SECOND DIVISION

[G.R. No. 146572. January 14, 2005]

CIRINEO BOWLING PLAZA, INC., petitioner, vs. GERRY SENSING, BELEN

FERNANDEZ, MIRASOL DIAZ, MARGARITA ABRIL, DARIO BENITEZ,
MANUEL BENITEZ, RONILLO TANDOC, EDGAR DIZON, JOVELYN
QUINTO, KAREN REMORAN, JENIFFER RINGOR, DEPARTMENT OF
LABOR AND EMPLOYMENT and COURT of APPEALS, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a special civil action for certiorari filed by petitioner assailing the
Resolution[1] dated August 31, 2000 of the Court of Appeals (CA) which dismissed petitioners
petition for certiorari; and the Resolution[2] dated November 10, 2000 which denied petitioners
motion for reconsideration.
The antecedent facts are as follows:
On November 27, 1995, Eligio Paolo, Jr., an employee of petitioner, filed a letter complaint
with the Department of Labor and Employment (DOLE for short), Dagupan District Office,
Dagupan City, requesting for the inspection/investigation of petitioner for various labor law
violations like underpayment of wages, 13th month pay, non-payment of rest day pay, overtime
pay, holiday pay and service incentive leave pay.[3]Pursuant to the visitorial and enforcement
powers of the Secretary of Labor and Employment, his duly authorized representative under
Article 128 of the Labor Code, as amended, conducted inspections on petitioners establishment
the following day. In his inspection report,[4] Labor and Employment Officer III, Crisanto Rey
Dingle, found that petitioner has thirteen[5] employees and had committed the following violations:
underpayment of minimum wage, 13th month pay, holiday premiums, overtime premiums, and
non-payment of rest day. The findings in the inspection report were explained to petitioners
officer-in-charge, Ma. Fe Boquiren, who signed the same.
The first hearing of the case was scheduled on December 27, 1995, but petitioner failed to
appear, thus, the hearing was reset to January 10, 1996. On the date set, Boquiren, as
petitioners representative, appeared with the information that petitioners President/General
Manager Luisito Cirineo was sick and confined in a hospital.
On the January 19, 1996 hearing, Cirineo appeared and asked for more time to settle with his
employees. The case was again set on January 26, 1996 but Cirineo failed to appear.
On April 22, 1996, an Order[6] was issued by the DOLE Regional Office, the dispositive portion
of which reads:

WHEREFORE, premises considered and considering further that the amount

computed constitutes part of the lawful remunerations of thirteen affected employees,
respondent is hereby ordered to pay them the total amount of THREE HUNDRED
SEVENTY SEVEN THOUSAND FIVE HUNDRED PESOS AND 58/100. (P377,500.58),
representing their unpaid/underpaid wages, 13th month pay, holiday premiums, rest
day pay and overtime premiums distributed as follows:
NAME
1. Gerry Sensing

AMOUNT
P 9,505.68

2. Belen Fernandez
3. Mirasol Diaz
4. Margarita Abril
5. Lamberto Solano
6. Dario Benitez
7. Manuel Benitez
8. Ronillo Tandoc
9. Edgar Dizon
10. Jovelyn Quinto
11. Karen Remoran
12. Jennifer Ringor
13. Eligio Paolo, Jr.
TOTAL

14,258.52
12,458.52
31,557.12
53,151.12
53,151.12
53,151.12
36,951.12
14,637.78
22,769.88
21,387.78
37,304.82
12,810.00
373,094.58

and to submit the proof of payment to this Office within ten (10) days from receipt
hereof. Otherwise, a Writ of Execution will be issued to enforce this order.
Respondent is further ORDERED to adjust the salaries of its employees to the
applicable daily minimum wages and to submit the proof thereof within the same
period.
SO ORDERED.[7]
copy of which was received by petitioners counsel on May 17, 1996. No motion for
reconsideration or appeal memorandum was filed by petitioner.
On May 27, 1996, petitioners representative, Carmen Zapata, appeared before the DOLE
Regional Office and submitted the quitclaims, waivers and releases of employees-awardees,
Lamberto Solano, Jovelyn Quinto, Manuel Benitez, Edgar Dizon, Ronillo Tandoc, Eligio Paolo, Jr.,
and Dario Benitez. Later, however, Benitez, Tandoc, Quinto and Dizon wrote DOLE a letter
denying having received any amount from petitioner. Thus, DOLEs inspector Dingle went to
petitioners establishment to confirm the authenticity of the quitclaims and releases and talked to
the employees concerned who stated that they signed the document without knowing its contents
but they are willing to settle if they will be given the amount computed by DOLE.
On June 19, 1996, Luisito Cirineo and a certain Fe Cirineo Octaviano, owner of Esperanza
Seafoods Kitchenette stationed in petitioners establishment, wrote DOLE a letter requesting that
the case be endorsed to the National Labor Relations Commission since the resolution of the case
required evidentiary matters not disclosed or verified in the normal course of inspection. They also
submitted documents to show that petitioner and Esperanza Seafoods Kitchenette are separate
and distinct business entities and that some of the employees-awardees are actually employees
of the Esperanza Seafoods Kitchenette.
On September 12, 1996, DOLE issued its Order[8] stating among others:

Records show that respondent, Luisito Cirineo and his representative appeared before
this Office during the summary investigation of this instant case but they never once
mentioned the issue of separate juridical personalities. Respondent had always been
bent on settling the respective claims of all thirteen (13) concerned employees.
In the process, however, he acknowledged being their employer. He cannot at
this juncture therefore say, that some of the awardees in our ORDER are
employees of another business entity. This being the case, we cannot grant his
request for indorsement to the NLRC.

WHEREFORE, premises considered, the case of employees Eligio Paolo, Jr. and
Lamberto Solano whose respective claims had been settled by respondent is hereby
DISMISSED. The ORDER for the payment of the monetary claims of the eleven (11)
other cash awardees STANDS. Let execution follow immediately.[9](Emphasis supplied)
On October 21, 1996, DOLE Regional Director Maximo B. Lim issued a writ of
execution.[10] On November 13, 1996, petitioner filed a motion to quash [11] the writ of execution
alleging the following grounds:
I. The Writ of Execution seeks to satisfy the monetary awards given to employees who are not
employees of Cirineo Bowling Plaza, Inc..
II. The Writ of Execution seeks to satisfy monetary awards given to employees of Fe Esperanza
C. Octaviano who was not impleaded.
III. The Writ of Execution seeks to satisfy monetary awards wrongfully given to employees
employed by establishments employing less than ten (10) employees, who are not for this
reason entitled to holiday and holiday premium pay, nor to underpayment of wages.
IV. The Writ of Execution seeks to satisfy the award of benefits in excess of the jurisdictional
amount allowed by law.
V. The Writ of Execution seeks to enforce an Order issued beyond the quasi-judicial authority of
the Regional Director[12].

In an Order[13] dated February 7, 1997, DOLE Regional Director Lim denied petitioners motion
to quash the writ of execution.
Petitioner filed its Memorandum of Appeal to the Secretary of Labor and Employment [14] who
dismissed the appeal on the ground that same was filed out of time. [15] On motion for
reconsideration, the appeal was granted and the appeal was given due course.
However, on March 30, 1999, DOLE Undersecretary Jose Espaol dismissed the appeal and
affirmed the order dated February 7, 1997 of the DOLE Regional Director with the following
disquisitions:

In support thereof, respondent alleges that it had only eight (8) employees as the other
claimants of labor benefits . . . are employees of Fe Esperanza Octaviano doing
business under the name and style Esperanza Seafoods Kitchenette. Thus, it points
out that:
...
Hence, under the Labor Code, Article 94 thereof the employees of the appellant are not
entitled to holiday pay and holiday premium pay.
Under Republic Act 6727 and its Implementing Rules, Chapter 1, Section 1 thereof,
establishments employing less than ten (10) employees are exempted from compliance
with minimum wage rates. Hence, the wages given to respondents do not constitute
under payments. As to their claims for overtime pay and rest day pay, there is no proof
that respondents rendered overtime or restday work, hence they are not entitled to the
same. (Cagampanan vs. NLRC, 195 SCRA 533)
We do not agree.
The records show that during the summary investigation respondent never refuted the
findings of the labor inspector particularly the identity of the thirteen (13) concerned
employees nor raised the issue of separate juridical personalities of respondent Cirineo

and Esperanza Seafoods Kitchenette. Thus, in the Order dated 07 February 1997, the
Regional Director ruled:
. . . Respondents actuation during and after the summary investigation disclosed that it
was bent on settling all the claims of the claimant-awardees and never did it refute the
identity of the concerned awardees. Otherwise, respondent could have easily raised
the issue by admitting evidence such as payrolls, daily time records and any similar
document which could have pinpointed the real employer of the claimants.
...
The documents submitted to this Office by respondent could be interpreted as a
desperate attempt to mislead this Office and to evade liability.
On the issue of jurisdiction, we rule that the Regional Director has jurisdiction over the
instant case.
The old rule limiting the jurisdiction of the Secretary of Labor and Employment or his
duly authorized representatives to money claims not exceeding P5,000.00 has been
repealed by the passage of R.A. No. 7730, Section 1 of which reads:
Section 1. Paragraph (b) of Article 128 of the Labor Code. As amended, is hereby
further amended to read as follows:
Art. 128. Visitorial and Enforcement Power.
...
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representative shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code
and other labor legislation based on the finding of the labor employment and
enforcement officer or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the
employer contests the findings of the labor employment and enforcement officer and
raises issues supported by documentary proofs which were not considered in the
course of inspection.
Pursuant to R.A. 7730, the jurisdictional limitations imposed by Article 129 on the
visitorial and enforcement powers of this Office under Article 128 of the Labor Code,
have been repealed. The phrase notwithstanding the provision of Articles 129 and
217 of the Labor Code to the contrary, erases all doubts as to the amendatory nature
of R.A. No. 7730. The amendment, in effect, overturned the rulings in the Aboitiz and
Servandos cases insofar as the restrictive effect of Article 129 on the use of the power
under Article 128 is concerned.
Indeed, the Supreme Court in Nazareno Furniture vs. Hon. Secretary of Labor and
Employment and Tomas Mendoza (G.R. No. 128546, April 30, 1997), already ruled
that:

Petitioner is incorrect in stating that R.A. 7730 did not specifically amend Art. 217 of the
Labor Code. In fact, it is plainly stated that the amendment applies notwithstanding the
provisions of Articles 129 and 217 to the contrary. Even if Article 217 confers original
and exclusive jurisdiction over cases such as the one subject of this petition, this has
been modified by the later enactment of R.A. 7730. . . .[16]
Petitioners motion for reconsideration was denied in a Resolution dated April 18, 2000. [17]
Petitioner filed a petition for certiorari with prayer for the issuance of temporary restraining
order with the CA.
On August 31, 2000, the CA dismissed the petition for failure of petitioner to (1) attach a copy
of the letter complaint filed by petitioners employees and the Order dated February 7, 1997 of the
DOLE Regional Director and (2) state the material date when the assailed Orders/Resolutions
were received pursuant to Section 1 of Rule 65 and Section 3 of Rule 46 of the 1997 Rules of Civil
Procedure. Petitioner filed a motion for reconsideration which was also denied by the CA on
November 10, 2000, copy of which was received by petitioner on November 24, 2000.
Petitioner comes to us by way of a petition for certiorari under Rule 65 raising the sole issue:

PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE
INSTANT PETITION AND OUTRIGHT DISMISSAL OF PETITIONERS MOTION
FOR RECONSIDERATION DUE TO MERE TECHNICALITIES.
Respondents did not file their comment on the petition.
We dismiss the petition.
We find no grave abuse of discretion committed by the CA in issuing the assailed resolutions.
The CA dismissed the petition for certiorarifor failure of petitioner to attach certain documents and
to state the material date. While petitioner filed its motion for reconsideration, attaching the
required documents, the CA correctly found that it still did not state the material date when it
received the DOLEs Resolution dated April 18, 2000 denying its motion for reconsideration. Thus,
without the date of receipt of the denial of such motion, the CA could not determine whether the
petition was filed within the reglementary period of sixty days for filing the petition
for certiorari under Rule 65 of the Rules of Court. Under Section 3, Rule 46 of the 1997 Rules of
Civil Procedure, as amended by SC Circular No. 39-98, in original actions for certiorari filed with
the CA, the petition must include the following material dates, to wit:

Section 3. Contents and filing of petition; effect of non-compliance with requirements....

In actions filed under Rule 65, the petition shall further indicate the material dates
showing when the notice of the judgment or final order or resolution subject thereof
was received, when a motion for new trial or reconsideration, if any, was filed and when
notice of the denial thereof was received.
...
The failure of the petitioner to comply with any of the foregoing requirements shall be
sufficient ground for the dismissal of the petition.
It bears stressing that the timely perfection of an appeal is a mandatory requirement, which
cannot be trifled with as a mere technicality to suit the interest of a party. The rules on periods
for filing appeals are to be observed religiously, and parties who seek to avail themselves of the

privilege must comply with the rules.[18] The failure to perfect an appeal as required by law renders
the judgment final and executory.[19]
While there are exceptional cases where we set aside procedural defects to correct a patent
injustice, there should be an effort on the part of the party invoking liberality to at least explain its
failure to comply with the rules.[20] It appears that petitioners new counsel failed to state the
material date twice, first in its petition filed with the CA and, second, in its motion for
reconsideration. Petitioners explanation focused on the fact that its President, Luisito Cirineo, only
learned of the DOLEs denial of its motion for reconsideration on August 1, 2000 when he came
back from a trip from Europe; that efforts to communicate with its former counsel remained futile.
We find such explanation unsatisfactory since the material dates can easily be verified from the
files of the DOLE office.
Even if we disregard technicality, we find the arguments raised by petitioner without merit. As
correctly held by the DOLE Regional Director and sustained by the DOLE Undersecretary, records
show that petitioner never refuted the findings of the labor inspector as to the identity of the
thirteen employees nor raised the issue of separate juridical personalities of petitioner Cirineo and
Esperanza Seafoods Kitchenette during the investigation and on the hearings conducted.
Likewise, we sustain the jurisdiction of the DOLE Regional Director. The visitorial and
enforcement powers of the DOLE Regional Director to order and enforce compliance with labor
standard laws can be exercised even where the individual claim exceeds P5,000.00.[21] In Allied
Investigation Bureau, Inc. vs. Secretary of Labor and Employment,[22] we elucidated:

Petitioner argues that the power to adjudicate money claims belongs to the Labor
Arbiter who has exclusive jurisdiction over employees claims where the aggregate
amount of the claims of each employee exceeds P5,000.00; and, that the Labor Arbiter
has jurisdiction over all other claims arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00), whether or not accompanied with a claim
for reinstatement.
Petitioners arguments are untenable.
While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the aggregate money claims of each
employee exceeds P5,000.00, said provisions of law do not contemplate nor cover the
visitorial and enforcement powers of the Secretary of Labor or his duly authorized
representatives.
Rather, said powers are defined and set forth in Article 128 of the Labor Code (as
amended by R.A. No. 7730) thus:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives, including labor
regulation officers, shall have access to employers records and premises at any time
of the day or night whenever work is being undertaken therein, and the right to copy
therefrom, to question any employee and investigate any fact, condition or matter
which may be necessary to determine violations or which may aid in the enforcement
of this Code and of any labor law, wage order or rules and regulations issued pursuant
thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee exists, the Secretary of

Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code
and other labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The Secretary
or his duly authorized representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the employer
contests the finding of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of
inspection.
An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order
involved a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to the
monetary award in the order appealed from.
...
The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of
the Labor Code by the phrase (N)otwithstanding the provisions of Articles 129 and 217
of this Code to the contrary . . . thereby retaining and further strengthening the power
of the Secretary of Labor or his duly authorized representative to issue compliance
orders to give effect to the labor standards provisions of said Code and other labor
legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection.
In the case at bar, the Office of respondent Regional Director conducted inspection
visits at petitioners establishment on February 9 and 14, 1995 in accordance with the
above-mentioned provision of law. In the course of said inspection, several violations
of the labor standard provisions of the Labor Code were discovered and reported by
Senior Labor Enforcement Officer Eduvigis A. Acero in his Notice of Inspection
Results. It was on the bases of the aforesaid findings (which petitioner did not contest),
that respondent Regional Director issued the assailed Order for petitioner to pay
private respondents the respective wage differentials due them.
Clearly, as the duly authorized representative of respondent Secretary of Labor, and in
the lawful exercise of the Secretarys visitorial and enforcement powers under Article
128 of the Labor Code, respondent Regional Director had jurisdiction to issue his
impugned Order.
In a recent case, the Supreme Court ruled in this wise:
Assailed in this special civil action for certiorari is the Order dated August 1, 1995
issued by public respondent Regional Director Romeo A. Young of the Department of
Labor and Employment (DOLE) in Case No. NCROO-9503-IS-035, ordering petitioner
Lord and Lady Salon to pay private respondent Ateldo Barroga the sum of P14,099.05
representing his underpaid wages and premium pay for work on holidays. This suit is
an offshoot of the complaint for payment of salary differentials filed by private
respondent against petitioner on March 20, 1995. Upon investigation conducted by
public respondents office, petitioner was found to have committed the following

violations: (1) underpayment of wages, (2) non-implementation of premium pay for

worked legal holidays, and (3) non-availability of records at the time of inspection.
Consequent to the parties failure to reach an amicable settlement, public respondent
issued the assailed resolution. Petitioner asserts that public respondent exceeded his
jurisdiction in taking cognizance of the complaint and ordering the payment
of P14,099.05 to private respondent because the award of the latter amount goes over
the jurisdictional amount of P5,000.00 for cases filed before the Regional Director,
thus, is properly cognizable by the Labor Arbiter instead.
We dismiss the petition. Pursuant to Section 1 of Republic Act 7730 [Approved on
June 2, 1994] which amended Article 128 (b) of the Labor Code, the Secretary of Labor
and Employment or his duly authorized representative, in the exercise of their visitorial
and enforcement powers, are now authorized to issue compliance orders to give effect
to the labor standards provisions of this Code and other labor legislation based on the
findings of labor employment and enforcement officers or industrial safety engineers
made in the course of inspection, sans any restriction with respect to the jurisdictional
amount of P5,000.00 provided under Article 129 and Article 217 of the Code.
The instant case therefore falls squarely within the coverage of the aforecited
amendment as the assailed order was issued to enforce compliance with the provisions
of the Code with respect to the payment of proper wages. Hence, petitioners claim of
lack of jurisdiction on the part of public respondent is bereft of merit.[23]
WHEREFORE, the instant petition is DISMISSED for lack of merit.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
PEOPLES BROADCASTING
SERVICE (BOMBO RADYO
PHILS., INC.),
Petitioner,

- versus -

THE SECRETARY OF THE

DEPARTMENT OF LABOR AND
EMPLOYMENT, THE REGIONAL
DIRECTOR, DOLE REGION VII,
and JANDELEON JUEZAN,
Respondents.

G.R. No. 179652

Present:
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.
Promulgated:

March 6, 2012
x-----------------------------------------------------------------------------------------x
RESOLUTION
VELASCO, JR., J.:
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service,
Inc. (Bombo Radyo Phils., Inc.) questioned the Decision and Resolution of the Court of
Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEBSP No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner with the
Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for
illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for
holiday and rest day and illegal diminution of benefits, delayed payment of wages and
noncoverage of SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary
investigations, and after the parties submitted their position papers, the DOLE Regional

Director found that private respondent was an employee of petitioner, and was entitled to
his money claims.[2] Petitioner sought reconsideration of the Directors Order, but failed.
The Acting DOLE Secretary dismissed petitioners appeal on the ground that petitioner
submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety
bond. When the matter was brought before the CA, where petitioner claimed that it had
been denied due process, it was held that petitioner was accorded due process as it had
been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over
the matter, as the jurisdictional limitation imposed by Article 129 of the Labor Code on the
power of the DOLE Secretary under Art. 128(b) of the Code had been repealed by
Republic Act No. (RA) 7730.[3]
In the Decision of this Court, the CA Decision was reversed and set aside, and the
complaint against petitioner was dismissed. The dispositive portion of the Decision reads
as follows:
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and
the Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855
are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the
Department of Labor and Employment dated 27 January 2005 denying petitioners appeal,
and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27
February 2004, respectively, are ANNULLED. The complaint against petitioner
is DISMISSED.[4]

The Court found that there was no employer-employee relationship between

petitioner and private respondent. It was held that while the DOLE may make a
determination of the existence of an employer-employee relationship, this function could
not be co-extensive with the visitorial and enforcement power provided in Art. 128(b) of the
Labor Code, as amended by RA 7730. The National Labor Relations Commission (NLRC)
was held to be the primary agency in determining the existence of an employer-employee
relationship. This was the interpretation of the Court of the clause in cases where the
relationship of employer-employee still exists in Art. 128(b).[5]
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification
of Decision (with Leave of Court). The PAO sought to clarify as to when the visitorial and
enforcement power of the DOLE be not considered as co-extensive with the power to
determine the existence of an employer-employee relationship.[6] In its Comment,[7] the
DOLE sought clarification as well, as to the extent of its visitorial and enforcement power
under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for
reconsideration, granting said motion and reinstating the petition.[8] It is apparent that

there is a need to delineate the jurisdiction of the DOLE Secretary vis--vis that of the
NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized
hearing officers to hear and decide any matter involving the recovery of wages and other
monetary claims and benefits was qualified by the proviso that the complaint not include a
claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA
7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the
Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to
exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only
qualification to this expanded power of the DOLE was only that there still be an existing
employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has
been terminated or it has not existed from the start, the DOLE has no jurisdiction. Under
Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads,
Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in
cases where the relationship of employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other
labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. It is clear and beyond
debate that an employer-employee relationship must exist for the exercise of the visitorial
and enforcement power of the DOLE. The question now arises, may the DOLE make a
determination of whether or not an employer-employee relationship exists, and if so, to
what extent?
The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places
a limitation upon the power of the DOLE, that is, the determination of the existence of an
employer-employee relationship cannot be co-extensive with the visitorial and enforcement
power of the DOLE. But even in conceding the power of the DOLE to determine the
existence of an employer-employee relationship, the Court held that the determination of
the existence of an employer-employee relationship is still primarily within the power of the
NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.

No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where the
DOLE would only make a preliminary finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first seek the NLRCs determination of
the existence of an employer-employee relationship, or that should the existence of the
employer-employee relationship be disputed, the DOLE would refer the matter to the
NLRC. The DOLE must have the power to determine whether or not an employeremployee relationship exists, and from there to decide whether or not to issue compliance
orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has
a ready set of guidelines to follow, the same guide the courts themselves use. The
elements to determine the existence of an employment relationship are: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
(4) the employers power to control the employees conduct.[9] The use of this test is not
solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can utilize
the same test, even in the course of inspection, making use of the same evidence that
would have been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the
DOLE must be respected. The expanded visitorial and enforcement power of the DOLE
granted by RA 7730 would be rendered nugatory if the alleged employer could, by the
simple expedient of disputing the employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at least a prima facie showing
of the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does successfully refute the existence of an
employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee
relationship, it takes cognizance of the matter, to the exclusion of the NLRC. The DOLE
would have no jurisdiction only if the employer-employee relationship has already been
terminated, or it appears, upon review, that no employer-employee relationship existed in
the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation
would eliminate the prospect of competing conclusions between the DOLE and the
NLRC. The prospect of competing conclusions could just as well have been eliminated by

according respect to the DOLE findings, to the exclusion of the NLRC, and this We believe
is the more prudent course of action to take.
This is not to say that the determination by the DOLE is beyond question or
review. Suffice it to say, there are judicial remedies such as a petition for certiorari under
Rule 65 that may be availed of, should a party wish to dispute the findings of the DOLE.
It must also be remembered that the power of the DOLE to determine the existence
of an employer-employee relationship need not necessarily result in an affirmative
finding. The DOLE may well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the case. It must not be
precluded from being able to reach its own conclusions, not by the parties, and certainly
not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730,
there is still a threshold amount set by Arts. 129 and 217 of the Labor Code when money
claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the
regional director of the DOLE, under Art. 129, and if the amount involved exceeds PhP
5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that despite
the wording of Art. 128(b), this would only apply in the course of regular inspections
undertaken by the DOLE, as differentiated from cases under Arts. 129 and 217, which
originate from complaints. There are several cases, however, where the Court has ruled
that Art. 128(b) has been amended to expand the powers of the DOLE Secretary and his
duly authorized representatives by RA 7730. In these cases, the Court resolved that the
DOLE had the jurisdiction, despite the amount of the money claims involved. Furthermore,
in these cases, the inspection held by the DOLE regional director was prompted
specifically by a complaint. Therefore, the initiation of a case through a complaint does not
divest the DOLE Secretary or his duly authorized representative of jurisdiction under Art.
128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor
standards provisions of the Labor Code or other labor legislation, and there is a finding by
the DOLE that there is an existing employer-employee relationship, the DOLE exercises
jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-

employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed
with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that
the Labor Arbiter has original and exclusive jurisdiction over those cases involving wages,
rates of pay, hours of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there
is still an existing employer-employee relationship, the jurisdiction is properly with the
DOLE. The findings of the DOLE, however, may still be questioned through a petition for
certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an
employer-employee relationship has been subjected to review by this Court, with the
finding being that there was no employer-employee relationship between petitioner and
private respondent, based on the evidence presented. Private respondent presented selfserving allegations as well as self-defeating evidence.[10] The findings of the Regional
Director were not based on substantial evidence, and private respondent failed to prove
the existence of an employer-employee relationship. The DOLE had no jurisdiction over
the case, as there was no employer-employee relationship present. Thus, the dismissal of
the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED,
with the MODIFICATION that in the exercise of the DOLEs visitorial and enforcement
power, the Labor Secretary or the latters authorized representative shall have the power
to determine the existence of an employer-employee relationship, to the exclusion of the
NLRC.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 142293

February 27, 2003

VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and

SBT1 TRUCKING CORPORATION,petitioners,
vs.
HON. COURT OF APPEALS and JAIME SAHOT, respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision2 of the Court of Appeals dated
February 29, 2000, in CA-G.R. SP No. 52671, affirming with modification the decision3 of
the National Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR
CA No. 010526-96. Petitioners also pray for the reinstatement of the decision4 of the Labor
Arbiter in NLRC NCR Case No. 00-09-06717-94.
Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot5 started working as a truck helper for
petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he
became a truck driver of the same family business, renamed T. Paulino Trucking Service,
later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking
Corporation since 1994. Throughout all these changes in names and for 36 years, private
respondent continuously served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was
suffering from various ailments. Particularly causing him pain was his left thigh, which
greatly affected the performance of his task as a driver. He inquired about his medical and
retirement benefits with the Social Security System (SSS) on April 25, 1994, but
discovered that his premium payments had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically
examined and treated for EOR, presleyopia, hypertensive retinopathy G II (Annexes "G-5"
and "G-3", pp. 48, 104, respectively),6 HPM, UTI, Osteoarthritis (Annex "G-4", p.
105),7 and heart enlargement (Annex G, p. 107).8 On said grounds, Belen Paulino of the
SBT Trucking Service management told him to file a formal request for extension of his
leave. At the end of his week-long absence, Sahot applied for extension of his leave for
the whole month of June, 1994. It was at this time when petitioners allegedly threatened to
terminate his employment should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to
work, But he could not retire on pension because petitioners never paid his correct SSS
premiums. The fact remained he could no longer work as his left thigh hurt abominably.
Petitioners ended his dilemma. They carried out their threat and dismissed him from work,
effective June 30, 1994. He ended up sick, jobless and penniless.

On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint
for illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He prayed for the
recovery of separation pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy,
Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs Trucking and SBT
Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking business in the 1950s but denied
employing helpers and drivers. They contend that private respondent was not illegally
dismissed as a driver because he was in fact petitioners industrial partner. They add that it
was not until the year 1994, when SBT Trucking Corporation was established, and only
then did respondent Sahot become an employee of the company, with a monthly salary
that reached P4,160.00 at the time of his separation.
Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and
was not able to report for work for almost seven days. On June 1, 1994, Sahot asked
permission to extend his leave of absence until June 30, 1994. It appeared that from the
expiration of his leave, private respondent never reported back to work nor did he file an
extension of his leave. Instead, he filed the complaint for illegal dismissal against the
trucking company and its owners.
Petitioners add that due to Sahots refusal to work after the expiration of his authorized
leave of absence, he should be deemed to have voluntarily resigned from his work. They
contended that Sahot had all the time to extend his leave or at least inform petitioners of
his health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled "Manuelito
Jimenez et al. vs. T. Paulino Trucking Service," as a defense in view of the alleged
similarity in the factual milieu and issues of said case to that of Sahots, hence they are
in pari material and Sahots complaint ought also to be dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that
there was no illegal dismissal in Sahots case. Private respondent had failed to report to
work. Moreover, said the Labor Arbiter, petitioners and private respondent were industrial
partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay
"financial assistance" of P15,000 to Sahot for having served the company as a regular
employee since January 1994 only.
On appeal, the National Labor Relations Commission modified the judgment of the Labor
Arbiter. It declared that private respondent was an employee, not an industrial partner,
since the start. Private respondent Sahot did not abandon his job but his employment was
terminated on account of his illness, pursuant to Article 2849 of the Labor Code.
Accordingly, the NLRC ordered petitioners to pay private respondent separation pay in the
amount of P60,320.00, at the rate of P2,080.00 per year for 29 years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision
dated February 29, 2000, the appellate court affirmed with modification the judgment of the
NLRC. It held that private respondent was indeed an employee of petitioners since 1958. It
also increased the amount of separation pay awarded to private respondent to P74,880,
computed at the rate of P2,080 per year for 36 years of service from 1958 to 1994. It
decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB
Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of
SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and
for his separation pay.10

Hence, the instant petition anchored on the following contentions:

I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED]
DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR
RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT
NAUGHT ARTICLE 402 OF THE CIVIL CODE.11
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT
THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL
FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION
TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE
CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS
NATIONAL CAPITAL REGION (305 SCRA 233).12
III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING
CORPORATION.13
Three issues are to be resolved: (1) Whether or not an employer-employee relationship
existed between petitioners and respondent Sahot; (2) Whether or not there was valid
dismissal; and (3) Whether or not respondent Sahot is entitled to separation pay.
Crucial to the resolution of this case is the determination of the first issue. Before a case
for illegal dismissal can prosper, an employer-employee relationship must first be
established.14
Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that
respondent Sahot was not an employee but was in fact, petitioners industrial partner.15 It
is contended that it was the Labor Arbiter who heard the case and had the opportunity to
observe the demeanor and deportment of the parties. The same conclusion, aver
petitioners, is supported by substantial evidence.16 Moreover, it is argued that the findings
of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made the
following pronouncement:
We agree with complainant that there was error committed by the Labor Arbiter when he
concluded that complainant was an industrial partner prior to 1994. A computation of the
age of complainant shows that he was only twenty-three (23) years when he started
working with respondent as truck helper. How can we entertain in our mind that a twentythree (23) year old man, working as a truck helper, be considered an industrial partner.
Hence we rule that complainant was only an employee, not a partner of respondents from
the time complainant started working for respondent.17
Because the Court of Appeals also found that an employer-employee relationship existed,
petitioners aver that the appellate courts decision gives an "imprimatur" to the "illegal"
finding and conclusion of the NLRC.
Private respondent, for his part, denies that he was ever an industrial partner of
petitioners. There was no written agreement, no proof that he received a share in

petitioners profits, nor was there anything to show he had any participation with respect to
the running of the business.18
The elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct. The most
important element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it.19
As found by the appellate court, petitioners owned and operated a trucking business since
the 1950s and by their own allegations, they determined private respondents wages and
rest day.20 Records of the case show that private respondent actually engaged in work as
an employee. During the entire course of his employment he did not have the freedom to
determine where he would go, what he would do, and how he would do it. He merely
followed instructions of petitioners and was content to do so, as long as he was paid his
wages. Indeed, said the CA, private respondent had worked as a truck helper and driver of
petitioners not for his own pleasure but under the latters control.
Article 176721 of the Civil Code states that in a contract of partnership two or more persons
bind themselves to contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves.22 Not one of these circumstances is
present in this case. No written agreement exists to prove the partnership between the
parties. Private respondent did not contribute money, property or industry for the purpose
of engaging in the supposed business. There is no proof that he was receiving a share in
the profits as a matter of course, during the period when the trucking business was under
operation. Neither is there any proof that he had actively participated in the management,
administration and adoption of policies of the business. Thus, the NLRC and the CA did
not err in reversing the finding of the Labor Arbiter that private respondent was an
industrial partner from 1958 to 1994.
On this point, we affirm the findings of the appellate court and the NLRC. Private
respondent Jaime Sahot was not an industrial partner but an employee of petitioners from
1958 to 1994. The existence of an employer-employee relationship is ultimately a question
of fact23 and the findings thereon by the NLRC, as affirmed by the Court of Appeals,
deserve not only respect but finality when supported by substantial evidence. Substantial
evidence is such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.24
Time and again this Court has said that "if doubt exists between the evidence presented
by the employer and the employee, the scales of justice must be tilted in favor of the
latter."25 Here, we entertain no doubt. Private respondent since the beginning was an
employee of, not an industrial partner in, the trucking business.
Coming now to the second issue, was private respondent validly dismissed by petitioners?
Petitioners contend that it was private respondent who refused to go back to work. The
decision of the Labor Arbiter pointed out that during the conciliation proceedings,
petitioners requested respondent Sahot to report back for work. However, in the same
proceedings, Sahot stated that he was no longer fit to continue working, and instead he
demanded separation pay. Petitioners then retorted that if Sahot did not like to work as a
driver anymore, then he could be given a job that was less strenuous, such as working as
a checker. However, Sahot declined that suggestion. Based on the foregoing recitals,

petitioners assert that it is clear that Sahot was not dismissed but it was of his own volition
that he did not report for work anymore.
In his decision, the Labor Arbiter concluded that:
While it may be true that respondents insisted that complainant continue working with
respondents despite his alleged illness, there is no direct evidence that will prove that
complainants illness prevents or incapacitates him from performing the function of a
driver. The fact remains that complainant suddenly stopped working due to boredom or
otherwise when he refused to work as a checker which certainly is a much less strenuous
job than a driver.26
But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court
of Appeals, held that:
While it was very obvious that complainant did not have any intention to report back to
work due to his illness which incapacitated him to perform his job, such intention cannot be
construed to be an abandonment. Instead, the same should have been considered as one
of those falling under the just causes of terminating an employment. The insistence of
respondent in making complainant work did not change the scenario.
It is worthy to note that respondent is engaged in the trucking business where physical
strength is of utmost requirement (sic). Complainant started working with respondent as
truck helper at age twenty-three (23), then as truck driver since 1965. Complainant was
already fifty-nine (59) when the complaint was filed and suffering from various illness
triggered by his work and age.
x x x27
In termination cases, the burden is upon the employer to show by substantial evidence
that the termination was for lawful cause and validly made.28 Article 277(b) of the Labor
Code puts the burden of proving that the dismissal of an employee was for a valid or
authorized cause on the employer, without distinction whether the employer admits or
does not admit the dismissal.29 For an employees dismissal to be valid, (a) the dismissal
must be for a valid cause and (b) the employee must be afforded due process.30
Article 284 of the Labor Code authorizes an employer to terminate an employee on the
ground of disease, viz:
Art. 284. Disease as a ground for termination- An employer may terminate the services of
an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health as well as the health of his coemployees: xxx
However, in order to validly terminate employment on this ground, Book VI, Rule I, Section
8 of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to his health or to the
health of his co-employees, the employer shall not terminate his employment unless there
is a certification by competent public health authority that the disease is of such nature or
at such a stage that it cannot be cured within a period of six (6) months even with proper
medical treatment. If the disease or ailment can be cured within the period, the employer

shall not terminate the employee but shall ask the employee to take a leave. The employer
shall reinstate such employee to his former position immediately upon the restoration of
his normal health. (Italics supplied).
As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC,31 the requirement
for a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of
the gravity or extent of the employees illness and thus defeat the public policy in the
protection of labor.
In the case at bar, the employer clearly did not comply with the medical certificate
requirement before Sahots dismissal was effected. In the same case of Sevillana vs. I.T.
(International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the
employer, the latter should likewise bear the burden of showing that the requisites for a
valid dismissal due to a disease have been complied with. In the absence of the required
certification by a competent public health authority, this Court has ruled against the validity
of the employees dismissal. It is therefore incumbent upon the private respondents to
prove by the quantum of evidence required by law that petitioner was not dismissed, or if
dismissed, that the dismissal was not illegal; otherwise, the dismissal would be unjustified.
This Court will not sanction a dismissal premised on mere conjectures and suspicions, the
evidence must be substantial and not arbitrary and must be founded on clearly established
facts sufficient to warrant his separation from work.32
In addition, we must likewise determine if the procedural aspect of due process had been
complied with by the employer.
From the records, it clearly appears that procedural due process was not observed in the
separation of private respondent by the management of the trucking company. The
employer is required to furnish an employee with two written notices before the latter is
dismissed: (1) the notice to apprise the employee of the particular acts or omissions for
which his dismissal is sought, which is the equivalent of a charge; and (2) the notice
informing the employee of his dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his defense.33 These, the petitioners
failed to do, even only for record purposes. What management did was to threaten the
employee with dismissal, then actually implement the threat when the occasion presented
itself because of private respondents painful left thigh.
All told, both the substantive and procedural aspects of due process were violated. Clearly,
therefore, Sahots dismissal is tainted with invalidity.
On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to
separation pay. The law is clear on the matter. An employee who is terminated because of
disease is entitled to "separation pay equivalent to at least one month salary or to one-half
month salary for every year of service, whichever is greater xxx."34Following the formula
set in Art. 284 of the Labor Code, his separation pay was computed by the appellate court
at P2,080 times 36 years (1958 to 1994) or P74,880. We agree with the computation, after
noting that his last monthly salary was P4,160.00 so that one-half thereof is P2,080.00.
Finding no reversible error nor grave abuse of discretion on the part of appellate court, we
are constrained to sustain its decision. To avoid further delay in the payment due the
separated worker, whose claim was filed way back in 1994, this decision is immediately

executory. Otherwise, six percent (6%) interest per annum should be charged thereon, for
any delay, pursuant to provisions of the Civil Code.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated
February 29, 2000 is AFFIRMED. Petitioners must pay private respondent Jaime Sahot his
separation pay for 36 years of service at the rate of one-half monthly pay for every year of
service, amounting to P74,880.00, with interest of six per centum (6%) per annum from
finality of this decision until fully paid.
Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and Callejo, Sr., JJ., concur.
Austria-Martinez, J., no part.

SECOND DIVISION

[G.R. No. 146530. January 17, 2005]

PEDRO
CHAVEZ, petitioner, vs. NATIONAL
LABOR
RELATIONS
COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant
Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution[1] dated
December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated April 28,
2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated
July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the
complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC
decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming that
of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by respondents
Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of
manufacturing cartons and other packaging materials for export and distribution. It
engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25,
1984. As such, the petitioner was tasked to deliver the respondent companys products
from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila. The
respondent company furnished the petitioner with a truck. Most of the petitioners delivery
trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning
thereto in the afternoon two or three days after. The deliveries were made in accordance
with the routing slips issued by respondent company indicating the order, time and
urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This was
later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner
was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent
companys plant manager, his (the petitioners) desire to avail himself of the benefits that
the regular employees were receiving such as overtime pay, nightshift differential pay, and
13th month pay, among others. Although he promised to extend these benefits to the
petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the
case could be heard, respondent company terminated the services of the petitioner.
Consequently, on May 25, 1995, the petitioner filed an amended complaint against the
respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay,
nightshift differential pay, 13th month pay, among others. The case was docketed as
NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee
relationship between the respondent company and the petitioner. They averred that the

petitioner was an independent contractor as evidenced by the contract of service which he

and the respondent company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the
Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts
the services to be rendered to the Principal, under the following terms and covenants heretofore
mentioned:
1. That the inland transport delivery/hauling activities to be performed by the
contractor to the principal, shall only cover travel route from Mariveles to Metro
Manila. Otherwise, any change to this travel route shall be subject to further
agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery
transport services fully rendered by the Contractor shall be on a per trip basis
depending on the size or classification of the truck being used in the transport
service, to wit:
a)

If the hauling or delivery service shall require a truck of six wheeler, the payment on
a per trip basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS
(P300.00) and EFFECTIVE December 15, 1984.

b)

If the hauling or delivery service require a truck of ten wheeler, the payment on a per
trip basis, following the same route mentioned, shall be THREE HUNDRED FIFTY
(P350.00) Pesos and Effective December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at
least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the
Principal for the cost of any damage to, loss of any goods, cargoes, finished
products or the like, while the same are in transit, or due to reckless [sic] of its
men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its
men working for him subject to this agreement, and that the Contractor shall
hold the Principal free and harmless from any liability or claim that may arise by
virtue of the Contractors non-compliance to the existing provisions of the
Minimum Wage Law, the Employees Compensation Act, the Social Security
System Act, or any other such law or decree that may hereafter be enacted, it
being clearly understood that any truck drivers, helpers or men working with and
for the Contractor, are not employees who will be indemnified by the Principal for
any such claim, including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties,
subject to renewal on a year-to-year basis.[2]
This contract of service was dated December 12, 1984. It was subsequently renewed
twice, on July 10, 1989 and September 28, 1992. Except for the rates to be paid to the
petitioner, the terms of the contracts were substantially the same. The relationship of the
respondent company and the petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and
methods by which his work was accomplished. He paid the wages of his helpers and
exercised control over them. As such, the petitioner was not entitled to regularization
because he was not an employee of the respondent company. The respondents, likewise,

maintained that they did not dismiss the petitioner. Rather, the severance of his
contractual relation with the respondent company was due to his violation of the terms and
conditions of their contract. The petitioner allegedly failed to observe the minimum degree
of diligence in the proper maintenance of the truck he was using, thereby exposing
respondent company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the
Decision dated February 3, 1997, finding the respondents guilty of illegal dismissal. The
Labor Arbiter declared that the petitioner was a regular employee of the respondent
company as he was performing a service that was necessary and desirable to the latters
business. Moreover, it was noted that the petitioner had discharged his duties as truck
driver for the respondent company for a continuous and uninterrupted period of more than
ten years.
The contract of service invoked by the respondents was declared null and void as it
constituted a circumvention of the constitutional provision affording full protection to labor
and security of tenure. The Labor Arbiter found that the petitioners dismissal was
anchored on his insistent demand to be regularized. Hence, for lack of a valid and just
cause therefor and for their failure to observe the due process requirements, the
respondents were found guilty of illegal dismissal. The dispositive portion of the Labor
Arbiters decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent
SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at
BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant
his separation pay equivalent to one (1) month pay per year of service based on the average monthly
pay of P10,800.00 in lieu of reinstatement as his reinstatement back to work will not do any good
between the parties as the employment relationship has already become strained and full backwages
from the time his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off
date) until compliance, otherwise, his backwages shall continue to run. Also to pay complainant his
13th month pay, night shift differential pay and service incentive leave pay hereunder computed as
follows:
a)
b)
c)
d)

Backwages .. P248,400.00
Separation Pay .... P140,400.00
13th month pay .P 10,800.00
Service Incentive Leave Pay ..
2,040.00
TOTAL
P401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys fees.
SO ORDERED.[3]
The respondents seasonably interposed an appeal with the NLRC. However, the
appeal was dismissed by the NLRC in its Decision[4]dated January 27, 1998, as it
affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the petitioner
as a scheme that was resorted to by the respondents who, taking advantage of the
petitioners unfamiliarity with the English language and/or legal niceties, wanted to evade
the effects and implications of his becoming a regularized employee.[5]
The respondents sought reconsideration of the January 27, 1998 Decision of the
NLRC. Acting thereon, the NLRC rendered another Decision[6] dated July 10, 1998,
reversing its earlier decision and, this time, holding that no employer-employee

relationship existed between the respondent company and the petitioner. In reconsidering
its earlier decision, the NLRC stated that the respondents did not exercise control over the
means and methods by which the petitioner accomplished his delivery services. It upheld
the validity of the contract of service as it pointed out that said contract was silent as to the
time by which the petitioner was to make the deliveries and that the petitioner could hire
his own helpers whose wages would be paid from his own account. These factors
indicated that the petitioner was an independent contractor, not an employee of the
respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280
of the Labor Code on the regularization of employees. Said contract, including the fixed
period of employment contained therein, having been knowingly and voluntarily entered
into by the parties thereto was declared valid citing Brent School, Inc. v. Zamora.[7] The
NLRC, thus, dismissed the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied
by the NLRC in its Resolution dated September 7, 1998. He then filed with this Court a
petition for certiorari, which was referred to the CA following the ruling in St. Martin Funeral
Home v. NLRC.[8]
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10,
1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said
decision, the CA ruled that the petitioner was a regular employee of the respondent
company because as its truck driver, he performed a service that was indispensable to the
latters business. Further, he had been the respondent companys truck driver for ten
continuous years. The CA also reasoned that the petitioner could not be considered an
independent contractor since he had no substantial capital in the form of tools and
machinery. In fact, the truck that he drove belonged to the respondent company. The CA
also observed that the routing slips that the respondent company issued to the petitioner
showed that it exercised control over the latter. The routing slips indicated the
chronological order and priority of delivery, the urgency of certain deliveries and the time
when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his
job noting that he just filed a complaint for regularization. This actuation of the petitioner
negated the respondents allegation that he abandoned his job. The CA held that the
respondents failed to discharge their burden to show that the petitioners dismissal was for
a valid and just cause. Accordingly, the respondents were declared guilty of illegal
dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the
respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from
attaining the status of regular employment, it is but necessary for the courts to scrutinize with
extreme caution their legality and justness. Where from the circumstances it is apparent that a
contract has been entered into to preclude acquisition of tenurial security by the employee, they
should be struck down and disregarded as contrary to public policy and morals. In this case, the
contract of service is just another attempt to exploit the unwitting employee and deprive him of
the protection of the Labor Code by making it appear that the stipulations of the parties were
governed by the Civil Code as in ordinary transactions.[9]
However, on motion for reconsideration by the respondents, the CA made a complete
turn around as it rendered the assailed Resolution dated December 15, 2000 upholding
the contract of service between the petitioner and the respondent company. In

reconsidering its decision, the CA explained that the extent of control exercised by the
respondents over the petitioner was only with respect to the result but not to the means
and methods used by him. The CA cited the following circumstances: (1) the respondents
had no say on how the goods were to be delivered to the customers; (2) the petitioner had
the right to employ workers who would be under his direct control; and (3) the petitioner
had no working time.
The fact that the petitioner had been with the respondent company for more than ten
years was, according to the CA, of no moment because his status was determined not by
the length of service but by the contract of service. This contract, not being contrary to
morals, good customs, public order or public policy, should be given the force and effect of
law as between the respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioners complaint for
illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000
Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION
TO THE CONTRACT OF SERVICE ENTERED INTO BY PETITIONER AND
PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE
PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS
THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE CONTROL TEST WHICH
IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.[10]
The threshold issue that needs to be resolved is whether there existed an employeremployee relationship between the respondent company and the petitioner. We rule in the
affirmative.
The elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employers power to control the employees conduct.[11] The most
important element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it. [12]
All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner
without the intervention of a third party.
Second. Wages are defined as remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time,
task, piece or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for
work done or to be done, or for service rendered or to be rendered.[13] That the petitioner
was paid on a per trip basis is not significant. This is merely a method of computing

compensation and not a basis for determining the existence or absence of employeremployee relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on whether the
elements of an employer-employee relationship are present or not.[14] In this case, it
cannot be gainsaid that the petitioner received compensation from the respondent
company for the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required
to pay his employees by means of payroll.[15] The payroll should show, among other
things, the employees rate of pay, deductions made, and the amount actually paid to the
employee. Interestingly, the respondents did not present the payroll to support their claim
that the petitioner was not their employee, raising speculations whether this omission
proves that its presentation would be adverse to their case.[16]
Third. The respondents power to dismiss the petitioner was inherent in the fact that
they engaged the services of the petitioner as truck driver. They exercised this power by
terminating the petitioners services albeit in the guise of severance of contractual
relation due allegedly to the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship,
the control test is the most important. Compared to an employee, an independent
contractor is one who carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under its own responsibility
according to its own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work except as to the results
thereof.[17] Hence, while an independent contractor enjoys independence and freedom
from the control and supervision of his principal, an employee is subject to the employers
power to control the means and methods by which the employees work is to be performed
and accomplished.[18]
Although the respondents denied that they exercised control over the manner and
methods by which the petitioner accomplished his work, a careful review of the records
shows that the latter performed his work as truck driver under the respondents supervision
and control. Their right of control was manifested by the following attendant
circumstances:
1.

The truck driven by the petitioner belonged to respondent company;

2.
There was an express instruction from the respondents that the truck shall be used exclusively
to deliver respondent companys goods; [19]
3.
Respondents directed the petitioner, after completion of each delivery, to park the truck in
either of two specific places only, to wit: at its office in Metro Manila at 2320 Osmea Street,
Makati City or at BEPZ, Mariveles, Bataan;[20] and
4.
Respondents determined how, where and when the petitioner would perform his task by
issuing to him gate passes and routing slips. [21]
a.
The routing slips indicated on the column REMARKS, the chronological order and
priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to
deliver the same according to the order of priority indicated therein.
b.
The routing slips, likewise, showed whether the goods were to be delivered urgently or not
by the word RUSH printed thereon.

c.
The routing slips also indicated the exact time as to when the goods were to be delivered
to the customers as, for example, the words tomorrow morning was written on slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised
control over the means and methods by which the petitioner accomplished his work as
truck driver of the respondent company. On the other hand, the Court is hard put to
believe the respondents allegation that the petitioner was an independent contractor
engaged in providing delivery or hauling services when he did not even own the truck used
for such services. Evidently, he did not possess substantial capitalization or investment in
the form of tools, machinery and work premises. Moreover, the petitioner performed the
delivery services exclusively for the respondent company for a continuous and
uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances
earlier discussed indubitably establish the existence of an employer-employee relationship
between the respondent company and the petitioner. It bears stressing that the existence
of an employer-employee relationship cannot be negated by expressly repudiating it in a
contract and providing therein that the employee is an independent contractor when, as in
this case, the facts clearly show otherwise. Indeed, the employment status of a person is
defined and prescribed by law and not by what the parties say it should be.[22]
Having established that there existed an employer-employee relationship between the
respondent company and the petitioner, the Court shall now determine whether the
respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid
and just cause.[23] In this case, the respondents failed to prove any such cause for the
petitioners dismissal. They insinuated that the petitioner abandoned his job. To constitute
abandonment, these two factors must concur: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship.[24] Obviously, the petitioner did not intend to sever his relationship with the
respondent company for at the time that he allegedly abandoned his job, the petitioner just
filed a complaint for regularization, which was forthwith amended to one for illegal
dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a
complaint for illegal dismissal, more so when it includes a prayer for reinstatement.[25]
Neither can the respondents claim that the petitioner was guilty of gross negligence in
the proper maintenance of the truck constitute a valid and just cause for his dismissal.
Gross negligence implies a want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.[26] The negligence, to warrant
removal from service, should not merely be gross but also habitual.[27] The single and
isolated act of the petitioners negligence in the proper maintenance of the truck alleged by
the respondents does not amount to gross and habitual neglect warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not dismissed from
the service but due to complainants breach of their contractual relation, i.e., his violation of the
terms and conditions of the contract, we are very much inclined to believe complainants story that
his dismissal from the service was anchored on his insistent demand that he be considered a regular
employee. Because complainant in his right senses will not just abandon for that reason alone his
work especially so that it is only his job where he depends chiefly his existence and support for his
family if he was not aggrieved by the respondent when he was told that his services as driver will be
terminated on February 23, 1995.[28]

Thus, the lack of a valid and just cause in terminating the services of the petitioner
renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is
unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other
privileges, and to the payment of full backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. [29] However, as found by the
Labor Arbiter, the circumstances obtaining in this case do not warrant the petitioners
reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an
award of separation pay equivalent to one month for every year of service from the time of
his illegal dismissal up to the finality of this judgment in addition to his full backwages,
allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15,
2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP
No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the
Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of
illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

[22]

AZUCENA, I THE LABOR CODE (1999 ed.) 127.

[23]

Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General Trade, 396 SCRA 518 (2003).
Article 282 of the Labor Code provides: An employer may terminate an employment for any of the following
causes:
(a)

Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b)

Gross and habitual neglect by the employee of his duties;

(c)

Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;

(d)

Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative;

(e)

Other causes analogous to the foregoing.

[24]

Buenviaje v. Court of Appeals, 391 SCRA 440 (2002).

[25]

Globe Telecom, Inc. v. Florendo-Flores, 390 SCRA 201 (2002)

[26]

Philippine Aeolus Automotive United Corporation v. NLRC, 331 SCRA 237 (2000).

[27]

Id. at 247.

[28]

Rollo, pp. 149-150.

[29]

Cebu Marine Beach Resort v. NLRC, 414 SCRA 173 (2003).

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
CESAR C. LIRIO, doing business
under the name and style of
CELKOR AD SONICMIX,
Petitioner,

- versus -

G.R. No. 169757

Present:

VELASCO, JR., J., Chairperson,

PERALTA,
ABAD,
PEREZ,* and
MENDOZA, JJ.

Promulgated:
WILMER D. GENOVIA,
Respondent.
November 23, 2011
x----------------------------------------------------------------------------------------x
DECISION

PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in
CA-G.R. SP No. 88899 dated August 4, 2005 and its Resolution dated September 21, 2005,
denying petitioners motion for reconsideration.
The Court of Appeals reversed and set aside the resolution of the NLRC, and
reinstated the decision of the Labor Arbiter with modification, finding that respondent is an
employee of petitioner, and that respondent was illegally dismissed and entitled to the
payment of backwages and separation pay in lieu of reinstatement.
The facts are as follows:
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner
Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment
of commission and award of moral and exemplary damages.
In his Position Paper,[1] respondent Genovia alleged, among others, that on August 15,
2001, he was hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix
Recording Studio (Celkor). He was employed to manage and operate Celkor and to promote

and sell the recording studio's services to music enthusiasts and other prospective clients. He
received a monthly salary of P7,000.00. They also agreed that he was entitled to an
additional commission of P100.00 per hour as recording technician whenever a client uses
the studio for recording, editing or any related work. He was made to report for work from
Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day
only, but most of the time, he still rendered eight hours of work or more. All the employees
of petitioner, including respondent, rendered overtime work almost everyday, but petitioner
never kept a daily time record to avoid paying the employees overtime pay.
Respondent stated that a few days after he started working as a studio manager,
petitioner approached him and told him about his project to produce an album for his 15year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner
asked respondent to compose and arrange songs for Celine and promised that he (Lirio)
would draft a contract to assure respondent of his compensation for such services. As agreed
upon, the additional services that respondent would render included composing and
arranging musical scores only, while the technical aspect in producing the album, such as
digital editing, mixing and sound engineering would be performed by respondent in his
capacity as studio manager for which he was paid on a monthly basis. Petitioner instructed
respondent that his work on the album as composer and arranger would only be done during
his spare time, since his other work as studio manager was the priority. Respondent then
started working on the album.
Respondent alleged that before the end of September 2001, he reminded petitioner
about his compensation as composer and arranger of the album. Petitioner verbally assured
him that he would be duly compensated. By mid-November 2001, respondent finally
finished the compositions and musical arrangements of the songs to be included in the
album. Before the month ended, the lead and back-up vocals in the ten (10) songs were
finally recorded and completed. From December 2001 to January 2002, respondent, in his
capacity as studio manager, worked on digital editing, mixing and sound engineering of the
vocal and instrumental audio files.
Thereafter, respondent was tasked by petitioner to prepare official correspondence,
establish contacts and negotiate with various radio stations, malls, publishers, record
companies and manufacturers, record bars and other outlets in preparation for the promotion
of the said album. By early February 2002, the album was in its manufacturing stage.
ELECTROMAT, manufacturer of CDs and cassette tapes, was tapped to do the job. The
carrier single of the album, which respondent composed and arranged, was finally aired over
the radio on February 22, 2002.
On February 26, 2002, respondent again reminded petitioner about the contract on his
compensation as composer and arranger of the album. Petitioner told respondent that since
he was practically a nobody and had proven nothing yet in the music industry, respondent
did not deserve a high compensation, and he should be thankful that he was given a job to
feed his family. Petitioner informed respondent that he was entitled only to 20% of the net
profit, and not of the gross sales of the album, and that the salaries he received and would
continue to receive as studio manager of Celkor would be deducted from the said 20% net
profit share. Respondent objected and insisted that he be properly compensated. On March
14, 2002, petitioner verbally terminated respondents services, and he was instructed not to
report for work.

Respondent asserts that he was illegally dismissed as he was terminated without any
valid grounds, and no hearing was conducted before he was terminated, in violation of his
constitutional right to due process. Having worked for more than six months, he was already
a regular employee. Although he was a so called studio manager, he had no managerial
powers, but was merely an ordinary employee.
Respondent prayed for his reinstatement without loss of seniority rights, or, in the
alternative, that he be paid separation pay, backwages and overtime pay; and that he be
awarded unpaid commission in the amount of P2,000.00 for services rendered as a studio
technician as well as moral and exemplary damages.
Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15,
2002, which was certified correct by petitioner,[2] and Petty Cash Vouchers[3] evidencing
receipt of payroll payments by respondent from Celkor.
In defense, petitioner stated in his Position Paper[4] that respondent was not hired as
studio manager, composer, technician or as an employee in any other capacity of Celkor.
Respondent could not have been hired as a studio manager, since the recording studio has no
personnel except petitioner. Petitioner further claimed that his daughter Celine Mei Lirio, a
former contract artist of ABS-CBN Star Records, failed to come up with an album as the
latter aborted its project to produce one. Thus, he decided to produce an album for his
daughter and established a recording studio, which he named Celkor Ad Sonicmix
Recording Studio. He looked for a composer/arranger who would compose the songs for the
said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who
claimed to be an amateur composer, an arranger with limited experience and musician
without any formal musical training. According to petitioner, respondent had no track record
as a composer, and he was not known in the field of music. Nevertheless, after some
discussion, respondent verbally agreed with petitioner to co-produce the album based on the
following terms and conditions: (1) petitioner shall provide all the financing, equipment and
recording studio; (2) Celine Mei Lirio shall sing all the songs; (3) respondent shall act as
composer and arranger of all the lyrics and the music of the five songs he already composed
and the revival songs; (4) petitioner shall have exclusive right to market the album; (5)
petitioner was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were
each entitled to 20% of the net profit; and (6) respondent shall be entitled to draw advances
of P7,000.00 a month, which shall be deductible from his share of the net profits and only
until such time that the album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the
mutual understanding that respondent was just an amateur composer with no track record
whatsoever in the music industry, had no definite source of income, had limited experience
as an arranger, had no knowledge of the use of sound mixers or digital arranger and that
petitioner would help and teach him how to use the studio equipment; that petitioner would
shoulder all the expenses of production and provide the studio and equipment as well as his
knowledge in the use thereof; and Celine Mei Lirio would sing the songs. They embarked on
the production of the album on or about the third week of August 2002.
Petitioner asserted that from the aforesaid terms and conditions, his relationship with
respondent is one of an informal partnership under Article 1767[5] of the New Civil Code,
since they agreed to contribute money, property or industry to a common fund with the

intention of dividing the profits among themselves. Petitioner had no control over the time
and manner by which respondent composed or arranged the songs, except on the result
thereof. Respondent reported to the recording studio between 10:00 a.m. and 12:00 noon.
Hence, petitioner contended that no employer-employee relationship existed between him
and the respondent, and there was no illegal dismissal to speak of.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a
decision,[6] finding that an employer-employee relationship existed between petitioner and
respondent, and that respondent was illegally dismissed. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, we find that respondents CELKOR AD
SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner), have illegally
dismissed complainant in his status as regular employee and, consequently, ORDERING
said respondents:
1)

To pay him full backwages from date of illegal dismissal on March

14, 2002 until finality of this decision and, in lieu of reinstatement, to
[pay] his separation pay of one (1) month pay per year of service
reckoned from [the] date of hire on August 15, 2001 until finality of
this decision, which as of date amounts to full backwages total of
145,778.6 (basicP7,000.00 x 19.6 mos.=P133,000.00 + 1/12 thereof as
13th month pay of P11,083.33 + SILP P7,000/32.62 days=P214.59/day
x
5=P1,072.96
x
1.58
yrs.=P1,695.27); separation
pay
of P22,750.00 (P7,000.00 x 3.25 yrs.);

2)
3)

To pay complainant's unpaid commission of P2,000.00;

To pay him moral and exemplary damages in the combined amount
of P75,000.00.

Other monetary claims of complainant are dismissed for lack of merit.[7]

The Labor Arbiter stated that petitioners denial of the employment relationship
cannot overcome respondents positive assertion and documentary evidence proving that
petitioner hired respondent as his employee.[8]
Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations
Commission (NLRC).
In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the
decision of the Labor Arbiter. The dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the

Decision appealed from is REVERSED and, hence, SET ASIDE and a new one ENTERED
dismissing the instant case for lack of merit.[9]

The NLRC stated that respondent failed to prove his employment tale with substantial
evidence. Although the NLRC agreed that respondent was able to prove that he received
gross pay less deduction and net pay, with the corresponding Certification of Correctness by
petitioner, covering the period from July 31, 2001 to March 15, 2002, the NLRC held
that respondent failed to proved with substantial evidence that he was selected and engaged
by petitioner, that petitioner had the power to dismiss him, and that they had the power to
control him not only as to the result of his work, but also as to the means and methods of
accomplishing his work.
Respondents motion for reconsideration was denied by the NLRC in a
Resolution9 dated December 14, 2004.
Respondent filed a petition for certiorari before the Court of Appeals.
On August 4, 2005, the Court of Appeals rendered a decision[10] reversing and setting
aside the resolution of the NLRC, and reinstating the decision of the Labor Arbiter, with
modification in regard to the award of commission and damages. The Court of Appeals
deleted the award of commission, and moral and exemplary damages as the same were not
substantiated. The dispositive portion of the Court of Appeals decision reads:
WHEREFORE, the petition is GRANTED and the assailed resolutions dated October
14, 2004 and December 14, 2004 are herebyREVERSED and SET ASIDE. Accordingly, the
decision dated October 31, 2003 of the Labor Arbiter is REINSTATED, with
[11]
themodification that the awards of commission and damages are deleted.
(Emphasis
supplied.)

Petitioners motion for reconsideration was denied for lack of merit by the Court of
Appeals in its Resolution[12] dated September 21, 2005.
Hence, petitioner Lirio filed this petition.
Petitioner states that respondent appealed to the Court of Appeals via a petition
for certiorari under Rule 65, which will prosper only if there is a showing of grave abuse of
discretion or an act without or in excess of jurisdiction on the part of the NLRC.[13] However,
petitioner contends that the Court of Appeals decided the case not in accordance with law
and applicable rulings of this Court as petitioner could not find any portion in the Decision
of the Court of Appeals ruling that the NLRC acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner
submits that the Court of Appeals could not review an error of judgment by the NLRC raised
before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure. Moreover, petitioner contends that it was error on the part of the Court of
Appeals to review the finding of facts of the NLRC on whether there exists an employeremployee relationship between the parties.
Petitioners argument lacks merit.
It is noted that respondent correctly sought judicial review of the decision of the
NLRC via a petition for certiorari under Rule 65 of the Rules of Court filed before the Court

of Appeals in accordance with the decision of the Court in St. Martin Funeral Home v.
NLRC,[14] which held:
Therefore, all references in the amended Section 9 of B.P. No. 129 to
supposed appeals from the NLRC to the Supreme Court are interpreted and hereby
declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all
such petitions should henceforth be initially filed in the Court of Appeals in strict
observance of the doctrine on the hierarchy of courts as the appropriate forum for the relief
desired.[15]

The Court of Appeals stated in its decision that the issue it had to resolve
was whether or not the public respondent [NLRC] committed grave abuse of
discretion when it declared that no employer-employee relationship exists between the
petitioner and the private respondents, since the petitioner failed to prove such fact by
substantial evidence.[16]
Errors of judgment, as distinguished from errors of jurisdiction, are not within the
province of a special civil action forcertiorari, which is merely confined to issues of
jurisdiction or grave abuse of discretion.[17] By grave abuse of discretion is meant such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it
must be shown that the discretion was exercised arbitrarily or despotically.[18]
The Court of Appeals, therefore, could grant the petition for certiorari if it finds that
the NLRC, in its assailed decision or resolution, committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily disregarding evidence that is material to or decisive
of the controversy; and it cannot make this determination without looking into the evidence
of the parties.[19] Necessarily, the appellate court can only evaluate the materiality or
significance of the evidence, which is alleged to have been capriciously, whimsically, or
arbitrarily disregarded by the NLRC, in relation to all other evidence on record.[20] Thus,
contrary to the contention of petitioner, the Court of Appeals can review the finding of facts
of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused
its discretion in finding that no employer-employee relationship existed between petitioner
and respondent.[21]
Respondent raised before the Court of Appeals the following issues:
I.
RESPONDENT NATIONAL LABOR RELATIONS COMMISSION
COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN OF
PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE
PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN
VIOLATION OF ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.

II.
RESPONDENT NATIONAL LABOR RELATIONS COMMISSION
COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE PETITIONER
AND THE PRIVATE RESPONDENTS.

III.
RESPONDENT NATIONAL LABOR RELATIONS COMMISSION
COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE
PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN INDICIA OF
EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE
RESPONDENTS.[22]

Between the documentary evidence presented by respondent and the mere allegation
of petitioner without any proof by way of any document evincing their alleged partnership
agreement, the Court of Appeals agreed with the Labor Arbiter that petitioner failed to
substantiate his claim that he had a partnership with respondent, citing the Labor Arbiters
finding, thus:
In this case, complainant's evidence is substantial enough to prove the employment
relationship that on August 14, 2001, he was hired as 'Studio manager' by respondent Lirio to
manage and operate the recording studio and to promote and sell its services to music
enthusiasts and clients, proven by his receipt for this purpose from said respondent a fixed
monthly compensation of P7,000.00, with commission of P100.00 per hour when serving as
recording technician, shown by the payroll from July 31, 2001-March 15, 2002. The said
evidence points to complainant's hiring as employee so that the case comes within the
purview of our jurisdiction on labor disputes between an employer and an employee. x x x.
Respondent Lirio's so-called existence of a partnership agreement was not
substantiated and his assertion thereto, in the face of complainant's evidence, constitute
but a self-serving assertion, without probative value, a mere invention to justify the illegal
dismissal.
xxxx
Indeed, we find credible that what caused complainant's dismissal on March 14, 2002
was due to his refusal to respondent's Lirio's insistences on merely giving him 20% based on
net profit on sale of the album which he composed and arranged during his free time and,
moreover, that salaries which he received would be deducted therefrom, which obviously,
soured the relations from the point of view of respondent Lirio.[23]

Hence, based on the finding above and the doctrine that if doubt exists between the
evidence presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter,[24] the Court of Appeals reversed the resolution of the NLRC and
reinstated the decision of the Labor Arbiter with modification. Even if the Court of Appeals
was remiss in not stating it in definite terms, it is implied that the Court of Appeals found
that the NLRC gravely abused its discretion in finding that no employer-employee
relationship existed between petitioner and respondent based on the evidence on record.
We now proceed to the main issue raised before this Court: Whether or not the
decision of the Court of Appeals is in accordance with law, or whether or not the Court of
Appeals erred in reversing and setting aside the decision of the NLRC, and reinstating the
decision of the Labor Arbiter with modification.
In petitions for review, only errors of law are generally reviewed by this Court. This
rule, however, is not ironclad.[25] Where the issue is shrouded by a conflict of factual
perceptions by the lower court or the lower administrative body, in this case, the NLRC, this
Court is constrained to review the factual findings of the Court of Appeals.[26]

Before a case for illegal dismissal can prosper, it must first be established that an
employer-employee relationship existed between petitioner and respondent.[27]
The elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct. The most
important element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it.[28]
It is settled that no particular form of evidence is required to prove the existence of an
employer-employee relationship.[29]Any competent and relevant evidence to prove the
relationship may be admitted.[30]
In this case, the documentary evidence presented by respondent to prove that he was
an employee of petitioner are as follows: (a) a document denominated as "payroll" (dated
July 31, 2001 to March 15, 2002) certified correct by petitioner,[31] which showed that
respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month and
another P3,500.00 every 30thof the month) with the corresponding deductions due to
absences incurred by respondent; and (2) copies of petty cash vouchers,[32] showing the
amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and he
was paid monthly wages of P7,000.00. Petitioner wielded the power to dismiss as respondent
stated that he was verbally dismissed by petitioner, and respondent, thereafter, filed an action
for illegal dismissal against petitioner. The power of control refers merely to the existence
of the power.[33] It is not essential for the employer to actually supervise the performance of
duties of the employee, as it is sufficient that the former has a right to wield the
power.[34] Nevertheless, petitioner stated in his Position Paper that it was agreed that he
would help and teach respondent how to use the studio equipment. In such case,
petitioner certainly had the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was
one of partnership. Such claim was not supported by any written agreement. The Court
notes that in the payroll dated July 31, 2001 to March 15, 2002,[35] there were deductions
from the wages of respondent for his absence from work, which negates petitioners claim
that the wages paid were advances for respondents work in the partnership. In Nicario v.
National Labor Relations Commission,[36] the Court held:
It is a well-settled doctrine, that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. It is a
time-honored rule that in controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and writing should be
resolved in the formers favor. The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection of labor. This rule should be
applied in the case at bar, especially since the evidence presented by the private respondent
company is not convincing. x x x[37]

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence
presented by the parties showed that an employer-employee relationship existed between
petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence
that the termination was for lawful cause and validly made. [38] Article 277 (b) of the Labor
Code[39] puts the burden of proving that the dismissal of an employee was for a valid or
authorized cause on the employer, without distinction whether the employer admits or does
not admit the dismissal.[40]For an employees dismissal to be valid, (a) the dismissal must be
for a valid cause, and (b) the employee must be afforded due process.[41] Procedural due
process requires the employer to furnish an employee with two written notices before the
latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions
for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice
informing the employee of his dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his defense.[42] Petitioner failed to
comply with these legal requirements; hence, the Court of Appeals correctly affirmed the
Labor Arbiters finding that respondent was illegally dismissed, and entitled to the payment
of backwages, and separation pay in lieu of reinstatement.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution dated September 21, 2005,
are AFFIRMED.
No costs.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD
Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

JOSE CATRAL MENDOZA

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts
Division.

RENATO C. CORONA
Chief Justice

Designated as an additional member in lieu of Associate Justice Estela M. Perlas-Bernabe, per Special Order No. 1152,
dated November 11, 2011.
[1]
[2]

CA rollo, p. 49.

Annex A, id. at 61.

CA rollo, pp. 62-65.
[4]
Id. at 66.
[5]
Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.
[6]
CA rollo, p. 115.
[7]
Id. at 120-121.
[8]
Labor Arbiters Decision, id. at 118.
[9]
Rollo, pp. 53-54.
[10]
Id. at 30-41.
[11]
Id. at 41.
[12]
Id. at 42.
[13]
Id. at 24, citing Philtranco Service Enterprises, Inc. v. National Labor Relations Commission, 351 Phil. 827, 834
(1998).
[14]
356 Phil. 811 (1998).
[3]

[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]

Id. at 824. (Emphasis supplied.)

Emphasis supplied.
Leonis Navigation Co., Inc. v. Villamater, G.R. No. 179169, March 3, 2010, 614 SCRA 182, 192.
Id.
Id.
Id.
See St. Martin Funeral Home v. NLRC, supra note 14.
CA Decision, rollo, pp. 36-37.
Rollo, pp. 39-40.
Sy v. Court of Appeals, G.R. No. 142293, February 27, 2003, 398 SCRA 301, 309.
Alay sa Kapatid International Foundation, Inc. (AKAP) v. Dominguez, G.R. No. 164198, June 15, 2007, 524 SCRA

719, 723.
[26]

Id. See also Philemploy Services and Resources, Inc. v. Rodriguez, G.R. No. 152616, March 31, 2006, 486 SCRA 302,
314; Filipinas Pre-Fabricated Building Systems, Inc. v. Puente, 493 Phil. 923, 930 (2005); Go v. Court of Appeals, G.R. No.
158922, May 28, 2004, 430 SCRA 358, 365.
[27]
Sy v. Court of Appeals, supra note 23, at 306.
[28]
Id.
[29]
Opulencia Ice Plant and Storage v. NLRC, G.R. No. 98368, December 15, 1993, 228 SCRA 473, 478.
[30]
Id.
[31]
CA rollo, p. 61.
[32]
Id. at 62-65.
[33]
Social Security System v. Court of Appeals, 401 Phil. 132, 151 (2000).
[34]
Id.
[35]
CA rollo, p. 61
[36]
356 Phil. 936 (1998).
[37]
Id. at 943.
[38]
Sy v. Court of Appeals, supra note 24, at 310.
[39]

Article 277. Miscellaneous provisions. x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283
of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken
by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal
by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer. x x x (Emphasis supplied.)
[40]
[41]

[42]

Sy v. Court of Appeals, supra note 24, at 310.

Id.
Id. at 312.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

BITOY JAVIER
(DANILO P. JAVIER),
Petitioner,

- versus -

FLY ACE CORPORATION/

FLORDELYN CASTILLO,
Respondents.

G.R. No. 192558

Present:
CARPIO, J.,
PERALTA, Acting Chairperson,
ABAD,
PEREZ,*** and
MENDOZA, JJ.

Promulgated:
February 15, 2012

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

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March
18, 2010 Decision[1] of the Court of Appeals (CA) and its June 7, 2010 Resolution,[2] in CAG.R. SP No. 109975, which reversed the May 28, 2009 Decision[3] of the National Labor

Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn
Castillo,[4] holding that petitioner Bitoy Javier (Javier) was illegally dismissed from
employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation
pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of
salaries and other labor standard benefits. He alleged that he was an employee of Fly Ace
since September 2007, performing various tasks at the respondents warehouse such as
cleaning and arranging the canned items before their delivery to certain locations, except in
instances when he would be ordered to accompany the companys delivery vehicles,
as pahinante; that he reported for work from Monday to Saturday from 7:00 oclock in the
morning to 5:00 oclock in the afternoon; that during his employment, he was not issued an
identification card and payslips by the company; that on May 6, 2008, he reported for work
but he was no longer allowed to enter the company premises by the security guard upon the
instruction of Ruben Ong (Mr. Ong), his superior;[5] that after several minutes of begging to
the guard to allow him to enter, he saw Ong whom he approached and asked why he was
being barred from entering the premises; that Ong replied by saying, Tanungin mo anak
mo; [6] that he then went home and discussed the matter with his family; that he discovered
that Ong had been courting his daughter Annalyn after the two met at a fiesta celebration in
Malabon City; that Annalyn tried to talk to Ong and convince him to spare her father from
trouble but he refused to accede; that thereafter, Javier was terminated from his employment
without notice; and that he was neither given the opportunity to refute the cause/s of his
dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela
who alleged that Javier was a stevedore orpahinante of Fly Ace from September 2007 to
January 2008. The said affidavit was subscribed before the Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in the business of importation and
sales of groceries. Sometime in December 2007, Javier was contracted by its employee, Mr.
Ong, as extra helper on a pakyaw basis at an agreed rate of 300.00 per trip, which was later
increased to 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only
in a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not
available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that
he was their employee, Fly Ace insisted that there was no illegal dismissal. [8] Fly
Ace submitted a copy of its agreement with Milmar Hauling Services and copies of
acknowledgment receipts evidencing payment to Javier for his contracted services bearing
the words, daily manpower (pakyaw/piece rate pay) and the latters signatures/initials.
Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the
ground that Javier failed to present proof that he was a regular employee of Fly Ace. He
wrote:

Complainant has no employee ID showing his employment with the

Respondent nor any document showing that he received the benefits accorded to
regular employees of the Respondents. His contention that Respondent failed to
give him said ID and payslips implies that indeed he was not a regular employee of
Fly Ace considering that complainant was a helper and that Respondent company
has contracted a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation
and sales of groceries. Since there is a regular hauler to deliver its products, we give
credence to Respondents claim that complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented by the
Respondents showing salaries of workers on pakiao basis has evidentiary weight
because although the signature of the complainant appearing thereon are not
uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above
described payrolls, Respondents are not liable for salary differentials. [9]

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the
argument of Javier and immediately concluded that he was not a regular employee simply
because he failed to present proof. It was of the view that a pakyaw-basis arrangement did
not preclude the existence of employer-employee relationship. Payment by result x x x is a
method of compensation and does not define the essence of the relation. It is a mere method
of computing compensation, not a basis for determining the existence or absence of an
employer-employee relationship.[10] The NLRC further averred that it did not follow that a
worker was a job contractor and not an employee, just because the work he was doing was
not directly related to the employers trade or business or the work may be considered as
extra helper as in this case; and that the relationship of an employer and an employee was
determined by law and the same would prevail whatever the parties may call it. In this case,
the NLRC held that substantial evidence was sufficient basis for judgment on the existence
of the employer-employee relationship. Javier was a regular employee of Fly Ace because
there was reasonable connection between the particular activity performed by the
employee (as a pahinante) in relation to the usual business or trade of the employer
(importation, sales and delivery of groceries). He may not be considered as an independent
contractor because he could not exercise any judgment in the delivery of company
products. He was only engaged as a helper.

Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a
security of tenure. For failing to present proof of a valid cause for his termination, Fly Ace
was found to be liable for illegal dismissal of Javier who was likewise entitled to backwages
and separation pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially
GRANTED. The assailed Decision of the labor arbiter is VACATED and a new one is
hereby entered holding respondent FLY ACE CORPORATION guilty of illegal
dismissal and non-payment of 13th month pay. Consequently, it is hereby ordered to
pay complainant DANILO Bitoy JAVIER the following:

1. Backwages

-45,770.83

2. Separation pay, in lieu of reinstatement

- 8,450.00

3. Unpaid 13th month pay (proportionate)

- 5,633.33

TOTAL

-59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.[11]

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a
former employee of Fly Ace and reinstated the dismissal of Javiers complaint as ordered by
the LA. The CA exercised its authority to make its own factual determination anent the issue
of the existence of an employer-employee relationship between the parties. According to the
CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove
that its dismissal was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established. x x x it is
incumbent upon private respondent to prove the employee-employer relationship by
substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence,
that he is an employee of petitioners, but he failed to discharge his burden. The nonissuance of a company-issued identification card to private respondent supports
petitioners contention that private respondent was not its employee.[12]

The CA likewise added that Javiers failure to present salary vouchers, payslips, or
other pieces of evidence to bolster his contention, pointed to the inescapable conclusion that
he was not an employee of Fly Ace. Further, it found that Javiers work was not necessary
and desirable to the business or trade of the company, as it was only when there were
scheduled deliveries, which a regular hauling service could not deliver, that Fly Ace would
contract the services of Javier as an extra helper. Lastly, the CA declared that the facts
alleged by Javier did not pass the control test.

He contracted work outside the company premises; he was not required to observe definite
hours of work; he was not required to report daily; and he was free to accept other work
elsewhere as there was no exclusivity of his contracted service to the company, the same
being co-terminous with the trip only.[13] Since no substantial evidence was presented to
establish an employer-employee relationship, the case for illegal dismissal could not
prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THE PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THE PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.[14]

The petitioner contends that other than its bare allegations and self-serving affidavits
of the other employees, Fly Ace has nothing to substantiate its claim that Javier was engaged
on a pakyaw basis. Assuming that Javier was indeed hired on a pakyawbasis, it does not
preclude his regular employment with the company. Even the acknowledgment receipts
bearing his signature and the confirming receipt of his salaries will not show the true nature
of his employment as they do not reflect the necessary details of the commissioned task.
Besides, Javiers tasks as pahinante are related, necessary and desirable to the line of
business by Fly Ace which is engaged in the importation and sale of grocery items. On days
when there were no scheduled deliveries, he worked in petitioners warehouse, arranging
and cleaning the stored cans for delivery to clients.[15] More importantly, Javier was subject
to the control and supervision of the company, as he was made to report to the office from
Monday to Saturday, from 7:00 oclock in the morning until 5:00 oclock in the afternoon.
The list of deliverable goods, together with the corresponding clients and their respective
purchases and addresses, would necessarily have been prepared by Fly Ace. Clearly, he was
subjected to compliance with company rules and regulations as regards working hours,
delivery schedule and output, and his other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that
payment to a worker on a per trip basis is not significant because this is merely a method of

computing compensation and not a basis for determining the existence of employeremployee relationship. Javier likewise invokes the rule that, in controversies between a
laborer and his master, x x x doubts reasonably arising from the evidence should be resolved
in the formers favour. The policy is reflected is no less than the Constitution, Labor Code
and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally
dismissed by the latters failure to observe substantive and procedural due process. Since his
dismissal was not based on any of the causes recognized by law, and was implemented
without notice, Javier is entitled to separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove
employer-employee relationship. Having a service contract with Milmar Hauling Services
for the purpose of transporting and delivering company products to customers, Fly Ace
contracted Javier as an extra helper or pahinante on a mere per trip basis. Javier, who was
actually a loiterer in the area, only accompanied and assisted the company driver when
Milmar could not deliver or when the exigency of extra deliveries arises for roughly five to
six times a month. Before making a delivery, Fly Ace would turn over to the driver and
Javier the delivery vehicle with its loaded company products. With the vehicle and products
in their custody, the driver and Javier would leave the company premises using their own
means, method, best judgment and discretion on how to deliver, time to deliver, where and
[when] to start, and manner of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from
his bare allegations, he presented nothing to substantiate his status as an employee. It is a
basic rule of evidence that each party must prove his affirmative allegation. If he claims a
right granted by law, he must prove his claim by competent evidence, relying on the strength
of his own evidence and not upon the weakness of his opponent.[21] Invoking the case
of Lopez v. Bodega City,[22] Fly Ace insists that in an illegal dismissal case, the burden of
proof is upon the complainant who claims to be an employee. It is essential that an
employer-employee relationship be proved by substantial evidence. Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove
that its dismissal of an employee was for a valid cause. However, before a case for
illegal dismissal can prosper, an employer-employee relationship must first be
established.

Fly Ace points out that Javier merely offers factual assertions that he was an employee
of Fly Ace, which are unfortunately not supported by proof, documentary or
otherwise.[23] Javier simply assumed that he was an employee of Fly Ace, absent any
competent or relevant evidence to support it. He performed his contracted work outside the
premises of the respondent; he was not even required to report to work at regular hours; he
was not made to register his time in and time out every time he was contracted to work; he
was not subjected to any disciplinary sanction imposed to other employees for company
violations; he was not issued a company I.D.; he was not accorded the same benefits given to
other employees; he was not registered with the Social Security System (SSS) as petitioners
employee; and, he was free to leave, accept and engage in other means of livelihood as there

is no exclusivity of his contracted services with the petitioner, his services being co-terminus
with the trip only. All these lead to the conclusion that petitioner is not an employee of the
respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and
methods by which Javier would perform his work or by which the same is to be
accomplished.[25] In other words, Javier and the company driver were given a free hand as to
how they would perform their contracted services and neither were they subjected to definite
hours or condition of work.

Fly Ace likewise claims that Javiers function as a pahinante was not directly related
or necessary to its principal business of importation and sales of groceries. Even without
Javier, the business could operate its usual course as it did not involve the business of inland
transportation. Lastly, the acknowledgment receipts bearing Javiers signature and words
pakiao rate, referring to his earned salaries on a per trip basis, have evidentiary weight that
the LA correctly considered in arriving at the conclusion that Javier was not an employee of
the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the
existence of an employer-employee relationship between him and Fly Ace. This is
essentially a question of fact. Generally, the Court does not review errors that raise factual
questions. However, when there is conflict among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, it is proper, in the exercise of Our
equity jurisdiction, to review and re-evaluate the factual issues and to look into the records
of the case and re-examine the questioned findings.[26] In dealing with factual issues in
labor cases, substantial evidence that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion is sufficient.[27]
As the records bear out, the LA and the CA found Javiers claim of employment with
Fly Ace as wanting and deficient. The Court is constrained to agree. Although Section 10,
Rule VII of the New Rules of Procedure of the NLRC[28] allows a relaxation of the rules of
procedure and evidence in labor cases, this rule of liberality does not mean a complete
dispensation of proof. Labor officials are enjoined to use reasonable means to ascertain the
facts speedily and objectively with little regard to technicalities or formalities but nowhere in
the rules are they provided a license to completely discount evidence, or the lack of it. The
quantum of proof required, however, must still be satisfied. Hence, when confronted with
conflicting versions on factual matters, it is for them in the exercise of discretion to
determine which party deserves credence on the basis of evidence received, subject only to
the requirement that their decision must be supported by substantial
evidence.[29] Accordingly, the petitioner needs to show by substantial evidence that he was
indeed an employee of the company against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as
different as chalk and cheese. It is, therefore, incumbent upon the Court to determine
whether the party on whom the burden to prove lies was able to hurdle the same. No

particular form of evidence is required to prove the existence of such employer-employee

relationship. Any competent and relevant evidence to prove the relationship may be
admitted. Hence, while no particular form of evidence is required, a finding that such
relationship exists must still rest on some substantial evidence. Moreover, the substantiality
of the evidence depends on its quantitative as well as its qualitative aspects.[30] Although
substantial evidence is not a function of quantity but rather of quality, the x x x
circumstances of the instant case demand that something more should have been proffered.
Had there been other proofs of employment, such as x x x inclusion in petitioners payroll,
or a clear exercise of control, the Court would have affirmed the finding of employeremployee relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of evidence.[32] Whoever claims
entitlement to the benefits provided by law should establish his or her right thereto x x
x.[33] Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his
employment with Fly Ace. By way of evidence on this point, all that Javier presented were
his self-serving statements purportedly showing his activities as an employee of Fly
Ace. Clearly, Javier failed to pass the substantiality requirement to support his
claim. Hence, the Court sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he
was made to work in the company premises during weekdays arranging and cleaning
grocery items for delivery to clients, no other proof was submitted to fortify his claim. The
lone affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javiers
cause. In said document, all Valenzuela attested to was that he would frequently see Javier at
the workplace where the latter was also hired as stevedore.[34] Certainly, in gauging the
evidence presented by Javier, the Court cannot ignore the inescapable conclusion that his
mere presence at the workplace falls short in proving employment therein. The supporting
affidavit could have, to an extent, bolstered Javiers claim of being tasked to clean grocery
items when there were no scheduled delivery trips, but no information was offered in this
subject simply because the witness had no personal knowledge of Javiers employment
status in the company. Verily, the Court cannot accept Javiers statements, hook, line and
sinker.
The Court is of the considerable view that on Javier lies the burden to pass the wellsettled tests to determine the existence of an employer-employee relationship, viz: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees conduct. Of these elements, the most
important criterion is whether the employer controls or has reserved the right to control the
employee not only as to the result of the work but also as to the means and methods by
which the result is to be accomplished.[35]
In this case, Javier was not able to persuade the Court that the above elements exist in
his case. He could not submit competent proof that Fly Ace engaged his services as a
regular employee; that Fly Ace paid his wages as an employee, or that Fly Ace could dictate
what his conduct should be while at work. In other words, Javiers allegations did not

establish that his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to
refute Fly Aces assertion that it had an agreement with a hauling company to undertake the
delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Aces
denial of his services exclusivity to the company. In short, all that Javier laid down were
bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as
a stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw basis per the acknowledgment
receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere
denial of the signatures affixed therein cannot automatically sway us to ignore the
documents because forgery cannot be presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party alleging forgery.[36]
Considering the above findings, the Court does not see the necessity to resolve the
second issue presented.
One final note. The Courts decision does not contradict the settled rule that
payment by the piece is just a method of compensation and does not define the essence of
the relation.[37] Payment on a piece-rate basis does not negate regular employment. The
term wage is broadly defined in Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or ascertained on a time, task,
piece or commission basis. Payment by the piece is just a method of compensation and does
not define the essence of the relations. Nor does the fact that the petitioner is not covered by
the SSS affect the employer-employee relationship. However, in determining whether the
relationship is that of employer and employee or one of an independent contractor, each case
must be determined on its own facts and all the features of the relationship are to be
considered.[38] Unfortunately for Javier, the attendant facts and circumstances of the instant
case do not provide the Court with sufficient reason to uphold his claimed status as
employee of Fly Ace.
While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its rights which are entitled to respect and
enforcement in the interest of simple fair play. Out of its concern for the less privileged in
life, the Court has inclined, more often than not, toward the worker and upheld his cause in
his conflicts with the employer. Such favoritism, however, has not blinded the Court to the
rule that justice is in every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine.[39]
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court
of Appeals and its June 7, 2010Resolution, in CA-G.R. SP No. 109975, are
hereby AFFIRMED.
SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

DIOSDADO M. PERALTA

ROBERTO A. ABAD

Associate Justice

Associate Justice

Acting Chairperson

JOSE PORTUGAL PEREZ

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

DIOSDADO M. PERALTA
Associate Justice
Acting Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Acting
Chairpersons Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.

RENATO C. CORONA
Chief Justice

Designated as additional member in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order No. 1185
dated February 10, 2012.

Designated as Acting Chairperson, per Special Order No. 1184 dated February 10, 2012.

Designated as additional member in lieu of Associate Justice Estela M. Perlas-Bernabe, per Special Order No. 1192
dated February 10, 2012.
[1]
Rollo, pp. 33-46. Penned by Associate Justice Celia C. Librea-Leagogo and concurred in by Associate Justice Bienvenido L.
Reyes (now a member of this Court) and Associate Justice Stephen C. Cruz.
[2]
Id. at 30-31.
[3]
Id. at 77-86.
[4]
Docketed as NLRC LAC No. 02-000346-09(8) and NLRC NCR CN. 05-07424-08.
[5]
Rollo, p. 78.
[6]
Decision of LA, id. at 88.
[7]
Id. at 87.
[8]
Id. at 78.
[9]
Id. at 92-93.
[10]
Id. at 80.
[11]
Id. at 86.
[12]
Id. at 42.
[13]
Id. at 44.
[14]
Id. at 16.
[15]
Id. at 20.
[16]
Id.
[17]
489 Phil. 44 (2005).
[18]
Dealco Farms v. NLRC, G.R. No. 153192, January 30, 2009, 577 SCRA 280.
[19]
Rollo, pp. 207-220.
[20]
Id. at 209.
[21]
Id. at 211.
[22]
G.R. No. 155731, September 3, 2007, 532 SCRA 56.

[23]

Respondents Comment, rollo, p. 212.

Id. at 215-216.
[25]
Id. at 216.
[26]
Masing and Sons Development Corporation and Crispin Chan v. Gregorio P. Rogelio, G.R. No. 161787, April 27, 2011.
[27]
Id., citing Opulencia Ice Plant and Storage v. NLRC, G.R. No. 98368, December 15, 1993, 228 SCRA 473, 478.
[28]
The rules of procedure and evidence prevailing in courts of law and equity shall not be controlling and the Commission shall
use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of
law or procedure, all in the interest of due process.
[29]
Salvador Lacorte v. Hon. Amado G. Inciong, 248 Phil. 232 (1988), citing Gelmart Industries [Phil.] Inc. v. Leogardo, Jr., 239
Phil. 386 (1987).
[30]
People's Broadcasting (Bombo Radyo Phils., Inc.) v. The Secretary of the Department of Labor and Employment, G.R. No.
179652, May 8, 2009, 587 SCRA 724, citing Opulencia Ice Plant and Storage v. NLRC, G.R. No. 98368, December 15, 1993,
228 SCRA 473 and Insular Life Assurance Co., Ltd. Employees Association-Natu v. Insular Life Assurance Co., Ltd., 166 Phil.
505 (1977).
[31]
Id.
[32]
Jebsens Maritime Inc., represented by Ms. Arlene Asuncion and/or Alliance Marine Services, Ltd. v. Enrique Undag, G.R.
No. 191491, December 14, 2011.
[33]
Alex C. Cootauco v. MMS Phil. Maritime Services, Inc., Ms. Mary C. Maquilan and/or MMS Co. Ltd., G.R. No. 184722,
March 15, 2010, 615 SCRA 529, 544-545.
[34]
Rollo, p. 126.
[24]

[35]

Avelino Lambo and Vicente Belocura v. NLRC and J.C. Tailor Shop and/or Johnny Co., 375 Phil. 855 (1999), citing Makati
Haberdashery, Inc. v. NLRC, 259 Phil. 52 (1989).
[36]
Dionisio C. Ladignon v. Court of Appeals and Luzviminda C. Dimaun, 390 Phil. 1161 (2000), citing Heirs of Gregorio v.
Court of Appeals, 360 Phil. 753 (1998).
[37]
Elias Villuga v. NLRC, G.R. No. L-75038, August 23, 1993, 225 SCRA 537, citing Dy Keh Beng v. International Labor and
Marine Union of the Philippines, 179 Phil. 131 (1979).
[38]
Avelino Lambo and Vicente Belocura v. NLRC and J.C. Tailor Shop and/or Johnny Co., supra note 35, citing Elias Villuga v.
NLRC, G.R. No. L-75038, August 23, 1993, 225 SCRA 537.
[39]
Philippine Rural Reconstruction Movement (PRRM) v. Virgilio E. Pulgar, G.R. No. 169227, July 5, 2010, 623 SCRA 244,
257.

THIRD DIVISION

[G.R. No. 159121. February 3, 2005]

PAMPLONA
PLANTATION
COMPANY,
INC.
and/or
JOSE
LUIS
BONDOC, petitioners, vs. RODEL TINGHIL, MARYGLENN SABIHON,
ESTANISLAO BOBON, CARLITO TINGHIL, BONIFACIO TINGHIL, NOLI
TINGHIL, EDGAR TINGHIL, ERNESTO ESTOMANTE, SALLY TOROY,
BENIGNO TINGHIL JR., ROSE ANN NAPAO, DIOSDADO TINGHIL,
ALBERTO
TINGHIL,
ANALIE
TINGHIL,
and
ANTONIO
ESTOMANTE, respondents.
DECISION
PANGANIBAN, J.:

To protect the rights of labor, two corporations with identical directors, management, office
and payroll should be treated as one entity only. A suit by the employees against one corporation
should be deemed as a suit against the other. Also, the rights and claims of workers should not
be prejudiced by the acts of the employer that tend to confuse them about its corporate identity.
The corporate fiction must yield to truth and justice.

The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to annul the
January 31, 2003 Decision[2] and the June 17, 2003 Resolution[3] of the Court of Appeals (CA) in
CA-GR SP No. 62813. The assailed Decision disposed as follows:

WHEREFORE, in view of the foregoing, the petition is GRANTED. The assailed decision
of public respondent NLRC dated 19 July 2000 [is] REVERSEDand SET ASIDE and a new
one entered DIRECTING private respondents to reinstate petitioners, except Rufino Bacubac,
Felix Torres and Antonio Canolas, to their former positions without loss of seniority rights plus
payment of full backwages. However, if reinstatement is no longer feasible, a one-month salary
for every year of service shall be paid the petitioners as ordered by the Labor Arbiter in his
decision dated 31 August 1998 plus payment of full backwages computed from date of illegal
dismissal to the finality of this decision.[4]
The Decision[5] of the National Labor Relations Commission (NLRC),[6] reversed by the CA,
disposed as follows:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED, and
another one entered DISMISSING the complaint.[7]
The June 17, 2003 Resolution denied petitioners Motion for Reconsideration.

The Facts
The CA summarized the antecedents as follows:

Sometime in 1993, [Petitioner] Pamplona Plantations Company, Inc. (company for brevity)
was organized for the purpose of taking over the operations of the coconut and sugar plantation
of Hacienda Pamplona located in Pamplona, Negros Oriental. It appears that Hacienda
Pamplona was formerly owned by a certain Mr. Bower who had in his employ several
agricultural workers.
When the company took over the operation of Hacienda Pamplona in 1993, it did not absorb
all the workers of Hacienda Pamplona. Some, however, were hired by the company during
harvest season as coconut hookers or sakador, coconut filers, coconut haulers, coconut
scoopers or lugiteros, and charcoal makers.
Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the purpose
of engaging in the business of operating tourist resorts, hotels, and inns, with complementary
facilities, such as restaurants, bars, boutiques, service shops, entertainment, golf courses, tennis
courts, and other land and aquatic sports and leisure facilities.
On 15 December 1996, the Pamplona Plantation Labor Independent Union (PAPLIU)
conducted an organizational meeting wherein several [respondents] who are either union
members or officers participated in said meeting.
Upon learning that some of the [respondents] attended the said meeting, [Petitioner] Jose Luis
Bondoc, manager of the company, did not allow [respondents] to work anymore in the
plantation.
Thereafter, on various dates, [respondents] filed their respective complaints with the NLRC,
Sub-Regional Arbitration Branch No. VII, Dumaguete City against [petitioners] for unfair labor
practice, illegal dismissal, underpayment, overtime pay, premium pay for rest day and holidays,
service incentive leave pay, damages, attorneys fees and 13th month pay.
On 09 October 1997, [respondent] Carlito Tinghil amended his complaint to implead
Pamplona Plantation Leisure Corporation x x x.
On 31 August 1998, Labor Arbiter Jose G. Gutierrez rendered a decision finding [respondents],
except Rufino Bacubac, Antonio Caolas and Felix Torres who were complainants in another
case, to be entitled to separation pay.
xxx

xxx

xxx

[Petitioners] appealed the Labor Arbiters decision to [the] NLRC. In the assailed decision
dated 19 July 2000, the NLRCs Fourth Division reversed the Labor Arbiter, ruling that
[respondents], except Carlito Tinghil, failed to implead Pamplona Plantation Leisure
Corporation, an indispensable party and that there exist no employer-employee relation
between the parties.
xxx

xxx

xxx

[Respondents] filed a motion for reconsideration which was denied by [the] NLRC in a
Resolution dated 06 December 2000.[8]
Respondents elevated the case to the CA via a Petition for Certiorari under Rule 65 of the
Rules of Court.

Ruling of the Court of Appeals

Guided by the fourfold test for determining the existence of an employer-employee
relationship, the CA held that respondents were employees of petitioner-company. Finding there
was a power to hire, the appellate court considered the admission of petitioners in their
Comment that they had hired respondents as coconut filers, coconut scoopers, charcoal makers,
or as pieceworkers. The fact that respondents were paid by piecework did not mean that they
were not employees of the company. Further, the CA ruled that petitioners necessarily exercised
control over the work they performed, since the latter were working within the premises of the
plantation. According to the CA, the mere existence -- not necessarily the actual exercise -- of the
right to control the manner of doing work sufficed to meet the fourth element of an employeremployee relation.
The appellate court also held that respondents were regular employees, because the tasks
they performed were necessary and indispensable to the operation of the company. Since there
was no compliance with the twin requirements of a valid and/or authorized cause and of
procedural due process, their dismissal was illegal.
Hence, this Petition.[9]

Issues
In their Memorandum, petitioners submit the following issues for our consideration:

1. Whether or not the finding of the Court of Appeals that herein respondents are
employees of Petitioner Pamplona Plantation Company, Inc. is contrary to the
admissions of the respondents themselves.
2. Whether or not the Court of Appeals has decided in a way not in accord with law and
jurisprudence, and with grave abuse of discretion, in not dismissing the respondents
complaint for failure to implead Pamplona Plantation Leisure Corp., which is an
indispensable party to this case.
3. Whether or not the Court of Appeals has decided in a way not in accord with law and
jurisprudence, and with grave abuse of discretion in ordering reinstatement or payment of
separation pay and backwages to the respondents, considering the lack of employeremployee relationship between petitioner and respondents.[10]
The main issue raised is whether the case should be dismissed for the non-joinder of the
Pamplona Plantation Leisure Corporation. The other issues will be taken up in the discussion of
the main question.
The Courts Ruling
The Petition lacks merit.

Preliminary Issue:
Factual Matters
Section 1 of Rule 45 of the Rules of Court states that only questions of law are entertained in
appeals by certiorari to the Supreme Court. However, jurisprudence has recognized several

exceptions in which factual issues may be resolved by this Court:[11] (1) the legal conclusions
made by the lower tribunal are speculative;[12] (2) its inferences are manifestly
mistaken,[13] absurd, or impossible; (3) the lower court committed grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts;[14] (5) the findings of fact of the lower tribunals are
conflicting;[15] (6) the CA went beyond the issues; (7) the CAs findings are contrary to the admissions of
the parties;[16] (8) the CA manifestly overlooked facts not disputed which, if considered, would justify a
different conclusion; (9) the findings of fact are conclusions without citation of the specific evidence on
which they are based; and (10) when the findings of fact of the CA are premised on the absence of
evidence but such findings are contradicted by the evidence on record.[17]
The very same reason that constrained the appellate court to review the factual findings of the
NLRC impels this Court to take its own look at the facts. Normally, the Supreme Court is not a
trier of facts.[18] However, since the findings of the CA and the NLRC on this point were conflicting,
we waded through the records to find out if there was basis for the formers reversal of the NLRCs
Decision. We shall discuss our factual findings together with our review of the main issue.

Main Issue:
Piercing the Corporate Veil
Petitioners contend that the CA should have dismissed the case for the failure of respondents
(except Carlito Tinghil) to implead the Pamplona Plantation Leisure Corporation, an indispensable
party, for being the true and real employer. Allegedly, respondents admitted in their Affidavits
dated February 3, 1998,[19] that they had been employed by the leisure corporation and/or
engaged to perform activities that pertained to its business.
Further, as the NLRC allegedly noted in their individual Complaints, respondents specifically
averred that they had worked in the golf course and performed related jobs in the recreational
facilities of the leisure corporation. Hence, petitioners claim that, as a sugar and coconut
plantation company separate and distinct from the Pamplona Plantation Leisure Corporation, the
petitioner-company is not the real party in interest.
We are not persuaded.
An examination of the facts reveals that, for both the coconut plantation and the golf course,
there is only one management which the laborers deal with regarding their work.[20] A portion of
the plantation (also called Hacienda Pamplona) had actually been converted into a golf course
and other recreational facilities. The weekly payrolls issued by petitioner-company bore the name
Pamplona Plantation Co., Inc.[21] It is also a fact that respondents all received their pay from the
same person, Petitioner Bondoc -- the managing director of the company. Since the workers were
working for a firm known as Pamplona Plantation Co., Inc., the reason they sued their employer
through that name was natural and understandable.
True, the Petitioner Pamplona Plantation Co., Inc., and the Pamplona Plantation Leisure
Corporation appear to be separate corporate entities. But it is settled that this fiction of law cannot
be invoked to further an end subversive of justice.[22]
The principle requiring the piercing of the corporate veil mandates courts to see through the
protective shroud that distinguishes one corporation from a seemingly separate one. [23] The
corporate mask may be removed and the corporate veil pierced when a corporation is the mere
alter ego of another.[24] Where badges of fraud exist, where public convenience is defeated, where
a wrong is sought to be justified thereby, or where a separate corporate identity is used to evade
financial obligations to employees or to third parties,[25] the notion of separate legal entity should
be set aside[26] and the factual truth upheld. When that happens, the corporate character is not
necessarily abrogated.[27] It continues for other legitimate objectives. However, it may be pierced
in any of the instances cited in order to promote substantial justice.
In the present case, the corporations have basically the same incorporators and directors and
are headed by the same official. Both use only one office and one payroll and are under one
management. In their individual Affidavits, respondents allege that they worked under the

supervision and control of Petitioner Bondoc -- the common managing director of both the
petitioner-company and the leisure corporation. Some of the laborers of the plantation also work
in the golf course.[28] Thus, the attempt to make the two corporations appear as two separate
entities, insofar as the workers are concerned, should be viewed as a devious but obvious means
to defeat the ends of the law. Such a ploy should not be permitted to cloud the truth and
perpetrate an injustice.
We note that this defense of separate corporate identity was not raised during the
proceedings before the labor arbiter. The main argument therein raised by petitioners was their
alleged lack of employer-employee relationship with, and power of control over, the means and
methods of work of respondents because of the seasonal nature of the latters work.[29]
Neither was the issue of non-joinder of indispensable parties raised in petitioners appeal
before the NLRC.[30] Nevertheless, in its Decision[31] dated July 19, 2000, the Commission
concluded that the plantation company and the leisure corporation were two separate and distinct
corporations, and that the latter was an indispensable party that should have been impleaded.
We quote below pertinent portions of that Decision:

Respondent posits that it is engaged in operating and maintaining sugar and coconut
plantation. The positions of complainants could only be determined through their individual
complaints. Yet all complainants alleged in their affidavits x x x that they were working at the
golf course. Worthy to note that only Carlito Tinghil amended his complaint to include
Pamplona Leisure Corporation, which respondents maintain is a separate corporation
established in 1995. Thus, xxx Pamplona Plantation Co., Inc. and Pamplona Leisure
Corporation are two separate and distinct corporations. Except for Carlito Tinghil the
complainants have the wrong party respondent. Pamplona Leisure Corporation is an
indispensable party without which there could be no final determination of the case.[32]
Indeed, it was only after this NLRC Decision was issued that the petitioners harped on the
separate personality of the Pamplona Plantation Co., Inc., vis--vis the Pamplona Plantation
Leisure Corporation.
As cited above, the NLRC dismissed the Complaints because of the alleged admission of
respondents in their Affidavits that they had been working at the golf course. However, it failed to
appreciate the rest of their averments. Just because they worked at the golf course did not
necessarily mean that they were not employed to do other tasks, especially since the golf course
was merely a portion of the coconut plantation. Even petitioners admitted that respondents had
been hired as coconut filers, coconut scoopers or charcoal makers. [33] Consequently, NLRCs
conclusion derived from the Affidavits of respondents stating that they were employees of the
Pamplona Plantation Leisure Corporation alonewas the result of an improper selective
appreciation of the entire evidence.
Furthermore, we note that, contrary to the NLRCs findings, some respondents indicated that
their employer was the Pamplona Plantation Leisure Corporation, while others said that it was the
Pamplona Plantation Co., Inc. But in all these Affidavits, both the leisure corporation and
petitioner-company were identified or described as entities engaged in the development and
operation of sugar and coconut plantations, as well as recreational facilities such as a golf course.
These allegations reveal that petitioner successfully confused the workers as to who their true and
real employer was. All things considered, their faulty belief that the plantation company and the
leisure corporation were one and the same can be attributed solely to petitioners. It would
certainly be unjust to prejudice the claims of the workers because of the misleading actions of
their employer.

Non-Joinder of Parties

Granting for the sake of argument that the Pamplona Plantation Leisure Corporation is an
indispensable party that should be impleaded, NLRCs outright dismissal of the Complaints was
still erroneous.
The non-joinder of indispensable parties is not a ground for the dismissal of an action. [34] At
any stage of a judicial proceeding and/or at such times as are just, parties may be added on the
motion of a party or on the initiative of the tribunal concerned. [35] If the plaintiff refuses to implead
an indispensable party despite the order of the court, that court may dismiss the complaint for the
plaintiffs failure to comply with the order. The remedy is to implead the non-party claimed to be
indispensable.[36] In this case, the NLRC did not require respondents to implead the Pamplona
Plantation Leisure Corporation as respondent; instead, the Commission summarily dismissed the
Complaints.
In any event, there is no need to implead the leisure corporation because, insofar as
respondents are concerned, the leisure corporation and petitioner-company are one and the same
entity. Salvador v. Court of Appeals[37] has held that this Court has full powers, apart from that
power and authority which is inherent, to amend the processes, pleadings, proceedings and
decisions by substituting as party-plaintiff the real party-in-interest.
In Alonso v. Villamor,[38] we had the occasion to state thus:

There is nothing sacred about processes or pleadings, their forms or contents. Their sole
purpose is to facilitate the application of justice to the rival claims of contending parties. They
were created, not to hinder and delay, but to facilitate and promote, the administration of justice.
They do not constitute the thing itself, which courts are always striving to secure to litigants.
They are designed as the means best adapted to obtain that thing. In other words, they are a
means to an end. When they lose the character of the one and become the other, the
administration of justice is at fault and courts are correspondingly remiss in the performance of
their obvious duty.
The controlling principle in the interpretation of procedural rules is liberality, so that they may
promote their object and assist the parties in obtaining just, speedy and inexpensive determination
of every action and proceeding.[39] When the rules are applied to labor cases, this liberal
interpretation must be upheld with even greater vigor.[40] Without in any way depriving the
employer of its legal rights, the thrust of statutes and rules governing labor cases has been to
benefit workers and avoid subjecting them to great delays and hardships. This intent holds
especially in this case, in which the plaintiffs are poor laborers.

Employer-Employee Relationship
Petitioners insist that respondents are not their employees, because the former exercised no
control over the latters work hours and method of performing tasks. Thus, petitioners contend
that under the control test, the workers were independent contractors.
We disagree. As shown by the evidence on record, petitioners hired respondents, who
performed tasks assigned by their respective officers-in-charge, who in turn were all under the
direct supervision and control of Petitioner Bondoc. These allegations are contained in the
workers Affidavits, which were never disputed by petitioners. Also uncontroverted are the
payrolls bearing the name of the plantation company and signed by Petitioner Bondoc. Some of
these payrolls include the time records of the employees. These documents prove that petitionercompany exercised control and supervision over them.
To operate against the employer, the power of control need not have been actually exercised.
Proof of the existence of such power is enough.[41] Certainly, petitioners wielded that power to hire
or dismiss, as well as to check on the progress and the quality of work of the laborers.

Jurisprudence provides other equally important considerations [42] that support the conclusion
that respondents were not independent contractors. First, they cannot be said to have carried on
an independent business or occupation.[43] They are not engaged in the business of filing,
scooping and hauling coconuts and/or operating and maintaining a plantation and a golf
course. Second, they do not have substantial capital or investment in the form of tools,
equipment, machinery, work premises, and other implements needed to perform the job, work or
service under their own account or responsibility.[44] Third, they have been working exclusively for
petitioners for several years. Fourth, there is no dispute that petitioners are in the business of
growing coconut trees for commercial purposes. There is no question, either, that a portion of the
plantation was converted into a golf course and other recreational facilities. Clearly, respondents
performed usual, regular and necessary services for petitioners business.
WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against
the petitioners.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

[1]

Rollo, pp. 3-31.

[2]

Annex A of Petition; id., pp. 32-44. Penned by Justice B. A. Adefuin-de la Cruz (Division chair) and concurred in
by Justices Mercedes Gozo-Dadole and Mariano C. del Castillo (members).

[3]

Annex B of Petition; id., p. 45.

[4]

CA Decision, pp. 12-13; id., pp. 43-44.

[5]

Penned by Commissioner Bernabe S. Batuhan and concurred in by Presiding Commissioner Irenea E. Ceniza and
Commissioner Edgardo M. Enerlan; id., pp. 109-115.

[6]

Fourth Division, Cebu City.

[7]

Annex T of Petition, p. 6; id., p. 114.

[8]

CA Decision, pp. 2-5; id., pp. 33-36.

[9]

This case was deemed submitted for decision on September 29, 2004, upon this Courts receipt of petitioners
Memorandum, signed by Attys. Jefferson M. Marquez and Glenda S. Bonghanoy. Respondents
Memorandum, signed by Attys. Francisco Dy Yap and Whelma F. Siton-Yap, was received by this Court on
September 2, 2004.

[10]

Petitioners Memorandum, p. 8; rollo, p. 474. Original in uppercase.

[11]

Fuentes v. CA, 335 Phil. 1163, February 26, 1997; Sarmiento v. CA, 353 Phil. 834, 846, July 2, 1998; Alsua-Betts
v. CA, 92 SCRA 332, July 30, 1979

[12]

Philippine Deposit Insurance Corporation v. CA, 347 Phil. 741, December 22, 1997; People v. Milan, 330 Phil. 493,
July 28, 1999; Yobido v. CA, 346 Phil. 1, October 17, 1997.

[13]

Luna v. Linatoc, 74 Phil. 15, October 28, 1942.

[14]

De la Cruz v. Sosing, 94 Phil. 26, 28, November 27, 1953.

[15]

Social Security System v. CA, 348 SCRA 1, December 14, 2000.

[16]

Rizal Commercial Banking Corporation v. Alfa RTW Manufacturing Corporation, 420 Phil. 702, November 14,
2001.

[17]

De la Cruz v. Sosing, supra.

[18]

Far East Bank and Trust Co. v. CA, 326 Phil. 15, April 1, 1996.

[19]

Rollo, pp. 163-175.

[20]

See respondents Motion for Reconsideration; id., pp. 216-217.

[21]

Rollo, pp. 70-99.

[22]

Tomas Lao Construction v. NLRC, 344 Phil. 268, September 5, 1997.

[23]

Lim v. CA, 380 Phil. 60, January 24, 2000.

[24]

Heirs of Ramon Durano Sr. v. Uy, 344 SCRA 238, October 24, 2000; Tan Boon Bee and Co. v. Jarencio, 163
SCRA 205, June 30, 1988.

[25]

Claparols v. Court of Industrial Relations, 65 SCRA 613, July 31, 1975; reiterated in Concept Builders, Inc. v.
NLRC, 257 SCRA 149, May 29, 1996.

[26]

De Leon v. NLRC, 358 SCRA 274, May 30, 2001; Lim v. CA, supra.

[27]

Reynoso IV v. CA, 345 SCRA 335, November 22, 2000.

[28]

See Affidavits; rollo, pp. 163-175.

[29]

See petitioners Position Paper; id., pp. 61-69.

[30]

See petitioners Notice of Appeal and Memorandum on Appeal; id., pp. 196-206.

[31]

Id., pp. 208-214.

[32]

NLRC Decision, pp. 2-3; id., pp. 209-210.

[33]

See CA Decision, p. 6; id., p. 37.

[34]

Vesagas v. CA, 371 SCRA 508, December 5, 2001; Caruncho III v. COMELEC, 315 SCRA 693, September 30,
1999.

[35]

11, Rule 3 of the 1997 Rules of Court

[36]

Vesagas v. CA, supra; Caruncho III v. COMELEC, supra.

[37]

313 Phil. 36, April 5, 1995, per Davide Jr., J. (now CJ).

[38]

16 Phil. 315, 321, July 26, 1910, per Moreland, J.

[39]

2, Rule 1 of the Rules of Court.

[40]

Asian Transmission Corporation v. CA, GR No. 144664, March 15, 2004.

[41]

Vinoya v. NLRC, 324 SCRA 469, February 2, 2000; Religious of the Virgin Mary v. NLRC, 316 SCRA 614, October
13, 1999.

[42]

De los Santos v. NLRC, 372 SCRA 723, December 20, 2001; Vinoya v. NLRC, supra; Religious of the Virgin Mary
v. NLRC, supra; Lim v. NLR, 303 SCRA 432, February 19, 1999; Ponce v. NLRC, 293 SCRA 366, July 30,
1998.
Some factors are whether the contractor is carrying on an independent business; the nature and
extent of work; the term and duration of the relationship; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

[43]

Vinoya v. NLRC, supra; see also Neri v. NLRC, 224 SCRA 717, July 23, 1993.

[44]

De los Santos v. NLRC, supra; Vinoya v. NLRC, supra; Lim v. NLRC, 303 SCRA 432, February 19, 1999.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

TIMOTEO H. SARONA,

G.R. No. 185280

Petitioner,
Present:

CARPIO, J.,
- versus -

Chairperson,
PEREZ,
SERENO,
REYES, and

NATIONAL LABOR RELATIONS

BERNABE, JJ.

COMMISSION, ROYALE SECURITY

AGENCY (FORMERLY SCEPTRE
SECURITY AGENCY) and

Promulgated:

CESAR S. TAN,
Respondents.

January 18, 2012

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

DECISION

REYES, J.:

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

WHEREFORE, in view of the foregoing, the instant petition is PARTLY

GRANTED, though piercing of the corporate veil is hereby denied for lack of
merit. Accordingly, the assailed Decision and Resolution of the NLRC
respectively dated November 30, 2005 and January 31, 2006 are
hereby AFFIRMED as to the monetary awards.

SO ORDERED.

Factual Antecedents

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime
in April 1976, was asked by Karen Therese Tan (Karen), Sceptres Operation Manager, to
submit a resignation letter as the same was supposedly required for applying for a position at
Royale. The petitioner was also asked to fill up Royales employment application form, which
was handed to him by Royales General Manager, respondent Cesar Antonio Tan II (Cesar).3

After several weeks of being in floating status, Royales Security Officer, Martin Gono
(Martin), assigned the petitioner at Highlight Metal Craft, Inc. (Highlight Metal) from July 29,
2003 to August 8, 2003. Thereafter, the petitioner was transferred and assigned to Wide Wide
World Express, Inc. (WWWE, Inc.). During his assignment at Highlight Metal, the petitioner
used the patches and agency cloths of Sceptre and it was only
when he was posted at WWWE, Inc. that he started using those of Royale.4

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

On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit
for a short period from September 22, 2003 to September 30, 2003. Subsequently, when the
petitioner reported at Royales office on October 1, 2003, Martin informed him that he would no
longer be given any assignment per the instructions of Aida Sabalones-Tan (Aida), general
manager of Sceptre. This prompted him to file a complaint for illegal dismissal on October 4,
2003.6

In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the
petitioners favor and found him illegally dismissed. For being unsubstantiated, LA Gutierrez
denied credence to the respondents claim that the termination of the petitioners employment
relationship with Royale was on his accord following his alleged employment in another
company. That the petitioner was no longer interested in being an employee of Royale cannot be
presumed from his request for a certificate of employment, a claim which, to begin with, he
vehemently denies. Allegation of the petitioners abandonment is negated by his filing of a

complaint for illegal dismissal three (3) days after he was informed that he would no longer be
given any assignments. LA Gutierrez ruled:

In short, respondent wanted to impress before us that complainant abandoned his

employment. We are not however, convinced.

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

Abandonment of position is a matter of intention expressed

in clearly certain and unequivocal acts, however, an interim
employment does not mean abandonment. (Jardine Davis, Inc. vs.
NLRC, 225 SCRA 757).

In abandonment, there must be a concurrence of the

intention to abandon and some overt acts from which an employee
may be declared as having no more interest to work. (C. Alcontin
& Sons, Inc. vs. NLRC, 229 SCRA 109).

It is clear, deliberate and unjustified refusal to severe

employment and not mere absence that is required to constitute
abandonment. x x x (De Ysasi III vs. NLRC, 231 SCRA 173).

Aside from lack of proof showing that complainant has abandoned his
employment, the record would show that immediate action was taken in order to
protest his dismissal from employment. He filed a complaint [for] illegal dismissal
on October 4, 2004 or three (3) days after he was dismissed. This act, as declared
by the Supreme Court is inconsistent with abandonment, as held in the case of
Pampanga Sugar Development Co., Inc. vs. NLRC, 272 SCRA 737 where the
Supreme Court ruled:

The immediate filing of a complaint for [i]llegal [d]ismissal

by an employee is inconsistent with abandonment.
7

The respondents were ordered to pay the petitioner backwages, which LA Gutierrez
computed from the day he was dismissed, or on October 1, 2003, up to the promulgation of his
Decision on May 11, 2005. In lieu of reinstatement, the respondents were ordered to pay the
petitioner separation pay equivalent to his one (1) month salary in consideration of his tenure
with Royale, which lasted for only one (1) month and three (3) days. In this
regard, LA Gutierrez refused to pierce Royales corporate veil for purposes of factoring the
petitioners length of service with Sceptre in the computation of his separation pay. LA
Gutierrez ruled that Royales corporate personality, which is separate and distinct from that of
Sceptre, a sole proprietorship owned by the late Roso Sabalones (Roso) and later, Aida, cannot
be pierced absent clear and convincing evidence that Sceptre and Royale share the same
stockholders and incorporators and that Sceptre has complete control and dominion over the
finances and business affairs of Royale. Specifically:

To support its prayer of piercing the veil of corporate entity of respondent Royale,
complainant avers that respondent Royal (sic) was using the very same office of
SCEPTRE in C. Padilla St., Cebu City. In addition, all officers and staff of
SCEPTRE are now the same officers and staff of ROYALE, that all [the]
properties of SCEPTRE are now being owned by ROYALE and that ROYALE is
now occupying the property of SCEPTRE. We are not however, persuaded.

It should be pointed out at this juncture that SCEPTRE, is a single proprietorship.

Being so, it has no distinct and separate personality. It is owned by the late Roso T.
Sabalones. After the death of the owner, the property is supposed to be divided by
the heirs and any claim against the sole proprietorship is a claim against Roso T.
Sabalones. After his death, the claims should be instituted against the estate of
Roso T. Sabalones. In short, the estate of the late Roso T. Sabalones should have
been impleaded as respondent of this case.

Complainant wanted to impress upon us that Sceptre was organized into another
entity now called Royale Security Agency. There is however, no proof to this
assertion. Likewise, there is no proof that Roso T. Sabalones, organized his single
proprietorship business into a corporation, Royale Security Agency. On the
contrary, the name of Roso T. Sabalones does not appear in the Articles of
Incorporation. The names therein as incorporators are:

Bruno M. Kuizon [P]150,000.00

Wilfredo K. Tan 100,000.00

Karen Therese S. Tan 100,000.00

Cesar Antonio S. Tan 100,000.00
Gabeth Maria K. Tan 50,000.00

Complainant claims that two (2) of the incorporators are the granddaughters
of Roso T. Sabalones. This fact even give (sic) us further reason to conclude that
respondent Royal (sic) Security Agency is not an alter ego or conduit of
SCEPTRE. It is obvious that respondent Royal (sic) Security Agency is not owned
by the owner of SCEPTRE.

It may be true that the place where respondent Royale hold (sic) office is the
same office formerly used by SCEPTRE. Likewise, it may be true that the same
officers and staff now employed by respondent Royale Security Agency were the
same officers and staff employed by SCEPTRE. We find, however, that these
facts are not sufficient to justify to require respondent Royale to answer for the
liability of Sceptre, which was owned solely by the late Roso T. Sabalones. As we
have stated above, the remedy is to address the claim on the estate of Roso T.
Sabalones.
8

The respondents appealed LA Gutierrezs May 11, 2005 Decision to the NLRC, claiming
that the finding of illegal dismissal was attended with grave abuse of discretion. This appeal
was, however, dismissed by the NLRC in its November 30, 2005 Decision,9 the dispositive
portion of which states:

WHEREFORE, premises considered, the Decision of the Labor Arbiter

declaring the illegal dismissal of complainant is herebyAFFIRMED.

However[,] We modify the monetary award by limiting the grant of

backwages to only three (3) months in view of complainants very limited service
which lasted only for one month and three days.

1. Backwages - [P]15,600.00
2. Separation Pay - 5,200.00

3. 13th Month Pay - 583.34

[P]21,383.34 Attorneys Fees- 2,138.33
Total [P]23,521.67

The appeal of respondent Royal (sic) Security Agency is

hereby DISMISSED for lack of merit.

SO ORDERED.

10

The NLRC partially affirmed LA Gutierrezs May 11, 2005 Decision. It concurred with
the latters finding that the petitioner was illegally dismissed and the manner by which his
separation pay was computed, but modified the monetary award in the petitioners favor by
reducing the amount of his backwages from P95,600.00 to P15,600.00. The NLRC determined
the petitioners backwages as limited to three (3) months of his last monthly salary, considering
that his employment with Royale was only for a period for one (1) month and three (3) days,
thus:11

On the other hand, while complainant is entitled to backwages, We are aware that
his stint with respondent Royal (sic) lasted only for one (1) month and three (3)
days such that it is Our considered view that his backwages should be limited to
only three (3) months.

Backwages:

[P]5,200.00 x 3 months = [P]15,600.00

12

The petitioner, on the other hand, did not appeal LA Gutierrezs May 11, 2005 Decision but
opted to raise the validity of LA Gutierrezs adverse findings with respect to piercing Royales
corporate personality and computation of his separation pay in his Reply to the respondents

Memorandum of Appeal. As the filing of an appeal is the prescribed remedy and no aspect of
the decision can be overturned by a mere reply, the NLRC dismissed the petitioners efforts to
reverse LA Gutierrezs disposition of these issues. Effectively, the petitioner had already waived
his right to question LA Gutierrezs Decision when he failed to file an appeal within the
reglementary period. The NLRC held:

On the other hand, in complainants Reply to Respondents Appeal Memorandum

he prayed that the doctrine of piercing the veil of corporate fiction of respondent
be applied so that his services with Sceptre since 1976 [will not] be deleted. If
complainant assails this particular finding in the Labor Arbiters Decision,
complainant should have filed an appeal and not seek a relief by merely filing a
Reply to Respondents Appeal Memorandum.
13

Consequently, the petitioner elevated the NLRCs November 30, 2005 Decision to the CA by
way of a Petition for Certiorari under Rule 65 of the Rules of Court. On the other hand, the
respondents filed no appeal from the NLRCs finding that the petitioner was illegally dismissed.

The CA, in consideration of substantial justice and the jurisprudential dictum that an
appealed case is thrown open for the appellate courts review, disagreed with the NLRC and
proceeded to review the evidence on record to determine if Royale is Sceptres alter ego that
would warrant the piercing of its corporate veil.14 According to the CA, errors not assigned on
appeal may be reviewed as technicalities should not serve as bar to the full adjudication of
cases. Thus:

In Cuyco v. Cuyco, which We find application in the instant case, the Supreme
Court held:

In their Reply, petitioners alleged that their petition only raised the
sole issue of interest on the interest due, thus, by not filing their own
petition for review, respondents waived their privilege to bring
matters for the Courts review that [does] not deal with the sole issue
raised.

Procedurally, the appellate court in deciding the case shall consider

only the assigned errors, however, it is equally settled that the Court
is clothed with ample authority to review matters not assigned as
errors in an appeal, if it finds that their consideration is necessary to
arrive at a just disposition of the case.

Therefore, for full adjudication of the case, We have to primarily resolve the issue
of whether the doctrine of piercing the corporate veil be justly applied in order to
determine petitioners length of service with private respondents. (citations
omitted)
15

Nonetheless, the CA ruled against the petitioner and found the evidence he submitted to
support his allegation that Royale and Sceptre are one and the same juridical entity to be
wanting. The CA refused to pierce Royales corporate mask as one of the probative factors that
would justify the application of the doctrine of piercing the corporate veil is stock ownership by
one or common ownership of both corporations and the petitioner failed to present clear and
convincing proof that Royale and Sceptre are commonly owned or controlled. The relevant
portions of the CAs Decision state:

In the instant case, We find no evidence to show that Royale Security

Agency, Inc. (hereinafter Royale), a corporation duly registered with the
Securities and Exchange Commission (SEC) and Sceptre Security Agency
(hereinafter Sceptre), a single proprietorship, are one and the same entity.

Petitioner, who has been with Sceptre since 1976 and, as ruled by both the
Labor Arbiter and the NLRC, was illegally dismissed by Royale on October 1,
2003, alleged that in order to circumvent labor laws, especially to avoid payment
of money claims and the consideration on the length of service of its employees,
Royale was established as an alter ego or business conduit of Sceptre. To prove his
claim, petitioner declared that Royale is conducting business in the same office of
Sceptre, the latter being owned by the late retired Gen. Roso Sabalones, and was
managed by the latters daughter, Dr. Aida Sabalones-Tan; that two of Royales
incorporators are grandchildren [of] the late Gen. Roso Sabalones; that all the
properties of Sceptre are now owned by Royale, and that the officers and staff of
both business establishments are the same; that the heirs of Gen. Sabalones should
have applied for dissolution of Sceptre before the SEC before forming a new
corporation.

On the other hand, private respondents declared that Royale was

incorporated only on March 10, 2003 as evidenced by the Certificate of
Incorporation issued by the SEC on the same date; that Royales incorporators are
Bruino M. Kuizon, Wilfredo Gracia K. Tan, Karen Therese S. Tan, Cesar Antonio
S. Tan II and [Gabeth] Maria K. Tan.

Settled is the tenet that allegations in the complaint must be duly proven by
competent evidence and the burden of proof is on the party making the allegation.
Further, Section 1 of Rule 131 of the Revised Rules of Court provides:

SECTION 1. Burden of proof. Burden of proof is the duty

of a party to present evidence on the facts in issue necessary to
establish his claim or defense by the amount of evidence required by
law.

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

By way of this Petition, the petitioner would like this Court to revisit the computation of his
backwages, claiming that the same should be computed from the time he was illegally dismissed
until the finality of this decision.17 The petitioner would likewise have this Court review and
examine anew the factual allegations and the supporting evidence to determine if the CA erred
in its refusal to pierce Royales corporate mask and rule that it is but a mere continuation or
successor of Sceptre. According to the petitioner, the erroneous computation of his separation
pay was due to the CAs failure, as well as the NLRC and LA Gutierrez, to consider evidence
conclusively demonstrating that Royale and Sceptre are one and the same juridical entity. The
petitioner claims that since Royale is no more than Sceptres alter ego, it should recognize and
credit his length of service with Sceptre.18

The petitioner claimed that Royale and Sceptre are not separate legal persons for
purposes of computing the amount of his separation pay and other benefits under the Labor
Code. The piercing of Royales corporate personality is justified by several indicators that
Royale was incorporated for the sole purpose of defeating his right to security of tenure and
circumvent payment of his benefits to which he is entitled under the law: (i) Royale was holding
office in the same property used by Sceptre as its principal place of business;19(ii) Sceptre and
Royal have the same officers and employees;20 (iii) on October 14, 1994, Roso, the sole
proprietor of Sceptre, sold to Aida, and her husband, Wilfredo Gracia K. Tan (Wilfredo),21 the
property used by Sceptre as its principal place of business;22 (iv) Wilfredo is one of the
incorporators of Royale;23 (v) on May 3, 1999, Roso ceded the license to operate Sceptre issued
by the Philippine National Police to Aida;24 (vi) on July 28, 1999, the business name Sceptre
Security & Detective Agency was registered with the Department of Trade and Industry (DTI)
under the name of Aida;25 (vii) Aida exercised control over the affairs of Sceptre and Royale, as
she was, in fact, the one who dismissed the petitioner from employment;26 (viii) Karen, the
daughter of Aida, was Sceptres OperationManager and is one of the incorporators of
Royale;27 and (ix) Cesar Tan II, the son of Aida was one of Sceptres officers and is one of the
incorporators of Royale.28

In their Comment, the respondents claim that the petitioner is barred from questioning the
manner by which his backwages and separation pay were computed. Earlier, the petitioner
moved for the execution of the NLRCs November 30, 2005 Decision29 and the respondents paid
him the full amount of the monetary award thereunder shortly after the writ of execution was
issued.30 The respondents likewise maintain that Royales separate and distinct corporate
personality should be respected considering that the evidence presented by the petitioner fell
short of establishing that Royale is a mere alter ego of Sceptre.

The petitioner does not deny that he has received the full amount of backwages and
separation pay as provided under the NLRCs November 30, 2005 Decision.31 However, he
claims that this does not preclude this Court from modifying a decision that is tainted with grave
abuse of discretion or issued without jurisdiction.32

ISSUES

Considering the conflicting submissions of the parties, a judicious determination of their

respective rights and obligations requires this Court to resolve the following substantive issues:

a. Whether Royales corporate fiction should be pierced for the purpose of

compelling it to recognize the petitioners length of service with Sceptre and for
holding it liable for the benefits that have accrued to him arising from his
employment with Sceptre; and

b. Whether the petitioners backwages should be limited to his salary for

three (3) months.

OUR RULING

Because his receipt of the proceeds of the award

under the NLRCs November 30, 2005 Decision is
qualified and without prejudice to the CAs
resolution of his petition forcertiorari, the petitioner
is not barred from exercising his right to elevate the
decision of the CA to this Court.

Before this Court proceeds to decide this Petition on its merits, it is imperative to resolve the
respondents contention that the full satisfaction of the award under the NLRCs November 30,
2005 Decision bars the petitioner from questioning the validity thereof. The respondents submit
that they had paid the petitioner the amount of P21,521.67 as directed by the NLRC and this
constitutes a waiver of his right to file an appeal to this Court.

The respondents fail to convince.

The petitioners receipt of the monetary award adjudicated by the NLRC is not absolute,
unconditional and unqualified. The petitioners May 3, 2007 Motion for Release contains a
reservation, stating in his prayer that: it is respectfully prayed that the respondents and/or Great
Domestic Insurance Co. be ordered to RELEASE/GIVE the amount of P23,521.67 in favor of
the complainant TIMOTEO H. SARONA without prejudice to the outcome of the petition with
the CA.33

In Leonis Navigation Co., Inc., et al. v. Villamater, et al.,34 this Court ruled that the
prevailing partys receipt of the full amount of the judgment award pursuant to a writ of
execution issued by the labor arbiter does not
close or terminate the case if such receipt is qualified as without prejudice to the outcome of the
petition for certiorari pending with the CA.

Simply put, the execution of the final and executory decision or resolution
of the NLRC shall proceed despite the pendency of a petition forcertiorari, unless
it is restrained by the proper court. In the present case, petitioners already paid
Villamaters widow, Sonia, the amount ofP3,649,800.00, representing the total and
permanent disability award plus attorneys fees, pursuant to the Writ of Execution
issued by the Labor Arbiter. Thereafter, an Order was issued declaring the case as
"closed and terminated". However, although there was no motion for
reconsideration of this last Order, Sonia was, nonetheless, estopped from claiming
that the controversy had already reached its end with the issuance of the Order
closing and terminating the case. This is because the Acknowledgment Receipt she
signed when she received petitioners payment was without prejudice to the final
outcome of the petition for certiorari pending before the CA.
35

The finality of the NLRCs decision does not preclude the filing of a petition
for certiorari under Rule 65 of the Rules of Court. That the NLRC issues an entry of judgment
after the lapse of ten (10) days from the parties receipt of its decision 36 will only give rise to the
prevailing partys right to move for the execution thereof but will not prevent the CA from
taking cognizance of a petition forcertiorari on jurisdictional and due process
considerations.37 In turn, the decision rendered by the CA on a petition for certiorari may be
appealed to this Court by way of a petition for review on certiorari under Rule 45 of the Rules
of Court. Under Section 5, Article VIII of the Constitution, this Court has the power to review,
revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in x x x all cases in which only an error or

question of law is involved. Consistent with this constitutional mandate, Rule 45 of the Rules
of Court provides the remedy of an appeal by certiorari from decisions, final orders or
resolutions of the CA in any case, i.e., regardless of the nature of the action or proceedings
involved, which would be but a continuation of the appellate process over the original
case.38 Since an appeal to this Court is not an original and independent action but a continuation
of the proceedings before the CA, the filing of a petition for review under Rule 45 cannot be
barred by the finality of the NLRCs decision in the same way that a petition
for certiorari under Rule 65 with the CA cannot.

Furthermore, if the NLRCs decision or resolution was reversed and set aside for being issued
with grave abuse of discretion by way of a petition for certiorari to the CA or to this Court by
way of an appeal from the decision of the CA, it is considered void ab initio and, thus, had
never become final and executory.39

A Rule 45 Petition should be confined to questions of

law. Nevertheless, this Court has the power to
resolve a question of fact, such as whether a
corporation is a mere alter ego of another entity or
whether the corporate fiction was invoked for
fraudulent or malevolent ends, if the findings in
assailed decision is not supported by the evidence on
record or based on a misapprehension of facts.

The question of whether one corporation is merely an alter ego of another is purely one of
fact. So is the question of whether a corporation is a paper company, a sham or subterfuge or
whether the petitioner adduced the requisite quantum of evidence warranting the piercing of the
veil of the respondents corporate personality.40

As a general rule, this Court is not a trier of facts and a petition for review
on certiorari under Rule 45 of the Rules of Court must exclusively raise questions of law.
Moreover, if factual findings of the NLRC and the LA have been affirmed by the CA, this Court
accords them the respect and finality they deserve. It is well-settled and oft-repeated
that findings of fact of administrative agencies and quasi-judicial bodies, which have acquired

expertise because their jurisdiction is confined to specific matters, are generally accorded not
only respect, but finality when affirmed by the CA. 41

Nevertheless, this Court will not hesitate to deviate from what are clearly procedural
guidelines and disturb and strike down the findings of the CA and those of the labor tribunals if
there is a showing that they are unsupported by the evidence on record or there was a patent
misappreciation of facts. Indeed, that the impugned decision of the CA is consistent with the
findings of the labor tribunals does not per se conclusively demonstrate the correctness thereof.
By way of exception to the general rule, this Court will scrutinize the facts if only to rectify the
prejudice and injustice resulting from an incorrect assessment of the evidence presented.

A resolution of an issue that has supposedly become

final and executory as the petitioner only raised it in
his reply to the respondents appeal may be revisited
by the appellate court if such is necessary for a just
disposition of the case.

As above-stated, the NLRC refused to disturb LA Gutierrezs denial of the petitioners plea to
pierce Royales corporate veil as the petitioner did not appeal any portion of LA Gutierrezs
May 11, 2005 Decision.

In this respect, the NLRC cannot be accused of grave abuse of discretion. Under Section 4(c),
Rule VI of the NLRC Rules,42 the NLRC shall limit itself to reviewing and deciding only the
issues that were elevated on appeal. The NLRC, while not totally bound by technical rules of
procedure, is not licensed to disregard and violate the implementing rules it implemented. 43

Nonetheless, technicalities should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. Technical rules are not binding in
labor cases and are not to be applied strictly if the result would be detrimental to the working
man.44 This Court may choose not to encumber itself with technicalities and limitations
consequent to procedural rules if such will only serve as a hindrance to its duty to decide cases

judiciously and in a manner that would put an end with finality to all existing conflicts between
the parties.

Royale is a continuation or successor of Sceptre.

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

succession and such powers, attributes, and properties expressly authorized by law or incident to
its existence. It has a personality separate and distinct from the persons composing it, as well as
from any other legal entity to which it may be related. This is basic.45

Equally well-settled is the principle that the corporate mask may be removed or the
corporate veil pierced when the corporation is just an alter ego of a person or of another
corporation. For reasons of public policy and in the interest of justice, the corporate veil will
justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed
against third persons.46

Hence, any application of the doctrine of piercing the corporate veil should be done with
caution. A court should be mindful of the milieu where it is to be applied. It must be certain that
the corporate fiction was misused to such an extent that injustice, fraud, or crime was committed
against another, in disregard of rights. The wrongdoing must be clearly and convincingly
established; it cannot be presumed. Otherwise, an injustice that was never unintended may result
from an erroneous application.47

Whether the separate personality of the corporation should be pierced hinges on obtaining
facts appropriately pleaded or proved. However, any piercing of the corporate veil has to be
done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is
misused or when necessary in the interest of justice. After all, the concept of corporate entity
was not meant to promote unfair objectives.48

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely:
1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion
of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong,
protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce
since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as
to make it merely an instrumentality, agency, conduit or adjunct of another corporation. 49

In this regard, this Court finds cogent reason to reverse the CAs findings. Evidence
abound showing that Royale is a mere continuation or successor of Sceptre and fraudulent
objectives are behind Royales incorporation and the petitioners subsequent employment
therein. These are plainly suggested by events that the respondents do not dispute and which the
CA, the NLRC and LA Gutierrez accept as fully substantiated but misappreciated as insufficient
to warrant the use of the equitable weapon of piercing.

As correctly pointed out by the petitioner, it was Aida who exercised control and
supervision over the affairs of both Sceptre and Royale. Contrary to the submissions of the
respondents that Roso had been the only one in sole control of Sceptres finances and business
affairs, Aida took over as early as 1999 when Roso assigned his license to operate Sceptre on
May 3, 1999.50 As further proof of Aidas acquisition of the rights as Sceptres sole proprietor,
she caused the registration of the business name Sceptre Security & Detective Agency under
her name with the DTI a few months after Roso abdicated his rights to Sceptre in her favor.51 As
far as Royale is concerned, the respondents do not deny that she has a hand in its management
and operation and possesses control and supervision of its employees, including the petitioner.
As the petitioner correctly pointed out, that Aida was the one who decided to stop giving any
assignments to the petitioner and summarily dismiss him is an eloquent testament of the power
she wields insofar as Royales affairs are concerned. The presence of actual common control
coupled with the misuse of the corporate form to perpetrate oppressive or manipulative conduct
or evade performance of legal obligations is patent; Royale cannot hide behind its corporate
fiction.

Aidas control over Sceptre and Royale does not, by itself, call for a disregard of the
corporate fiction. There must be a showing that a fraudulent intent or illegal purpose is behind
the exercise of such control to warrant the piercing of the corporate veil.52 However, the manner
by which the petitioner was made to resign from Sceptre and how he became an employee of

Royale suggest the perverted use of the legal fiction of the separate corporate personality. It is
undisputed that the petitioner tendered his resignation and that he applied at Royale at the
instance of Karen and Cesar and on the impression they created that these were necessary for his
continued employment. They orchestrated the petitioners resignation from Sceptre and
subsequent employment at Royale, taking advantage of their ascendancy over the petitioner and
the latters lack of knowledge of his rights and the consequences of his actions. Furthermore,
that the petitioner was made to resign from Sceptre and apply with Royale only to be
unceremoniously terminated shortly thereafter leads to the ineluctable conclusion that there was
intent to violate the petitioners rights as an employee, particularly his right to security of
tenure. The respondents scheme reeks of bad faith and fraud and compassionate justice dictates
that Royale and Sceptre be merged as a single entity, compelling Royale to credit and recognize
the petitioners length of service with Sceptre. The respondents cannot use the legal fiction of a
separate corporate personality for ends subversive of the policy and purpose behind its
creation53 or which could not have been intended by law to which it owed its being.54

For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole

proprietorship. As ruled in Prince Transport, Inc., et al. v. Garcia, et al., it is the act of hiding
behind the separate and distinct personalities of juridical entities to perpetuate fraud, commit
illegal acts, evade ones obligations that the equitable piercing doctrine was formulated to
address and prevent:
55

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

Also, Sceptre and Royale have the same principal place of business. As early as October 14,
1994, Aida and Wilfredo became the owners of the property used by Sceptre as its principal
place of business by virtue of a Deed of Absolute Sale they executed with Roso. 57 Royale,
shortly after its incorporation, started to hold office in the same property. These, the respondents
failed to dispute.

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

Royale also claimed a right to the cash bond which the petitioner posted when he was still
with Sceptre. If Sceptre and Royale are indeed separate entities, Sceptre should have released
the petitioners cash bond when he resigned and Royale would have required the petitioner to
post a new cash bond in its favor.

Taking the foregoing in conjunction with Aidas control over Sceptres and Royales
business affairs, it is patent that Royale was a mere subterfuge for Aida. Since a sole
proprietorship does not have a separate and distinct personality from that of the owner of the
enterprise, the latter is personally liable. This is what she sought to avoid but cannot prosper.

Effectively, the petitioner cannot be deemed to have changed employers as Royale and
Sceptre are one and the same. His separation pay should, thus, be computed from the date he
was hired by Sceptre in April 1976 until the finality of this decision. Based on this Courts
ruling in Masagana Concrete Products, et al. v. NLRC, et al., the intervening period between
the day an employee was illegally dismissed and the day the decision finding him illegally
dismissed becomes final and executory shall be considered in the computation of his separation
pay as a period of imputed or putative service:
58

Separation pay, equivalent to one month's salary for every year of service, is
awarded as an alternative to reinstatement when the latter is no longer an option.
Separation pay is computed from the commencement of employment up to the
time of termination, including the imputed service for which the employee is
entitled to backwages, with the salary rate prevailing at the end of the period of
putative service being the basis for computation.
59

It is well-settled, even axiomatic, that if

reinstatement is not possible, the period covered in
the computation of backwages is from the time the
employee was unlawfully terminated until the
finality of the decision finding illegal dismissal.

With respect to the petitioners backwages, this Court cannot subscribe to the view that it should
be limited to an amount equivalent to three (3) months of his salary. Backwages is a remedy
affording the employee a way to recover what he has lost by reason of the unlawful
dismissal.60 In awarding backwages, the primordial consideration is the income that should have
accrued to the employee from the time that he was dismissed up to his reinstatement 61 and the
length of service prior to his dismissal is definitely inconsequential.

As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62 clarified in no

uncertain terms that if reinstatement is no longer possible, backwages should be computed from
the time the employee was terminated until the finality of the decision, finding the dismissal
unlawful.

Therefore, in accordance with R.A. No. 6715, petitioners are entitled on their full
backwages, inclusive of allowances and other benefits or their monetary
equivalent, from the time their actual compensation was withheld on them up to
the time of their actual reinstatement.

As to reinstatement of petitioners, this Court has already ruled that reinstatement is

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

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

Article 279 of the Labor Code, as amended by Section 34 of Republic Act

6715 instructs:

Art. 279. Security of Tenure. - In cases of regular employment, the

employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.

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

In case separation pay is awarded and reinstatement is no longer feasible, backwages shall be
computed from the time of illegal dismissal up to the finality of the decision should separation
pay not be paid in the meantime. It is the employees actual receipt of the full amount of his
separation pay that will effectively terminate the employment of an illegally dismissed
employee.66 Otherwise, the employer-employee relationship subsists and the illegally dismissed
employee is entitled to backwages, taking into account the increases and other benefits,
including the 13th month pay, that were received by his co-employees who are not dismissed.67 It
is the obligation of the employer to pay an illegally dismissed employee or worker the whole
amount of the salaries or wages, plus all other benefits and
bonuses and general increases, to which he would have been normally entitled had he not been
dismissed and had not stopped working.68

In fine, this Court holds Royale liable to pay the petitioner backwages to be computed
from his dismissal on October 1, 2003 until the finality of this decision. Nonetheless, the

amount received by the petitioner from the respondents in satisfaction of the November 30,
2005 Decision shall be deducted accordingly.

Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the
petitioners dismissal, which was tainted by bad faith and fraud, are in order. Moral damages
may be recovered where the dismissal of the employee was tainted by bad faith or fraud, or
where it constituted an act oppressive to labor, and done in a manner contrary to morals, good
customs or public policy while exemplary damages are recoverable only if the dismissal was
done in a wanton, oppressive, or malevolent manner.69

WHEREFORE, premises considered, the Petition is hereby GRANTED.

We REVERSE and SET ASIDE the CAs May 29, 2008 Decision in C.A.-G.R. SP No. 02127
and order the respondents to pay the petitioner the following minus the amount of (P23,521.67)
paid to the petitioner in satisfaction of the NLRCs November 30, 2005 Decision in NLRC Case
No. V-000355-05:

a) full backwages and other benefits computed from October 1, 2003 (the date Royale
illegally dismissed the petitioner) until the finality of this decision;

b) separation pay computed from April 1976 until the finality of this decision at the rate of one
month pay per year of service;

c) ten percent (10%) attorneys fees based on the total amount of the awards under (a)
and (b) above;

d) moral damages of Twenty-Five Thousand Pesos (P25,000.00); and

5. exemplary damages of Twenty-Five Thousand Pesos (P25,000.00).

This case is REMANDED to the labor arbiter for computation of the separation pay,
backwages, and other monetary awards due the petitioner.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

JOSE PORTUGAL PEREZ

MARIA LOURDES P. A. SERENO

Associate Justice

Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice
Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012.
1 Penned by Associate Justice Francisco P. Acosta, with Associate Justices Amy C. Lazaro-Javier and Florito S. Macalino,
concurring; rollo, pp. 19-30.
2 Id. at 29.
3 Id. at 3, 4 and 21.
4Id. at 4-5, 21.
5 Id. at 5-6.
6 Id. at 5-6, 21.
7 Id. at 55.
8 Id. at 53-54.
9 Id. at 58-65.
10 Id. at 64-65.
11 Id. at 64.
12 Id.
13 Id.
14 Id. at 24-25.
15 Id.
16 Id. at 26-27.
17 Id. at 13-15.
18 Id. at 7-13.
19 Id. at 5, 6 and 9.
20 Id. at 8-9.

21 Id. at 74-80.
22 Id. at 82.
23 Id. at 44.
24 Id. at 73-79.
25 Id. at 73-80.
26 Id. at 12.
27 Id. at 8, 44, 73-74.
28 Id.
29 Id. at 58-65.
30 Id. at 49.
31 Id. at 77.
32 Id.
33 Id. at 67.
34 G.R. No. 179169, March 3, 2010, 614 SCRA 182.
35 Id. at 193-194.
36 2011 NLRC Rules of Procedure, Rule VII, Section 14.
37Id.
38Cua, Jr. v. Tan, G.R. No. 181455-56, December 4, 2009, 607 SCRA , 686-687.
39 Leonis Navigation Co., Inc. v. Villamater, supra note 34 at 192.
40 China Banking Corporation v. Dyne-Sem Electronics Corporation, 527 Phil 80 (2006).
41 Reyes v. National Labor Relations Commission, G.R. No. 160233, August 8, 2007, 529 SCRA 499.
42 New Rules of Procedure of the National Labor Relations Commission (as amended by NLRC Resolution No. 01-02, Series of
2002).
43 Del Monte Philippines, Inc. v. NLRC, G.R. No. 87371, August 6, 1990, 188 SCRA 370.
44 Government Service Insurance System v. NLRC, G.R. No. 180045, November 17, 2010, 635 SCRA 258.
45 General Credit Corporation v. Alsons Development and Investment Corporation, G.R. No. 154975, January 29, 2007, 513
SCRA 237-238.
46 Philippine National Bank v. Andrada Electric Engineering Company, 430 Phil 894 (2002).
47 Id. at 894-895; citations omitted.
48 Supra note 45 at 238.
49 Id. at 238-239.

50 Rollo, p. 79.
51 Id. at 80.
52 NASECO Guards Association-PEMA (NAGA-PEMA) v. National Service Corporation, G.R. No. 165442, August 25, 2010,
629 SCRA 101.
53 Cf. Emiliano Cano Enterprises, Inc. v. CIR, et al., 121 Phil 276 (1965).
54 Land Bank of the Philippines v. Court of Appeals, 416 Phil 774, 783 (2001).
55 G.R. No. 167291, January 12, 2011, 639 SCRA 312.
56 Id. at 328.
57 Rollo, pp. 5, 54, 74 and 82.
58 372 Phil 459 (1999).
59 Id. at 481.
60 De Guzman v. National Labor Relations Commission, 371 Phil 202 (1999).
61 Velasco v. NLRC, et al., 525 Phil 749, 761-762, (2006).
62332 Phil 833 (1996).
63 Id. at 843.
64 G.R. No. 181913, March 5, 2010, 614 SCRA 342.
65 Id. at 350-351.
66 Rasonable v. NLRC, 324 Phil 191, 200 (1996).
67 Id.
68 St. Louis College of Tuguegarao v. NLRC, 257 Phil 1008 (1989), citing East Asiatic Co., Ltd. v. Court of Industrial Relations,
148-B Phil 401, 429 (1971).
69 Norkis Trading Co., Inc. v. NLRC, 504 Phil 709, 719-720 (2005).