om3ell+n reasons,1#'2 su!* as *en t*at determ+nat+on +s !learl+t*out e+dent+ar su33ort or *en rae a"use o d+s!ret+on *as









"een !omm+tted.1#92 T*+s +s as +t s*ould "e s+n!e t*e Court, +n3et+t+ons or re+e o CA de!+s+ons under Rule /0 o t*e Rules o Court, usuall l+m+ts +ts +nu+r onl to uest+ons o la. Statedot*er+se, +t +s not t*e un!t+on o t*e Court to anale and e+*

all oer aa+n t*e e+den!e or 3rem+ses su33ort+e o t*e a!tual*old+ns o loer !ourts.1#$2

As not*+n +n t*e re!ord +nd+!ates an o t*e e(!e3t+onsaderted to a"oe, t*e a!tual !on!lus+on o t*e CA t*at t*e P%M+ll+on 3rom+ssor note +n uest+on as aut*ent+! and as +ssuedat t*e 4rst +nstan!e to res3ondent A>SONS and t*e Al!antaraam+l or t*e amount stated on +ts a!e, must "e aDrmed. Its*ould "e stressed +n t*+s reard t*at een t*e +ssu+n ent+t, i.e.,res3ondent ELUITY, neer !*allened t*e enu+neness and duee(e!ut+on o t*e note.

T*+s "r+ns us to t*e rema+n+n "ut !ore +ssue tendered +n t*+s!ase and a3tl ra+sed " t*e 3et+t+oner, to +t: *et*er t*ere +sa"solutel no "as+s or 3+er!+n ;CCs e+l o !or3orate +dent+t.

A !or3orat+on +s an art+4!+al "e+n ested " la +t* a3ersonal+t d+st+n!t and se3arate rom t*ose o t*e 3ersons!om3os+n +t1%&2 as ell as rom t*at o an ot*er ent+t to *+!* +tma "e related.1%#2 T*e 4rst !onseuen!e o t*e do!tr+ne o lealent+t o t*e se3arate 3ersonal+t o t*e !or3orat+on +s t*at a!or3orat+on ma not "e made to anser or a!ts and l+a"+l+t+es o +ts sto!7*olders or t*ose o leal ent+t+es to *+!* +t ma "e!onne!ted or +!e ersa.1%%2

T*e not+on o se3arate 3ersonal+t, *oeer, ma "ed+srearded under t*e do!tr+ne 3+er!+n t*e e+l o !or3orate4!t+on as +n a!t t*e !ourt +ll oten loo7 at t*e !or3orat+on as amere !olle!t+on o +nd++duals or an areat+on o 3ersonsunderta7+n "us+ness as a rou3, d+sreard+n t*e se3arate













6ur+d+!al 3ersonal+t o t*e !or3orat+on un++n t*e rou3. Anot*erormulat+on o t*+s do!tr+ne +s t*at *en to ?%@ "us+nessenter3r+ses are oned, !ondu!ted and !ontrolled " t*e same3art+es, "ot* la and eu+t +ll, *en ne!essar to 3rote!t t*e

r+*ts o t*+rd 3art+es, d+sreard t*e leal 4!t+on t*at to!or3orat+ons are d+st+n!t ent+t+es and treat t*em as +dent+!al orone and t*e same.1%82

F*et*er t*e se3arate 3ersonal+t o t*e !or3orat+on s*ould "e3+er!ed *+nes on o"ta+n+n a!ts, a33ro3r+atel 3leaded or3roed. Hoeer, an 3+er!+n o t*e !or3orate e+l *as to "edone +t* !aut+on, al"e+t t*e Court +ll not *es+tate to d+sreardt*e !or3orate e+l *en +t +s m+sused or *en ne!essar +n t*e+nterest o 6ust+!e.1%/2 Ater all, t*e !on!e3t o !or3orate ent+t asnot meant to 3romote una+r o"6e!t+es.

Aut*or+t+es are areed on at least t*ree ?8@ "as+! areas*ere 3+er!+n t*e e+l, +t* *+!* t*e la !oers and +solates t*e!or3orat+on rom an ot*er leal ent+t to *+!* +t ma "e related,+s alloed.1%02 T*ese are: #@ deeat o 3u"l+! !onen+en!e,1%<2 as*en t*e !or3orate 4!t+on +s used as e*+!le or t*e eas+on o an

e(+st+n o"l+at+on1%'2 %@ raud !ases or *en t*e !or3orate ent+t+s used to 6ust+ a ron, 3rote!t raud, or deend a !r+me 1%92 or8@ ater ego !ases, *ere a !or3orat+on +s merel a ar!e s+n!e +t +sa mere alter eo or "us+ness !ondu+t o a 3erson, or *ere t*e!or3orat+on +s so oran+ed and !ontrolled and +ts aKa+rs are so!ondu!ted as to ma7e +t merel an +nstrumental+t, aen!,!ondu+t or ad6un!t o anot*er !or3orat+on.1%$2

T*e CA ound al+d rounds to 3+er!e t*e !or3orate e+l o 3et+t+oner ;CC, t*ere "e+n 6ust+4a"le "as+s or su!* a!t+on. F*ent*e a33ellate !ourt s3o7e o a 6ust++n a!tor, t*e reeren!e asto *at t*e tr+al !ourt sa+d +n +ts de!+s+on, namel: t*e e(+sten!eo certain circumstances 1'-i&-2( ta7en toget-er( ga!e ri"e tot-e ineu&tabe &on&u"ion t-at 1re"#ondent2 *89I:; i" but anin"trumentaity or ad<un&t o% 1#etitioner2 GCC.

















T*e Court arees +t* t*e d+s3os+t+on o t*e a33ellate !ourt on t*ea33l+!at+on o t*e 3+er!+n do!tr+ne to t*e transa!t+on su"6e!t o t*+s !ase. Per t*e Courts !ount, t*e tr+al !ourt enumerated no less

t*an %& do!umented !+r!umstan!es and transa!t+ons, *+!*,ta7en as a 3a!7ae, +ndeed stronl su33orted t*e !on!lus+ont*at res3ondent ELUITY as "ut an ad6un!t, an +nstrumental+t or"us+ness !ondu+t o 3et+t+oner ;CC. T*+s relat+on, +n turn, 3ro+desa 6ust++n round to 3+er!e 3et+t+oners !or3orate e(+sten!e as toA>SONS !la+m +n uest+on. Goremost o *at t*e tr+al !ourtreerred to as !erta+n !+r!umstan!es are t*e !ommonal+t o d+re!tors, oD!ers and sto!7*olders and een s*ar+n o oD!e"eteen 3et+t+oner ;CC and res3ondent ELUITY !erta+n 4nan!+n

and manaement arranements "eteen t*e to, allo+n t*e3et+t+oner to *andle t*e unds o t*e latter t*e +rtual dom+nat+on+ not !ontrol +elded " t*e 3et+t+oner oer t*e 4nan!es, "us+ness3ol+!+es and 3ra!t+!es o res3ondent ELUITY and t*eesta"l+s*ment o res3ondent ELUITY " t*e 3et+t+oner to!+r!ument C rules. Gor a 3ers3e!t+e, t*e ollo+n are somereleant e(!er3ts rom t*e tr+al !ourts de!+s+on sett+n ort* +nsome deta+l t*e t+33+n !+r!umstan!es aderted to t*ere+n:

It must "e noted t*at as !*ara!ter+ed " t*e+r "us+ness

relat+ons*+3, 1res3ondent2 EBI(D and &e!i!ioner "CC6ad +o//on dire+!or and%or o4+er a :ell a

!o+H6older. T*+s +s reealed " t*e 3ro!eed+ns

re!orded +n SEC Case No. %0-9# ent+tled Ael+na Ramoso,

et al., s. ;CC, et al., *ere +t as esta"l+s*ed, t*ru t*e

test+mon o ELUITYs on Pres+dent t*at more t*an $&B

o t*e sto!7*olders o ELUITY ere also sto!7*olders o

;CC .. )+s!losed l+7e+se +s t*e a!t t*at *en 1ELUITYs

Pres+dent2 >a"aen sold t*e s*are*old+ns o ELUITY +nsa+d ran!*+se !om3an+es, 3ra!t+!all t*e ent+re 3ro!eeds

t*ereo ere surrendered to ;CC, and not re!e+ed "

ELUITY ?EJHIIT RR@ (((.



It as l+7e+se s*on " a 3re3onderan!e o e+den!e

t*at not onl *ad "CC fnan+ed EBI(D and t*at t*e

latter as *ea+l +nde"ted to t*e ormer "ut EBI(D

:a, in ;a+!, a :6oll9 o:ned idiar9 o;

"CC. T*us, as aDrmed " ELUITYsPres+dent, t*e ;ndine!ed 9 EBI(D in !6e CCC ;ran+6ie +o/&anie

a+!all9 +a/e ;ro/ CCC P6il. or "CC ?E(*+"+t Y-0@.

t*at, as d+s!losed " t*e Aud+tors re3ort or #$9%, 3ast

due re!e+a"les alone o ;CC e(!eeded P#&#,&&&,&&&.&&

mostl to ;CC aDl+ates es3e!+all CCC ELUITY. t*at

1Cs2 Re3ort o E(am+nat+on dated =ul #/, #$'' s*os

t*at ELUITY *+!* *as a 3a+d-u3 !a3+tal o onl

P0&&,&&&.&& as t*e "+est "orroer o ;CC +t* a total

loan o P<.'& M+ll+on .

((( ((( (((

It *as l+7e+se "een am3l su"stant+ated " 1res3ondent

A>SONS2 e+den!e t*at not onl d+d ;CC !ause t*e

+n!or3orat+on o ELUITY, "ut, t*e latter *ad rossl

+nadeuate !a3+tal or t*e 3ursu+t o +ts l+ne o "us+ness to

t*e e(tent t*at i! ine aair :ere +onidered

a "CC o:n ine endeaor. (((.

((( ((( (((

A>SONS *as l+7e+se s*on t*at t*e "onuses o t*e

oD!ers and d+re!tors o ELUITY as "ased on +ts total

4nan!+al 3erorman!e toet*er +t* all +ts aDl+ates "ot*

4rms ere s*ar+n one and t*e same oD!e *en "ot*

ere st+ll o3erat+onal and t*at t*e d+re!tors and



e(e!ut+es o EBI(D neer a+!ed inde&enden!l9 !

!ooH !6eir order ;ro/ "CC.

(6e eiden+e 6a alo indi!al9 e!ali6ed !6a!EBI(D :a or$anied 9 "CC ;or !6e &r&oe o;

+ir+/en!in$ C< rle and re$la!ion and !6e

An!i-r9 La:. T*us, as d+s!losed " t*e Adan!e

Re3ort on t*e result o Central an7s O3erat+ons

E(am+nat+on !ondu!ted on ;CC as o Mar!* 8#,

#$'' ?EJHIITS GGG et!.@, t*e latter +olated 1C2 rules

and reulat+ons " : ?a@ us+n as a !ondu+t +ts non-uas+

"an7 aDl+ates . ?"@ +ssu+n +t*out re!ourse a!+l+t+es toena"le ;CC to e(tend !red+t to aDl+ates l+7e ELUITY *+!*

o "eond t*e s+nle "orroers l+m+t +t*out t*e need o

s*o+n outstand+n "alan!e +n t*e "oo7 o a!!ounts.

?Em3*as+s oer ords +n "ra!7ets added.@

It "ears to stress at t*+s 3o+nt t*at t*e a!ts and t*e+neren!es dran t*ererom, u3on *+!* t*e to ?%@ !ourts "eloa33l+ed t*e 3+er!+n do!tr+ne, stand, or t*e most 3art,und+s3uted. Amon t*ese +s, to re+terate, t*e matter o ELUITY*a+n "een +n!or3orated to sere, as +t d+d sere, as an+nstrumental+t or ad6un!t o ;CC. F+t* t*e +e e ta7e o t*+s!ase, ;CC d+d not addu!e an e+den!e, let alone re"ut t*etest+mon+es and do!uments 3resented " A>SONS, to esta"l+s*t*e 3rea+l+n !+r!umstan!es aderted to t*at 3ro+ded t*e

6ust++n o!!as+on to 3+er!e t*e e+l o !or3orate 4!t+on "eteen;CC and ELUITY. Fe uote t*e tr+al !ourt:

5er+l, +ndeed, as t*e relat+ons*+3s "+nd+n *ere+n

1res3ondent ELUITY and 3et+t+oner ;CC2 *ae "een t*at

o 3arent-su"s+d+ar !or3orat+ons t*e oreo+n 3r+n!+3les



and do!tr+nes 4nd su+ta"le a33l+!a"+l+t +n t*e !ase at "ar

and, +t *a+n "een sat+sa!tor+l and +ndu"+ta"l s*on

t*at t*e sa+d relat+ons*+3s *ad "een used to 3erorm

!erta+n un!t+ons not !*ara!ter+ed +t* le+t+ma!, t*+s

Court eels am3l 6ust+4ed to 3+er!e t*e e+l o !or3orateent+t and dire$ard !6e e&ara!e e>i!en+e o; !6e

&er+en! @s+! and idiar9 !6e la!!er 6ain$ een

o +on!rolled 9 !6e &aren! !6a! i! e&ara!e

iden!i!9 i 6ardl9 di+ernile !6 e+o/in$ a /ere

in!r/en!ali!9 or al!er e$o o; !6e ;or/er.

Conseuentl, as t*e 3arent !or3orat+on, 13et+t+oner2 ;CC

ma"e ?s+!@ *eld res3ons+"le or t*e a!ts and !ontra!ts o

+ts su"s+d+ar 1res3ondent2 ELUITY - most es3e!+all + t*e

latter ?*o *ad an*o a!7noleded +ts l+a"+l+t to

A>SONS@ ma"e ?s+!@ +t*out suD!+ent 3ro3ert +t*

*+!* to settle +ts o"l+at+ons. Gor, ater all, ;CC as t*e

ent+t *+!* +n+t+ated and "ene4ted +mmensel rom t*e

raudulent s!*eme 3er3etrated +n +olat+on o t*e la.

?Fords +n 3arent*es+s +n t*e or++nal em3*as+s and

"ra!7eted ords added@.

;+en t*e oreo+n !ons+derat+ons, +t "e*ooes t*e 3et+t+oner, asa matter o la and eu+t, to assume t*e le+t+mate 4nan!+alo"l+at+on o a !as*-stra33ed su"s+d+ar !or3orat+on *+!* +t+rtuall !ontrolled to su!* a deree t*at t*e latter "e!ame +ts+nstrument or aent. T*e a!ts, as ound " t*e !ourts a =uo, andt*e a33l+!a"le la !all or t*+s 7+nd o d+s3os+t+on. Or else, t*eCourt ould "e allo+n t*e ron use o t*e 4!t+on o !or3oratee+l.

?)EREFORE, t*e +nstant 3et+t+on +s *ENIE* and t*e a33ealed)e!+s+on and Resolut+on o t*e Court o A33eals area!!ord+nl AFFIR#E*.



Costs aa+nst t*e 3et+t+oner.

'O OR*ERE*.

.R. No. L51864 Ma7 /3, /61/

TELEPHONE ENINEERIN SER@ICE COMPAN, INC., petitioner,vs.-ORMENGS COMPENSATION COMMISSION, PRO@INCIAL SHERIFF OF RIAL an LEONILA SANTOSATUS, $or "rs"#$ an in !"a#$ o$ "r *inor i#r"n, T"r"sita, Antonina an R"7na#o, a## s&rna*"ATUS, respondents.

MELENCIOHERRERA, J.:1äwphï1.ñët

These certiorari proceedings stem from the award rendered against petitioner Telephone <ngineering and9ervices, #o., 'nc. 6T<9#+7 on +ctober 8, -85 by the 1cting "eferee of "egional +ffice o. 3, Mue*on #ity

9ub$"egional +ffice, WorkmenBs #ompensation 9ection, in favor of respondent !eonila 9. Aatus and herchildren, dependents of the deceased employee %acifico !. Aatus. The principal contention is that the awardwas rendered without jurisdiction as there was no employer$employee relationship between petitioner and thedeceased.

%etitioner is a domestic corporation engaged in the business of manufacturing telephone equipment withoffices at 9heridan 9treet, (andaluyong, "i*al. 'ts <xecutive )ice$%resident and Aeneral (anager is =ose !uis9antiago. 't has a sister company, the Itilities (anagement #orporation 6I(1#+"7, with offices in the samelocation. I(1#+" is also under the management of =ose !uis 9antiago.

+n 9eptember , -83, I(1#+" employed the late %acifica !. Aatus as %urchasing 1gent. +n (ay 8, -8:,%acifico !. Aatus was detailed with petitioner company. ?e reported back to I(1#+" on 1ugust , -8:. +n=anuary /, -85, he contracted illness and although he retained to work on (ay 0, -85, he diednevertheless on =uly 3, -85 of Cliver cirrhosis with malignant degeneration.C

+n 1ugust 5, -85, his widow, respondent !eonila 9. Aatus, filed a Cotice and #laim for #ompensationC with"egional +ffice o. 3, Mue*on #ity 9ub$"egional +ffice, WorkmenBs #ompensation 9ection, alleging therein

that her deceased husband was an employee of T<9#+, and that he died of liver cirrhosis. / +n 1ugust -,-85, and +ffice wrote petitioner transmitting the otice and for #ompensation, and requiring it to submitan <mployerBs "eport of 1ccident or 9ickness pursuant to 9ection /5 of the WorkmenBs #ompensation

1ct 61ct o. /347. 5 1n C<mployerBs "eport of 1ccident or 9icknessC was thus submitted with I(1#+"indicated as the employer of the deceased. The "eport was signed by =ose !uis 9antiago. 'n answer toquestions os. and 5, the employer stated that it would not controvert the claim for compensation, andadmitted that the deceased employee contracted illness Cin regular occupation.C 3 +n the basis of this"eport, the 1cting "eferee awarded death benefits in the amount of %:,5:-.:4 plus burial expenses of%400.00 in favor of the heirs of Aatus in a letter$award dated +ctober 8, -85 4 against T<9#+.

"eplying on +ctober 45, -85, T<9#+, through =ose !uis 9antiago, informed the 1cting "eferee that it wouldavail of the :$days$notice given to it to state its non$conformity to the award and contended that the cause ofthe illness contracted by Aatus was in no way aggravated by the nature of his work. ?

+n ovember 8, -85, T<9#+ requested for an extension of ten days within which to file a (otion for

"econsideration, 8 and on ovember :, -85, asked for an additional extension of five days. 2 T<9#+filed its C(otion for "econsideration andDor %etition to 9et 1side 1wardC on ovember , -85, allegingas grounds therefor, that the admission made in the C<mployerBs "eport of 1ccident or 9icknessC was dueto honest mistake andDor excusable negligence on its part, and that the illness for which compensation is



sought is not an occupational disease, hence, not compensable under the law. 1 The extension requestedwas denied. The (otion for "econsideration was likewise denied in an +rder issued by the #hief of9ection of the "egional +ffice dated 2ecember 4, -85 6 predicated on two grounds> that the allegedmistake or negligence was not excusable, and that the basis of the award was not the theory of directcausation alone but also on that of aggravation. +n =anuary 4, -8, an +rder of execution was issuedby the same +ffice.

+n ebruary /, -8, petitioner filed an CIrgent (otion to #ompel "eferee to <levate the "ecords to the

WorkmenBs #ompensation #ommission for "eview.C /0 (eanwhile, the %rovincial 9heriff of "i*al levied onand attached the properties of T<9#+ on ebruary 5, -8, and scheduled the sale of the same atpublic auction on ebruary 48, -8. +n ebruary 4, -8, the #ommission issued an +rder requiringpetitioner to submit verified or true copies of the (otion for "econsideration andDor %etition to 9et 1side

1ward and +rder of 2ecember 4, -85, and to show proof that said (otion for "econsideration was filedwithin the reglementary period, with the warning that failure to comply would result in the dismissal of the(otion. ?owever, before this +rder could be released, T<9#+ filed with this #ourt, on ebruary 44, -8,The present petition for C#ertiorari with %reliminary 'njunctionC seeking to annul the award and to enjointhe 9heriff from levying and selling its properties at public auction.

+n ebruary 4-, -8, this #ourt required respondents to answer the %etition but denied

'njunction.

//

T<9#+B9 Irgent (otion dated 1pril 4, -8, for the issuance of a temporary restraining order to enjoin the 9heriff from proceeding with the auction sale of its properties was denied in our "esolutiondated (ay , -8.

T<9#+ asserts> 12/ph1.4t

'. That the respondent WorkmenBs #ompensation #ommission has no jurisdiction nor authorityto render the award 61nnex B2B, %etition7 against your petitioner there being no employer$employee relationship between it and the deceased Aatus;

''. That petitioner can never be estopped from questioning the jurisdiction of respondentcommission especially considering that jurisdiction is never conferred by the acts or omissionof the parties;

'''. That this ?onorable #ourt has jurisdiction to nullify the award of respondent commission.

T<9#+ takes the position that the #ommission has no jurisdiction to render a valid award in this suit as therewas no employer$employee relationship between them, the deceased having been an employee of I(1#+"and not of T<9#+. 'n support of this contention, petitioner submitted photostat copies of the payroll of

I(1#+" for the periods (ay 8$/, -85 and =une $:, -85 /5 showing the name of the deceased as oneof the three employees listed under the %urchasing 2epartment of I(1#+". 't also presented aphotostat copy of a check of I(1#+" payable to the deceased representing his salary for the period=une 3 to =uly /, -85. /3

&oth public and private respondents contend, on the other hand, that T<9#+ is estopped from claiming lack ofemployer P employee relationship.

To start with, a few basic principles should be re$stated the existence of employer$employee relationship is the

jurisdictional foundation for recovery of compensation under the WorkmenBs #ompensation !aw. /4 The lack ofemployer$employee relationship, however, is a matter of defense that the employer should properly raisein the proceedings below. The determination of this relationship involves a finding of fact, which isconclusive and binding and not subject to review by this #ourt. /?

)iewed in the light of these criteria, we note that it is only in this %etition before us that petitioner denied, for thefirst time, the employer$employee relationship. 'n fact, in its letter dated +ctober 45, -85 to the 1cting "eferee,in its request for extension of time to file (otion for "econsideration, in its C(otion for "econsideration andDor



%etition to 9et 1side 1ward,C and in its CIrgent (otion to #ompel the "eferee to <levate "ecords to the#ommission for "eview,C petitioner represented and defended itself as the employer of the deceased. owherein said documents did it allege that it was not the employer. %etitioner even admitted that T<9#+ andI(1#+" are sister companies operating under one single management and housed in the same building. 1lthough respect for the corporate personality as such, is the general rule, there are exceptions. 'n appropriatecases, the veil of corporate fiction may be pierced as when the same is made as a shield to confuse thelegitimate issues. /8

While, indeed, jurisdiction cannot be conferred by acts or omission of the parties, T<9#+B9 denial at this stagethat it is the employer of the deceased is obviously an afterthought, a devise to defeat the law and evade its

obligations. /2 This denial also constitutes a change of theory on appeal which is not allowed in this jurisdiction. /1(oreover, issues not raised before the WorkmenBs #ompensation #ommission cannot beraised for the first time on appeal./6 or that matter, a factual question may not be raised for the first timeon appeal to the 9upreme #ourt. 50

This certiorari proceeding must also be held to have been prematurely brought. &efore a petition for certiorari

can be instituted, all remedies available in the trial #ourt must be exhausted first. 5/ certiorari cannot beresorted to when the remedy of appeal is present. 55 What is sought to be annulled is the award made bythe "eferee. ?owever, T<9#+ did not pursue the remedies available to it under "ules 4/, 43 and 4: ofthe "ules of the WorkmenBs #ompensation #ommission, namely, an appeal from the award of the

"eferee, within fifteen days from notice, to the #ommission; a petition for reconsideration of the latterBsresolution, if adverse, to the #ommission en an& ; and within ten days from receipt of an unfavorabledecision by the latter, an appeal to this #ourt. 1s petitioner had not utili*ed these remedies available to it,certiorari win not he, it being prematurely filed. 1s this #ourt ruled in the case of "anila 6o&e$ Clu, In&.vs. 7el Rosario, ! #CR ! (191). 12/ph1.4t

1n aggrieved party by the decision of a #ommissioner should seek a reconsideration of thedecision by the #ommission en an& . 'f the decision is adverse to him, he may appeal to the9upreme #ourt. 1n appeal brought to the 9upreme #ourt without first resorting to the remedyreferred to is premature and may be dismissed.

1lthough this rule admits of exceptions, as where public welfare and the advancement of public policy sodictate, the broader interests of justice so require, or where the +rders complained of were found to be

completely null and void or that the appeal was not considered the appropriate remedy, 53 the case at bar doesnot fan within any of these exceptions. W?<"<+"<, this %etition is hereby dismissed.

9+ +"2<"<2.

FRANCISCO MOTORS CORPORATION, petitioner , vs. COURT OF

APPEALS and SPOUSES GREGORIO and LIBRA"A

MANUEL, respondents.

" E C I S I O N

$UISUMBING, J .&

6his petition for re%iew on certiorari, under Rule * of the Rules of -ourt, sees to annul

the decision;1< of the -ourt of Appeals in -.A. :.R. -V o. 1221* affirmin the decision

rendered !y +ranch 1&, Reional 6rial -ourt of Maati, Metro Manila. 6he proceduralantecedents of this petition are as followsE

7n Fanuary #&, 10D, petitioner filed a complaint ;#< aainst pri%ate respondents to reco%er

three thousand four hundred twel%e and si? centa%os (P&,*1#.2/, representin the !alance of the

http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/100812.htm#_edn1






=eep !ody purchased !y the Manuels from petitioner" an additional sum of twenty thousand four

hundred fifty)four and eihty centa%os (P#2,**.D2 representin the unpaid !alance on the cost

of repair of the %ehicle" and si? thousand pesos (P/,222.22 for cost of suit and attorneys fees.;&< 6o the oriinal !alance on the price of =eep !ody were added the costs of repair. ;*< In their

answer, pri%ate respondents interposed a counterclaim for unpaid leal ser%ices !y :reorio

Manuel in the amount of fifty thousand pesos (P2,222 which was not paid !y the incorporators,directors and officers of the petitioner. 6he trial court decided the case on Fune #/, 10D, in fa%or

of petitioner in reard to the petitioners claim for money, !ut also allowed the counter)claim of

pri%ate respondents. +oth parties appealed. 7n April 1, 1001, the -ourt of Appeals sustained thetrial courts decision.;<Hence, the present petition.

Bor our re%iew in particular is the propriety of the permissi%e counterclaim which pri%ate

respondents filed toether with their answer to petitioners complaint for a sum of money. Pri%ate

respondent :reorio Manuel alleed as an affirmati%e defense that, while he was petitionersAssistant $eal 7fficer, he represented mem!ers of the Brancisco family in the intestate estate

proceedins of the late +enita 6rinidad. Howe%er, e%en after the termination of the proceedins,

his ser%ices were not paid. 'aid family mem!ers, he said, were also incorporators, directors and

officers of petitioner. Hence to counter petitioners collection suit, he filed a permissi%ecounterclaim for the unpaid attorneys fees.;/<

Bor failure of petitioner to answer the counterclaim, the trial court declared petitioner in

default on this score, and e%idence eparte was presented on the counterclaim. 6he trial courtruled in fa%or of pri%ate respondents and found that :reorio Manuel indeed rendered leal

ser%ices to the Brancisco family in 'pecial Proceedins um!er 8D2&) In the Matter of Intestate

5state of +enita 6rinidad. 'aid court also found that his leal ser%ices were not compensateddespite repeated demands, and thus ordered petitioner to pay him the amount of fifty thousand

(P2,222.22 pesos.;8<

4issatisfied with the trial courts order, petitioner ele%ated the matter to the -ourt of Appeals,

posin the followin issuesE

I.

3H56H5R 7R 76 6H5 45-I'I7 R545R54 +9 6H5 $735R -7R6 I'

$$ A4 V7I4 A' I6 5V5R A-@IR54 FRI'4I-6I7 7V5R 6H5

P5R'7 7B 6H5 45B54A6.

II.

3H56H5R 7R 76 P$AI6IBB)APP5$$A6 76 +5I: A R5A$ PAR69 I

6H5 A$$5:54 P5RMI''IV5 -765R-$AIM 'H7$4 +5 H5$4 $IA+$567 6H5 -$AIM 7B 45B54A6)APP5$$55'.

III.

3H56H5R 7R 76 6H5R5 I' BAI$R5 7 6H5 PAR6 7B P$AI6IBB)

APP5$$A6 67 A'35R 6H5 A$$5:54 P5RMI''IV5 -765R-$AIM.;D<















Petitioner contended that the trial court did not acCuire =urisdiction o%er it !ecause no

summons was %alidly ser%ed on it toether with the copy of the answer containin the permissi%e

counterclaim. Burther, petitioner Cuestions the propriety of its !ein made party to the case !ecause it was not the real party in interest !ut the indi%idual mem!ers of the Brancisco family

concerned with the intestate case.

In its assailed decision now !efore us for re%iew, respondent -ourt of Appeals held that acounterclaim must !e answered in ten (12 days, pursuant to 'ection *, Rule 11, of the 1ules of

$ourt " and nowhere does it state in the Rules that a party still needed to !e summoned anew if a

counterclaim was set up aainst him. Bailure to ser%e summons, said respondent court, did not

effecti%ely neate trial courts =urisdiction o%er petitioner in the matter of the counterclaim. Itliewise pointed out that there was no reason for petitioner to !e e?cused from answerin the

counterclaim. -ourt records showed that its former counsel, icanor :. Al%arez, recei%ed the

copy of the answer with counterclaim two (# days prior to his withdrawal as counsel for petitioner. Moreo%er when petitioners new counsel, Fose . ACuino, entered his appearance,

three (& days still remained within the period to file an answer to the counterclaim. Ha%in

failed to answer, petitioner was correctly considered in default !y the trial court. ;0< 5%en assumin

that the trial court acCuired no =urisdiction o%er petitioner, respondent court also said, !ut ha%infiled a motion for reconsideration seein relief from the said order of default, petitioner

was estopped from further Cuestionin the trial courts =urisdiction.;12<

7n the Cuestion of its lia!ility for attorneys fees owin to pri%ate respondent :reorioManuel, petitioner arued that !ein a corporation, it should not !e held lia!le therefor !ecause

these fees were owed !y the incorporators, directors and officers of the corporation in their

personal capacity as heirs of +enita 6rinidad. Petitioner stressed that the personality of thecorporation, %is))%is the indi%idual persons who hired the ser%ices of pri%ate respondent, is

separate and distinct,;11< hence, the lia!ility of said indi%iduals did not !ecome an o!liation

charea!le aainst petitioner.

e%ertheless, on the foreoin issue, the -ourt of Appeals ruled as followsE

Howe%er, this distinct and separate personality is merely a fiction created !y law for

con%enience and to promote =ustice. Accordinly, this separate personality of the

corporation may !e disrearded, or the %eil of corporate fiction pierced, in cases

where it is used as a cloa or co%er for found (sic illeality, or to wor an in=ustice, or

where necessary to achie%e eCuity or when necessary for the protection of

creditors. ('ulo n +ayan, Inc. vs. Araneta, Inc., 8# '-RA &*8 -orporations are

composed of natural persons and the leal fiction of a separate corporate personality is

not a shield for the commission of in=ustice and ineCuity. (-hemple? Philippines, Inc.

%s. Pamatian, 8 '-RA *2D

In the instant case, e%idence shows that the plaintiff)appellant Brancisco Motors

-orporation is composed of the heirs of the late +enita 6rinidad as directors and

incorporators for whom defendant :reorio Manuel rendered leal ser%ices in the

intestate estate case of their deceased mother. -onsiderin the aforestated principles

and circumstances esta!lished in this case, eCuity and =ustice demands plaintiff)









appellants %eil of corporate identity should !e pierced and the defendant !e

compensated for leal ser%ices rendered to the heirs, who are directors of the plaintiff)

appellant corporation.;1#<

ow !efore us, petitioner assins the followin errorsE

I.

6H5 -7R6 7B APP5A$' 5RR54 I APP$9I: 6H5 47-6RI5 7B

PI5R-I: 6H5 V5I$ 7B -7RP7RA65 56I69.

II.

6H5 -7R6 7B APP5A$' 5RR54 I ABBIRMI: 6HA6 6H5R5 3A'

FRI'4I-6I7 7V5R P56I6I75R 3I6H R5'P5-6 67 6H5

-765R-$AIM.;1&<

Petitioner su!mits that respondent court should not ha%e resorted to piercin the %eil of

corporate fiction !ecause the transaction concerned only respondent :reorio Manuel and theheirs of the late +enita 6rinidad. Accordin to petitioner, there was no cause of action !y said

respondent aainst petitioner" personal concerns of the heirs should !e distinuished from those

in%ol%in corporate affairs. Petitioner further contends that the present case does not fall amon

the instances wherein the courts may loo !eyond the distinct personality of acorporation. Accordin to petitioner, the ser%ices for which respondent :reorio Manuel sees to

collect fees from petitioner are personal in nature. Hence, it a%ers the heirs should ha%e !een

sued in their personal capacity, and not in%ol%e the corporation.;1*<

3ith reard to the permissi%e counterclaim, petitioner also insists that there was no proper

ser%ice of the answer containin the permissi%e counterclaim. It claims that the counterclaim is aseparate case which can only !e properly ser%ed upon the opposin party throuhsummons. Burther petitioner states that !y nature, a permissi%e counterclaim is one which does

not arise out of nor is necessarily connected with the su!=ect of the opposin partys

claim. Petitioner a%ers that since there was no ser%ice of summons upon it with reard to the

counterclaim, then the court did not acCuire =urisdiction o%er petitioner. 'ince a counterclaim isconsidered an action independent from the answer, accordin to petitioner, then in effect there

should !e two simultaneous actions !etween the same partiesE each party is at the same time !oth

plaintiff and defendant with respect to the other ,;1< reCuirin in each case separate summonses.

In their -omment, pri%ate respondents focus on the two Cuestions raised !y petitioner. 6hey

defend the propriety of piercin the %eil of corporate fiction, !ut deny the necessity of ser%inseparate summonses on petitioner in reard to their permissi%e counterclaim contained in the

answer.

Pri%ate respondents maintain !oth trial and appellate courts found that respondent :reorio

Manuel was employed as assistant leal officer of petitioner corporation, and that his ser%ices

were solicited !y the incorporators, directors and mem!ers to handle and represent them in'pecial Proceedins o. 8D2&, concernin the Intestate 5state of the late +enita 6rinidad. 6hey

assert that the mem!ers of petitioner corporation too ad%antae of their positions !y not













compensatin respondent :reorio Manuel after the termination of the estate proceedins

despite his repeated demands for payment of his ser%ices. 6hey cite findins of the appellate

court that support piercin the %eil of corporate identity in this particular case. 6hey assert thatthe corporate %eil may !e disrearded when it is used to defeat pu!lic con%enience, =ustify

wron, protect fraud, and defend crime. It may also !e pierced, accordin to them, where the

corporate entity is !ein used as an alter eo, ad=unct, or !usiness conduit for the sole !enefit of the stocholders or of another corporate entity. In these instances, they a%er, the corporation

should !e treated merely as an association of indi%idual persons.;1/<

Pri%ate respondents dispute petitioners claim that its riht to due process was %iolated when

respondents counterclaim was ranted due course, althouh no summons was ser%ed uponit. 6hey claim that no pro%ision in the Rules of -ourt reCuires ser%ice of summons upon a

defendant in a counterclaim. Pri%ate respondents arue that when the petitioner filed its

complaint !efore the trial court it %oluntarily su!mitted itself to the =urisdiction of the court. As aconseCuence, the issuance of summons on it was no loner necessary. Pri%ate respondents say

they ser%ed a copy of their answer with affirmati%e defenses and counterclaim on petitioners

former counsel, icanor :. Al%arez. 3hile petitioner would ha%e the -ourt !elie%e that

respondents ser%ed said copy upon Al%arez after he had withdrawn his appearance as counsel for the petitioner, pri%ate respondents assert that this contention is utterly !aseless. Records disclose

that the answer was recei%ed two (# days !efore the former counsel for petitioner withdrew hisappearance, accordin to pri%ate respondents. 6hey maintain that the present petition is !ut a

form of dilatory appeal, to set off petitioners o!liations to the respondents !y runnin up more

interest it could reco%er from them. Pri%ate respondents therefore claim damaes aainst

petitioner .;18<

6o resol%e the issues in this case, we must first determine the propriety of piercin the %eil

of corporate fiction.

+asic in corporation law is the principle that a corporation has a separate personality distinct

from its stocholders and from other corporations to which it may !e connected. ;1D< Howe%er,under the doctrine of piercin the %eil of corporate entity, the corporations separate =uridical

personality may !e disrearded, for e?ample, when the corporate identity is used to defeat pu!lic

con%enience, =ustify wron, protect fraud, or defend crime. Also, where the corporation is a merealter eo or !usiness conduit of a person, or where the corporation is so oranized and controlled

and its affairs are so conducted as to mae it merely an instrumentality, aency, conduit or

ad=unct of another corporation, then its distinct personality may !e inored.;10< In thesecircumstances, the courts will treat the corporation as a mere arupation of persons and the

lia!ility will directly attach to them. 6he leal fiction of a separate corporate personality in those

cited instances, for reasons of pu!lic policy and in the interest of =ustice, will !e =ustifia!ly setaside.

In our %iew, howe%er, i%en the facts and circumstances of this case, the doctrine of piercin

the corporate %eil has no rele%ant application here. Respondent court erred in permittin the trial

courts resort to this doctrine. 6he rationale !ehind piercin a corporations identity in a i%en caseis to remo%e the !arrier !etween the corporation from the persons comprisin it to thwart the

fraudulent and illeal schemes of those who use the corporate personality as a shield for

undertain certain proscri!ed acti%ities. Howe%er, in the case at !ar, instead of holdin certainindi%iduals or persons responsi!le for an alleed corporate act, the situation has !een re%ersed. It













is the petitioner as a corporation which is !ein ordered to answer for the personal lia!ility of

certain indi%idual directors, officers and incorporators concerned. Hence, it appears to us that the

doctrine has !een turned upside down !ecause of its erroneous in%ocation. ote that accordin to pri%ate respondent :reorio Manuel his ser%ices were solicited as counsel for mem!ers of the

Brancisco family to represent them in the intestate proceedins o%er +enita 6rinidads

estate. 6hese estate proceedins did not in%ol%e any !usiness of petitioner. ote also that he souht to collect leal fees not =ust from certain Brancisco family mem!ers

!ut also from petitioner corporation on the claims that its manaement had reCuested his ser%ices

and he acceded thereto as an employee of petitioner from whom it could !e deduced he was also

recei%in a salary. His mo%e to reco%er unpaid leal fees throuh a counterclaim aainstBrancisco Motors -orporation, to offset the unpaid !alance of the purchase and repair of a =eep

!ody could only result from an o!%ious misapprehension that petitioners corporate assets could

!e used to answer for the lia!ilities of its indi%idual directors, officers, and incorporators. 'uchresult if permitted could easily pre=udice the corporation, its own creditors, and e%en other

stocholders" hence, clearly ineCuitous to petitioner.

Burthermore, considerin the nature of the leal ser%ices in%ol%ed, whate%er o!liation saidincorporators, directors and officers of the corporation had incurred, it was incurred in their

personal capacity. 3hen directors and officers of a corporation are una!le to compensate a party

for a personal o!liation, it is far)fetched to allee that the corporation is perpetuatin fraud or

promotin in=ustice, and !e there!y held lia!le therefor !y piercin its corporate %eil. 3hile thereare no hard and fast rules on disreardin separate corporate identity, we must always !e mindful

of its function and purpose. A court should !e careful in assessin the milieu where the doctrine

of piercin the corporate %eil may !e applied. 7therwise an in=ustice, althouh unintended, mayresult from its erroneous application.

6he personality of the corporation and those of its incorporators, directors and officers in

their personal capacities ouht to !e ept separate in this case. 6he claim for leal fees aainst

the concerned indi%idual incorporators, officers and directors could not !e properly directedaainst the corporation without %iolatin !asic principles o%ernin corporations. Moreo%er,

e%ery action includin a counterclaim must !e prosecuted or defended in the name of the real

party in interest.;#2< It is plainly an error to lay the claim for leal fees of pri%ate respondent:reorio Manuel at the door of petitioner (BM- rather than indi%idual mem!ers of the

Brancisco family.

Howe%er, with reard to the procedural issue raised !y petitioners alleation, that it neededto !e summoned anew in order for the court to acCuire =urisdiction o%er it, we aree with

respondent courts %iew to the contrary. 'ection *, Rule 11 of the 1ules of $ourt pro%ides that a

counterclaim or cross)claim must !e answered within ten (12 days from ser%ice. othin in the

Rules of -ourt says that summons should first !e ser%ed on the defendant !efore an answer tocounterclaim must !e made. 6he purpose of a summons is to ena!le the court to acCuire

=urisdiction o%er the person of the defendant. Althouh a counterclaim is treated as an entirely

distinct and independent action, the defendant in the counterclaim, !ein the plaintiff in theoriinal complaint, has already su!mitted to the =urisdiction of the court. Bollowin Rule 0,

'ection & of the 1008 1ules of $ivil rocedure,;#1< if a defendant (herein petitioner fails to

answer the counterclaim, then upon motion of plaintiff, the defendant may !e declared indefault. 6his is what happened to petitioner in this case, and this -ourt finds no procedural error








in the disposition of the appellate court on this particular issue. Moreo%er, as noted !y the

respondent court, when petitioner filed its motion seein to set aside the order of default, in

effect it su!mitted itself to the =urisdiction of the court. As well said !y respondent courtE

Burther on the lac of =urisdiction as raised !y plaintiff)appellant;,< ;t<he records show

that upon its reCuest, plaintiff)appellant was ranted time to file a motion forreconsideration of the disputed decision. Plaintiff)appellant did file its motion for

reconsideration to set aside the order of default and the =udment rendered on the

counterclaim.

6hus, e%en if the court acCuired no =urisdiction o%er plaintiff)appellant on the

counterclaim, as it %iorously insists, plaintiff)appellant is considered to ha%e

su!mitted to the courts =urisdiction when it filed the motion for reconsideration

seein relief from the court. ('oriano %s. Palacio, 1# '-RA **8. A party is estopped

from assailin the =urisdiction of a court after %oluntarily su!mittin himself to its

=urisdiction. (6e=ones %s. :ironella, 10 '-RA 122. 5stoppel is a !ar aainst anyclaims of lac of =urisdiction. (+alais %s. +alais, 10 '-RA &8.;##<

WHEREFORE, the petition is here!y :RA654 and the assailed decision is here!y

R5V5R'54 insofar only as it held Brancisco Motors -orporation lia!le for the leal o!liation

owin to pri%ate respondent :reorio Manuel" !ut this decision is without pre=udice to his filin

the proper suit aainst the concerned mem!ers of the Brancisco family in their personalcapacity. o pronouncement as to costs.

SO OR"ERE".

TIMOTEO H. SARONA,

Petitioner,

'()*+*

NATIONAL LABOR RELATIONS

".R. No. 1880

PresentE

-ARPI7, 4.,

$hairperson,

P5R5G,

'5R57,

R595', and





COMMISSION, RO#ALE SECURIT#

AGENC# FORMERL# SCEPTRE

SECURIT# AGENC#- and

CESAR S. TAN,

Respondents.

+5RA+5, 44. ∗

PromulatedE

Fanuary 1D, #21#

?)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))?

"ECISION

RE#ES, J.&

6his is a petition for re%iew under Rule * of the Rules of -ourt from the May

#0, #22D 4ecision1 of the 6wentieth 4i%ision of the -ourt of Appeals (-A in -A)

:.R. 'P o. 2#1#8 entitled >Timoteo ?. 'arona v. 2ational <abor 1elations

$ommission, 1oyale 'ecurity =gency formerly 'ceptre 'ecurity =gency- and $esar

'. Tan@ (Assailed 4ecision, which affirmed the ational $a!or Relations

-ommissions ($R- o%em!er &2, #22 4ecision and Fanuary &1, #22/

Resolution, findin the petitioner illeally dismissed !ut limitin the amount of his

!acwaes to three (& monthly salaries. 6he -A liewise affirmed the $R-sfindin that the petitioners separation pay should !e computed only on the !asis of

his lenth of ser%ice with respondent Royale 'ecurity Aency (Royale. 6he -A held

that a!sent any showin that Royale is a mere alter eo of 'ceptre 'ecurity Aency

('ceptre, Royale cannot !e compelled to reconize the petitioners tenure with

'ceptre. 6he dispositi%e portion of the -As Assailed 4ecision statesE

http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/185280.html#sdfootnote1sym






WHEREFORE, in %iew of the foreoin, the instant petition

is PARTL# GRANTE", thouh piercin of the corporate %eil is here!y

denied for lac of merit. Accordinly, the assailed 4ecision and

Resolution of the $R- respecti%ely dated o%em!er &2, #22 andFanuary &1, #22/ are here!y AFFIRME" as to the monetary awards.

SO OR"ERE". #

Fa/+a An/((d(n/*

7n Fune #2, #22&, the petitioner, who was hired !y 'ceptre as a security uard

sometime in April 108/, was ased !y aren 6herese 6an (aren, 'ceptres

7peration Manaer, to su!mit a resination letter as the same was supposedly

reCuired for applyin for a position at Royale. 6he petitioner was also ased to fill up

Royales employment application form, which was handed to him !y Royales

:eneral Manaer, respondent -esar Antonio 6an II (-esar.&

After se%eral wees of !ein in floatin status, Royales 'ecurity 7fficer,

Martin :ono (Martin, assined the petitioner at Hihliht Metal -raft, Inc.

(Hihliht Metal from Fuly #0, #22& to Auust D, #22&. 6hereafter, the petitioner was

transferred and assined to 3ide 3ide 3orld 5?press, Inc. (3335, Inc.. 4urin

his assinment at Hihliht Metal, the petitioner used the patches and aency cloths of

'ceptre and it was onlywhen he was posted at 3335, Inc. that he started usin those of Royale. *

7n 'eptem!er 18, #22&, the petitioner was informed that his assinment at

3335, Inc. had !een withdrawn !ecause Royale had alleedly !een replaced !y










another security aency. 6he petitioner, howe%er, shortly disco%ered thereafter that

Royale was ne%er replaced as 3335, Inc.s security aency. 3hen he placed a call

at 3335, Inc., he learned that his fellow security uard was not relie%ed from his

post.

7n 'eptem!er #1, #22&, the petitioner was once aain assined at Hihliht

Metal, al!eit for a short period from 'eptem!er ##, #22& to 'eptem!er &2, #22&.

'u!seCuently, when the petitioner reported at Royales office on 7cto!er 1, #22&,

Martin informed him that he would no loner !e i%en any assinment per the

instructions of Aida 'a!alones)6an (Aida, eneral manaer of 'ceptre. 6his

prompted him to file a complaint for illeal dismissal on 7cto!er *, #22&./

In his May 11, #22 4ecision, $a!or Ar!iter Fose :utierrez ($A :utierrez

ruled in the petitioners fa%or and found him illeally dismissed. Bor !ein

unsu!stantiated, $A :utierrez denied credence to the respondents claim that the

termination of the petitioners employment relationship with Royale was on his accord

followin his alleed employment in another company. 6hat the petitioner was no

loner interested in !ein an employee of Royale cannot !e presumed from his

reCuest for a certificate of employment, a claim which, to !ein with, he %ehemently

denies. Alleation of the petitioners a!andonment is neated !y his filin of a

complaint for illeal dismissal three (& days after he was informed that he would no

loner !e i%en any assinments. $A :utierrez ruledE

In short, respondent wanted to impress !efore us that complainant

a!andoned his employment. 3e are not howe%er, con%inced.

6here is a!andonment when there is a clear proof showin that one hasno more interest to return to wor. In this instant case, the record has no

proof to such effect. In a lon line of decisions, the 'upreme -ourt ruledE







J 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. !"#, $$%

&#"A '%'.

J In abandonment, there must be a concurrence of

the intention to abandon and some overt acts from which

an employee may be declared as havin) no more interest

to wor*.” (#. Alcontin + &ons, Inc. vs. !"#, $$ &#"A

-.

J It is clear, deliberate and un/ustified refusal to

severe employment and not mere absence that is required

to constitute abandonment.” x x x” (De 0sasi III vs.

!"#, $1- &#"A -'1.

Aside from lac of proof showin that complainant has

a!andoned his employment, the record would show that immediate

action was taen in order to protest his dismissal from employment. Hefiled a complaint ;for< illeal dismissal on 7cto!er *, #22* or three (&

days after he was dismissed. 6his act, as declared !y the 'upreme -ourt

is inconsistent with a!andonment, as held in the case of Pampana 'uar

4e%elopment -o., Inc. %s. $R-, #8# '-RA 8&8 where the 'upreme

-ourt ruledE

J2he immediate filin) of a complaint for 3i4lle)al

3d4ismissal by an employee is inconsistent withabandonment.” 8





6he respondents were ordered to pay the petitioner !acwaes, which $A

:utierrez computed from the day he was dismissed, or on 7cto!er 1, #22&, up to the

promulation of his 4ecision on May 11, #22. In lieu of reinstatement, the

respondents were ordered to pay the petitioner separation pay eCui%alent to his one (1

month salary in consideration of his tenure with Royale, which lasted for only one (1month and three (& days. In this

reard, $A :utierrez refused to pierce Royales corporate %eil for purposes of

factorin the petitioners lenth of ser%ice with 'ceptre in the computation of his

separation pay. $A :utierrez ruled that Royales corporate personality, which is

separate and distinct from that of 'ceptre, a sole proprietorship owned !y the late

Roso 'a!alones (Roso and later, Aida, cannot !e pierced a!sent clear and con%incin

e%idence that 'ceptre and Royale share the same stocholders and incorporators and

that 'ceptre has complete control and dominion o%er the finances and !usiness affairs

of Royale. 'pecificallyE

6o support its prayer of piercin the %eil of corporate entity of

respondent Royale, complainant a%ers that respondent Royal (sic was

usin the %ery same office of '-5P6R5 in -. Padilla 't., -e!u -ity. In

addition, all officers and staff of '-5P6R5 are now the same officers

and staff of R79A$5, that all ;the< properties of '-5P6R5 are now

!ein owned !y R79A$5 and that R79A$5 is now occupyin the

property of '-5P6R5. 3e are not howe%er, persuaded.

It should !e pointed out at this =uncture that '-5P6R5, is a sinle

proprietorship. +ein so, it has no distinct and separate personality. It is

owned !y the late Roso 6. 'a!alones. After the death of the owner, the

property is supposed to !e di%ided !y the heirs and any claim aainst the

sole proprietorship is a claim aainst Roso 6. 'a!alones. After his death,

the claims should !e instituted aainst the estate of Roso 6. 'a!alones. In

short, the estate of the late Roso 6. 'a!alones should ha%e !een

impleaded as respondent of this case.

-omplainant wanted to impress upon us that 'ceptre was oranized into

another entity now called Royale 'ecurity Aency. 6here is howe%er, no

proof to this assertion. $iewise, there is no proof that Roso 6.



'a!alones, oranized his sinle proprietorship !usiness into a

corporation, Royale 'ecurity Aency. 7n the contrary, the name of Roso

6. 'a!alones does not appear in the Articles of Incorporation. 6he names

therein as incorporators areE

+runo M. uizon K ;P<12,222.22

3ilfredo . 6an K 122,222.22

aren 6herese '. 6an K 122,222.22

-esar Antonio '. 6an K 122,222.22

:a!eth Maria . 6an K 2,222.22

-omplainant claims that two (# of the incorporators are the

randdauhters of Roso 6. 'a!alones. 6his fact e%en i%e (sic us further

reason to conclude that respondent Royal (sic 'ecurity Aency is not an

alter eo or conduit of '-5P6R5. It is o!%ious that respondent Royal

(sic 'ecurity Aency is not owned !y the owner of J'-5P6R5L.

It may !e true that the place where respondent Royale hold (sic

office is the same office formerly used !y J'-5P6R5.L $iewise, it may

!e true that the same officers and staff now employed !y respondent

Royale 'ecurity Aency were the same officers and staff employed !y

J'-5P6R5.L 3e find, howe%er, that these facts are not sufficient to

=ustify to reCuire respondent Royale to answer for the lia!ility of 'ceptre,

which was owned solely !y the late Roso 6. 'a!alones. As we ha%e

stated a!o%e, the remedy is to address the claim on the estate of Roso 6.

'a!alones.D





6he respondents appealed $A :utierrezs May 11, #22 4ecision to the $R-,

claimin that the findin of illeal dismissal was attended with ra%e a!use of

discretion. 6his appeal was, howe%er, dismissed !y the $R- in its o%em!er &2,

#22 4ecision,0 the dispositi%e portion of which statesE

WHEREFORE, premises considered, the 4ecision of the $a!or

Ar!iter declarin the illeal dismissal of complainant is

here!y AFFIRME".

Howe%er;,< 3e modify the monetary award !y limitin the rant

of !acwaes to only three (& months in %iew of complainants %ery

limited ser%ice which lasted only for one month and three days.

1. +acwaes ) ;P<1,/22.22

#. 'eparation Pay ) ,#22.22

&. 1&th Month Pay ) D&.&*

;P<#1,&D&.&* Attorneys Bees) #,1&D.&&

6otal ;P<#&,#1./8

6he appeal of respondent Royal (sic 'ecurity Aency is

here!y "ISMISSE" for lac of merit.

SO OR"ERE".12







6he $R- partially affirmed $A :utierrezs May 11, #22 4ecision. It

concurred with the latters findin that the petitioner was illeally dismissed and the

manner !y which his separation pay was computed, !ut modified the monetary award

in the petitioners fa%or !y reducin the amount of his !acwaes from P0,/22.22

to P1,/22.22. 6he $R- determined the petitioners !acwaes as limited to three(& months of his last monthly salary, considerin that his employment with Royale

was only for a period for one (1 month and three (& days, thusE11

7n the other hand, while complainant is entitled to !acwaes, 3e are

aware that his stint with respondent Royal (sic lasted only for one (1

month and three (& days such that it is 7ur considered %iew that his

!acwaes should !e limited to only three (& months.

+acwaesE

;P<,#22.22 ? & months ;P<1,/22.221#

6he petitioner, on the other hand, did not appeal $A :utierrezs May 11, #22

4ecision !ut opted to raise the %alidity of $A :utierrezs ad%erse findins with

respect to piercin Royales corporate personality and computation of his separation

pay in his Reply to the respondents Memorandum of Appeal. As the filin of an

appeal is the prescri!ed remedy and no aspect of the decision can !e o%erturned !y a

mere reply, the $R- dismissed the petitioners efforts to re%erse $A :utierrezs

disposition of these issues. 5ffecti%ely, the petitioner had already wai%ed his riht to

Cuestion $A :utierrezs 4ecision when he failed to file an appeal within therelementary period. 6he $R- heldE

7n the other hand, in complainants Reply to Respondents Appeal

Memorandum he prayed that the doctrine of piercin the %eil of







corporate fiction of respondent !e applied so that his ser%ices with

'ceptre since 108/ ;will not< !e deleted. If complainant assails this

particular findin in the $a!or Ar!iters 4ecision, complainant should

ha%e filed an appeal and not see a relief !y merely filin a Reply to

Respondents Appeal Memorandum.1&

-onseCuently, the petitioner ele%ated the $R-s o%em!er &2, #22 4ecision to the

-A !y way of a Petition for $ertiorari under Rule / of the Rules of -ourt. 7n the

other hand, the respondents filed no appeal from the $R-s findin that the

petitioner was illeally dismissed.

6he -A, in consideration of su!stantial =ustice and the =urisprudential dictum

that an appealed case is thrown open for the appellate courts re%iew, disareed with

the $R- and proceeded to re%iew the e%idence on record to determine if Royale is

'ceptres alter eo that would warrant the piercin of its corporate %eil. 1* Accordin to

the -A, errors not assined on appeal may !e re%iewed as technicalities should not

ser%e as !ar to the full ad=udication of cases. 6husE

In $uyco v. $uyco, which 3e find application in the instant case, the

'upreme -ourt heldE

JIn their Reply, petitioners alleed that their petition only

raised the sole issue of interest on the interest due, thus, !y

not filin their own petition for re%iew, respondents wai%ed

their pri%ilee to !rin matters for the -ourts re%iew that

;does< not deal with the sole issue raised.

Procedurally, the appellate court in decidin the case shall

consider only the assined errors, howe%er, it is eCually

settled that the -ourt is clothed with ample authority to







re%iew matters not assined as errors in an appeal, if it

finds that their consideration is necessary to arri%e at a =ust

disposition of the case.L

6herefore, for full ad=udication of the case, 3e ha%e to primarily resol%e

the issue of whether the doctrine of piercin the corporate %eil !e =ustly

applied in order to determine petitioners lenth of ser%ice with pri%ate

respondents.1 (citations omitted

onetheless, the -A ruled aainst the petitioner and found the e%idence hesu!mitted to support his alleation that Royale and 'ceptre are one and the same

=uridical entity to !e wantin. 6he -A refused to pierce Royales corporate mas as

one of the Jpro!ati%e factors that would =ustify the application of the doctrine of

piercin the corporate %eil is stoc ownership !y one or common ownership of !oth

corporationsL and the petitioner failed to present clear and con%incin proof that

Royale and 'ceptre are commonly owned or controlled. 6he rele%ant portions of the

-As 4ecision stateE

In the instant case, 3e find no e%idence to show that Royale

'ecurity Aency, Inc. (hereinafter JRoyaleL, a corporation duly

reistered with the 'ecurities and 5?chane -ommission ('5- and

'ceptre 'ecurity Aency (hereinafter J'ceptreL, a sinle proprietorship,

are one and the same entity.

Petitioner, who has !een with 'ceptre since 108/ and, as ruled !y

!oth the $a!or Ar!iter and the $R-, was illeally dismissed !y Royale

on 7cto!er 1, #22&, alleed that in order to circum%ent la!or laws,

especially to a%oid payment of money claims and the consideration on

the lenth of ser%ice of its employees, Royale was esta!lished as an alter

eo or !usiness conduit of 'ceptre. 6o pro%e his claim, petitioner

declared that Royale is conductin !usiness in the same office of

'ceptre, the latter !ein owned !y the late retired :en. Roso 'a!alones,





and was manaed !y the latters dauhter, 4r. Aida 'a!alones)6an" that

two of Royales incorporators are randchildren ;of< the late :en. Roso

'a!alones" that all the properties of 'ceptre are now owned !y Royale,

and that the officers and staff of !oth !usiness esta!lishments are the

same" that the heirs of :en. 'a!alones should ha%e applied for

dissolution of 'ceptre !efore the '5- !efore formin a new corporation.

7n the other hand, pri%ate respondents declared that Royale was

incorporated only on March 12, #22& as e%idenced !y the -ertificate of

Incorporation issued !y the '5- on the same date" that Royales

incorporators are +ruino M. uizon, 3ilfredo :racia . 6an, aren

6herese '. 6an, -esar Antonio '. 6an II and ;:a!eth< Maria . 6an.

'ettled is the tenet that alleations in the complaint must !e duly

pro%en !y competent e%idence and the !urden of proof is on the party

main the alleation. Burther, 'ection # of 1ule #3# of the 1evised

1ules of $ourt pro%idesE

J &5#2I6 -. (urden of proof. A (urden of proof is

the duty of a party to present evidence on the facts in issuenecessary to establish his claim or defense by the amount

of evidence reBuired by law.@

3e !elie%e that petitioner did not dischare the reCuired !urden of

proof to esta!lish his alleations. As 3e see it, petitioners claim that

Royale is an alter eo or !usiness conduit of 'ceptre is without !asis

!ecause aside from the fact that there is no common ownership of !oth

Royale and 'ceptre, no e%idence on record would pro%e that 'ceptre,much less the late retired :en. Roso 'a!alones or his heirs, has control

or complete domination of Royales finances and !usiness transactions.

A!sence of this first element, coupled !y petitioners failure to present

clear and con%incin e%idence to su!stantiate his alleations, would

pre%ent piercin of the corporate %eil. Alleations must !e pro%en !y



sufficient e%idence. 'imply stated, he who allees a fact has the !urden

of pro%in it" mere alleation is not e%idence. 1/ (citations omitted

+y way of this Petition, the petitioner would lie this -ourt to re%isit the computation

of his !acwaes, claimin that the same should !e computed from the time he was

illeally dismissed until the finality of this decision.18 6he petitioner would liewise

ha%e this -ourt re%iew and e?amine anew the factual alleations and the supportin

e%idence to determine if the -A erred in its refusal to pierce Royales corporate mas

and rule that it is !ut a mere continuation or successor of 'ceptre. Accordin to the

petitioner, the erroneous computation of his separation pay was due to the -As

failure, as well as the $R- and $A :utierrez, to consider e%idence conclusi%elydemonstratin that Royale and 'ceptre are one and the same =uridical entity. 6he

petitioner claims that since Royale is no more than 'ceptres alter eo, it should

reconize and credit his lenth of ser%ice with 'ceptre.1D

6he petitioner claimed that Royale and 'ceptre are not separate leal persons

for purposes of computin the amount of his separation pay and other !enefits under

the $a!or -ode. 6he piercin of Royales corporate personality is =ustified !y se%eral

indicators that Royale was incorporated for the sole purpose of defeatin his riht tosecurity of tenure and circum%ent payment of his !enefits to which he is entitled under

the lawE (i Royale was holdin office in the same property used !y 'ceptre as its

principal place of !usiness"10 (ii 'ceptre and Royal ha%e the same officers and

employees"#2 (iii on 7cto!er 1*, 100*, Roso, the sole proprietor of 'ceptre, sold to

Aida, and her hus!and, 3ilfredo :racia . 6an (3ilfredo, #1 the property used !y

'ceptre as its principal place of !usiness" ## (i% 3ilfredo is one of the incorporators of

Royale"#& (% on May &, 1000, Roso ceded the license to operate 'ceptre issued !y the

Philippine ational Police to Aida"#* (%i on Fuly #D, 1000, the !usiness name J'ceptre

'ecurity N 4etecti%e AencyL was reistered with the 4epartment of 6rade andIndustry (46I under the name of Aida"# (%ii Aida e?ercised control o%er the affairs

of 'ceptre and Royale, as she was, in fact, the one who dismissed the petitioner from

employment"#/ (%iii aren, the dauhter of Aida, was 'ceptres 7peration Manaer

and is one of the incorporators of Royale"#8 and (i? -esar 6an II, the son of Aida was

one of 'ceptres officers and is one of the incorporators of Royale. #D





























In their -omment, the respondents claim that the petitioner is !arred from

Cuestionin the manner !y which his !acwaes and separation pay were computed.

5arlier, the petitioner mo%ed for the e?ecution of the $R-s o%em!er &2, #22

4ecision#0 and the respondents paid him the full amount of the monetary award

thereunder shortly after the writ of e?ecution was issued.&2 6he respondents liewise

maintain that Royales separate and distinct corporate personality should !e respected

considerin that the e%idence presented !y the petitioner fell short of esta!lishin that

Royale is a mere alter eo of 'ceptre.

6he petitioner does not deny that he has recei%ed the full amount of !acwaes

and separation pay as pro%ided under the $R-s o%em!er &2, #224ecision.&1 Howe%er, he claims that this does not preclude this -ourt from modifyin a

decision that is tainted with ra%e a!use of discretion or issued without =urisdiction.&#

ISSUES

-onsiderin the conflictin su!missions of the parties, a =udiciousdetermination of their respecti%e rihts and o!liations reCuires this -ourt to resol%e

the followin su!stanti%e issuesE

a. 3hether Royales corporate fiction should !e pierced for the

purpose of compellin it to reconize the petitioners lenth of ser%ice

with 'ceptre and for holdin it lia!le for the !enefits that ha%e accrued to

him arisin from his employment with 'ceptre" and

!. 3hether the petitioners !acwaes should !e limited to his

salary for three (& months.











OUR RULING

B(a+*( 2* )((23/ o4 /( 3)o((d* o4 /(

aa)d +nd() /( NLRC* No'(78() 90,:005 "(2*2on 2* ;+a242(d and 2/o+/

3)(<+d2( /o /( CA* )(*o+/2on o4 2*

3(/2/2on 4o)certiorari , /( 3(/2/2on() 2* no/

8a))(d 4)o7 (=()2*2n> 2* )2>/ /o (('a/(

/( d(2*2on o4 /( CA /o /2* Co+)/.

+efore this -ourt proceeds to decide this Petition on its merits, it is imperati%e to

resol%e the respondents contention that the full satisfaction of the award under the

$R-s o%em!er &2, #22 4ecision !ars the petitioner from Cuestionin the

%alidity thereof. 6he respondents su!mit that they had paid the petitioner the amount

of P#1,#1./8 as directed !y the $R- and this constitutes a wai%er of his riht to file

an appeal to this -ourt.

6he respondents fail to con%ince.

6he petitioners receipt of the monetary award ad=udicated !y the $R- is not

a!solute, unconditional and unCualified. 6he petitioners May &, #228 Motion for

Release contains a reser%ation, statin in his prayer thatE Jit is respectfully prayed that

the respondents and>or :reat 4omestic Insurance -o. !e ordered to R5$5A'5>:IV5

the amount of P#&,#1./8 in fa%or of the complainant 6IM7657 H. 'AR7A

without pre=udice to the outcome of the petition with the -A.L&&

In <eonis 2avigation $o., !nc., et al. v. )illamater, et al.,&* this -ourt ruled that

the pre%ailin partys receipt of the full amount of the =udment award pursuant to a

writ of e?ecution issued !y the la!or ar!iter does not








close or terminate the case if such receipt is Cualified as without pre=udice to the

outcome of the petition for certiorari pendin with the -A.

'imply put, the e?ecution of the final and e?ecutory decision orresolution of the $R- shall proceed despite the pendency of a petition

for certiorari, unless it is restrained !y the proper court. In the present

case, petitioners already paid Villamaters widow, 'onia, the amount

of P&,/*0,D22.22, representin the total and permanent disa!ility award

plus attorneys fees, pursuant to the 3rit of 5?ecution issued !y the

$a!or Ar!iter. 6hereafter, an 7rder was issued declarin the case as

Oclosed and terminatedO. Howe%er, althouh there was no motion for

reconsideration of this last 7rder, 'onia was, nonetheless, estopped from

claimin that the contro%ersy had already reached its end with the

issuance of the 7rder closin and terminatin the case. 6his is !ecause

the Acnowledment Receipt she sined when she recei%ed petitioners

payment was without pre=udice to the final outcome of the petition

for certiorari pendin !efore the -A.&

6he finality of the $R-s decision does not preclude the filin of a petition

for certiorari under Rule / of the Rules of -ourt. 6hat the $R- issues an entry of

=udment after the lapse of ten (12 days from the parties receipt of its decision &/ will

only i%e rise to the pre%ailin partys riht to mo%e for the e?ecution thereof !ut will

not pre%ent the -A from tain conizance of a petition for certiorari on

=urisdictional and due process considerations.&8 In turn, the decision rendered !y the

-A on a petition for certiorari may !e appealed to this -ourt !y way of a petition for

re%iew on certiorari under Rule * of the Rules of -ourt. nder 'ection , Article

VIII of the -onstitution, this -ourt has the power to Jre%iew, re%ise, re%erse, modify,

or affirm on appeal or certiorari as the law or the Rules of -ourt may pro%ide, final

=udments and orders of lower courts in ? ? ? all cases in which only an error orCuestion of law is in%ol%ed.L -onsistent with this constitutional mandate, Rule * of

the Rules of -ourt pro%ides the remedy of an appeal !y certiorari from decisions,

final orders or resolutions of the -A in any case, i.e., reardless of the nature of the

action or proceedins

in%ol%ed, which would !e !ut a continuation of the appellate process o%er the oriinal

case.&D 'ince an appeal to this -ourt is not an oriinal and independent action !ut a











continuation of the proceedins !efore the -A, the filin of a petition for re%iew

under Rule * cannot !e !arred !y the finality of the $R-s decision in the same

way that a petition for certiorari under Rule / with the -A cannot.

Burthermore, if the $R-s decision or resolution was re%ersed and set aside for

!ein issued with ra%e a!use of discretion !y way of a petition for certiorari to the

-A or to this -ourt !y way of an appeal from the decision of the -A, it is considered

%oid ab initio and, thus, had ne%er !ecome final and e?ecutory.&0

A R+( ?5 P(/2/2on *o+d 8( on42n(d /o

;+(*/2on* o4 a. N('()/((**, /2* Co+)/

a* /( 3o() /o )(*o'( a ;+(*/2on o4 4a/,

*+ a* (/() a o)3o)a/2on 2* a 7()(

a/() (>o o4 ano/() (n/2/@ o) (/() /(

o)3o)a/( 42/2on a* 2n'o(d 4o)

4)a+d+(n/ o) 7a('o(n/ (nd*, 24 /(

42nd2n>* 2n a**a2(d d(2*2on 2* no/

*+33o)/(d 8@ /( ('2d(n( on )(o)d o)

8a*(d on a 72*a33)((n*2on o4 4a/*.

6he Cuestion of whether one corporation is merely an alter eo of another is

purely one of fact. 'o is the Cuestion of whether a corporation is a paper company, a

sham or su!terfue or whether the petitioner adduced the reCuisite Cuantum of

e%idence warrantin the piercin of the %eil of the respondents corporate personality.*2

As a eneral rule, this -ourt is not a trier of facts and a petition for re%iew

on certiorari under Rule * of the Rules of -ourt must e?clusi%ely raise Cuestions of

law. Moreo%er, if factual findins of the $R- and the $A ha%e !een affirmed !y the

-A, this -ourt accords them the respect and finality they deser%e. It is well)settled

and oft)repeated that findins of fact of administrati%e aencies and Cuasi)=udicial

!odies, which ha%e acCuired e?pertise !ecause their =urisdiction is confined to specific







matters, are enerally accorded not only respect, !ut finality when affirmed !y the

-A. *1

e%ertheless, this -ourt will not hesitate to de%iate from what are clearly

procedural uidelines and distur! and strie down the findins of the -A and those of

the la!or tri!unals if there is a showin that they are unsupported !y the e%idence on

record or there was a patent misappreciation of facts. Indeed, that the impuned

decision of the -A is consistent with the findins of the la!or tri!unals does not per

se conclusi%ely demonstrate the correctness thereof. +y way of e?ception to the

eneral rule, this -ourt will scrutinize the facts if only to rectify the pre=udice and

in=ustice resultin from an incorrect assessment of the e%idence presented.

A )(*o+/2on o4 an 2**+( /a/ a* *+33o*(d@

8(o7( 42na and (=(+/o)@ a* /(

3(/2/2on() on@ )a2*(d 2/ 2n 2* )(3@ /o /(

)(*3ond(n/* a33(a 7a@ 8( )('2*2/(d 8@ /(

a33(a/( o+)/ 24 *+ 2* n((**a)@ 4o) a

<+*/ d2*3o*2/2on o4 /( a*(.

As a!o%e)stated, the $R- refused to distur! $A :utierrezs denial of the petitioners

plea to pierce Royales corporate %eil as the petitioner did not appeal any portion of

$A :utierrezs May 11, #22 4ecision.

In this respect, the $R- cannot !e accused of ra%e a!use of discretion. nder

'ection *(c, Rule VI of the $R- Rules,*#

the $R- shall limit itself to re%iewinand decidin only the issues that were ele%ated on appeal. 6he $R-, while not

totally !ound !y technical rules of procedure, is not licensed to disreard and %iolate

the implementin rules it implemented. *&











onetheless, technicalities should not !e allowed to stand in the way of eCuita!ly and

completely resol%in the rihts and o!liations of the parties. 6echnical rules are not

!indin in la!or cases and are not to !e applied strictly if the result would !e

detrimental to the worin man. ** 6his -ourt may choose not to encum!er itself with

technicalities and limitations conseCuent to procedural rules if such will only ser%e asa hindrance to its duty to decide cases =udiciously and in a manner that would put an

end with finality to all e?istin conflicts !etween the parties.

Ro@a( 2* a on/2n+a/2on o) *+(**o) o4

S(3/)(.

A corporation is an artificial !ein created !y operation of law. It possesses the riht

of succession and such powers, attri!utes, and properties e?pressly authorized !y law

or incident to its e?istence. It has a personality separate and distinct from the persons

composin it, as well as from any other leal entity to which it may !e related. 6his is

!asic.*

5Cually well)settled is the principle that the corporate mas may !e remo%ed or

the corporate %eil pierced when the corporation is =ust an alter eo of a person or of

another corporation. Bor reasons of pu!lic policy and in the interest of =ustice, the

corporate %eil will =ustifia!ly !e impaled only when it !ecomes a shield for fraud,

illeality or ineCuity committed aainst third persons. */

Hence, any application of the doctrine of piercin the corporate %eil should !e

done with caution. A court should !e mindful of the milieu where it is to !e applied. Itmust !e certain that the corporate fiction was misused to such an e?tent that in=ustice,

fraud, or crime was committed aainst another, in disreard of rihts. 6he wrondoin

must !e clearly and con%incinly esta!lished" it cannot !e presumed. 7therwise, an

in=ustice that was ne%er unintended may result from an erroneous application. *8











3hether the separate personality of the corporation should !e pierced hines on

o!tainin facts appropriately pleaded or pro%ed. Howe%er, any piercin of the

corporate %eil has to !e done with caution, al!eit the -ourt will not hesitate to

disreard the corporate %eil when it is misused or when necessary in the interest of

=ustice. After all, the concept of corporate entity was not meant to promote unfairo!=ecti%es.*D

6he doctrine of piercin the corporate %eil applies only in three (& !asic areas,

namelyE 1 defeat of pu!lic con%enience as when the corporate fiction is used as a

%ehicle for the e%asion of an e?istin o!liation" # fraud cases or when the corporate

entity is used to =ustify a wron, protect fraud, or defend a crime" or & alter eo cases,

where a corporation is merely a farce since it is a mere alter eo or !usiness conduit of

a person, or where thecorporation is so oranized and controlled and its affairs are so conducted as

to mae it merely an instrumentality, aency, conduit or ad=unct of another

corporation.*0

In this reard, this -ourt finds coent reason to re%erse the -As findins.

5%idence a!ound showin that Royale is a mere continuation or successor of 'ceptre

and fraudulent o!=ecti%es are !ehind Royales incorporation and the petitioners

su!seCuent employment therein. 6hese are plainly suested !y e%ents that the

respondents do not dispute and which the -A, the $R- and $A :utierrez accept as

fully su!stantiated !ut misappreciated as insufficient to warrant the use of the

eCuita!le weapon of piercin.

As correctly pointed out !y the petitioner, it was Aida who e?ercised control

and super%ision o%er the affairs of !oth 'ceptre and Royale. -ontrary to the

su!missions of the respondents that Roso had !een the only one in sole control of'ceptres finances and !usiness affairs, Aida too o%er as early as 1000 when Roso

assined his license to operate 'ceptre on May &, 1000.2 As further proof of Aidas

acCuisition of the rihts as 'ceptres sole proprietor, she caused the reistration of the

!usiness name J'ceptre 'ecurity N 4etecti%e AencyL under her name with the 46I a

few months after Roso a!dicated his rihts to 'ceptre in her fa%or.1 As far as Royale is

concerned, the respondents do not deny that she has a hand in its manaement and











operation and possesses control and super%ision of its employees, includin the

petitioner. As the petitioner correctly pointed out, that Aida was the one who decided

to stop i%in any assinments to the petitioner and summarily dismiss him is an

eloCuent testament of the power she wields insofar as Royales affairs are concerned.

6he presence of actual common control coupled with the misuse of the corporate formto perpetrate oppressi%e or manipulati%e conduct or e%ade performance of leal

o!liations is patent" Royale cannot hide !ehind its corporate fiction.

Aidas control o%er 'ceptre and Royale does not, !y itself, call for a disreard

of the corporate fiction. 6here must !e a showin that a fraudulent intent or illeal

purpose is !ehind the e?ercise of such control to warrant the piercin of the corporate

%eil.# Howe%er, the manner !y which the petitioner was made to resin from 'ceptre

and how he !ecame an employee of Royale suest the per%erted use of the lealfiction of the separate corporate personality. It is undisputed that the petitioner

tendered his resination and that he applied at Royale at the instance of aren and

-esar and on the impression they created that these were necessary for his continued

employment. 6hey orchestrated the petitioners resination from 'ceptre and

su!seCuent employment at Royale, tain ad%antae of their ascendancy o%er the

petitioner and the latters lac of nowlede of his rihts and the conseCuences of his

actions. Burthermore, that the petitioner was made to resin from 'ceptre and apply

with Royale only to !e unceremoniously terminated shortly thereafter leads to the

inelucta!le conclusion that there was intent to %iolate the petitioners rihts as anemployee, particularly his riht to security of tenure. 6he respondents scheme rees

of !ad faith and fraud and compassionate =ustice dictates that Royale and 'ceptre !e

mered as a sinle entity, compellin Royale to credit and reconize the petitioners

lenth of ser%ice with 'ceptre. 6he respondents cannot use the leal fiction of a

separate corporate personality for ends su!%ersi%e of the policy and purpose !ehind its

creation& or which could not ha%e !een intended !y law to which it owed its !ein. *

Bor the piercin doctrine to apply, it is of no conseCuence if 'ceptre is a sole proprietorship. As ruled in rince Transport, !nc., et al. v. Carcia, et al., it is the act

of hidin !ehind the separate and distinct personalities of =uridical entities to

perpetuate fraud, commit illeal acts, e%ade ones o!liations that the eCuita!le

piercin doctrine was formulated to address and pre%entE











A settled formulation of the doctrine of piercin the corporate %eil is that

when two !usiness enterprises are owned, conducted and controlled !y

the same parties, !oth law and eCuity will, when necessary to protect the

rihts of third parties, disreard the leal fiction that these two entities

are distinct and treat them as identical or as one and the same. In the

present case, it may !e true that $u!as is a sinle proprietorship and nota corporation. Howe%er, petitioners attempt to isolate themsel%es from

and hide !ehind the supposed separate and distinct personality of $u!as

so as to e%ade their lia!ilities is precisely what the classical doctrine of

piercin the %eil of corporate entity sees to pre%ent and remedy./

Also, 'ceptre and Royale ha%e the same principal place of !usiness. As early as7cto!er 1*, 100*, Aida and 3ilfredo !ecame the owners of the property used !y

'ceptre as its principal place of !usiness !y %irtue of a 4eed of A!solute 'ale they

e?ecuted with Roso.8 Royale, shortly after its incorporation, started to hold office in

the same property. 6hese, the respondents failed to dispute.

6he respondents do not liewise deny that Royale and 'ceptre share the same

officers and employees. aren assumed the dual role of 'ceptres 7peration Manaer

and incorporator of Royale. 3ith respect to the petitioner, e%en if he has already

resined from 'ceptre and has !een employed !y Royale, he was still usin the

patches and aency cloths of 'ceptre durin his assinment at Hihliht Metal.

Royale also claimed a riht to the cash !ond which the petitioner posted when

he was still with 'ceptre. If 'ceptre and Royale are indeed separate entities, 'ceptre

should ha%e released the petitioners cash !ond when he resined and Royale would

ha%e reCuired the petitioner to post a new cash !ond in its fa%or.

6ain the foreoin in con=unction with Aidas control o%er 'ceptres and

Royales !usiness affairs, it is patent that Royale was a mere su!terfue for Aida.

'ince a sole proprietorship does not ha%e a separate and distinct personality from that







of the owner of the enterprise, the latter is personally lia!le. 6his is what she souht to

a%oid !ut cannot prosper.

5ffecti%ely, the petitioner cannot !e deemed to ha%e chaned employers as

Royale and 'ceptre are one and the same. His separation pay should, thus, !e

computed from the date he was hired !y 'ceptre in April 108/ until the finality of this

decision. +ased on this -ourts rulin in "asagana $oncrete roducts, et al. v.

2<1$, et al.,D the inter%enin period !etween the day an employee was illeally

dismissed and the day the decision findin him illeally dismissed !ecomes final and

e?ecutory shall !e considered in the computation of his separation pay as a period of

JimputedL or Jputati%eL ser%iceE

'eparation pay, eCui%alent to one months salary for e%ery year of

ser%ice, is awarded as an alternati%e to reinstatement when the latter is

no loner an option. 'eparation pay is computed from the

commencement of employment up to the time of termination, includin

the imputed ser%ice for which the employee is entitled to !acwaes,

with the salary rate pre%ailin at the end of the period of putati%e ser%ice

!ein the !asis for computation.0

I/ 2* (*(//(d, ('(n a=2o7a/2, /a/ 24

)(2n*/a/(7(n/ 2* no/ 3o**28(, /( 3()2od

o'()(d 2n /( o73+/a/2on o4 8aa>(* 2*

4)o7 /( /27( /( (73o@(( a* +na4+@

/()72na/(d +n/2 /( 42na2/@ o4 /( d(2*2on

42nd2n> 2(>a d2*72**a.

3ith respect to the petitioners !acwaes, this -ourt cannot su!scri!e to the %iew

that it should !e limited to an amount eCui%alent to three (& months of his salary.

+acwaes is a remedy affordin the employee a way to reco%er what he has lost !y







reason of the unlawful dismissal./2 In awardin !acwaes, the primordial

consideration is the income that should ha%e accrued to the employee from the time

that he was dismissed up to his reinstatement /1 and the lenth of ser%ice prior to his

dismissal is definitely inconseCuential.

As early as 100/, this -ourt, in (ustamante, et al. v. 2<1$, et al.,/# clarified in

no uncertain terms that if reinstatement is no loner possi!le, !acwaes should !e

computed from the time the employee was terminated until the finality of the decision,

findin the dismissal unlawful.

6herefore, in accordance with R.A. o. /81, petitioners are entitled ontheir full !acwaes, inclusi%e of allowances and other !enefits or their

monetary eCui%alent, from the time their actual compensation was

withheld on them up to the time of their actual reinstatement.

As to reinstatement of petitioners, this -ourt has already ruled that

reinstatement is no loner feasi!le, !ecause the company would !e

ad=ustly pre=udiced !y the continued employment of petitioners who at

present are o%erae, a separation pay eCual to one)month salary rantedto them in the $a!or Ar!iters decision was in order and, therefore,

affirmed on the -ourts decision of 1 March 100/. F+)/()7o)(, *2n(

)(2n*/a/(7(n/ on /2* a*( 2* no on>() 4(a*28(, /( a7o+n/ o4

8aa>(* *a 8( o73+/(d 4)o7 /( /27( o4 /(2) 2(>a

/()72na/2on on :5 J+n( 10 +3 /o /( /27( o4 42na2/@ o4 /2*

d(2*2on./& emphasis supplied-

A further clarification was made in 4avellana, 4r. v. (elenD/*

Article #80 of the $a!or -ode, as amended !y 'ection &* of

Repu!lic Act /81 instructsE













Art. #80. 'ecurity of 6enure. ) In cases of reular

employment, the employer shall not terminate the ser%ices

of an employee e?cept for a =ust cause or when authorized

!y this 6itle. An employee who is un=ustly dismissed fromwor shall !e entitled to reinstatement without loss of

seniority rihts and other pri%ilees and to his full

!acwaes, inclusi%e of allowances, and to his other

!enefits or their monetary eCui%alent computed from the

time his compensation was withheld from him up to the

time of his actual reinstatement.

-learly, the law intends the award of !acwaes and similar !enefits toaccumulate past the date of the $a!or Ar!iters decision until the

dismissed employee is actually reinstated. +ut if, as in this case,

reinstatement is no loner possi!le, this -ourt has consistently ruled that

!acwaes shall !e computed from the time of illeal dismissal until the

date the decision !ecomes final. / (citation omitted

In case separation pay is awarded and reinstatement is no loner feasi!le, !acwaes

shall !e computed from the time of illeal dismissal up to the finality of the decision

should separation pay not !e paid in the meantime. It is the employees actual receipt

of the full amount of his separation pay that will effecti%ely terminate the employment

of an illeally dismissed employee. // 7therwise, the employer)employee relationship

su!sists and the illeally dismissed employee is entitled to !acwaes, tain into

account the increases and other !enefits, includin the 1& th month pay, that were

recei%ed !y his co)employees who are not dismissed./8 It is the o!liation of the

employer to pay an illeally dismissed employee or worer the whole amount of thesalaries or waes, plus all other !enefits and

!onuses and eneral increases, to which he would ha%e !een normally entitled had he

not !een dismissed and had not stopped worin. /D











In fine, this -ourt holds Royale lia!le to pay the petitioner !acwaes to !e

computed from his dismissal on 7cto!er 1, #22& until the finality of this decision.

onetheless, the amount recei%ed !y the petitioner from the respondents in

satisfaction of the o%em!er &2, #22 4ecision shall !e deducted accordinly.

Binally, moral damaes and e?emplary damaes at P#,222.22 each as

indemnity for the petitioners dismissal, which was tainted !y !ad faith and fraud, are

in order. Moral damaes may !e reco%ered where the dismissal of the employee was

tainted !y !ad faith or fraud, or where it constituted an act oppressi%e to la!or, and

done in a manner contrary to morals, ood customs or pu!lic policy while e?emplary

damaes are reco%era!le only if the dismissal was done in a wanton, oppressi%e, or

male%olent manner./0

WHEREFORE, premises considered, the Petition is here!y GRANTE".

3e REVERSE and SET ASI"E the -As May #0, #22D 4ecision in -.A.):.R. 'P

o. 2#1#8 and order the respondents to pay the petitioner the followin minus the

amount of (P#&,#1./8 paid to the petitioner in satisfaction of the $R-s o%em!er

&2, #22 4ecision in $R- -ase o. V)222&)2E

a full !acwaes and other !enefits computed from 7cto!er 1, #22& (the date

Royale illeally dismissed the petitioner until the finality of this decision"

! separation pay computed from April 108/ until the finality of this decision at the

rate of one month pay per year of ser%ice"

c ten percent (12Q attorneys fees !ased on the total amount of the awards

under (a and (! a!o%e"

d moral damaes of 6wenty)Bi%e 6housand Pesos (P#,222.22" and





. e?emplary damaes of 6wenty)Bi%e 6housand Pesos (P#,222.22.

6his case is REMAN"E" to the la!or ar!iter for computation of the separation pay,

!acwaes, and other monetary awards due the petitioner.

SO OR"ERE".

WENSHA SPA CENTER,

INC. ando) DU %HI JIE,

Petitioners,

) %ersus )

LORETA T. #UNG,Respondent.

G.R. No. 151::

PresentE

-ARPI7, 4 ., -hairperson,

A-HRA,

P5RA$6A,

A+A4, and

M547GA, 44.

PromulatedE

Auust 1/, #212

))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))

" E C I S I O N

75D68A, J.9

6his is a petition for re%iew on certiorari under Rule * of the Rules of

-ourt filed !y an employer who was chared !efore the ational $a!or Relations

-ommission 2<1$- for dismissin an employee upon the ad%ice of a Ben 'hui

master. In this action, the petitioners assail the May #D, #22D 4ecision;1< and

7cto!er #&, #22D Resolution;#< of the -ourt of Appeals $=- in -A):.R. 'P o.

http://sc.judiciary.gov.ph/jurisprudence/2010/august2010/185122.htm#_ftn1






0DD entitled <oreta T. Eung v. 2ational <abor 1elations $ommission, Wensha

'pa $enter, !nc. and/or Fu Ghi 4ie.

THE FACTS&

3ensha 'pa -enter, Inc. (Wensha in @uezon -ity is in the !usiness of sauna

!ath and massae ser%ices. u Ghi Fie a..a. Po!!y -o >?u@ is its president,;&< respondent $oreta 6. 9un >Loreta@ was its administrati%e manaer at the time

of her termination from employment.

In her position paper,;*< $oreta stated that she used to !e employed !y

Manmen 'er%ices -o., $td. ( "anmen where u was a client. u was apparently

impressed !y $oretas performance. After he esta!lished 3ensha, he con%inced

$oreta to transfer and wor at 3ensha. $oreta was initially reluctant to accept us

offer !ecause her =o! at Manmen was sta!le and she had !een with Manmen for se%en years. +ut u was persistent and offered her a hiher pay. 5nticed, $oreta

resined from Manmen and transferred to 3ensha. 'he started worin on April

#1, #22* as us personal assistant and interpreter at a monthly salary

of P1#,222.22.

$oreta introduced positi%e chanes to 3ensha which resulted in increased

!usiness. 6his pleased u so that on May 1D, #22*, she was promoted to the

position of Administrati%e Manaer.;<

$oreta recounted that on Auust 12, #22*, she was ased to lea%e her office

!ecause u and a Ben 'hui master were e?plorin the premises. $ater that day,

u ased $oreta to o on lea%e with pay for one month.'he did so and returned

on 'eptem!er 12, #22*. pon her return, u and his wife ased her to resin from

3ensha !ecause, accordin to the Ben 'hui master, her aura did not match that of

u. $oreta refused !ut was informed that she could no loner continue worin at

3ensha. 6hat same afternoon, $oreta went to the N>RC and filed a case for illeal

dismissal aainst u and 3ensha.

3ensha and u denied illeally terminatin $oretas employment. 6hey

claimed that two months after $oreta was hired, they recei%ed %arious complaints

aainst her from the employees so that on Auust 12, #22*, they ad%ised her to

tae a lea%e of a!sence for one month while they conducted an in%estiation on the

matter. +ased on the results of the in%estiation, they terminated $oretas

employment on Auust &1, #22* for loss of trust and confidence.;/<











6he $a!or Ar!iter <=- Brancisco Ro!les dismissed $oretas complaint for

lac of merit. He found it more pro!a!le that $oreta was dismissed from her

employment due to 3enshas loss of trust and confidence in her. 6he $As

decision

;8<

partly readsE However, this office has found it dubious and hard to

believe the contentions made by the complainant that she wasdismissed by the respondents on the sole ground that she is amismatch in respondents' business as advised by an alleged FengShui Master. The complainant herself alleged in her positionpaper that she has done several improvements in respondents

business such as uplifting the morale and efficiency of itsemployees and increasing respondents clientele, and that

respondent Co was very much pleased with the improvementsmade by the complainant that she was offered twice a promotion but she nevertheless declined. t would be against humane!perience and contrary to business acumen to let go of someone,

who was an asset and has done so much for the company merely on the ground that she is a mismatch to the business. "bsent any proof submitted by the complainant, this office finds it moreprobable that the complainant was dismissed due to loss of trustand confidence.;D<

6his rulin was affirmed !y the $R- in its 4ecem!er #0, #22/ Resolution,;0< citin its o!ser%ation that 3ensha was still considerin the proper action to tae

on the day $oreta left 3ensha and filed her complaint.6he $R- added that this

findin was !olstered !y 3enshas 'eptem!er 12, #22* letter to $oreta asin her

to come !ac to personally clarify some matters, !ut she declined !ecause she had

already filed a case.

$oreta mo%ed for a reconsideration of the $R-s rulin !ut her motion was

denied. $oreta then went to the -A on a petition for certiorari. 6he

-A re!er"ed the rulin of the $R- on the round that it ra%ely a!used its

discretion in appreciatin the factual !ases that led to $oretas dismissal. 6he -A

noted that there were irreularities and inconsistencies in 3enshas position. 6he

-A stated the followinE

#e, thus, peruse the affidavits and documentary evidence of the $rivate %espondents and find the following& First, on theaffidavits of their witnesses, it must be noted that the same were









mere photocopies. t was held that T]he purpose of the rule inrequiring the production of the best evidence is the prevention of

fraud, because if a party is in possession of such evidence and withholds it, and seeks to substitute inferior evidence in its place,the presumption naturally arise[s] that the better evidence is

withheld for fraudulent purposes which its production would expose and defeat. Moreover, the affidavits were not e!ecutedunder oath. The rule is that an affiant must sign the document inthe presence of and ta(e his oath before a notary public asevidence that the affidavit was properly made. )uided by theseprinciples, the affidavits cannot be assigned any weighty probative

value and are mere scraps of paper the contents of which arehearsay. econd , on the sales report and order slips, whichallegedly prove that *ung had been charging her food and drin(sto #ensha, the said pieces of evidence do not, however, bear

*ungs name thereon or even her signature. n fact, it does notstate anyones name, e!cept that of #ensha. Hence, it wouldsimply be capricious to pinpoint, or impute, on *ung as the authorin charging such e!penses to #ensha on the basis of hearsay evidence. Third , while the affidavit of #enshas +perationsManager, $rincess delos %eyes delos %eyes-, may have been duly e!ecuted under oath, she did not, however, specify the allegedinfractions that *ung committed. f at all, delos %eyes only madegeneral statements on the alleged complaints against *ung that

were not even substantiated by any other piece of evidence. Finally, the daily time records T%s- of *ung, whichsupposedly prove her habitual tardiness, were mere photocopiesthat are not even signed by #enshas authori/ed representative,thus suspect, if not violative of the best evidence rule and,therefore, incompetent evidence. ! ! ! 0mphases appear in theoriginal1

! ! ! !. Finally, after the $rivate %espondents filed their position

paper, they alleged mista(e on the part of their former counsel instating that *ung was dismissed on "ugust 23, 4556. Thus, they subse7uently moved for the admission of their re8oinder. 9otably,however, the said re8oinder was dated +ctober 6, 4556, earlierthan the date when their position paper was filed, which wason 9ovember 2, 4556. t is also pu//ling that their position paper

was dated 9ovember 4:, 4556, much later than its date of



filing. The irregularities are simply too glaring to beignored. 9evertheless, the $rivate %espondents admission of

*ungs termination on "ugust 23, 4556 cannot be retracted.They anno/ +*( /( 72*/a( o4 /(2) o+n*( a* an (=+*(

on*2d()2n> /a/ /( 3o*2/2on 3a3() a* '()242(d 8@ /(2) O3()a/2on*

Mana>(), d(o* R(@(*, who attested to the truth of the contentstherein.;12< 0mphasis supplied1

Hence, the fallo of the -A decision readsE

#H0%0F+%0, the instant petition is )%"9T0. #ensha

Spa Center, nc. and ;u <hi =ie are +%0%0 to, 8ointly andseverally, pay >oreta T. *ung her full bac(wages, other privileges,and benefits, or their monetary e7uivalent, corresponding to theperiod of her dismissal from September 3, 4556 up to the finality of this decision, and damages in the amounts of fifty thousandpesos $hp:5,555.55- as moral damages, twenty five thousandpesos $hp4:,555.55- as e!emplary damages, and twenty thousand pesos $hp45,555.55- as attorneys fees. 9o costs.

S+ +%0%0.331

3ensha and u now assail this rulin of the -A in this petition presentin

the followinE

V. GROUNDS FOR THE ALLOWANCE OF

THE PETITION

:.3 The following are the reasons and arguments, which are

purely 7uestions of law and some 7uestions of facts, which 8ustify the appeal by certiorari under %ule 6: of the 3??@ %evised %ulesof Civil $rocedure, as amended, to this Honorable SA$%0M0C+A%T of the assailed ecision and %esolution, to wit&

:.3.3 The Honorable C+A%T +F "$$0">S gravely erred in reversing that factual findings of theHonorable >abor "rbiter and the Honorable9>%C Third ivision- notwithstandingrecogni/ed and established rule in our

8urisdiction that findings of facts of 7uasiB 8udicial agencies who have gained e!pertise on







their respective sub8ect matters are givenrespect and finality

:.3.4 The Honorable C+A%T +F "$$0">S committed

grave abuse of discretion and serious errors

when it ruled that findings of facts of theHonorable >abor "rbiter and the Honorable9>%C are not supported by substantial evidencedespite the fact that the records clearly show that petitioner therein was not dismissed but isunder investigation, and that she is guilty of serious infractions that warranted hertermination

:.3.2 The Honorable C+A%T +F "$$0">S gravely1erred when it ordered herein petitioner to pay herein respondent her separation pay, in lieu of reinstatement, and full bac(wages, as well asdamages and attorneys fees

:.3.6 The Honorable C+A%T +F "$$0">S committed

grave abuse of discretion and serious errors when it held that petitioner ;A <H =0 to besolidarily liable with #09SH", assuming thatrespondent was illegally dismissed

:.4 The same need to be corrected as they would wor(

in8ustice to the herein petitioner, grave and irreparable damage will be done to him, and would pose dangerous precedent.341

THE COURTS RULING&

$oretas security of tenure is uaranteed !y the -onstitution and the $a!or

-ode. 6he 10D8 Philippine -onstitution pro%ides in 'ection 1D, Article II that the'tate shall protect the rihts of worers and promote their welfare. 'ection &,

Article III also pro%ides that all worers shall !e entitled to security of

tenure. Alon that line, Article & of the $a!or -ode mandates that the 'tate shall

assure the rihts of worers to security of tenure.

nder the security of tenure uarantee, a worer can only !e terminated

from his employment for cause and after due process. Bor a %alid termination !y





the employerE (1 the dismissal must !e for a %alid cause as pro%ided in Article

#D#, or for any of the authorized causes under Articles #D& and #D* of the $a!or

-ode" and (# the employee must !e afforded an opportunity to !e heard and to

defend himself. A =ust and %alid cause for an employees dismissal must !e

supported !y su!stantial e%idence, and !efore the employee can !e dismissed, hemust !e i%en notice and an adeCuate opportunity to !e heard.;1&< In the process, the

employer !ears the !urden of pro%in that the dismissal of an employee was for a

%alid cause. Its failure to dischare this !urden renders the dismissal un=ustified

and, therefore, illeal.;1*<

As a rule, the factual findins of the court !elow are conclusi%e on s in a

petition for re%iew on certiorari where 3e re%iew only errors of law. 6his case,

howe%er, is an e?ception !ecause the -As factual findins are not conruent with

those of the $R- and the $A.

Accordin to 3ensha in its position paper,;1< it dismissed $oreta on Auust

&1, #22* after in%estiatin the complaints aainst her. 3ensha asserted that her

dismissal was a %alid e?ercise of an employers riht to terminate a manaerial

employee for loss of trust and confidence. It claimed that she caused the

resination of an employee !ecause of ossips initiated !y her. It was the reason

she was ased to tae a lea%e of a!sence with pay for one month startin Auust

12, #22*.;1/<

3ensha also alleed that $oreta was sowin intriues in the company whichwas inimical to 3ensha. 'he was also accused of dishonesty, serious !reach of

trust reposed in her, tardiness, and a!use of authority.;18<

In its Re=oinder, 3ensha &-anged it" #o"ition claimin that it did not

terminate $oretas employment on Auust &1, #22*. It e%en sent her a notice

reCuestin her to report !ac to wor. 'he, howe%er, declined !ecause she had

already filed her complaint.;1D<

As correctly found !y the -A, the cause of $oretas dismissal is

Cuestiona!le. $oss of trust and confidence to !e a %alid round for dismissal must

ha%e !asis and must !e founded on clearly esta!lished facts.;10<

6he -ourt finds the $A rulin that states, ;a<!sent any proof su!mitted !y

the complainant, this office finds it more pro!a!le that the complainant was


















dismissed due to loss of trust and confidence, ;#2< to !e utterly erroneous as it is

contrary to the applica!le rules and pertinent =urisprudence. 6he onus of pro%in a

%alid dismissal rests on the employer, not on the employee. ;#1< It is the employer

who !ears the !urden of pro%in that its dismissal of the employee is for a %alid or

authorized cause supported !y su!stantial e%idence.

;##<

Accordin to the $R-, ;p<erusal of the entire records show that

complainant left the respondents premises when she was confronted with the

infractions imputed aainst her .;#&< 6his information was taen from the

affida%it;#*< of Princess 4elos Reyes 9elos 1eyes- which was dated March #1,

#22, not in 3enshas earlier position paper or pleadins su!mitted to the $A. 6he

affida%its;#< of employees attached to 4elos Reyes affida%it were all

dated o%em!er 10, #22* indicatin that they were not yet e?ecuted when the

complaints aainst $oreta were supposedly !ein in%estiated in Auust #22*.

It is also noteworthy that 3enshas position paper related that !ecause of the

ossips perpetrated !y $oreta, a certain 7li%a :onzalo Conzalo- resined from

3ensha. +ecause of the incident, :onzalo, whose father was a policeman,

reportedly ot anry with complainant and of the manaement tellin her friends at

respondent company that she would retaliate thus creatin fear amon those

concerned.;#/< As a result, $oreta was ad%ised to tae a paid lea%e of a!sence for

one month while 3ensha conducted an in%estiation.

Accordin to $oreta, howe%er, the reason for her termination was her aura did not

match that of u and the wor en%ironment at 3ensha. $oreta narratedE+n "ugust 35, 4556 however, complainant was called by

respondent ;u and told her to wait at the lounge area while thelatter and a Feng Shui Master were doing some analysis of theoffice. "fter several hours of waiting, respondent ;u then toldcomplainant that according to the Feng Shui master her Chinese<odiac sign is a mismatch with that of the respondents thatcomplainant should not enter the administrative office for amonth while an altar was to be placed on the left side wherecomplainant has her table to allegedly correct the mismatch and

that it is necessary that offerings and prayers have to be made andsaid for about a month to correct the alleged 8in!. %espondent ;uinstructed complainant not to report to the office for a month withassurance of continued and regular salary. She was ordered not tosee( employment elsewhere and was told to come bac( on the35th of September 4556.;#8<




















Althouh she was a little confused, $oreta did as she was instructed and did

not report for wor for a month. 'he returned to wor on 'eptem!er 12, #22*. 6his

is how $oreta recounted the e%ents of that dayE +n September 35, 4556, in the morning, complainant

reported to the office of respondents. "s usual, she punchedBinher time card and signed in the logboo( of the security guard. #hen she entered the administrative office, some of itsemployees immediately contacted respondent ;u. %espondent ;uthen contacted complainant thru her mobile phone and told her toleave the administrative office immediately and instead to wait forhim in the dining area.

!!! Complainant waited for respondent ;u in the dining

area. "fter waiting for about two 4- hours, respondent ;u wasnowhere. nstead, it was =iang ;ue Din a.(.a "nnie Co, theChinese wife of respondent ;u, who arrived and after a shortconversation between them, the former fran(ly told complainantthat she has to resign allegedly she is a mismatch to respondent;u according to the Feng Shui master and therefore she does notfit to wor( sic- with the respondents. Surprised and shoc(ed,complainant demanded of =iang ;ue Din to issue a letter of

termination if it were the reason therefor. nstead of a termination letter issued, =iang ;ue Din

insisted for the complainant's resignation. Eut when complainantstood her ground, =ian ;ue Din shouted invectives at her and toldto leave the office immediately.

%espondent ;u did not show up but tal(ed to the

complainant over the mobile phone and convinced her li(ewise toresign from the company since there is no way to retain her

because her aura unbalanced the area of employment according tothe Feng Shui, the Chinese spiritual art of placement. Hearing thisfrom no lees than respondent ;u, complainant left the office and

went straight to this +ffice and filed the present caseonSeptember 35, 4556. !!!41





$oreta also alleed that in the afternoon of that day, 'eptem!er 12, #22*, a

notice was posted on the 3ensha !ulletin !oard that readsE

T+ ">> 0M$>+*00S +F #09SH" S$" C09T0%

#0 #+A> >G0 T+ 9F+%M *+A TH"T !. "#$%& T& '()* , F+%M0% "M9ST%"T0 +FFC0% +F #09SH" S$" C09T0% % )# "#)*&$ C+990CT0 T+THS C+M$"9* ST"%T9) T+"* &+T&!&$ -, /0.

"9* T%"9S"CT+9 M"0 E* H0% S 9+ >+9)0% " >"E>T* +F TH0 C+M$"9*.

S).- TH0 M"9")0M09T talics were in red letters.14?1

6he -ourt finds $oretas complaint credi!le. 6here is consistency in her

pleadins and e%idence. In contrast, 3enshas pleadins and e%idence, taen as a

whole, suffer from inconsistency. Moreo%er, the affida%its of the employees only

pertain to petty matters that, to the -ourts mind, are not sufficient to support

3enshas alleed loss of trust and confidence. 6o !e a %alid cause for termination of

employment, the act or acts constitutin !reach of trust must ha%e !een done

intentionally, nowinly, and purposely" and they must !e founded on clearly

esta!lished facts.

6he -A decision is supported !y e%idence and loically flows from a re%iew

of the records. $oretas narration of the e%ents surroundin her termination from

employment was simple and straihtforward. Her claims are more credi!le than the

affida%its which were clearly prepared as an afterthouht.

More importantly, the records are !ereft of e%idence that $oreta was duly

informed of the chares aainst her and that she was i%en the opportunity to

respond to those chares prior to her dismissal. If there were indeed charesaainst $oreta that 3ensha had to in%estiate, then it should ha%e informed her of

those chares and reCuired her to e?plain her side. 3ensha should also ha%e ept

records of the in%estiation conducted while $oreta was on lea%e. 6he law reCuires

that two notices !e i%en to an employee prior to a %alid terminationE the first

notice is to inform the employee of the chares aainst her with a warnin that she

may !e terminated from her employment and i%in her reasona!le opportunity





within which to e?plain her side, and the second notice is the notice to the

employee that upon due consideration of all the circumstances, she is !ein

terminated from her employment.;&2< 6his is a reCuirement of due process and

clearly, $oreta did not recei%e any of those reCuired notices.

3e are in accord with the pronouncement of the -A that the reinstatement of

$oreta to her former position is no loner feasi!le in the liht of the strained

relations !etween the parties. Reinstatement, under the circumstances, would no

loner !e practical as it would not !e in the interest of !oth parties. nder the law

and =urisprudence, an illeally dismissed employee is entitled to two reliefs )

!acwaes and reinstatement, which are separate and distinct. If reinstatement

would only e?acer!ate the tension and further ruin the relations of the employer

and the employee, or if their relationship has !een unduly strained due to

irreconcila!le differences, particularly where the illeally dismissed employee held

a manaerial or ey position in the company, it would !e prudent to order paymentof separation pay instead of reinstatement.;&1< In the case of Colden =ce (uilders v.

Talde,;&#< 3e wroteE

Ander the doctrine of strained relations, the payment of separation pay has been considered an acceptable alternative toreinstatement when the latter option is no longer desirable or

viable. +n the one hand, such payment liberates the employeefrom what could be a highly oppressive wor( environment. +nthe other, the payment releases the employer from the grossly

unpalatable obligation of maintaining in its employ a wor(er itcould no longer trust.

In the case at !ench, the -A, upon its own assessment, pronounced that the

relations !etween petitioners and the respondent ha%e !ecome strained !ecause of

her dismissal anchored on du!ious chares. 6he respondent has not contested the

findin. As she is not insistin on !ein reinstated, she should !e paid separation

pay eCui%alent to one (1 month salary for e%ery year of ser%ice.;&&< 6he -A,

howe%er, failed to decree such award in the dispositi%e portion. 6his should !e

rectified.

e%ertheless, the -ourt finds merit in the arument of petitioner u that the

-A erred in rulin that he is solidarily lia!le with 3ensha.

5lementary is the rule that a corporation is in%ested !y law with a

personality separate and distinct from those of the persons composin it and from

that of any other leal entity to which it may !e related. Mere ownership !y a











sinle stocholder or !y another corporation of all or nearly all of the capital stoc

of a corporation is not of itself sufficient round for disreardin the separate

corporate personality.;&*<

In la!or cases, corporate directors and officers may !e held solidarily lia!lewith the corporation for the termination of employment only if done with malice or

in !ad faith.;&< +ad faith does not connote !ad =udment or nelience" it imports a

dishonest purpose or some moral o!liCuity and conscious doin of wron" it means

!reach of a nown duty throuh some moti%e or interest or ill will" it partaes of

the nature of fraud.;&/<

In the su!=ect decision, the -A concluded that petitioner u and 3ensha are

=ointly and se%erally lia!le to $oreta.;&8< 3e ha%e read the decision in its entirety

!ut simply failed to come across any findin of !ad faith or malice on the part of u. 6here is, therefore, no =ustification for such a rulin. 6o sustain such a findin,

there should !e an e%idence on record that an officer or director acted maliciously

or in !ad faith in terminatin the ser%ices of an employee.;&D< Moreo%er, the findin

or indication that the dismissal was effected with malice or !ad faith should !e

stated in the decision itself.;&0<

WHEREFORE, the petition is PARTIALL# GRANTE". 6he decretal portion of

the May #D, #22D 4ecision of the -ourt of Appeals, in -A):.R. 'P o. 0DD, is

here!y MO"IFIE" to read as followsE3H5R5B7R5, the petition is :RA654. 3ensha 'pa -enter,

Inc. is here!y ordered to pay $oreta 6. 9un her full !acwaes, other

pri%ilees, and !enefits, or their monetary eCui%alent, and*(3a)a/2on

3a@ reconed from the date of her dismissal, 'eptem!er 1, #22*, up to

the finality of this decision, plus damaes in the amounts of Bifty

6housand (P2,222.22 Pesos, as moral damaes" 6wenty Bi%e

6housand (P#,222.22 Pesos as e?emplary damaes" and 6wenty

6housand (P#2,222.22 Pesos, as attorneys fees. o costs.

SO OR"ERE".

)I-CE#EN( CORPORA(ION, ;.R. No. #8%/&8

Pe!i!ioner,















- e r -

IN'LAR <ANK OF A'IA AN*

A#ERICA @la!er P)ILIPPINE

CO##ERCIAL IN(ERNA(IONAL

<ANK and no:, EBI(A<LE-PCI

<ANK

Re&onden!.

> - - - - - - - - - - - - - - - - - - - - - - >

E.(. )ENRD CO. and ;.R. No. #8%/#$'PO'E' ENRIBE (AN

and LILIA (AN,

Pe!i!ioner, Present:

PUNO, C.J., C-air#er"on,

SAN)O5A>-;UTIERREZ,

- e r - CORONA,

AZCUNA and

;ARCIA, JJ.



IN'LAR <ANK OF A'IA AN*

A#ERICA @la!er P)ILIPPINE

CO##ERCIAL IN(ERNA(IONAL

<ANK and no:, EBI(A<LE-PCI

<ANK,Re&onden!.

Promulated:

Se3tem"er %9, %&&'

>- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - >

D E C I S I O N

CORONA , J.

At "ar are !onsol+dated 3et+t+ons assa+l+n t*e de!+s+on o t*eCourt o A33eals ?CA@ dated =anuar %#, #$$9 +n CA-;.R. C5 No.

8#<&& ent+tled In"uar an7 o% A"ia and Ameri&a 1no' P-ii##ine

Commer&ia Internationa an74>PCI@2 !. *.:. Henry B Co.( et a.1#2

http://sc.judiciary.gov.ph/jurisprudence/2007/september2007/132403.htm#_ftn1




T*e ante!edent a!ts ollo.

Pet+t+oners Enr+ue Tan and >+l+a Tan ?s3ouses Tan@ ere t*e!ontroll+n sto!7*olders o E.T. Henr Co., In!. ?E.T. Henr@, a

!om3an enaed +n t*e "us+ness o 3ro!ess+n and d+str+"ut+n

"un7er uel.1%2Amon E.T. HenrQs !ustomers ere 3et+t+oner H+-

Cement Cor3orat+on ?H+-Cement@,182 R+ers+de M+lls Cor3orat+on

?R+ers+de@ and ane"o Cosmet+!s P*+l+33+nes, In!. ?ane"o@. Gor

t*e+r 3ur!*ases, t*ese !or3orat+ons +ssued 3ostdated !*e!7s to

E.T. Henr.

Somet+me +n #$'$, res3ondent Insular an7 o As+a and

Amer+!a ?later PCI and no Eu+ta"le PCI-an7@ ranted E.T.

Henr a !red+t a!+l+t 7non as Pur!*ase o S*ort Term

Re!e+a"les. T*rou* t*+s arranement, E.T. Henr as a"le to

en!as*, +t* 3re-dedu!ted +nterest, t*e 3ostdated !*e!7s o +ts

!l+ents. In ot*er ords, E.T. Henr and res3ondent ere +nto re-

d+s!ount+n o !*e!7s.

Gor eer transa!t+on, res3ondent reu+red E.T. Henr to

e(e!ute a 3rom+ssor note and a deed o ass+nment "ear+n t*e

!onorm+t o t*e !l+ent to t*e re-d+s!ount+n. 1/2

Grom #$'$ to #$9#, E.T. Henr as a"le to re-d+s!ount +ts

!l+entsQ !*e!7s ?+t* deeds o ass+nment@ +t* res3ondent.

Hoeer, +n Ge"ruar #$9#, %& !*e!7s102 o H+-Cement ?*+!* ere

!rossed and *+!* "ore t*e restr+!t+on de3os+t to 3aees a!!ount











onl@ ere d+s*onored. So ere t*e !*e!7s o R+ers+de and

ane"o.1<2

Res3ondent 4led a !om3la+nt or sum o mone1'2 +n t*e t*en

Court o G+rst Instan!e o R+al 192 aa+nst E.T. Henr, t*e s3ouses

Tan, H+-Cement ?+n!lud+n +ts eneral manaer1$2 and +ts

treasurer 1#&2 as s+nator+es o t*e 3ostdated !rossed !*e!7s@,

R+ers+de and ane"o.1##2

In +ts !om3la+nt, res3ondent !la+med t*at, due to t*e d+s*onor o

t*e !*e!7s, +t suKered a!tual damaes eu+alent to t*e+r alue,

e(!lus+e o a!!rued and a!!ru+n +nterests, !*ares and

3enalt+es su!* as attornes ees and e(3enses o l+t+at+on, as

ollos:

#. R+ers+de M+lls Cor3orat+on P ##0,8#%.0&

%. ane"o Cosmet+!s P*+l+33+nes, In!. 0,9##,'0&.&&

8. H+-Cement Cor3orat+on #&,&&&,&&&.&&

Res3ondent also sou*t to !olle!t rom E.T. Henr and t*e

s3ouses Tan ot*er loan o"l+at+ons ?amount+n to P#,<<#,%<<.0#

and P/,$&&,9&0, res3e!t+el@ as de4!+en!+es result+n rom t*e

ore!losure o t*e real estate mortae on E.T. HenrQs 3ro3ert +n

Su!at, Paraaue.1#%2

















H+-Cement 4led +ts anser alle+n, amon ot*ers, t*at: ?#@ +ts

eneral manaer and treasurer ere not aut*or+ed to +ssue t*e

3ostdated !rossed !*e!7s +n E.T. HenrQs aor ?%@ t*e deed o

ass+nment 3ur3ortedl e(e!uted " H+-Cement ass+n+n t*em tores3ondent onl "ore t*e !onorm+t o +ts treasurer and ?8@

res3ondent as not a *older +n due !ourse as +t s*ould not *ae

d+s!ounted t*em or "e+n !rossed !*e!7s.1#82

In t*e+r anser ?+t* !ounter!la+m aa+nst res3ondent and !ross-

!la+ms aa+nst H+-Cement, R+ers+de and ane"o@,1#/2 E.T. Henr

and t*e s3ouses Tan !la+med t*at: ?#@ t*e draers o t*e

3ostdated !*e!7s a+led to *onor t*em due to t*e aderse

e!onom+! !ond+t+ons 3rea+l+n at t*e t+me res3ondent 3resented

t*em or 3ament ?%@ t*e e(tra-6ud+!+al sale o t*e mortaed

Su!at 3ro3ert as o+d due to ross +nadeua! o t*e "+d

3r+!e1#02and ?8@ t*e+r loans ere su"6e!ted to a usur+ous +nterest

rate o %#B 3.a.

Gor t*e+r 3art, R+ers+de and ane"o sou*t t*e d+sm+ssal o

t*e !ase aa+nst t*em, aru+n t*at t*e ere not 3r+ to t*e re-

d+s!ount+n arranement "eteen res3ondent and E.T. Henr.

On =une 8&, #$9$, t*e tr+al !ourt rendered a de!+s+on *+!*

read:

FHEREGORE, +n +e o t*e oreo+n, and as a

!onseuen!e o t*e 3re3onderan!e o e+den!e, t*+s

Court *ere" renders 6udment +n aor o 1res3ondent2









and aa+nst 1E.T. Henr, s3ouses Tan, H+-Cement,

R+ers+de and ane"o2, to +t:

#. Order+n 1E.T. Henr, s3ouses Tan, H+-Cement,R+ers+de and ane"o2, 6o+ntl and seerall, to 3a

1res3ondent2 damaes re3resented " t*e a!e alue

o t*e 3ostdated !*e!7s as ollos:

?a@ R+ers+de M+lls Cor3orat+on P ##0,8#%.0&

?"@ ane"o Cosmet+!s P*+l+33+nes, In!. 0,9##,'0&.&&

?!@ H+-Cement Cor3orat+on #&,&&&,&&&.&&

3lus +nterests, ser+!es, !*ares and 3enalt+es unt+l ull

3a+d

%.

Order+n 1E.T. Henr2 andor 1s3ouses Tan2 to 3a to1res3ondent2 t*e sum o P/,$&&,9&0.&& 3lus a!!rued

+nterests, !*ares, 3enalt+es unt+l ull 3a+d

8. Order+n 1E.T. Henr and s3ouses Tan2 to 3a

1res3ondent2 t*e sum o P#,<<#,%<<.0# 3lus +nterests,

!*ares, and 3enalt+es unt+l ull 3a+d

/. Order+n 1E.T. Henr, s3ouses Tan, H+-Cement,

R+ers+de and ane"o2 to 3a 1res3ondent2 1a2ttornes

ees and e(3enses o l+t+at+on +n t*e amount

o P%&&,&&&.&& and 3a t*e !ost o t*+s su+t.1#<2





SO OR)ERE).1#'2

Onl 3et+t+oners a33ealed t*e de!+s+on to t*e CA *+!* aDrmed

+t in toto. Hen!e, t*ese 3et+t+ons.

In ;.R. No. #8%/&8, 3et+t+oner H+-Cement d+s!la+ms l+a"+l+t or t*e

3ostdated !rossed !*e!7s "e!ause ?#@ +t d+d not aut*or+e t*e+r+ssuan!e ?%@ res3ondent as not a *older +n due !ourse and ?8@

t*ere as no "as+s or t*e loer !ourts *old+n t*at +t

as sol+dar+l l+a"le or t*e a!e alue o R+ers+des and ane"os

!*e!7s.1#92

In ;.R. No. #8%/#$, on t*e ot*er *and, E.T. Henr and t*e s3ouses

Tan essent+all !ontend t*at t*e loer !ourts erred +n: ?#@ a33l+n

t*e do!tr+ne o 3+er!+n t*e e+l o t*e !or3orate ent+t to ma7e

t*e s3ouses Tan sol+dar+l l+a"le +t* E.T. Henr ?%@ not rul+n on

t*e+r !ross-!la+ms and !ounter!la+ms, and ?8@ not de!lar+n t*e

ore!losure o E.T. HenrQs Su!at 3ro3ert as o+d.1#$2

@A ".R. 1303









As a rule, an a33eal " !ert+orar+ under Rule /0 o t*e Rules

o Court +s l+m+ted to re+e o errors o la.1%&2 T*e a!tual 4nd+ns

o t*e tr+al !ourt, s3e!+all *en aDrmed " t*e a33ellate !ourt,

are enerall "+nd+n on us unless t*ere as a m+sa33re*ens+ono a!ts or *en t*e +neren!e dran rom t*e a!ts as

man+estl m+sta7en.1%#2 T*+s !ase alls +t*+n t*e e(!e3t+on.

A()ORI(D OF )I-CE#EN('

"ENERAL

#ANA"ER AN* (REA'RER

(O I''E

()E PO'(*A(E* CRO''E* C

)ECK'

ot* t*e tr+al !ourt and t*e CA !on!luded t*at H+-Cement

aut*or+ed +ts eneral manaer and treasurer to +ssue t*e su"6e!t3ostdated !rossed !*e!7s. T*e "ot* *eld t*at H+-Cement as

alread esto33ed rom den+n su!* aut*or+t s+n!e +t neer

o"6e!ted to t*e s+nator+esQ +ssuan!e o all 3re+ous !*e!7s to E.T.

Henr *+!* t*e latter, +n turn, as a"le to re-d+s!ount +t*

res3ondent.

Fe aree +t* t*e loer !ourts t*at "ot* t*e eneral

manaer and treasurer o H+-Cement ere aut*or+ed to +ssue t*e

su"6e!ts !*e!7s. Hoeer, not+t*stand+n su!* a!t, res3ondent

!ould not "e !ons+dered a *older +n due !ourse.







RE'PON*EN( <ANK NO(

A

)OL*ER IN *E COR'E

T*e Neot+a"le Instruments >a ?NI>@, s3e!+4!all Se!t+on #$#,1%%2 3ro+des:

Holder means t*e 3aee or +ndorsee o a "+ll or a

note, or t*e 3erson *o +s +n 3ossess+on o +t, or t*e

"earer t*ereo.

On t*e ot*er *and, Se!t+on 0%1%82 states:

A *older +n due !ourse +s a *older *o *as ta7en t*e

+nstrument under t*e ollo+n !ond+t+ons: ?a@ +t +s

!om3lete and reular on +ts a!e ?"@ *e "e!ame t*e

*older o +t "eore +t as oerdue, and +t*out not+!e t*at+t *as 3re+ousl "een d+s*onored, + su!* as t*e a!t ?!@

*e too7 +t +n ood a+t* and or alue and ?d@ at t*e t+me +t

as neot+ated to *+m, *e *ad no not+!e o an +n4rm+t

+n t*e +nstrument or dee!t +n t*e t+tle o t*e 3erson

neot+at+n +t.







A"sent an o t*e elements set ort* +n Se!t+on 0%, t*e *older +s

not a *older +n due !ourse. In t*e !ase at "ar, t*e last to

reu+rements ere not met.

In ataan Cigar and Cigarette Fa&tory( In&. >CCF@ !. CA,1%/2 e *eld t*at t*e *older o !rossed !*e!7s as not a *older +n

due !ourse. T*ere, t*e draer ?CCG@ +ssued 3ostdated !rossed

!*e!7s +n aor o one o +ts su33l+ers ?;eore +n@ *o 3rom+sed

to del+er "ales o to"a!!o lea "ut a+led. ;eore +n, *oeer,

sold t*e !*e!7s on d+s!ount to State Inestment House, In!. ?SIHI@

and u3on t*e latters 3resentment to t*e draee "an7, CCG

ordered a sto3 3ament. T*ereater, SIHI 4led a !olle!t+on !ase

aa+nst +t. In rul+n t*at SIHI as not a *older +n due !ourse, e

e(3la+ned:

In order to 3resere t*e !red+t ort*+ness o !*e!7s,

6ur+s3ruden!e *as 3ronoun!ed t*at !ross+n o a !*e!7

s*ould *ae t*e ollo+n eKe!ts: ?a@ t*e !*e!7

ma not "e en!as*ed "ut onl de3os+ted +n t*e "an7 ?"@

t*e !*e!7 ma "e neot+ated onyon&e to one *o *as an

a!!ount +t* a "an7 1and2 ?!@ t*e a!t o !ross+n t*e

!*e!7s seres as 'arning to t*e *older t*at t*e !*e!7 *as

"een +ssued %or a de3nite #ur#o"e so t*at *e must +nu+re

+ *e *as re!e+ed t*e !*e!7 3ursuant to t*at 3ur3ose,

ot*er+se, *e +s not a -oder in due &our"e.





>+7e+se, +n Atrium Management Cor#oration !. CA(1%02 *ere E.T.

Henr, H+-Cement and +ts treasurer1%<2 aa+n enaed +n a leal

s!ue oer our 3ostdated !rossed !*e!7s, e *eld t*at Atr+um

?+t* *+!* t*e !*e!7s ere re-d+s!ounted@ as not a *older +ndue !ourse. In t*at !ase, E.T. Henr as t*e 3aee o our H+-

Cement 3ostdated !*e!7s

*+!* +t endorsed to Atr+um. F*en t*e latter 3resented t*e

!rossed !*e!7s to t*edraee "an7, H+-Cement sto33ed 3ament.1%'2 Fe *eld t*at Atr+um as not a *older +n due !ourse:

In t*e +nstant !ase, t*e !*e!7s ere !rossed and

s3e!+4!all +ndorsed or de3os+t to 3aees a!!ount onl.

Grom t*e "e+nn+n, Atr+um as aare o t*e a!t t*at t*e

!*e!7s ere all or de3os+t onl to 3aees a!!ount,

mean+n E.T. Henr. Clearl, t*en, Atr+um !ould not "e

!ons+dered a *older +n due !ourse.

In t*e !ase at "ar, res3ondentQs !la+m t*at +t a!ted +n ood a+t*

*en +t a!!e3ted and d+s!ounted H+-Cements 3ostdated !rossed

!*e!7s rom E.T. Henr ?as 3aee t*ere+n@ a+ls to !on+n!e us.

;ood a+t* "e!omes +n!onseuent+al am+dst 3roo o res3ondentQs

rossl nel+ent !ondu!t +n deal+n +t* t*e su"6e!t !*e!7s.

Res3ondent as all too aare t*at su"6e!t !*e!7s ere !rossed

and "ore restr+!t+ons t*at t*e ere or de3os+t to 3aeeQsa!!ount onl *en!e, t*e !ould not "e urt*er neot+ated to +t.

T*e re!ords l+7e+se reeal t*at res3ondent !om3letel

d+srearded a tell+n s+n o +rreular+t +n t*e re-d+s!ount+n o

t*e !*e!7s *en t*e eneral manaer d+d not a!u+es!e to +t as









onl t*e treasurerQs s+nature a33eared on t*e deed o

ass+nment. As a "an7+n +nst+tut+on, +t "e*ooed res3ondent to

a!t +t* e(traord+nar d+l+en!e +n e!ery transa!t+on.1%92 Its

"us+ness +s +m3ressed +t* 3u"l+! +nterest, t*us, +t as note(3e!ted to "e !areless and nel+ent, s3e!+all so *ere t*e

!*e!7s +t dealt +t* ere !rossed. In ataan Cigar and Cigarette

Fa&tory( In&.,1%$2 e ruled:

I! i !6en e!!led !6a! +roin$ o; +6e+H 6old &!!6e 6older on inMir9 and &on 6i/ deole !6e

d!9 !o a+er!ain !6e indorer !i!le !o !6e +6e+H or

!6e na!re o; 6i &oeion. Failin$ in !6i re&e+!,

!6e 6older i de+lared $il!9 o; $ro ne$li$en+e

a/on!in$ !o le$al aen+e o; $ood ;ai!6and as

su!*1,2 t*e !onsensus o aut*or+t +s to t*e eKe!t t*at t*e

*older o t*e !*e!7 +s not a *older +n due !ourse.

?em3*as+s su33l+ed@

T*e ne(t uer +s *et*er H+-Cement !an st+ll "e made l+a"le

or t*e !*e!7s. Fe anser +n t*e neat+e.

In State In!e"tment Hou"e( In&. >SIHI@ !. Intermediate

A##eate Court(18&2 SIHI re-d+s!ounted !rossed !*e!7s and as

de!lared not a *older +n due !ourse. As a result, *en +t 3resented

t*e !*e!7s or de3os+t, e deemed t*at +ts 3resentment to t*e









draee "an7 as not 3ro3er, *en!e, t*e l+a"+l+t d+d not atta!* to

t*e draer o t*e !*e!7s. Fe ruled t*at:

T*e t*ree su"6e!t !*e!7s +n t*e !ase at "ar *ad "een

!rossed*+!* !ould onl mean t*at t*e draer *ad

+ntended t*e same or de3os+t onl " t*e r+*tul 3erson,

+.e., t*e 3aee named t*ere+n. A33arentl, +t as not t*e

3aee *o 3resented t*e same or 3ament and

t*ereore, t*ere as no 3ro3er 3resentment, and t*e

l+a"+l+t d+d not atta!* to t*e draer. T*us, +n t*e a"sen!e

o due 3resentment, t*e draer d+d not "e!ome l+a"le. 18#2

Our resolut+on +n t*e oreo+n !ase as re+terated +n Atrium

Management Cor#oration !. CA(18%2 *ere e aDrmed t*e CA

rul+n t*at t*e draer o t*e 3ostdated !rossed !*e!7s as not

l+a"le to t*e *older *o as deemed not a *older +n due !ourse .

Fe note, *oeer, t*at +n t*e to aorement+oned !ases, e

made +t !lear t*at t*e NI> does not a"solutel "ar a *older *o +s

not a *older +n due !ourse rom re!oer+n on t*e !*e!7s. In "ot*,

e ruled t*at +t ma re!oer rom t*e 3art *o

+ndorseden!as*ed t*e !*e!7s + t*e latter *as no al+d e(!use or

reus+n 3ament. Here, t*ere as no dou"t t*at +t as E.T. Henr

t*at re-d+s!ounted H+-CementQs !*e!7s and re!e+ed t*e+r alue

rom res3ondent. S+n!e E.T. Henr *ad no 6ust+4!at+on to reuse

3ament, +t s*ould 3a res3ondent.








'OLI*ARD LIA<ILI(D OF )I-

CE#EN( FOR ()E FACE

VALE OF RIVER'I*E' AN*

KANE<O' C)ECK'

H+-Cement !ould not also "e made sol+dar+l l+a"le +t*

R+ers+de and ane"o or t*e a!e alue o t*e+r !*e!7s. H+-

Cement *ad not*+n to do +t* t*e !*e!7s o t*ese to

!or3orat+ons. Hoeer, alt*ou* t*e lanuae o t*e tr+al !ourt

de!+s+onQs d+s3os+t+e 3ort+on seemed !onus+n, a read+n o t*e

de!+s+on +n +ts ent+ret reeals t*at t*e %ao as or ea!*

!or3orat+on to "e l+a"le sol+dar+l +t* E.T. Henr andor t*e

s3ouses Tan or t*e res3e!t+e alues o t*e+r !*e!7s.

Gurt*ermore, sol+dar l+a"+l+t !annot "e 3resumed "ut must

"e esta"l+s*ed " la or !ontra!t. Ne+t*er +s 3resent *ere. Art+!les

#%&' and #%&9 o t*e C++l Code 3ro+de:

Art. #%&'. T*e !on!urren!e o to or more de"tors

+n one and t*e same o"l+at+on does not +m3l t*at ea!*

one o t*e ormer *as a r+*t to demand, or t*at ea!* one

o t*e latter +s "ound to render, ent+re !om3l+an!e +t*

t*e 3resentat+on. (6ere i olidar9 liaili!9 onl9 :6en

!6e oli$a!ion e>&rel9 o !a!e, or :6en !6e

oli$a!ion reMire olidari!9. ?em3*as+s su33l+ed@



Art. #%&9. I rom t*e la, or t*e nature o t*e

ord+n o t*e o"l+at+ons to *+!* t*e 3re!ed+n art+!le

reers to t*e !ontrar does not a33ear, t*e !red+t or de"t

s*all "e 3resumed to "e d++ded +nto as man eual

s*ares as t*ere are !red+tors or de"tors, t*e !red+ts orde"ts "e+n !ons+dered d+st+n!t rom one anot*er, su"6e!t

to t*e Rules oern+n t*e mult+3l+!+t o su+ts.

At an rate, t*e +ssue *as "e!ome moot +n +e o our rul+n t*at

H+-Cement +s not l+a"le or t*e !*e!7s.

@< ".R. No. 1312

*OC(RINE OF PIERCIN" ()E

VEIL OF CORPORA(E EN(I(D

In t*e+r 3et+t+on, E.T. Henr and t*e s3ouses Tan arue t*at t*e

loer !ourts erred +n a33l+n t*e 3+er!+n t*e e+l o !or3orate

ent+t do!tr+ne to t*e+r !ase. T*e !la+m t*at "ot* t*e tr+al and

a33ellate !ourts a+led to !+te t*e reasons * t*e do!tr+ne as

releant to t*em.



Fe aree +t* 3et+t+oners E.T. Henr and t*e s3ouses Tan +n t*+s

res3e!t.

I an eneral rule !an "e la+d don, +t +s t*at t*e !or3orat+on +ll

"e loo7ed u3on as a leal ent+t unt+l suD!+ent reasons to t*e

!ontrar a33ear. 1882 It +s onl *en t*e 4!t+on or not+on o leal

ent+t +s used to deeat 3u"l+! !onen+en!e, 6ust+ ron,

3er3etuate raud or deend !r+me t*at t*e la +ll s*red t*e

!or3orate leal e+l and reard +t as a mere asso!+at+on o

3ersons.

18/2

T*+s +s reerred to as t*e do!tr+ne o 3+er!+n t*e e+l o !or3orate ent+t.

Ater a !areul stud o t*e re!ords, e *old t*at E.T. HenrQs

!or3orate e+l s*ould not *ae "een 3+er!ed at all.

Fir"t , t*e tr+al !ourt a+led to 3ro+de a !lear round * t*e

do!tr+ne as used. It merel stated t*at +t areed +t*

res3ondents aruments "ut d+d not e(3la+n * t*e do!tr+ne as

releant to 3et+t+oner E.T. HenrQs and t*e s3ouses Tans !ase. On

t*e ot*er *and, t*e CA *eld:

It a33ears t*at s3ouses Tan are !ontroll+nsto!7*olders o E.T. Henr Co., In!. as ell as +ts

aut*or+ed s+nator+es. T*e "us+ness o t*e !or3orat+on

as !ondu!ted solel or t*e "ene4t o t*e s3ouses Tan

*o !olluded +t* 1H+-Cement2 +n deraud+n

1res3ondent2. As t*e loer !ourt !+ted1I2t +s a settled la








+n t*+s and ot*er 6ur+sd+!t+ons t*at *en t*e !or3orat+on +s

a mere alter eo o a 3erson, same "e+n true *en t*e

!or3orat+on +s !ontrolled, and +ts aKa+rs are so !ondu!ted

to ma7e +t merel an +nstrumental+t, aen! or !ondu+t o

anot*er.1802

S+m+larl, t*e CA let a a3+n *ole " a+l+n to 3ro+de t*e

"as+s or +ts rul+n t*at E.T. Henr and t*e s3ouses Tan derauded

res3ondent. It d+d not also state *at a!t

!onst+tuted t*e raud. Graud +s an alleat+on oKa!t t*at demands

!lear and !on+n!+n e+den!e.18<2 It +s neer 3resumed.18'2

Se&ond, t*e mere oners*+3 " a s+nle sto!7*older or "

anot*er !or3orat+on o all or nearl all o t*e !a3+tal sto!7 o a

!or3orat+on +s not o +tsel suD!+ent round or d+sreard+n t*e

se3arate !or3orate 3ersonal+t.1892

Gor t*+s round to stand +n t*+s!ase, t*ere must "e 3roo t*at t*e s3ouses Tan: ?#@ *ad !ontrol or

!om3lete dom+nat+on o E.T. Henrs 4nan!es and t*at t*e latter

*ad no se3arate e(+sten!e +t* res3e!t to t*e a!t !om3la+ned o

?%@ used su!* !ontrol to !omm+t raud or ron and ?8@ t*e !ontrol

as t*e 3ro(+mate !ause o t*e loss or +n6ur !om3la+ned o "

res3ondent.18$2 T*e re!ords o t*+s !ase do not s*o t*at t*ese

elements ere 3resent.













INA*EBACD OF ()E <I*

PRICE (O ANNL

FORECLO'RE PROCEE*IN"

F+t* res3e!t to t*e alleat+on t*at ore!losure as o+d due

to t*e +nadeua! o t*e "+d 3r+!e, e aree +t* t*e CA t*at t*e

mere +nadeua! o t*e 3r+!e o"ta+ned at t*e 1s2*er+Ks sale,

unless s*o!7+n to t*e !ons!+en!e, ?as@ not suD!+ent to set

as+de t*e sale + t*ere ?as@ no

s*o+n t*at, +n t*e eent o a reular sale, a "etter 3r+!e ?!ould@

"e

o"ta+ned.1/&2

Gurt*ermore, +n t*e a"sen!e o an +rreular+t +n t*e

ore!losure 3ro!eed+n or 3roo t*at +t as !arr+ed out +t*out

str+!t o"seran!e o t*e 3ro!edure, e +ll !ont+nue to assume +ts

reular+t and str+7e don an attem3t to +t+ate +t. In t*+s !ase,

E.T. Henr and t*e s3ouses Tan made no ment+on o an anomal

to su33ort t*e null+4!at+on o t*e ore!losure sale "ut merel

alleed a d+s3ar+t +n t*e "+d 3r+!e and t*e 3ro3erts a+r mar7et

alue.





CON(ERCLAI#' AN* CRO''-

CLAI#'

>astl, E.T. Henr and t*e s3ouses Tan !all t*+s CourtQs attent+on

to t*e alleed a+lure o t*e loer !ourt to 3ass u3on t*e+r

!ounter!la+m aa+nst res3ondent or !ross-!la+ms aa+nst H+-

Cement, R+ers+de and ane"o. T*e as7 us no to *old t*ese

3art+es l+a"le on t*e "as+s o sa+d !la+ms. Fe de!l+ne to do so.

Fir"t , E.T. Henr and t*e s3ouses Tan a+led to +m3lead H+-

Cement, R+ers+de and ane"o as 3art+es +n t*e !ase at "ar. Under

Rule 8 o t*e Rules o Court, eer a!t+on, +n!lud+n a

!ounter!la+m ?or a !ross-!la+m@, must "e 3rose!uted or deended

+n t*e name o t*e real 3art +n +nterest. 1/#2 T*e term deendant

ma reer to t*e or++nal deend+n 3art, t*e deendant +n a

!ounter!la+m, t*e !ross-deendant or t*e t*+rd ?ourt*, et!.@ 3art

deendant.1/%2 Hen!e, or t*+s te!*n+!al la3se, e are !onstra+ned

not to 3ass on E.T. HenrQs and t*e s3ouses TanQs !ross-!la+ms.

Se&ond, E.T. Henr and t*e s3ouses Tan 4led t*e !ounter!la+m

aa+nst res3ondent on t*e "as+s o an alleed o+d ore!losure

3ro!eed+n on E.T. HenrQs Su!at 3ro3ert due to an +nadeuate

"+d 3r+!e. It +s no loner ne!essar to dele +nto t*+s matter +n+e o our 4nd+n t*at t*e mere +nadeua! o t*e "+d 3r+!e on

t*e 3ro3ert d+d not automat+!all render t*e ore!losure sale

+rreular or o+d.







In!+dentall, t*e 3et+t+on +n ;.R. No. #8%/#$ 3osed no !ontest on

t*e loer !ourts rul+n on E.T. Henrs and t*e s3ouses Tans

sol+dar l+a"+l+t +t* R+ers+de and ane"o +s-a-+s t*e+r !*e!7s.1/82

To "e !ons+stent, *oeer, +t* our d+!tum on t*e se3arate3ersonal+t o E.T. Henr and t*e s3ouses Tan, t*e sol+dar+t

l+a"+l+t ar+s+n rom t*e !*e!7s o R+ers+de and ane"o s*all onl

"e enor!ed aa+nst E.T. Henr.

?)EREFORE, t*e assa+led de!+s+on o t*e Court o A33eals +n

CA-;.R. C5 No. 8#<&& +s*ere" AFFIR#E* +t* #O*IFICA(ION. A!!ord+nl, 3et+t+oner

H+-Cement Cor3orat+on +s d+s!*ared rom an l+a"+l+t.Onl

3et+t+oner E.T. Henr Co. +s OR*ERE* to 3a res3ondent Insular

an7 o As+a and Amer+!a ?later P*+l+33+ne Commer!+al

Internat+onal an7 and no Eu+ta"le PCI-an7@ t*e ollo+n:

#. P#&,&&&,&&& re3resent+n t*e alue o H+-CementQs

!*e!7s +t re!e+ed rom res3ondent 3lus a!!rued

+nterests, !*ares and 3enalt+es unt+l ull 3a+d, and

%. t*e loans or P#,<<#,%<<.0# and P/,$&&,9&0 3lus

a!!rued +nterests, !*ares and 3enalt+es unt+l ull 3a+d.

>et t*e re!ords o t*+s !ase "e remanded to t*e tr+al !ourt or t*e

3ro3er !om3utat+on o E.T. HenrQs, R+ers+deQs and ane"oQs

l+a"+l+t+es or t*e !*e!7s, attorneQs ees and !osts o l+t+at+on.





Costs aa+nst 3et+t+oners E.T. Henr and t*e s3ouses Enr+ue and

>+l+a Tan.

'O OR*ERE*.

.R. No. /42663 +&#7 5/, 5008

ENRIUE SECURIT SER@ICES, INC., petitioner,vs.@ICTOR A. CABOTA+E, respondent.

2 < # ' 9 ' +

CORONA, J .:

9ometime in =anuary -5-, respondent )ictor 1. #abotaje was employed as a security guard by <nrique*9ecurity and 'nvestigation 1gency 6<9'17. +n ovember /, -:, petitioner <nrique* 9ecurity 9ervices, 'nc.6<99'7 was incorporated. "espondent continued to work as security guard in petitionerGs agency.

+n reaching the age of 80 in =uly --5, respondent applied for retirement.

%etitioner acknowledged that respondent was entitled to retirement benefits but opposed his claim that thecomputation of such benefits must be reckoned from =anuary -5- when he started working for <9'1. 'tclaimed that the benefits must be computed only from ovember /, -: when <99' was incorporated.

"espondent consequently filed a complaint in the ational !abor "elations #ommission 6!"#7 seeking thepayment of retirement benefits under "epublic 1ct o. 6"17 583, otherwise known as the "etirement %ay

!aw.4

+n =anuary :, ---, labor arbiter <duardo #arpio decided in respondentGs favor>

#omplainant is entitled to retirement pay. This entitlement was not denied by respondents. xxx Thecomputation of this benefits shall cover the entire period of his employment from =anuary -5- up to=uly 8, --5 based on his latest monthly salary of %:,//.: per the payroll sheet submitted byrespondents. While respondents claim that respondent corporation was merely registered with the2+T# on ovember /, -:, they did not deny however that complainant was an employee of thethen <nrique* 9ecurity and 'nvestigation 1gency, and that complainantGs services with the said securityagency up to the present respondent corporation was uninterrupted. The obligation of the newcompany involves not only to absorb the workers of the dissolved company, but also to include thelength of service earned by the absorbed employee with their former employer as well. To rule

otherwise would be manifestly less than fair, certainly less than just and equitable.

xxx xxx xxx

W?<"<+"<, judgment is hereby rendered ordering respondents to pay complainant the grand totalamount of %44,:.00 representing his retirement benefits and other money claims.

9+ +"2<"<2./

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+n appeal, the !"# set aside the labor arbiterGs award of one$month salary for every year of service for beingexcessive. 't ruled that under "1 583, respondent #abotaje was entitled to retirement pay equivalent only toone$half month salary for every year of service. Thus>

W?<"<+"<, the assailed decision is hereby set aside and a new one entered ordering respondentsto pay complainant the amount of %58,50.80 representing his retirement benefits.

9+ +"2<"<2.3

+n (arch :, 4000, the !"# denied petitionerGs motion for reconsideration.:

+n (ay 4:, 4000, petitioner filed a special civil action for certiorar i8 with the #ourt of 1ppeals.

+n 9eptember 48, 4000, the appellate court affirmed the !"# decision.5 't also denied the motion forreconsideration on (ay , 400.

?ence, this petition for review on certiorar i- on the following issues>

. JwKhether or not the "etirement J%ayK !aw has retroactive effect.

4. JwKhether the whole : days service incentive leave or just a portion thereof equivalent to D4 shouldbe included in the Q month salary for purposes of computing the retirement pay.

/. JwKhether or not the length of service of a retired employee in a dissolved company 6his formeremployer7 should be included in his length of service with his last employer for purposes of computingthe retirement pay.0

We find no merit in the petition.

:irst. %etitionerGs contention that "1 583 cannot be applied retroactively has long been settled in theAuidelines for <ffective 'mplementation of "1 583 issued on +ctober 43, --8 by the 2epartment of !aborand <mployment. %aragraph & of the guidelines provides>

'n reckoning the length of service, the period of employment with the same employer before theeffectivity date of the law on =anuary 5, --/ should be included.

Thus, in Rufina ;atis :a&tor$ v. u&as, #r., we held>

"1 583 is undoubtedly a social legislation. The law has been enacted as a labor protection measureand as a curative statute that P absent a retirement plan devised by, an agreement with, or a voluntarygrant from, an employer P can respond, in part at least, to the financial well$being of workers duringtheir twilight years soon following their life of labor. There should be little doubt about the fact that t"#a< an a#7 to #a!or ontrats sti## "=istin' at t" ti*" t" stat&t" as ta>"n "$$"t, and that its!"n"$its an !" r">on" not on#7 $ro* t" at" o$ t" #a<s "nat*"nt !&t r"troativ"#7 to t"ti*" sai "*#o7*"nt ontrats av" start". (emphasis ours)

#e&ond. %etitionerGs insistence that only D4 of the service incentive leave 69'!7 should be included in thecomputation of the retirement benefit has no basis. 9ection , "1 583 provides>

x x x Inless the parties provide for broader inclusions, the term one$half 6D47 month salary shall meanfifteen 6:7 days plus one$twelfth 6D47 of the /th month pay and the cash equivalent of not morethan five 6:7 days of service incentive leave. x x x























9ection :.4, "ule '' of the 'mplementing "ules of &ook )' of the !abor #ode further clarifies what comprises theCD4 month salaryC due a retiring employee>

:.4 Components of One-half (1!) "onth #alar$. < or the purpose of determining the minimumretirement pay due an employee under this "ule, the term Cone$half month salaryC shall include all thefollowing>

6a7 ifteen 6:7 days salary of the employee based on his latest salary rate. x x x;

(!) T" as "%&iva#"nt o$ not *or" tan $iv" (?) a7s o$ s"rvi" in"ntiv" #"av";

6c7 +ne$twelfth of the /th month pay due an employee;

6d7 1ll other benefits that the employer and employee may agree upon that should be included in thecomputation of the employeeGs retirement pay.

The foregoing rules are clear that the whole : days of 9'! are included in the computation of a retiringemployeesG pay.

=hird. 't is a well$entrenched doctrine that the 9upreme #ourt does not pass upon questions of fact in anappeal by certiorari under "ule 3:.4 't is not our function to assess and evaluate the evidence all overagain/ where the findings of the quasi$judicial agency and the appellate court on the matter coincide.

The consistent rulings of the labor arbiter, the !"# and the appellate court should be respected andpetitionerGs veil of corporate fiction should likewise be pierced. These are based on the followinguncontroverted facts> 67 respondent worked with <9'1 and petitioner <99'; 647 his employment with bothsecurity agencies was continuous and uninterrupted; 6/7 both agencies were owned by the <nrique* family and637 petitioner <99' maintained its office in the same place where <9'1 previously held office.3

The attempt to make the security agencies appear as two separate entities, when in reality they were but one,was a devise to defeat the law and should not be permitted. 1lthough respect for corporate personality is thegeneral rule, there are exceptions. 'n appropriate cases, the veil of corporate fiction may be pierced as when it

is used as a means to perpetrate a social injustice or as a vehicle to evade obligations. %etitioner was thuscorrectly ordered to pay respondentGs retirement under "1 583, computed from =anuary -5- up to the timehe applied for retirement in =uly --5.

-HEREFORE, the petition is hereby DENIED. Theassailed decision and resolution of the #ourt of 1ppealsareAFFIRMED.

#osts against petitioner.

SO ORDERED.

.R. No. /14?/2 Oto!"r 1, 50/3

SME BAN INC., ABELARDO P. SAMSON, OLA SAMSON an AURELIO @ILLAFLOR, +R., %etitioners,vs.PERERIN T. DE UMAN,EDUARDO M. AUSTIN, +R., ELICERIO ASPAR, , RICARDO ASPAR +R.,EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, +R., an LIBERATO MANOBA, "espondents.

x $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ x

.R. No. /1884/










SME BAN INC., ABELARDO P. SAMSON, OLA SAMSON an AURELIO @ILLAFLOR, +R., %etitioners,vs.ELICERIO ASPAR, RICARDO ASPAR, +R., EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU,+R., an LIBERATO MANOBA, "espondents.

2 < # ' 9 ' +

SERENO, CJ.:

9ecurity of tenure is a constitutionally guaranteed right. <mployees may not be terminated from their regularemployment except for just or authori*ed causes under the !abor #ode4 and other pertinent laws. 1 merechange in the equity composition of a corporation is neither a just nor an authori*ed cause that would legallypermit the dismissal of the corporationGs employees en masse.

&efore this #ourt are consolidated "ule 3: %etitions for "eview on #ertiorar i/ assailing the 2ecision3 and"esolution: of the #ourt of 1ppeals6#17 in #1$A.". 9% o. -5:0 and its 2ecision8 and "esolution5 in #1$A.".9% o. -5-34.

The facts of the case are as follows>

"espondent employees <licerio Aaspar 6<licerio7, "icardo Aaspar, =r.6"icardo7, <ufemia "osete 6<ufemia7,idel <spiritu 6idel7, 9imeon <spiritu, =r. 69imeon, =r.7, and !iberato (angoba 6!iberato7 were employees of9mall and (edium <nterprise &ank, 'ncorporated 69(< &ank7.+riginally, the principal shareholders andcorporate directors of the bank were <duardo (. 1gustin, =r. 61gustin7 and %eregrin de Au*man, =r. 62eAu*man7.

'n =une 400, 9(< &ank experienced financial difficulties. To remedy the situation, the bank officials proposedits sale to 1belardo 9amson69amson7.

1ccordingly, negotiations ensued, and a formal offer was made to 9amson. Through his attorney$in$fact, Tomas9. Aome* '), 9amson then sent formal letters 6!etter 1greements7 to 1gustin and 2e Au*man, demanding thefollowing as preconditions for the sale of 9(< &ankGs shares of stock>

3. Nou shall guarantee the peaceful turn over of all assets as well as the peaceful transition of management ofthe bank and shall terminateDretire the employees we mutually agree upon, upon transfer of shares in favor ofour groupGs nominees;

x x x x

5. 1ll retirement benefits, if any of the above officersDstockholdersDboard of directors are hereby waived uponconsummation JsicK of the above sale. The retirement benefits of the rank and file employees including themanagers shall be honored by the new management in accordance with &.". o. 0, 9. --5.-

1gustin and 2e Au*man accepted the terms and conditions proposed by 9amson and signed the conformeportion of the !etter 1greements.0

9imeon <spiritu 6<spiritu7, then the general manager of 9(< &ank, held a meeting with all the employees ofthe head office and of the Talaveraand (uHo* branches of 9(< &ank and persuaded them to tender theirresignations, with the promise that they would be rehired upon reapplication. ?is directive was allegedly doneat the behest of petitioner +lga 9amson.4

"elying on this representation, <licerio,/ "icardo,3 idel,: 9imeon, =r.,8 and !iberato5 tendered theirresignations dated 45 1ugust 400. 1s for <ufemia, the records show that she first tendered a resignation letter dated45 1ugust 400, and then a retirement letter dated 9eptember 400.-

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<licerio,40 "icardo,4 idel,44 9imeon, =r.,4/ and !iberato43 submitted application letters on 9eptember 400.&oth the resignation letters and copies of respondent employeesG application letters were transmitted by<spiritu to 9amsonGs representative on 9eptember 400.4:

+n 9eptember 400, 1gustin and 2e Au*man signified their conformity to the !etter 1greements and sold8./8:O of the shares of stock of 9(< &ank to spouses 1belardo and +lga 9amson. 9pouses 9amson thenbecame the principal shareholders of 9(< &ank, while 1urelio )illaflor, =r. was appointed bank president. 1s itturned out, respondent employees, except for 9imeon, =r.,48 were not rehired. 1fter a month in service, 9imeon,=r. again resigned on +ctober 400.45

"espondent$employees demanded the payment of their respective separation pays, but their requests weredenied.1>/phi1

1ggrieved by the loss of their jobs, respondent employees filed a #omplaint before the ational !abor"elations #ommission 6!"#7P "egional 1rbitration &ranch o. ''' and sued 9(< &ank, spouses 1belardoand +lga 9amson and 1urelio )illaflor 6the 9amson Aroup7 for unfair labor practice; illegal dismissal; illegaldeductions; underpayment; and nonpayment of allowances, separation pay and /th monthpay.4 9ubsequently, they amended their #omplaint to include 1gustin and 2e Au*man as respondents to thecase.4-

+n 45 +ctober 4003, the labor arbiter ruled that the buyer of an enterprise is not bound to absorb itsemployees, unless there is an express stipulation to the contrary. ?owever, he also found that respondentemployees were illegally dismissed, because they had involuntarily executed their resignation letters afterrelying on representations that they would be given their separation benefits and rehired by the newmanagement. 1ccordingly, the labor arbiter decided the case against 1gustin and 2e Au*man, but dismissedthe #omplaint against the 9amson Aroup, as follows>

W?<"<+"<, premises considered, judgment is hereby rendered ordering respondents <duardo 1gustin, =r.and %eregrin 2e Au*man to pay complainantsG separation pay in the total amount of %//-,30/.00 detailed asfollows>

<licerio &. Aaspar R % :,/5.00

"icardo &. Aaspar, =r. R %,853.00

!iberato &. (angoba R %83,405.00

idel <. <spiritu R %4-,:.00

9imeon &. <spiritu, =r. R %48,000.00

<ufemia <. "osete R %404,:0.00

1ll other claims including the complaint against 1belardo 9amson, +lga 9amson and 1urelio )illaflor arehereby 2'9('99<2 for want of merit.

9+ +"2<"<2./0

2issatisfied with the 2ecision of the labor arbiter, respondent employees, 1gustin and 2e Au*man broughtseparate appeals to the !"#. "espondent employees questioned the labor arbiterGs failure to awardbackwages, while 1gustin and 2e Au*man contended that they should not be held liable for the payment of theemployeesG claims.

The !"# found that there was only a mere transfer of shares P and therefore, a mere change of management P from 1gustin and 2e Au*man to the 9amson Aroup. 1s the change of management was not a valid ground to





























terminate respondent bank employees, the !"# ruled that they had indeed been illegally dismissed. 't furtherruled that 1gustin, 2e Au*man and the 9amson Aroup should be held jointly and severally liable for theemployeesG separation pay and backwages, as follows>

W?<"<+"<, premises considered, the 2ecision appealed from is hereby (+2''<2. "espondents arehereby +rdered to jointly and severally pay the complainants backwages from 9eptember 400 until thefinality of this 2ecision, separation pay at one month pay for every year of service, %0,000.00 and %:,000.00moral and exemplary damages, and five 6:O7 percent attorneyGs fees.

+ther dispositions are 1'"(<2

9+ +"2<"<2./

+n 4 ovember 4008, the !"# denied the (otions for "econsideration filed by 1gustin, 2e Au*man and the9amson Aroup./4

1gustin and 2e Au*man filed a "ule 8: %etition for #ertiorari with the #1, docketed as #1$A.". 9% o. -5:0.The 9amson Aroup likewise filed a separate "ule 8: %etition for #ertiorari with the #1, docketed as #1$A.".9% o. -5-34. (otions to consolidate both cases were not acted upon by the appellate court.

+n / (arch 400, the #1 rendered a 2ecision in #1$A.". 9% o.-5:0 affirming that of the !"#. The falloof the #1 2ecision reads>

W?<"<+"<, in view of the foregoing, the petition is 2<'<2. 1ccordingly, the 2ecision dated (ay , 4008,and "esolution dated ovember 4, 4008 of the ational !abor "elations #ommission in !"# #" #1 o.03/4/8$0: 6!"# "1& '''$05$3:34$047 are hereby 1'"(<2.

9+ +"2<"<2.//

9ubsequently, #1$A.". 9% o. -5-34 was disposed of by the appellate court in a 2ecision dated : =anuary400, which likewise affirmed that of the !"#. The dispositive portion of the #1 2ecision states>

W?<"<+"<, premises considered, the instant %etition for #ertiorari is denied, and the herein assailed (ay, 4008 2ecision and ovember 4, 4008 "esolution of the !"# are hereby 1'"(<2.

9+ +"2<"<2./3

The appellate court denied the (otions for "econsideration filed by the parties in "esolutions dated 9eptember 400/: and - ebruary 400-./8

The 9amson Aroup then filed two separate "ule 3: %etitions questioning the #1 2ecisions and "esolutions in#1$A.". 9% o. -5:0 and #1$A.". 9% o. -5-34. +n 5 =une 400-, this #ourt resolved to consolidate both%etitions./5

T?< '99I<9

9uccinctly, the parties are asking this #ourt to determine whether respondent employees were illegallydismissed and, if so, which of the parties are liable for the claims of the employees and the extent of the reliefsthat may be awarded to these employees.

T?< #+I"TG9 "I!'A

The instant %etitions are partly meritorious.






















'

"espondent employees were illegally dismissed.

1s to <licerio Aaspar, "icardo Aaspar, =r., idel <spiritu, <ufemia "osete and !iberato (angoba

The 9amson Aroup contends that <licerio, "icardo, idel, and !iberato voluntarily resigned from their posts,while <ufemia retired from her position. 1s their resignations and retirements were voluntary, they were notdismissed from their employment./ 'n support of this argument, it presented copies of their resignation andretirement letters,/- which were couched in terms of gratitude.

We disagree. While resignation letters containing words of gratitude may indicate that the employees were notcoerced into resignation,30 this fact alone is not conclusive proof that they intelligently, freely and voluntarilyresigned. To rule that resignation letters couched in terms of gratitude are, by themselves, conclusive proof thatthe employees intended to relinquish their posts would open the floodgates to possible abuse. 'n order towithstand the test of validity, resignations must be made voluntarily and with the intention of relinquishing theoffice, coupled with an act of relinquishment.3 Therefore, in order to determine whether the employees trulyintended to resign from their respective posts, we cannot merely rely on the tenor of the resignation letters, butmust take into consideration the totality of circumstances in each particular case.

?ere, the records show that <licerio, "icardo, idel, and !iberato only tendered resignation letters becausethey were led to believe that, upon reapplication, they would be reemployed by the new management.34 1s itturned out, except for 9imeon, =r., they were not rehired by the new management. Their reliance on therepresentation that they would be reemployed gives credence to their argument that they merely submittedcourtesy resignation letters because it was demanded of them, and that they had no real intention of leavingtheir posts. We therefore conclude that <licerio, "icardo, idel, and !iberato did not voluntarily resign from their work; rather, they were terminated from their employment.

1s to <ufemia, both the #1 and the !"# discussed her case together with the cases of the rest ofrespondent$employees. ?owever, a review of the records shows that, unlike her co$employees, she did notresign; rather, she submitted a letter indicating that she was retiring from her former position.3/

The fact that <ufemia retired and did not resign, however, does not change our conclusion that illegal dismissal

took place.

"etirement, like resignation, should be an act completely voluntary on the part of the employee. 'f the intent toretire is not clearly established or if the retirement is involuntary, it is to be treated as a discharge. 33

'n this case, the facts show that <ufemiaGs retirement was not of her own volition. The circumstances could notbe more telling. The facts show that <ufemia was likewise given the option to resign or retire in order to fulfillthe precondition in the !etter 1greements that the seller should CterminateDretire the employees Jmutuallyagreed uponK upon transfer of sharesC to the buyers. 3: Thus, like her other co$employees, she first submitted aletter of resignation dated 45 1ugust 400.38 or one reason or another, instead of resigning, she chose to retireand submitted a retirement letter to that effect.35 't was this letter that was subsequently transmitted to therepresentative of the 9amson Aroup on 9eptember 400.3

'n 9an (iguel #orporation v. !"#,3- we have explained that involuntary retirement is tantamount to dismissal,as employees can only choose the means and methods of terminating their employment, but are powerless asto the status of their employment and have no choice but to leave the company. This rule squarely applies to<ufemiaGs case. 'ndeed, she could only choose between resignation and retirement, but was made tounderstand that she had no choice but to leave 9(< &ank. Thus, we conclude that, similar to her other co$employees, she was illegally dismissed from employment.

The 9amson Aroup further argues:0 that, assuming the employees were dismissed, the dismissal is legalbecause cessation of operations due to serious business losses is one of the authori*ed causes of terminationunder 1rticle 4/ of the !abor #ode.:



































1gain, we disagree.

The law permits an employer to dismiss its employees in the event of closure of the businessestablishment.:4?owever, the employer is required to serve written notices on the worker and the 2epartment of !abor at least one month before the intended date of closure.:/ (oreover, the dismissed employees are entitledto separation pay, except if the closure was due to serious business losses or financial reverses.:3 ?owever, tobe exempt from making such payment, the employer must justify the closure by presenting convincingevidence that it actually suffered serious financial reverses.::

'n this case, the records do not support the contention of 9(< &ank that it intended to close the businessestablishment. +n the contrary, the intention of the parties to keep it in operation is confirmed by the provisionsof the !etter 1greements requiring 1gustin and 2e Au*man to guarantee the Cpeaceful transition ofmanagement of the bankC and to appoint Ca manager of Jthe 9amson AroupGsK choice x x x to oversee bankoperations.C

<ven assuming that the parties intended to close the bank, the records do not show that the employees and the2epartment of !abor were given written notices at least one month before the dismissal took place. (oreover,aside from their bare assertions, the parties failed to substantiate their claim that 9(< &ank was suffering fromserious financial reverses.

'n fine, the argument that the dismissal was due to an authori*ed cause holds no water.

%etitioner bank also argues that, there being a transfer of the business establishment, the innocent transfereesno longer have any obligation to continue employing respondent employees,:8 and that the most that they cando is to give preference to the qualified separated employees; hence, the employees were validly dismissed.:5

The argument is misleading and unmeritorious. #ontrary to petitioner bankGs argument, there was no transfer of the business establishment to speak of, but merely a change in the new majority shareholders of thecorporation.

There are two types of corporate acquisitions> asset sales and stock sales.: 'n asset sales, the corporateentity:-sells all or substantially all of its assets80 to another entity. 'n stock sales, the individual or corporateshareholders8 sell a controlling block of stock84 to new or existing shareholders.

'n asset sales, the rule is that the seller in good faith is authori*ed to dismiss the affected employees, but isliable for the payment of separation pay under the law.8/ The buyer in good faith, on the other hand, is notobliged to absorb the employees affected by the sale, nor is it liable for the payment of their claims.83 The mostthat it may do, for reasons of public policy and social justice, is to give preference to the qualified separatedpersonnel of the selling firm.8:

'n contrast with asset sales, in which the assets of the selling corporation are transferred to another entity, thetransaction in stock sales takes place at the shareholder level. &ecause the corporation possesses apersonality separate and distinct from that of its shareholders, a shift in the composition of its shareholders willnot affect its existence and continuity. Thus, notwithstanding the stock sale, the corporation continues to be theemployer of its people and continues to be liable for the payment of their just claims. urthermore, thecorporation or its new majority share holders are not entitled to lawfully dismiss corporate employees absent a

just or authori*ed cause.

'n the case at bar, the !etter 1greements show that their main object is the acquisition by the 9amson Aroup of 8./8:O of the shares of stock of 9(< &ank.88 ?ence, this case involves a stock sale, whereby the transfereeacquires the controlling shares of stock of the corporation. Thus, following the rule in stock sales, respondentemployees may not be dismissed except for just or authori*ed causes under the !abor #ode.

%etitioner bank argues that, following our ruling in (anlimos v. !"#,85 even in cases of stock sales, the newowners are under no legal duty to absorb the sellerGs employees, and that the most that the new owners may







































do is to give preference to the qualified separated employees.8 Thus, petitioner bank argues that the dismissalwas lawful.

We are not persuaded.

(anlimos dealt with a stock sale in which a new owner or management group acquired complete ownership of

the corporation at the shareholder level.8-

The employees of the corporation were later Cconsidered terminated,with their conformityC50 by the new majority shareholders. The employees then re$applied for their jobs and wererehired on a probationary basis. 1fter about six months, the new management dismissed two of the employeesfor having abandoned their work, and it dismissed the rest for committing Cacts prejudicial to the interest of thenew management.C5 Thereafter, the employees sought reinstatement, arguing that their dismissal was illegal,since they Cremained regular employees of the corporation regardless of the change of management.C54

'n disposing of the merits of the case, we upheld the validity of the second termination, ruling that Cthe partiesare free to renew the contract or not Jupon the expiration of the period provided for in their probationarycontract of employmentK.C5/ #iting our pronouncements in #entral 1*ucarera del 2anao v. #ourt of 1ppeals,53 9an elipe eri 9chool of (andaluyong, 'nc. v. !"#,5: and (2'' 9upervisors L #onfidential<mployees 1ssociation v. %residential 1ssistant on !egal 1ffairs,58 we likewise upheld the validity of theemployeesG first separation from employment, pronouncing as follows>

1 change of ownership in a business concern is not proscribed bylaw. 'n #entral 1*ucarera del 2anao vs. #ourtof 1ppeals, this #ourt stated>

There can be no controversy for it is a principle well$recogni*ed, that it is within the employerGs legitimatesphere of management control of the business to adopt economic policies or make some changes oradjustments in their organi*ation or operations that would insure profit to itself or protect the investment of itsstockholders. 1s in the exercise of such management prerogative, the employer may merge or consolidate itsbusiness with another, or sellor dispose all or substantially all of its assets and properties which may bringabout the dismissal or termination of its employees in the process. 9uch dismissal or termination should nothowever be interpreted in such a manner as to permit the employer to escape payment of termination pay. orsuch a situation is not envisioned in the law. 't strikes at the very concept of social justice.

'n a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated

by good faith as an element of exemption from liability. 'ndeed, an innocent transferee of a businessestablishment has no liability to the employees of the transfer or to continue employer them. or is thetransferee liable for past unfair labor practices of the previous owner, except, when the liability therefor isassumed by the new employer under the contract of sale, or when liability arises because of the new ownerGsparticipation in thwarting or defeating the rights of the employees.

Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb thetransferorGs employees as there is no law compelling such absorption. The most that the transferee may do, forreasons of public policy and social justice, is to give preference to the qualified separated employees in thefilling of vacancies in the facilities of the purchaser.

9ince the petitioners were effectively separated from work due to a bona fide change of ownership and theywere accordingly paid their separation pay, which they freely and voluntarily accepted, the private respondentcorporation was under no obligation to employ them; it may, however, give them preference in the hiring. x x x.6#itations omitted7

We take this opportunity to revisit our ruling in (anlimos insofar as it applied a doctrine on asset sales to astock sale case. #entral 1*ucarera del 2anao, 9an elipe eri 9chool of (andaluyong and (2'' 9upervisorsL#onfidential <mployees 1ssociation all dealt with asset sales, as they involved a sale of all or substantially allof the assets of the corporation. The transactions in those cases were not made at the shareholder level, but atthe corporate level. Thus, applicable to those cases were the rules in asset sales> the employees may beseparated from their employment, but the seller is liable for the payment of separation pay; on the other hand,


























the buyer in good faith is not required to retain the affected employees in its service, nor is it liable for thepayment of their claims.

The rule should be different in (anlimos, as this case involves a stock sale. 't is error to even discuss transferof ownership of the business, as the business did not actually change hands. The transfer only involved achange in the equity composition of the corporation. To reiterate, the employees are not transferred to a newemployer, but remain with the original corporate employer, notwithstanding an equity shift in its majorityshareholders. This being so, the employment status of the employees should not have been affected by thestock sale. 1 change in the equity composition of the corporate shareholders should not result in the automatictermination of the employment of the corporationGs employees. either should it give the new majorityshareholders the right to legally dismiss the corporationGs employees, absent a just or authori*ed cause.

The right to security of tenure guarantees the right of employees to continue in their employment absent a justor authori*ed cause for termination. This guarantee proscribes a situation in which the corporation procures theseverance of the employment of its employees P who patently still desire to work for the corporation P onlybecause new majority stockholders and a new management have come into the picture. This situation is aclear circumvention of the employeesG constitutionally guaranteed right to security of tenure, an act that cannotbe countenanced by this #ourt.

't is thus erroneous on the part of the corporation to consider the employees as terminated from their

employment when the sole reason for so doing is a change of management by reason of the stock sale. Theconformity of the employees to the corporationGs act of considering them as terminated and their subsequentacceptance of separation pay does not remove the taint of illegal dismissal. 1cceptance of separation pay doesnot bar the employees from subsequently contesting the legality of their dismissal, nor does it estop them fromchallenging the legality of their separation from the service.55

We therefore see it fit to expressly reverse our ruling in (anlimos insofar as it upheld that, in a stock sale, thebuyer in good faith has no obligation to retain the employees of the selling corporation; and that the dismissal of the affected employees is lawful, even absent a just or authori*ed cause.

1s to 9imeon <spiritu, =r.

The #1 and the !"# discussed the case of 9imeon, =r. together with that of the rest of respondent$

employees. ?owever, a review of the records shows that the conditions leading to his dismissal fromemployment are different. We thus discuss his circumstance separately.

The 9amson Aroup contends that 9imeon, =r., likewise voluntarily resigned from his post.5 1ccording to them,he had resigned from 9(< &ank before the share transfer took place.5-

Ipon the change of ownership of the shares and the management of the company, 9imeon, =r. submitted aletter of application to and was rehired by the new management.0 ?owever, the 9amson Aroup alleged that forpurely personal reasons, he again resigned from his employment on : +ctober 400.

9imeon, =r., on the other hand, contends that while he was reappointed by the new management after his letter of application was transmitted, he was not given a clear position, his benefits were reduced, and he suffered ademotion in rank.4 These allegations were not refuted by the 9amson Aroup.

We hold that 9imeon, =r. was likewise illegally dismissed from his employment.

9imilar to our earlier discussion, we find that his first courtesy resignation letter was also executed involuntarily.Thus, it cannot be the basis of a valid resignation; and thus, at that point, he was illegally terminated from hisemployment. ?e was, however, rehired by 9(< &ank under new management, although based on hisallegations, he was not reinstated to his former position or to a substantially equivalent one./ "ather, he evensuffered a reduction in benefits and a demotion in rank.3 These led to his submission of another resignationletter effective : +ctober 400.:























We rule that these circumstances show that 9imeon, =r. was constructively dismissed. 'n

%eHaflor v. +utdoor #lothing (anufacturing #orporation,8 we have defined constructive dismissal as follows>

#onstructive dismissal is an involuntary resignation by the employee due to the harsh, hostile, and unfavorableconditions set by the employer and which arises when a clear discrimination, insensibility, or disdain by an

employer exists and has become unbearable to the employee.5

#onstructive dismissal exists where there is cessation of work, because Ccontinued employment is renderedimpossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in payC and otherbenefits.

These circumstances are clearly availing in 9imeon, =r.Gs case. ?e was made to resign, then rehired underconditions that were substantially less than what he was enjoying before the illegal termination occurred. Thus,for the second time, he involuntarily resigned from his employment. #learly, this case is illustrative ofconstructive dismissal, an act prohibited under our labor laws.

''

9(< &ank, <duardo (. 1gustin, =r. and %eregrin de Au*man, =r. are liable for illegal dismissal.

?aving ruled on the illegality of the dismissal, we now discuss the issue of liability and determine who amongthe parties are liable for the claims of the illegally dismissed employees.

The settled rule is that an employer who terminates the employment of its employees without lawful cause ordue process of law is liable for illegal dismissal.-

one of the parties dispute that 9(< &ank was the employer of respondent employees. The fact that there wasa change in the composition of its shareholders did not affect the employer$employee relationship between theemployees and the corporation, because an equity transfer affects neither the existence nor the liabilities of acorporation. Thus, 9(< &ank continued to be the employer of respondent employees notwithstanding theequity change in the corporation. This outcome is in line with the rule that a corporation has a personality

separate and distinct from that of its individual shareholders or members, such that a change in thecomposition of its shareholders or members would not affect its corporate liabilities.

Therefore, we conclude that, as the employer of the illegally dismissed employees before and after the equitytransfer, petitioner 9(< &ank is liable for the satisfaction of their claims.

Turning now to the liability of 1gustin, 2e Au*man and the 9amson Aroup for illegal dismissal, at the outset wepoint out that there is no privity of employment contracts between 1gustin, 2e Au*man and the 9amson Aroup,on the one hand, and respondent employees on the other. "ather, the employment contracts were between9(< &ank and the employees. ?owever, this fact does not mean that 1gustin, 2e Au*man and the 9amsonAroup may not be held liable for illegal dismissal as corporate directors or officers. 'n &ogo$(edellin 9ugarcane%lanters 1ssociation, 'nc. v. !"#,-0 we laid down the rule as regards the liability of corporate directors andofficers in illegal dismissal cases, as follows>

Inless they have exceeded their authority, corporate officers are, as a general rule, not personally liable fortheir official acts, because a corporation, by legal fiction, has a personality separate and distinct from itsofficers, stockholders and members. ?owever, this fictional veil may be pierced whenever the corporatepersonality is used as a means of perpetuating a fraud or an illegal act, evading an existing obligation, orconfusing a legitimate issue. 'n cases of illegal dismissal, corporate directors and officers are solidarily liablewith the corporation, where terminations of employment are done with malice or in bad faith.- 6#itationsomitted7


















Thus, in order to determine the respective liabilities of 1gustin, 2e Au*man and the 9amson Aroup under theafore$quoted rule, we must determine, first, whether they may be considered as corporate directors or officers;and, second, whether the terminations were done maliciously or in bad faith.

There is no question that both 1gustin and 2e Au*man were corporate directors of 9(< &ank. 1n analysis ofthe facts likewise reveals that the dismissal of the employees was done in bad faith. (otivated by their desire todispose of their shares of stock to 9amson, they agreed to and later implemented the precondition in the !etter 1greements as to the termination or retirement of 9(< &ankGs employees. ?owever, instead of going throughthe proper procedure, the bank manager induced respondent employees to resign or retire from theirrespective employments, while promising that they would be rehired by the new management. ully relying onthat promise, they tendered courtesy resignations or retirements and eventually found themselves jobless.#learly, this sequence of events constituted a gross circumvention of our labor laws and a violation of theemployeesG constitutionally guaranteed right to security of tenure. We therefore rule that, as 1gustin and 2eAu*man are corporate directors who have acted in bad faith, they may be held solidarily liable with 9(< &ankfor the satisfaction of the employeesG lawful claims.

1s to spouses 9amson, we find that nowhere in the records does it appear that they were either corporatedirectors or officers of 9(< &ank at the time the illegal termination occurred, except that the 9amson Arouphad already taken over as new management when 9imeon, =r. was constructively dismissed. ot beingcorporate directors or officers, spouses 9amson were not in legal control of the bank and consequently had no

power to dismiss its employees.

"espondent employees argue that the 9amson Aroup had already taken over and conducted an inventorybefore the execution of the share purchase agreement.-4 1gustin and 2e Au*man likewise argued that it was at+lga 9amsonGs behest that the employees were required to resign from their posts. -/ <ven if this statementwere true, it cannot amount to a finding that spouses 9amson should be treated as corporate directors orofficers of 9(< &ank. The records show that it was <spiritu who asked the employees to tender theirresignation and or retirement letters, and that these letters were actually tendered to him. -3 ?e then transmittedthese letters to the representative of the 9amson Aroup.-: That the spouses 9amson had to ask <spiritu torequire the employees to resign shows that they were not in control of the corporation, and that the formershareholders P through <spiritu P were still in charge thereof. 1s the spouses 9amson were neither corporateofficers nor directors at the time the illegal dismissal took place, we find that there is no legal basis in thepresent case to hold them in their personal capacities solidarily liable with 9(< &ank for illegally dismissingrespondent employees, without prejudice to any liabilities that may have attached under other provisions of law.

urthermore, even if spouses 9amson were already in control of the corporation at the time that 9imeon, =r.was constructively dismissed, we refuse to pierce the corporate veil and find them liable in their individualsteads. There is no showing that his constructive dismissal amounted to more than a corporate act by 9(<&ank, or that spouses 9amson acted maliciously or in bad faith in bringing about his constructive dismissal.

inally, as regards 1urelio )illaflor, while he may be considered as a corporate officer, being the president of9(< &ank, the records are bereft of any evidence that indicates his actual participation in the termination ofrespondent employees. ot having participated at all in the illegal act, he may not be held individually liable forthe satisfaction of their claims.

'''

"espondent employees are entitled to separation pay, full backwages, moral damages, exemplary damagesand attorneyGs fees.

The rule is that illegally dismissed employees are entitled to 67 either reinstatement, if viable, or separation payif reinstatement is no longer viable; and 647 backwages.-8

#ourts may grant separation pay in lieu of reinstatement when the relations between the employer and theemployee have been so severely strained; when reinstatement is not in the best interest of the parties; when itis no longer advisable or practical to order reinstatement; or when the employee decides not to be
















reinstated.-5 'n this case, respondent employees expressly pray for a grant of separation pay in lieu ofreinstatement. Thus, following a finding of illegal dismissal, we rule that they are entitled to the payment ofseparation pay equivalent to their one$month salary for every year of service as an alternative to reinstatement.

"espondent employees are likewise entitled to full backwages notwithstanding the grant of separation pay. 'n9antos v. !"#,- we explained that an award of backwages restores the income that was lost by reason of theunlawful dismissal, while separation pay Cprovides the employee with Bthe wherewithal during the period that heis looking for another employment.C-- Thus, separation pay is a proper substitute only for reinstatement; it is notan adequate substitute for both reinstatement and backwages.00 ?ence, respondent employees are entitled tothe grant of full backwages in addition to separation pay.

1s to moral damages, exemplary damages and attorneyBs fees, we uphold the appellate courtBs grant thereofbased on our finding that the forced resignations and retirement were fraudulently done and attended by badfaith.

W?<"<+"<, premises considered, the instant %etitions for "eview are %1"T'1!!N A"1T<2.

The assailed 2ecision and "esolution of the #ourt of 1ppeals in #1A.". 9% o. -5:0 dated / (arch 400and 9eptember 400,respectively, are hereby "<)<"9<2 and 9<T 19'2< insofar as it held 1belardo %.9amson, +lga 9amson and 1urelio )illaflor, =r. solidarily liable for illegal dismissal.

The assailed 2ecision and "esolution of the #ourt of 1ppeals in #1$A.". 9% o. -5-34 dated : =anuary400 and - ebruary 400-,respectively, are likewise "<)<"9<2 and 9<T19'2< insofar as it held 1belardo%. 9amson, +lga 9amson and 1urelio )illaflor, =r. solidarily liable for illegal dismissal.

We "<)<"9< our ruling in (anlimos v. !"# insofar as it upheld that, in a stock sale, the buyer in good faithhas no obligation to retain the employees of the selling corporation, and that the dismissal of the affectedemployees is lawful even absent a just or authori*ed cause.

9+ +"2<"<2.













Doctrine of Piercing Veil Cases

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