[G.R. No. 129718. August 17, 1998.]
; ERROR OF JUDGMENT, NOT REVIEWABLE BY EXTRAORDINARY REMEDY
SANTO TOMAS UNIVERSITY HOSPITAL, petitioner, vs. CESAR ANTONIO Y. SURLA and
EVANGELINE SURLA, respondents.
Legaspi & Associates for petitioner.
Cruz, Cruz & Navarro III for private respondents.
SYNOPSIS
Respondent spouses sued petitioner hospital for damages before the Regional Trial Court of
Quezon City based on their claim that their son, Emmanuel Cesar Surla, while confined at the
said hospital for having been born prematurely, had accidentally fallen from his incubator
possibly causing serious harm on the child. In its answer with compulsory counterclaim,
petitioner asserted that respondents still owed to it hospital bills for their son's confinement
thereat, and claimed moral and exemplary damages, plus attorney's fees. Respondents sought
dismissal of petitioner's counterclaim on the ground that it was not accompanied with a
certificate of non-forum shopping pursuant to Supreme Court Administrative Circular No. 04-
94. Petitioner, however, contended that since its counterclaim was compulsory in nature, the
circular did not apply to it. The trial court dismissed petitioner's counterclaim as the circular
does not distinguish whether the counterclaim should be permissive or compulsory.
Petitioner's petition for certiorari with the Court of Appeals was dismissed. Hence, this appeal.
The Supreme Court ruled that the language of Circular No. 04-94 distinctly suggests that it is
primarily intended to cover an initiatory pleading or an incipient application of a party asserting
a claim for relief. The circular has not been contemplated to include a kind of claim which, by
its very nature as being auxiliary to the proceedings in the suit and as deriving its substantive
and jurisdictional support therefrom, can only be appropriately pleaded in the answer and not
remain outstanding for independent resolution except by the court where the main case pends.
The appealed decision was modified and the claim for moral, exemplary damages and
attorney's fees of petitioner was ordered reinstated.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; FINAL JUDGMENT OR ORDER,
DISTINGUISHED FROM INTERLOCUTORY ORDER. The concept of a final judgment or order.
distinguished from an interlocutory issuance, is that the former decisively puts to a close, or
disposes of, a case or a disputed issue leaving nothing else to be done by the court in respect
thereto. Once that judgment or order is rendered, the adjudicative task of the court is likewise
ended on the particular matter involved. An order is interlocutory, upon the other hand, if its
effects would only be provisional in character and would still leave substantial proceedings to
be further had by the issuing court in order to put the controversy to rest.
2. ID.; ID.; ID.
OF CERTIORARI. As a rule, errors of judgment, as well as of procedure, neither relating to
the jurisdiction of the court nor involving grave abuse of discretion, are not reviewable by the
extraordinary remedy of certiorari. As long as a court acts within its jurisdiction and does not
gravely abuse its discretion in the exercise thereof, any supposed error committed by it will
amount to nothing more than an error of judgment reviewable by a timely appeal and not
assailable by a special civil action of certiorari. This rule, however, is not a rigid and inflexible
technicality. This Court has not too infrequently given due course to a petition for certiorari
even when the proper remedy would have been an appeal, where valid and compelling
considerations could warrant such a recourse. Certiorari has been deemed to be justified, for
instance, in order to prevent irreparable damage and injury to a party where the trial judge
has capriciously and whimsically exercised his judgment, or where there may be danger of
clear failure of justice, or where an ordinary appeal would simply be inadequate to relieve a
party from the injurious effects of the judgment complained of.
3. ID.; FORUM-SHOPPING; ADMINISTRATIVE CIRCULAR NO. 04-94; PURPOSE. It
bears stressing, once again, that the real office of Administrative Circular No. 04-94, made
effective on 01 April 1994, is to curb the malpractice commonly referred to also as forum-
shopping. It is an act of a party against whom an adverse judgment has been rendered in one
forum of seeking and possibly getting a favorable opinion in another forum, other than by
appeal or the special civil action of certiorari or the institution of two or more actions or
proceedings grounded on the same cause on the supposition that one or the other court would
make a favorable disposition. The language of the circular distinctly suggests that it is primarily
intended to cover an initiatory pleading or an incipient application of a party asserting a claim
for relief.
4. ID.; ID.; ID.; APPLICATION IN CASE OF COUNTERCLAIM. It should not be too
difficult, foregoing rationale of the circular aptly taken, to sustain the view that the circular in
question has not, in fact, been contemplated to include a kind of claim which, but its very
nature as being auxiliary to the proceedings in the suit and as deriving its substantive and
jurisdictional support therefrom, can only be appropriately pleaded in the answer and not
remain outstanding for independent resolution except by the court where the main case pends.
Prescinding from the foregoing, the proviso in the second paragraph of Section 5, Rule 8, of
the 1997 Rules of Civil Procedure, i.e., that the violation of the anti-forum shopping rule "shall
not be curable by mere amendment . . . but shall be cause for the dismissal of the case without
prejudice," being predicated on the applicability of the need for a certification against forum
shopping, obviously does not include a claim which cannot be independently set up. Petitioner,
nevertheless, is entitled to a mere partial relief. The so-called "counterclaim" of petitioner
really consists of two segregative parts: (1) for unpaid hospital bills of respondents' son,
Emmanuel Surla, in the total amount of P82,632.10; and (2) for damages, moral and exemplary,
plus attorney's fees by reason of the alleged malicious and unfounded suit filed against it. It is
1
the second, not the first, claim that the Court here refers to as not being initiatory in
character and thereby not covered by the provisions of Administrative Circular No. 04-94.
DECISION
VITUG, J p:
Can a compulsory counterclaim pleaded in an Answer be dismissed on the ground of a failure
to accompany it with a certificate of non-forum shopping? This question is the core issue
presented for resolution in the instant petition. dctai
First, a factual background.
On 26 December 1995, respondent spouses filed a complaint for damages against petitioner
Santo Tomas University Hospital with the Regional Trial Court of Quezon City predicated on an
allegation by the spouses that their son, Emmanuel Cesar Surla, while confined at the said
hospital for having been born prematurely, had accidentally fallen from his incubator on 16
April 1995 possibly causing serious harm on the child. The case was raffled and assigned to
Branch 226 of the Regional Trial Court of Quezon City, presided over by the Hon Leah S.
Domingo-Regala, and there docketed Civil Case No, Q-95-25977.
On 28 February 1996, petitioner hospital filed its Answer with Compulsory Counterclaim
asserting that respondents still owed to it the amount of P82,632.10 representing hospital bills
for Emmanuel's confinement at the hospital and making a claim for moral and exemplary
damages, plus attorney's fees, by reason of the supposed unfounded and malicious suit filed
against it.
On 21 March 1996, petitioner received a copy of respondents Reply to Counterclaim, dated 12
March 1996, that sought, inter alia, the dismissal of petitioner's counterclaim for its non-
compliance with Supreme Court Administrative Circular No. 04-94 requiring that a complaint
and other initiatory pleadings, such as a counterclaim, cross- claim, third (fourth, etc.) party
complaint, be accompanied with a certificate of non-forum shopping.
In its Rejoinder to respondents Reply to Counterclaim, petitioner contended that the subject
circular should be held to refer only to a permissive counterclaim, an initiatory pleading not
arising out of, nor necessarily connected with, the subject matter of the plaintiff's claim but
not to a compulsory counterclaim spawned by the filing of a complaint and so intertwined
therewith and logically related thereto that it verily could not stand for independent
adjudication. Petitioner concluded that, since its counterclaim was compulsory in nature, the
subject circular did not perforce apply to it. 1
In its Order of 22 March 1996, the trial court dismissed petitioners counterclaim; it held:
"Administrative Circular No. 04-94 provides; among others:
"'The complaint and other initiatory pleadings referred to and subject of this Circular are the
original civil complaint, counterclaim, crossclaim, third (fourth, etc.) party complaint, or
complaint-in-intervention, petition or application wherein a party asserts his claim on (sic)
relief.
It will be noted that the counterclaim does not distinguish whether the same should be
permissive or compulsory, hence this Court finds that the counterclaim referred to in said
Circular covers both kinds.
WHEREFORE, the counterclaim of defendant is hereby DISMISSED. Let the pre-trial of this case
be set on May 14, 1996 at 2:00 o clock in the afternoon . . ." 2
On 16 April 1996, petitioner filed before the same court an Omnibus Motion seeking a
clarification of the courts Order of 14 March 1996 denying respondents' Reply to Counterclaim
and a reconsideration of the 22nd March 1996. Order dismissing the compulsory counterclaim.
3 On 22 April 1996, petitioner received a copy of the courts Order, dated 16 April 1996 which
pertinently read:
"WHEREFORE, the Order dated Mar h 14, 1996 is hereby clarified as follows:
"xxx xxx xxx
'The Reply to counterclaim filed by counsel for plaintiffs is hereby NOTED.
SO ORDERED.'
"The Motion for Reconsideration of this Courts Order dated March 22, 1996 is hereby DENIED.
The pre-trial conference set on May 14, 1996 will go on as scheduled." 4
Petitioner forthwith elevated the matter to the Court of Appeals by way of a special civil action
for certiorari under Rule 65, Revised Rules of Court, asseverating grave abuse of discretion by
public respondent in dismissing the compulsory counterclaim and in espousing the view that
Administrative Circular No. 04-94 should apply even to compulsory counterclaims.
The Court of Appeals, in its Decision promulgated on 12 March 1997, dismissed the petition
for certiorari; it opined:
". . . the Supreme Court circular aforequoted requires without equivocation that to the original
civil complaint, counterclaim, crossclaim, third (fourth, etc.) party complaint, or complaint-in-
intervention, petition, or application wherein a party asserts his claim for relief to be filed in
all courts and agencies other than the Supreme Court and the Court of Appeals must be
annexed and simultaneously filed therewith the required certification under oath to avoid
forum shopping or multiple filing of petitions and complaints. Non-compliance therewith is a
cause for the dismissal of the complaint, petition, application or other initiatory pleading.
Included in such initiatory pleading is the defendant's counterclaim, permissive or compulsory.
2
"A counterclaim partakes of the nature of a complaint and/or a cause of action against the
plaintiff in a case . . ., only this time it is the original defendant who becomes the plaintiff. It
stands on the same footing and is tested by the same rules as if it were an independent action."
5 or where an ordinary appeal would simply be inadequate to relieve a party from the injurious
In its present recourse, petitioner contends that-
"The Court of Appeals (has) committed serious, evident and palpable error in ruling that:
"5.1 THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 OF THE REVISED RULES
OF COURT IS UNAVAILING. THE DISMISSAL OF THE COMPULSORY, COUNTERCLAIM BEING A
FINAL ORDER, THE PETITIONER SHOULD HAVE TAKEN AN APPEAL THEREFROM; AND
"5.2 ADMINISTRATIVE CIRCULAR NO. 04-94 OF THIS HONORABLE COURT LIKEWISE
APPLIES TO BOTH KINDS OF COUNTERCLAIMS, PERMISSIVE AND COMPULSORY. 6
The petition is partly meritorious.
The appellate court ruled that the dismissal of the counterclaim, being a final order,
petitioner's remedy was to appeal therefrom and, such appeal being then available, the special
civil action of certiorari had been improperly filed.
The concept of a final judgment or order, distinguished from an interlocutory issuance, is that
the former decisively puts to a close, or disposes of, a case or a disputed issue leaving nothing
else to be done by the court in respect thereto. Once that judgment or order is rendered, the
adjudicative task of the court is likewise ended on the particular matter involved. 7 An order
is interlocutory, upon the other hand, if its effects would only be provisional in character and
would still leave substantial proceedings to be further had by the issuing court in order to put
the controversy to rest. 8
The order of the trial court dismissing petitioner's counterclaim was, a final order since the
dismissal, although based on a technicality, would require nothing else to be done by the court
with respect to that specific subject except only to await the possible filing during the
reglementary period of a motion for reconsideration or the taking of an appeal therefrom.
cdtai
As a rule, errors of judgment, as well as of procedure, neither relating to the jurisdiction of the
court nor involving grave abuse of discretion, are not reviewable by the extraordinary remedy
of certiorari. 9 As long as a court acts within its jurisdiction and does not gravely abuse its
discretion in the exercise thereof, any supposed error committed by it will amount to nothing
more than an error of judgment reviewable by a timely appeal and not assailable by a special
civil action of certiorari. 10 This rule, however, is not a rigid and inflexible technicality. This
Court has not too infrequently given due course to a petition for certiorari, even when the
proper remedy would have been an appeal, where valid and compelling considerations could
warrant such a recourse. 11 Certiorari has been deemed to be justified, for instance, in order
to prevent irreparable damage and injury to a party where the trial judge has capriciously and
whimsically exercised his judgment, or where there may be danger of clear failure of justice,
effects of the judgment complained of. 12
In the case at bar, an appeal from the dismissal of the counterclaim, although not totally
unavailable, could have well been ineffective, if not futile, as far as petitioner is concerned
since no single piece of evidence has yet been presented by it, that opportunity having been
foreclosed by the trial court, on the dismissed counterclaim which could form part of the
records to be reviewed by the appellate court. The object of procedural law is not to cause an
undue protraction of the litigation, but to facilitate the adjudication of conflicting claims and
to serve, rather than to defeat, the ends of justice. 13
The opinion of this Court on the next issue persuades it to accept, tested by the foregoing
disquisition, the instant petition for its consideration.
The pertinent provisions of Administrative Circular No. 04-94 provide:
"1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition,
application or other initiatory pleading shall certify under oath in such original pleading, or in
a sworn certification annexed thereto and simultaneously filed therewith, to the truth of the
following facts and undertakings: (a) he has not theretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending
in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if there is any
such action or proceeding which is either pending or may have been terminated, he must state
the status thereof; and (d) if he should thereafter learn that a similar action or proceeding has
been filed or is pending before the Supreme Court, the Court of Appeals or any other tribunal
or agency, he undertakes to report that fact within five (5) days therefrom to the court or
agency wherein the original pleading and sworn certification contemplated here have been
filed.
"The complaint and other initiatory pleadings referred to and subject of this Circular are the
original civil, complaint, counterclaim, cross-claim third (fourth, etc.) party complaint or
complaint-in-intervention, petition, or application wherein a party asserts his claim for relief ."
(Emphasis supplied).
It bears stressing, once again, that the real office Of Administrative Circular No. 04-94, made
effective on 01 April 1994, is to curb the malpractice commonly referred to also as forum-
shopping. It is an act of a party against whom an adverse judgment has been rendered in one
forum of seeking and possibly getting a favorable opinion In another forum, other than by
appeal or the special civil action of certiorari, or the institution Of two or more actions or
3
proceedings grounded on the same cause on the supposition that one or the other court would
make a favorable disposition. 14 The language of the circular distinctly suggests that it is
primarily intended to cover an initiatory pleading or an incipient application of a party asserting
a claim for relief. 15

It should not be too difficult, the foregoing rationale of the circular aptly taken, to sustain the
view that the circular in question has not, in fact, been contemplated to include a kind of claim
which, by its very nature as being auxiliary to the proceeding in the suit and as deriving its
substantive and jurisdictional support therefrom, can only be appropriately pleaded in the
answer and not remain outstanding for independent resolution except by the court where the
main case pends. Prescinding from the foregoing, the proviso in the second paragraph of
Section 5, Rule 8, of the 1997 Rules of Civil Procedure, i.e., that the violation of the anti-forum
shopping rule "shall not be curable by mere amendment . . . but shall be cause for the dismissal
of the case without prejudice," being predicated on the applicability of the need for a
certification against forum shopping, obviously does not include a claim which cannot be
independently set up.

Petitioner, nevertheless, is entitled to a mere partial relief. The so-called "counterclaim" of

petitioner really consists of two segregative parts: (1) for unpaid hospital bills of respondents
son, Emmanuel Surla, in the total amount of P82,632.10; and (2) for damages, moral and
exemplary, plus attorneys fees by reason of the alleged malicious and unfounded suit filed
against it. 16 It is the second, not the first, claim that the Court here refers to as not being
initiatory in character and thereby not covered by the provisions of Administrative Circular No.
04-94.

WHEREFORE, the appealed decision is hereby modified in that the claim for moral, exemplary
damages and attorney's fees in Civil Case No. Q-95-25977 of petitioner is ordered reinstated.
The temporary restraining order priorly issued by this Court is lifted. No costs. dctai

SO ORDERED.

Davide, Jr., Bellosillo, Panganiban, and Quisumbing, JJ ., concur.

4
[G.R. No. 139396. August 15, 2000.]
EFREN O. LOQUIAS, ANTONIO V. DIN, JR., ANGELITO L. MARTINEZ II, LOVELYN J. BIADOR,
GREGORIO FACIOL, JR., petitioners, vs. OFFICE OF THE OMBUDSMAN, and DR. JOSE PEPITO H.
DALOGDOG, DR. AURORA BEATRIZ A. ROMANO, MA. TERESITA C. ABASTAR, JESSICA S. ALLAN,
MA. TERESA ANIVERSARIO, respondents.
Din Sevill & Associates Law Offices for petitioners.
The Solicitor General for respondents.
SYNOPSIS
Private respondents charged herein petitioners with violation of Republic Act No. 3019 for
their alleged failure to give the salary increases and benefits provided in Section 20 of the
Magna Carta of Public Health Workers (R.A. 7305) and Local Budget Circulars Nos. 54, 54-A, 56,
60 and 64 for the health personnel of the local government of San Miguel, Zamboanga del Sur.
Respondent Ombudsman approved the Resolution of the Graft Investigation Officer of the
Office of the Ombudsman-Mindanao finding "probable cause to conclude that the crime of
violation of Section 3 (e) of RA 3019 has been committed by respondents." Petitioners filed a
Motion for Reconsideration of the Resolution alleging that there was no probable cause in
holding that they violated Section 3 (e) of the Anti-Graft and Corrupt Practices Act. They
alleged that the joint affidavits of waiver executed by private complainants have made the
case of the prosecution against the accused "too weak which could not even create a probable
cause." Petitioners further alleged that the order disapproving the dismissal of the case
constitutes a denial of their motion for reconsideration. Hence, the present petition.
Petitioners questioned the act of the Ombudsman in disapproving the resolution
recommending the dismissal of the criminal case. ICAcaH
The Supreme Court dismissed the petition for lack of merit. The Court ruled that it will not
interfere with the Ombudsman's exercise of his constitutionally mandated investigatory and
prosecutory powers and that it is beyond the ambit of the Court to review the exercise of
discretion of the Ombudsman in prosecuting or dismissing a complaint filed before it. Such
initiative and independence, are inherent in the Ombudsman who, beholden to no one, acts
as the champion of the people and preserver of the integrity of the public service. The Court
also ruled that a joint affidavit of desistance is not binding on the Office of the Ombudsman
and cannot prevail over the provision of law which categorically allows the Office of the
Ombudsman to investigate and prosecute on its own any act or omission of a public officer or
employee, office or agency which appeared to be illegal, unjust, improper or inefficient.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; CERTIFICATION AGAINST FORUM SHOPPING;
NOT COMPLIED WITH IN CASE AT BAR. We agree with the Solicitor General that the petition
is defective. Section 5, Rule 7 expressly provides that it is the plaintiff or principal party who
shall certify under oath that he has not commenced any action involving the same issues in
any court, etc. Only petitioner Din, the Vice-Mayor of San Miguel, Zamboanga del Sur, signed
the certification. There is no showing that he was authorized by his co-petitioners to represent
the latter and to sign the certification. It cannot likewise be presumed that petitioner Din knew,
to the best of his knowledge, whether his co-petitioners had the same or similar actions or
claims filed or pending. We find that substantial compliance will not suffice in a matter
involving strict observance by the rules. The attestation contained in the certification on non-
forum shopping requires personal knowledge by the party who executed the same. Petitioners
must show reasonable cause for failure to personally sign the certification. Utter disregard of
the rules cannot justly be rationalized by harking on the policy of liberal construction. HSTAcI
2. CONSTITUTIONAL LAW; ACCOUNTABILITY OF PUBLIC OFFICERS; OFFICE OF THE
OMBUDSMAN; THE COURT WILL NOT INTERFERE WITH THE OMBUDSMAN'S EXERCISE OF HIS
CONSTITUTIONALLY MANDATED INVESTIGATORY POWERS; IT IS BEYOND THE AMBIT OF THE
COURT TO REVIEW THE EXERCISE OF DISCRETION OF THE OMBUDSMAN IN PROSECUTING OR
DISMISSING A COMPLAINT. Moreover, petitioners question the act of the Ombudsman in
disapproving the resolution recommending the dismissal of the criminal case. We have ruled
that this Court will not interfere with the Ombudsman's exercise of his constitutionally
mandated investigatory and prosecutory powers. Otherwise stated, it is beyond the ambit of
this Court to review the exercise of discretion of the Ombudsman in prosecuting or dismissing
a complaint filed before it. Such initiative and independence are inherent in the Ombudsman
who, beholden to no one, acts as the champion of the people and preserver of the integrity of
the public service. In Venus vs. Desierto, this Court stated that it ordinarily does not determine
whether there exists reasonable ground to believe that a crime has been committed and that
the accused is probably guilty thereof and, thereafter, to file the corresponding information
with the appropriate courts.
3. ID.; ID.; ID.; AFFIDAVITS OF DESISTANCE OF COMPLAINANTS NOT BINDING ON THE
OFFICE OF THE OMBUDSMAN. With respect to the joint affidavits of waiver allegedly
executed by private complainants for the purpose of requesting the Special Prosecutor to
move for the dismissal of the criminal case, this Court ruled in Alba vs. Nitorreda that a joint
affidavit of desistance is not binding on the Office of the Ombudsman and cannot prevail over
the provision of law which categorically allows the Office of the Ombudsman to investigate
and prosecute on its own any act or omission of a public officer or employee, office or agency
which appears to be illegal, unjust, improper or inefficient. DIESaC
RESOLUTION
GONZAGA-REYES, J p:
Before this Court is a petition for certiorari under Rule 65 assailing the Resolution dated June
29, 1998 charging herein petitioners for violation of Section 3, paragraph e of R.A. No. 3019
5
(Anti-Graft and Corrupt Practices Act) which was issued by the Office of the Ombudsman for
Mindanao and approved by Ombudsman Aniano A. Desierto, and the Memorandum dated
June 11, 1999 wherein Ombudsman Desierto disapproved the recommendation of the Special
Prosecutor dismissing Criminal Case No. 24852.
The antecedent facts are as follows: In a sworn complaint filed with the Office of the
Ombudsman-Mindanao, private respondents Dr. Jose Pepito H. Dalogdog, Dr. Aurora Beatriz
A. Romano, Maria Teresita C. Abastar, Jessica S. Allan and Maria Teresa Aniversario charged
herein petitioners Efren O. Loquias, Antonio V. Din, Jr., Angelito I Martinez II, Lovelyn J. Biador
and Gregorio Faciol, Jr. with violation of Republic Act No. 3019 for their alleged failure to give
the salary increases and benefits provided in Section 20 of the Magna Carta of Public Health
Workers (R.A. 7305) and Local Budget Circulars Nos. 54, 54-A, 56, 60 and 64 for the health
personnel of the local government of San Miguel, Zamboanga del Sur. Herein private
respondents were officers of the Association of Municipal Health Office Personnel of
Zamboanga del Sur who instituted the said complaint in behalf of the 490 members of the said
Association. Petitioners Efren Loquias and Antonio Din, Jr. are the Mayor and Vice-Mayor,
respectively, of San Miguel, Zamboanga del Sur while petitioners Angelito Martinez II, Lovelyn
Biador and Gregorio Faciol, Jr. are members of the Sangguniang Bayan of the said municipality.
SEIcHa
Docketed as Case No. OMB-MIN-98-0022, herein public respondent Ombudsman Aniano A.
Desierto approved on September 4, 1999 the Resolution dated June 29, 1998 of Graft
Investigation Officer II Jovito A. Coresis, Jr. of the Office of the Ombudsman-Mindanao finding
"probable cause to conclude that the crime of violation of Section 3 (e) of RA 3019 has been
committed by respondents Mayor, Vice-Mayor, members of the Sangguniang Bayan and
Budget Officer of San Miguel, Zamboanga del Sur" and that accordingly, the appropriate
Information be filed with the Sandiganbayan. 1 The case was docketed as Criminal Case No.
24852.
On March 15, 1999, petitioners filed a Motion for Reinvestigation with prayer to defer
arraignment and pre-trial alleging that they recognize the salary increases of the health
personnel as a mandatory statutory obligation but the salary increases could not be
implemented because of lack of funds and the municipality had incurred overdrafts. They
further argue that the failure to give salary increases and other Magna Carta benefits were due
to circumstances beyond their control and not due to any manifest partiality, evident bad faith
or gross inexcusable negligence on their part. 2
In the Memorandum dated June 11, 1999, Special Prosecution Officer I Jacqueline J. Ongpauco-
Cortel recommended the dismissal of the case which recommendation was approved by
Deputy Special Prosecutor Robert E. Kallos and concurred in by Special Prosecutor Leonardo P.
Tamayo. This recommendation was, however, disapproved by Ombudsman Desierto on June
18, 1999 stating in his handwriting that "(T)he crime had obviously been committed, per OMB
Mindanao findings, long before the payment granting that the accused latters' claim/allegation
is true." 3
Meanwhile, petitioners filed a Motion for Reconsideration dated June 14, 1999 of the
Resolution of the Office of the Ombudsman-Mindanao dated June 29, 1998 alleging that there
is no probable cause in holding that they violated Section 3 (e) of the Anti-Graft and Corrupt
Practices Act. They allege that the joint affidavits of waiver executed by private complainants
have made the case of the prosecution against the accused "too weak which could not even
create a probable cause." 4 Petitioners further allege that the order disapproving the dismissal
of the case constitutes a denial of their motion for reconsideration. 5
Alleging that the order disapproving the dismissal of the case constituted denial of the motion
for reconsideration, 6 petitioners filed the present petition assailing the Resolution dated June
29, 1998 and the Memorandum dated June 11, 1999 raising the following assignment of errors:
I.
THE HONORABLE OMBUDSMAN WITH DUE RESPECT, COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN APPROVING THE
RESOLUTION CHARGING THE PETITIONERS FOR VIOLATION OF SECTION 3 PAR. (E) OF R.A. 3019
ISSUED AND APPROVED BY OMBUDSMAN FOR MINDANAO.
II.
THE HONORABLE OMBUDSMAN WITH DUE RESPECT, COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN DISAPPROVING THE
MEMORANDUM RECOMMENDING THE DISMISSAL OF THE CRIMINAL CASE AGAINST THE
PETITIONER(S) ISSUED BY SPECIAL PROSECUTOR, CONCURRED BY SPECIAL PROSECUTOR BUT
DISAPPROVED BY THE OMBUDSMAN."
Petitioners contend that they recognize the salary increases of the health personnel as a
mandatory statutory obligation but the same could not be implemented due to lack of funds
and the Municipality incurred an overdraft. They further argue that petitioners Loquias, Din,
Martinez, Faciol and Biador were not yet elected as local officials during the year 1994; hence,
they cannot be held liable for non-payment of salary increases as mandated by the local budget
circular which took effect in the year 1994 before their election. THESAD
In its Comment, 7 the Office of the Ombudsman, through the Solicitor General, alleges that
the petition does not comply with Section 5, Rule 7 as the Verification and the Certification on
Non-Forum Shopping were signed only by petitioner Antonio Din and not by all the petitioners
and there is no showing that petitioner Din was authorized by his co-petitioners to represent
them in this case; that the petition raise factual issues; and that the municipality had sufficient
funds to grant the statutory salary increases and benefits.
6
In their Reply, 8 petitioners contend that there was substantial compliance with Section 5, Rule 14 this Court ruled in Alba vs. Nitorreda 15 that a joint affidavit of desistance is not binding on
7 notwithstanding the fact that only one of the petitioners signed the verification and the Office of the Ombudsman and cannot prevail over the provision of law which categorically
certification on forum shopping; and that the petition does not call for an examination of the allows the Office of the Ombudsman to investigate and prosecute on its own any act or
probative value of the evidence presented. omission of a public officer or employee, office or agency which appears to be illegal, unjust,
improper or inefficient.
At the outset, it is noted that the Verification and Certification was signed by Antonio Din, Jr.,
one of the petitioners in the instant case. We agree with the Solicitor General that the petition WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit.
is defective. Section 5, Rule 7 expressly provides that it is the plaintiff or principal party who
shall certify under oath that he has not commenced any action involving the same issues in SO ORDERED.
any court, etc. 9 Only petitioner Din, the Vice-Mayor of San Miguel, Zamboanga del Sur, signed Melo, Vitug, Panganiban, and Purisima, JJ., concur.
the certification. There is no showing that he was authorized by his co-petitioners to represent
the latter and to sign the certification. It cannot likewise be presumed that petitioner Din knew,
to the best of his knowledge, whether his co-petitioners had the same or similar actions or
claims filed or pending. We find that substantial compliance will not suffice in a matter
involving strict observance by the rules. The attestation contained in the certification on non-
forum shopping requires personal knowledge by the party who executed the same. Petitioners
must show reasonable cause for failure to personally sign the certification. Utter disregard of
the rules cannot justly be rationalized by harking on the policy of liberal construction. 10

Moreover, petitioners question the act of the Ombudsman in disapproving the resolution
recommending the dismissal of the criminal case. We have ruled that this Court will not
interfere with the Ombudsman's exercise of his constitutionally mandated investigatory and
prosecutory powers. Otherwise stated, it is beyond the ambit of this Court to review the
exercise of discretion of the Ombudsman in prosecuting or dismissing a complaint filed before
it. Such initiative and independence are inherent in the Ombudsman who, beholden to no one,
acts as the champion of the people and preserver of the integrity of the public service. 11 In
Venus vs. Desierto, 12 this Court stated that it ordinarily does not determine whether there
exists reasonable ground to believe that a crime has been committed and that the accused is
probably guilty thereof and, thereafter, to file the corresponding information with the
appropriate courts. As held in the Ocampo case: SHIcDT

". . . The rule is based not only upon respect for the investigatory and prosecutory powers
granted by the Constitution to the Office of the Ombudsman but upon practicality as well.
Otherwise, the functions of the courts will be grievously hampered by innumerable petitions
assailing the dismissal of investigatory proceedings conducted by the Office of the
Ombudsman with regard to complaints filed before it, in much the same way that the courts
would be extremely swamped if they could be compelled to review the exercise of discretion
on the part of the fiscals or prosecuting attorneys each time they decide to file an information
in court or dismiss a complaint by a private complainant." 13

With respect to the joint affidavits of waiver allegedly executed by private complainants for
the purpose of requesting the Special Prosecutor to move for the dismissal of the criminal case,

7
 Costs against defendant.
G.R. No. 161368, April 05, 2010
SO ORDERED.
MEDISERV, INC., PETITIONER, VS. COURT OF APPEALS (SPECIAL FORMER 13TH DIVISION)
AND LANDHEIGHTS DEVELOPMENT CORPORATION, RESPONDENTS.
Aggrieved, Mediserv appealed [5] the decision to the RTC of Manila docketed as Civil Case No.
DECISION 00-99395. On June 14, 2002 the RTC rendered a Decision, [6] the fallo of which reads:

VILLARAMA, JR., J.: WHEREFORE, the Judgment of the Honorable Metropolitan Trial Court, Branch 15, Manila,
dated October 26, 2000, is hereby reversed and set aside; and the Complaint for Ejectment is
Before the Court is a petition for certiorari to nullify the September 16, 2003 Resolution[1] of hereby ordered to be dismissed.
the Court of Appeals reinstating the Petition for Review of private respondent Landheights
Development Corporation and the November 7, 2003 Resolution [2] denying the motion for Further, on the Counterclaims, the plaintiff-appellee is hereby directed to pay the defendant-
reconsideration thereof. appellant, the sum of Php 50,000.00 for actual damages and another sum of Php 50,000.00 for
and as attorney's fees.
The facts are as follows:
With costs against plaintiff-appellee.
On September 20, 1994, petitioner Mediserv, Inc. executed a real estate mortgage in favor of
China Banking Corporation as security for a loan. The mortgage was constituted on a 500- SO ORDERED.
square meter lot with improvements located at 926 A.H. Lacson Street, Sampaloc, Manila and
covered by Transfer Certificate of Title (TCT) No. 205824 of the Registry of Deeds for the City
On September 16, 2002, Landheights' motion for reconsideration [7] was likewise denied. [8]
of Manila. Mediserv defaulted on its obligation with Chinabank and the real estate mortgage
was foreclosed. At the public auction sale, private respondent Landheights Development
Corporation emerged as the highest bidder with a bid price of P17,617,960.00 for the subject Accordingly, Landheights filed a Petition for Review [9] with the Court of Appeals, which
property. however dismissed the petition in a Resolution[10] dated December 12, 2002, to wit:

It appearing that the written authority of Dickson Tan to sign the verification and certification
Sometime in April 1998, Landheights filed with the Regional Trial Court (RTC) of Manila an on non-forum shopping, as well as the copies of the complaint and answer, are not attached
"Application for Possession of Real Estate Property Purchased at an Auction Sale under Act No. to the petition, the petition is DISMISSED.
3135." [3] On September 21, 1999, the title of the property was consolidated in favor of
Landheights and the Register of Deeds for the City of Manila issued TCT No. 242202 in its favor. SO ORDERED.
On March 13, 2000, Landheights, seeking to recover possession of the subject property, filed
a verified complaint for ejectment against Mediserv before the Metropolitan Trial Court of
Manila (MeTC). The case was docketed as Civil Case No. 166637. Landheights seasonably filed a motion for reconsideration [11] on December 26, 2002 and
subsequently submitted a Secretary's Certificate [12] dated January 13, 2003 executed by its
On October 12, 2000, the MeTC of Manila, Branch 15, rendered a decision [4] in favor of Corporate Secretary, Ms. Polly S. Tiu, stating that the Board of Directors affirms the authority
Landheights, the decretal portion of which states: of Mr. Dickson Tan to file the Petition for Review.

WHEREFORE, PREMISES CONSIDERED, judgment is hereby entered in favor of plaintiff and On March 19, 2003, the Court of Appeals issued a Resolution [13] granting Landheights a new
against the defendant ordering the latter and all persons claiming rights under said entity to period of ten (10) days within which to correct and rectify the deficiencies in the petition. On
VACATE the premises situated at 926 A.H. Lacson Street, Sampaloc, Manila; and to PAY plaintiff April 1, 2003, Mediserv filed a motion for reconsideration [14] praying that the March 19, 2003
the sum of P25,000.00 as attorney's fees. Resolution be set aside and the December 12, 2002 Resolution, which dismissed the petition,
be reinstated. On even date, Landheights filed its Manifestation of Compliance. [15]
8

On September 16, 2003, the appellate court issued the first assailed resolution reinstating the
petition for review, the pertinent portion of which reads as follows:
With the subsequent compliance of the petitioner with the requirement of the rules and in the
interest of substantial justice, We now consider the petition reinstated.
Respondent is hereby directed to file its comment on the petition within ten (10) days from
notice and petitioner may file its reply within five (5) days from receipt of the comment.
SO ORDERED.
Mediserv filed a motion for reconsideration [16] on October 3, 2003, while Landheights filed its
comment [17] thereto on October 14, 2003.
On November 7, 2003, the Court of Appeals issued the second assailed resolution, the
significant portion of which states:
However, again, in the interest of justice, we shall consider the belatedly filed Secretary's
Certificate as a subsequent compliance of our March 19, 2003 Resolution.
WHEREFORE, this Court's Resolution dated September 16, 2003 is hereby REITERATED. The
petition is hereby REINSTATED and the respondent is directed to file its Comment on the
petition within ten (10) days from notice.
SO ORDERED.
Its motion for reconsideration having been denied by the appellate court, petitioner is now
before us via the present recourse. Petitioner faults the appellate court as follows:
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION AND ACTED WITHOUT AND/ OR
IN EXCESS OF JURISDICTION IN REINSTATING THE PETITION DESPITE THE CLEAR MANDATE OF
THE RULES AS WELL AS THE JURISPRUDENCE AS LAID DOWN BY THIS HONORABLE COURT
CALLING FOR THE DISMISSAL OF THE SAID PETITION. [18]
Petitioner argues that from the beginning, the Court of Appeals found the petition filed before
it to be defective for failure to comply with the rules. It points out that there is no showing that
the respondent corporation, through its board of directors, had authorized Mr. Dickson Tan to
file the petition for review in its behalf and to sign the verification and certification against
forum-shopping. However, instead of upholding the dismissal of the petition, the Court of
Appeals allowed private respondent to rectify its deficiency, which is contrary to jurisprudence.
Petitioner also cites Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended, which
provides that failure to comply with the requirements on certification against forum shopping
shall not be curable by mere amendment of the complaint or other initiatory pleading but shall
be cause for dismissal of the case. Petitioner thus asserts that the appellate court acted with
grave abuse of discretion amounting to lack or in excess of jurisdiction in reinstating the
petition for review filed by respondent corporation.
We are not persuaded.
Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as amended,
petitions for certiorari must be verified and accompanied by a sworn certification of non-forum
shopping. [19] A pleading by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records. [20] The party need not sign the verification. A party's representative, lawyer or any
person who personally knows the truth of the facts alleged in the pleading may sign the
verification. [21]
On the other hand, a certification of non-forum shopping is a certification under oath by the
plaintiff or principal party in the complaint or other initiatory pleading asserting a claim for
relief or in a sworn certification annexed thereto and simultaneously filed therewith, (a) that
he has not theretofore commenced any action or filed any claim involving the same issues in
any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should thereafter learn that the same or
similar action or claim has been filed or is pending, he shall report that fact within five (5) days
therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
[22]
The requirement that a petitioner or principal party should sign the certificate of non-forum
shopping applies even to corporations, considering that the mandatory directives of the Rules
of Court make no distinction between natural and juridical persons. [23] A corporation, however,
exercises its powers through its board of directors and/or its duly authorized officers and
agents. Physical acts, like the signing of documents, can be performed only by natural persons
duly authorized for the purpose by corporate by-laws or by a specific act of the board of
directors. [24]
In the case of Digital Microwave Corp. v. Court of Appeals, [25] the certification of non-forum
shopping was signed by the petitioner corporation's counsel; hence, the appellate court
dismissed the petition for failure to comply with Revised Supreme Court Circular No. 28-91, as
9
amended. [26] Petitioner corporation's motion for reconsideration was denied by the appellate
court "absent any compelling reason for petitioner's failure to comply, at the first instance,
with [the circular] ...." On appeal, this Court denied the petition in this wise:
In this case, petitioner has not adequately explained its failure to have the certification against
forum shopping signed by one of its officers. Neither has it shown any compelling reason for
us to disregard strict compliance with the rules. [27] (Emphasis supplied.)
In Shipside Incorporated v. Court of Appeals, [28] petitioner Shipside Incorporated filed a
petition for certiorari and prohibition with the Court of Appeals, which was, however,
dismissed for failure to attach proof that the one (1) who signed the verification and
certification of non-forum shopping, its Manager Lorenzo Balbin, Jr., was authorized to
institute the petition in petitioner's behalf. Shipside Incorporated filed a motion for
reconsideration to which it attached a certificate issued by its board secretary stating that ten
(10) days before the filing of the petition, its board of directors authorized Balbin, Jr. to file it.
The Court of Appeals denied the motion for reconsideration, so the petitioner sought relief
from this Court. In granting the petition, this Court explained:
It is undisputed that on October 21, 1999, the time petitioner's Resident Manager Balbin filed
the petition, there was no proof attached thereto that Balbin was authorized to sign the
verification and non-forum shopping certification therein, as a consequence of which the
petition was dismissed by the Court of Appeals. However, subsequent to such dismissal,
petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by
its board secretary stating that on October 11, 1999, or ten days prior to the filing of the
petition, Balbin had been authorized by petitioner's board of directors to file said petition.
The Court has consistently held that the requirement regarding verification of a pleading is
formal, not jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000, 336 SCRA 419). Such
requirement is simply a condition affecting the form of the pleading, non-compliance with
which does not necessarily render the pleading fatally defective. Verification is simply intended
to secure an assurance that the allegations in the pleading are true and correct and not the
product of the imagination or a matter of speculation, and that the pleading is filed in good
faith. The court may order the correction of the pleading if verification is lacking or act on the
pleading although it is not verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with in order that the ends of justice may thereby
be served.
On the other hand, the lack of certification against forum shopping is generally not curable by
the submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of
Civil Procedure provides that the failure of the petitioner to submit the required documents
that should accompany the petition, including the certification against forum shopping, shall
be sufficient ground for the dismissal thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a corporation which are unaccompanied by
proof that said signatory is authorized to file a petition on behalf of the corporation.
In certain exceptional circumstances, however, the Court has allowed the belated filing of
the certification. In Loyola v. Court of Appeals, et al. (245 SCRA 477 [1995]), the Court
considered the filing of the certification one day after the filing of an election protest as
substantial compliance with the requirement. In Roadway Express, Inc. v. Court of Appeals, et
al. (264 SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before the
dismissal of the petition. In Uy v. LandBank, supra, the Court had dismissed Uy's petition for
lack of verification and certification against non-forum shopping. However, it subsequently
reinstated the petition after Uy submitted a motion to admit certification and non-forum
shopping certification. In all these cases, there were special circumstances or compelling
reasons that justified the relaxation of the rule requiring verification and certification on non-
forum shopping.
In the instant case, the merits of petitioner's case should be considered special circumstances
or compelling reasons that justify tempering the requirement in regard to the certificate of
non-forum shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-
compliance with the requirement as to the certificate of non-forum shopping. With more
reason should we allow the instant petition since petitioner herein did submit a certification
on non-forum shopping, failing only to show proof that the signatory was authorized to do so.
That petitioner subsequently submitted a secretary's certificate attesting that Balbin was
authorized to file an action on behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum
shopping is mandatory, nonetheless the requirements must not be interpreted too literally
and thus defeat the objective of preventing the undesirable practice of forum-shopping
(Bernardo v. NLRC, 255 SCRA 108 [1996]). Lastly, technical rules of procedure should be used
to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable
objective, the granting of substantial justice is an even more urgent ideal. [29] (Italics in the
original; emphasis and underscoring supplied.)
Unquestionably, there is sufficient jurisprudential basis to hold that Landheights has
substantially complied with the verification and certification requirements. We have held in a
catena of cases [30] with similar factual circumstances that there is substantial compliance with
the Rules of Court when there is a belated submission or filing of the secretary's certificate
through a motion for reconsideration of the Court of Appeals' decision dismissing the petition
for certiorari.
10
In Ateneo de Naga University v. Manalo, [31] this Court acknowledged that it has relaxed, under
justifiable circumstances, the rule requiring the submission of these certifications and has Finally, we note that the instant petition was filed under Rule 65 of the 1997 Rules of Civil
applied the rule of substantial compliance under justifiable circumstances with respect to the Procedure, as amended, which requires the existence of grave abuse of discretion. Grave
contents of the certification. It also conceded that if this Court has allowed the belated filing abuse of discretion exists where an act of a court or tribunal is performed with a capricious or
of the certification against forum shopping for compelling reasons in previous rulings, with whimsical exercise of judgment equivalent to lack of jurisdiction. The abuse of discretion must
more reason should it sanction the timely submission of such certification though the proof of be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to
the signatory's authority was submitted thereafter. perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by reason of passion or personal hostility. [37]
The Court is aware of the necessity for a certification of non-forum shopping in filing petitions No such grave abuse of discretion exists in this case to warrant issuance of the extraordinary
for certiorari as this is required under Section 1, Rule 65, in relation to Section 3, Rule 46 of the writ of certiorari.
Rules of Civil Procedure, as amended. When the petitioner is a corporation, the certification
should obviously be executed by a natural person to whom the power to execute such WHEREFORE, the petition is DISMISSED. The September 16, 2003 and November 7, 2003
certification has been validly conferred by the corporate board of directors and/or duly Resolutions of the Court of Appeals are AFFIRMED.
authorized officers and agents. Generally, the petition is subject to dismissal if a certification
was submitted unaccompanied by proof of the signatory's authority. [32] Let the records of this case be REMANDED to the Court of Appeals which is hereby DIRECTED
to take appropriate action thereon in light of the foregoing discussion with DISPATCH.
However, we must make a distinction between non-compliance with the requirements for
certificate of non-forum shopping and verification and substantial compliance with the With costs against the petitioner.
requirements as provided in the Rules of Court. The Court has allowed the belated filing of the
certification on the justification that such act constitutes substantial compliance. In Roadway SO ORDERED.
Express, Inc. v. CA, [33] the Court allowed the filing of the certification fourteen (14) days before
the dismissal of the petition. In Uy v. Land Bank of the Philippines, [34] the Court reinstated a Puno, C.J., Carpio Morales, Leonardo-De Castro, and Bersamin, JJ., concur.
petition on the ground of substantial compliance even though the verification and certification
were submitted only after the petition had already been originally dismissed. In Havtor
Management Phils. Inc. v. NLRC, [35] we acknowledged substantial compliance when the lacking
secretary's certificate was submitted by the petitioners as an attachment to the motion for
reconsideration seeking reversal of the original decision dismissing the petition for its earlier
failure to submit such requirement.

In the present case, Landheights rectified its failure to submit proof of Mr. Dickson Tan's
authority to sign the verification/certification on non-forum shopping on its behalfwhen the
required document was subsequently submitted to the Court of Appeals. The admission of
these documents, and consequently, the reinstatement of the petition itself, is in line with the
cases we have cited. In such circumstances, we deem it more in accord withsubstantive justice
that the case be decided on the merits.

It is settled that liberal construction of the rules may be invoked in situations where there may
be some excusable formal deficiency or error in a pleading, provided that the same does not
subvert the essence of the proceeding and connotes at least a reasonable attempt at
compliance with the rules. After all, rules of procedure are not to be applied in a very rigid,
technical sense; they are used only to help secure substantial justice. [36]

11
G.R. No. 170891, November 24, 2009
MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F. ESPIRITU, RAFAEL F.
ESPIRITU, ROLANDO M. MIRABUNA, HERMILYN A. MIRABUNA, KIM ROLAND A. MIRABUNA,
KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA, JUANITO P. DE CASTRO, GERONIMA A.
ALMONITE AND MANUEL C. DEE, WHO ARE THE OFFICERS AND DIRECTORS OF BICOL GAS
REFILLING PLANT CORPORATION, PETITIONERS, VS. PETRON CORPORATION AND CARMEN J.
DOLOIRAS, DOING BUSINESS UNDER THE NAME "KRISTINA PATRICIA ENTERPRISES,"
RESPONDENTS.
DECISION
ABAD, J.:
This case is about the offense or offenses that arise from the reloading of the liquefied
petroleum gas cylinder container of one brand with the liquefied petroleum gas of another
brand.
The Facts and the Case
Respondent Petron Corporation (Petron) sold and distributed liquefied petroleum gas (LPG) in
cylinder tanks that carried its trademark "Gasul."[1] Respondent Carmen J. Doloiras owned and
operated Kristina Patricia Enterprises (KPE), the exclusive distributor of Gasul LPGs in the
whole of Sorsogon.[2] Jose Nelson Doloiras (Jose) served as KPE's manager.
Bicol Gas Refilling Plant Corporation (Bicol Gas) was also in the business of selling and
distributing LPGs in Sorsogon but theirs carried the trademark "Bicol Savers Gas." Petitioner
Audie Llona managed Bicol Gas.
In the course of trade and competition, any given distributor of LPGs at times acquired
possession of LPG cylinder tanks belonging to other distributors operating in the same area.
They called these "captured cylinders." According to Jose, KPE's manager, in April 2001 Bicol
Gas agreed with KPE for the swapping of "captured cylinders" since one distributor could not
refill captured cylinders with its own brand of LPG. At one time, in the course of implementing
this arrangement, KPE's Jose visited the Bicol Gas refilling plant. While there, he noticed several
Gasul tanks in Bicol Gas' possession. He requested a swap but Audie Llona of Bicol Gas replied
that he first needed to ask the permission of the Bicol Gas owners. That permission was given
and they had a swap involving around 30 Gasul tanks held by Bicol Gas in exchange for assorted
tanks held by KPE.
KPE's Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard. He
offered to make a swap for these but Llona declined, saying the Bicol Gas owners wanted to
send those tanks to Batangas. Later Bicol Gas told Jose that it had no more Gasul tanks left in
its possession. Jose observed on almost a daily basis, however, that Bicol Gas' trucks which
plied the streets of the province carried a load of Gasul tanks. He noted that KPE's volume of
sales dropped significantly from June to July 2001.
On August 4, 2001 KPE's Jose saw a particular Bicol Gas truck on the Maharlika Highway. While
the truck carried mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and
one 50-kg Shellane tank. Jose followed the truck and when it stopped at a store, he asked the
driver, Jun Leorena, and the Bicol Gas sales representative, Jerome Misal, about the Gasul tank
in their truck. They said it was empty but, when Jose turned open its valve, he noted that it
was not. Misal and Leorena then admitted that the Gasul and Shellane tanks on their truck
belonged to a customer who had them filled up by Bicol Gas. Misal then mentioned that his
manager was a certain Rolly Mirabena.
Because of the above incident, KPE filed a complaint[3] for violations of Republic Act (R.A.) 623
(illegally filling up registered cylinder tanks), as amended, and Sections 155 (infringement of
trade marks) and 169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293). The
complaint charged the following: Jerome Misal, Jun Leorena, Rolly Mirabena, Audie Llona, and
several John and Jane Does, described as the directors, officers, and stockholders of Bicol Gas.
These directors, officers, and stockholders were eventually identified during the preliminary
investigation.
Subsequently, the provincial prosecutor ruled that there was probable cause only for violation
of R.A. 623 (unlawfully filling up registered tanks) and that only the four Bicol Gas employees,
Mirabena, Misal, Leorena, and petitioner Llona, could be charged. The charge against the other
petitioners who were the stockholders and directors of the company was dismissed.
Dissatisfied, Petron and KPE filed a petition for review with the Office of the Regional State
Prosecutor, Region V, which initially denied the petition but partially granted it on motion for
reconsideration. The Office of the Regional State Prosecutor ordered the filing of additional
informations against the four employees of Bicol Gas for unfair competition. It ruled, however,
that no case for trademark infringement was present. The Secretary of Justice denied the
appeal of Petron and KPE and their motion for reconsideration.
Undaunted, Petron and KPE filed a special civil action for certiorari with the Court of Appeals[4]
but the Bicol Gas employees and stockholders concerned opposed it, assailing the inadequacy
in its certificate of non-forum shopping, given that only Atty. Joel Angelo C. Cruz signed it on
behalf of Petron. In its Decision[5] dated October 17, 2005, the Court of Appeals ruled, however,
that Atty. Cruz's certification constituted sufficient compliance. As to the substantive aspect of
the case, the Court of Appeals reversed the Secretary of Justice's ruling. It held that unfair
competition does not necessarily absorb trademark infringement. Consequently, the court
12
ordered the filing of additional charges of trademark infringement against the concerned Bicol
Gas employees as well.
Since the Bicol Gas employees presumably acted under the direct order and control of its
owners, the Court of Appeals also ordered the inclusion of the stockholders of Bicol Gas in the
various charges, bringing to 16 the number of persons to be charged, now including petitioners
Manuel C. Espiritu, Jr., Freida F. Espiritu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M.
Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan
A. Mirabuna, Juanito P. de Castro, Geronima A. Almonite, and Manuel C. Dee (together with
Audie Llona), collectively, petitioners Espiritu, et al. The court denied the motion for
reconsideration of these employees and stockholders in its Resolution dated January 6, 2006,
hence, the present petition for review[6] before this Court.
The Issues Presented
The petition presents the following issues:
1. Whether or not the certificate of non-forum shopping that accompanied the petition filed
with the Court of Appeals, signed only by Atty. Cruz on behalf of Petron, complied with what
the rules require;
2. Whether or not the facts of the case warranted the filing of charges against the Bicol Gas
people for:
a) Filling up the LPG tanks registered to another manufacturer without the latter's consent in
violation of R.A. 623, as amended;
b) Trademark infringement consisting in Bicol Gas' use of a trademark that is confusingly similar
to Petron's registered "Gasul" trademark in violation of section 155 also of R.A. 8293; and
c) Unfair competition consisting in passing off Bicol Gas-produced LPGs for Petron-produced
Gasul LPG in violation of Section 168.3 of R.A. 8293.
The Court's Rulings
First. Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that
respondents KPE and Petron attached to the petition they filed with the Court of Appeals was
inadequate, having been signed only by Petron, through Atty. Cruz.
But, while procedural requirements such as that of submittal of a certificate of non-forum
shopping cannot be totally disregarded, they may be deemed substantially complied with
under justifiable circumstances.[7] One of these circumstances is where the petitioners filed a
collective action in which they share a common interest in its subject matter or raise a common
cause of action. In such a case, the certification by one of the petitioners may be deemed
sufficient.[8]
Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al.,
namely, the violation of their proprietary rights with respect to the use of Gasul tanks and
trademark. Furthermore, Atty. Cruz said in his certification that he was executing it "for and
on behalf of the Corporation, and co-petitioner Carmen J. Doloiras."[9] Thus, the object of the
requirement - to ensure that a party takes no recourse to multiple forums - was substantially
achieved. Besides, the failure of KPE to sign the certificate of non-forum shopping does not
render the petition defective with respect to Petron which signed it through Atty. Cruz.[10] The
Court of Appeals, therefore, acted correctly in giving due course to the petition before it.
Second. The Court of Appeals held that under the facts of the case, there is probable cause
that petitioners Espiritu, et al. committed all three crimes: (a) illegally filling up an LPG tank
registered to Petron without the latter's consent in violation of R.A. 623, as amended; (b)
trademark infringement which consists in Bicol Gas' use of a trademark that is confusingly
similar to Petron's registered "Gasul" trademark in violation of Section 155 of R.A. 8293; and
(c) unfair competition which consists in petitioners Espiritu, et al. passing off Bicol Gas-
produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293.
Here, the complaint adduced at the preliminary investigation shows that the one 50-kg Petron
Gasul LPG tank found on the Bicol Gas' truck "belonged to [a Bicol Gas] customer who had the
same filled up by BICOL GAS."[11] In other words, the customer had that one Gasul LPG tank
brought to Bicol Gas for refilling and the latter obliged.
R.A. 623, as amended,[12] punishes any person who, without the written consent of the
manufacturer or seller of gases contained in duly registered steel cylinders or tanks, fills the
steel cylinder or tank, for the purpose of sale, disposal or trafficking, other than the purpose
for which the manufacturer or seller registered the same. This was what happened in this case,
assuming the allegations of KPE's manager to be true. Bicol Gas employees filled up with their
firm's gas the tank registered to Petron and bearing its mark without the latter's written
authority. Consequently, they may be prosecuted for that offense.
But, as for the crime of trademark infringement, Section 155 of R.A. 8293 (in relation to Section
170[13]) provides that it is committed by any person who shall, without the consent of the
owner of the registered mark:
13
1. Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering
for sale, distribution, advertising of any goods or services including other preparatory steps
necessary to carry out the sale of any goods or services on or in connection with which such
use is likely to cause confusion, or to cause mistake, or to deceive; or
2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used in commerce
upon or in connection with the sale, offering for sale, distribution, or advertising of goods or
services on or in connection with which such use is likely to cause confusion, or to cause
mistake, or to deceive.
KPE and Petron have to show that the alleged infringer, the responsible officers and staff of
Bicol Gas, used Petron's Gasul trademark or a confusingly similar trademark on Bicol Gas tanks
with intent to deceive the public and defraud its competitor as to what it is selling.[14] Examples
of this would be the acts of an underground shoe manufacturer in Malabon producing "Nike"
branded rubber shoes or the acts of a local shirt company with no connection to La Coste,
producing and selling shirts that bear the stitched logos of an open-jawed alligator.
Here, however, the allegations in the complaint do not show that Bicol Gas painted on its own
tanks Petron's Gasul trademark or a confusingly similar version of the same to deceive its
customers and cheat Petron. Indeed, in this case, the one tank bearing the mark of Petron
Gasul found in a truck full of Bicol Gas tanks was a genuine Petron Gasul tank, more of a
captured cylinder belonging to competition. No proof has been shown that Bicol Gas has gone
into the business of distributing imitation Petron Gasul LPGs.
As to the charge of unfair competition, Section 168.3 (a) of R.A. 8293 (also in relation to Section
170) describes the acts constituting the offense as follows:
168.3. In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of
another manufacturer or dealer, either as to the goods themselves or in the wrapping of the
packages in which they are contained, or the devices or words thereon, or in any other feature
of their appearance, which would be likely to influence purchasers to believe that the goods
offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer,
or who otherwise clothes the goods with such appearance as shall deceive the public and
defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent
of any vendor engaged in selling such goods with a like purpose;
Essentially, what the law punishes is the act of giving one's goods the general appearance of
the goods of another, which would likely mislead the buyer into believing that such goods
belong to the latter. Examples of this would be the act of manufacturing or selling shirts
bearing the logo of an alligator, similar in design to the open-jawed alligator in La Coste shirts,
except that the jaw of the alligator in the former is closed, or the act of a producer or seller of
tea bags with red tags showing the shadow of a black dog when his competitor is producing or
selling popular tea bags with red tags showing the shadow of a black cat.
Here, there is no showing that Bicol Gas has been giving its LPG tanks the general appearance
of the tanks of Petron's Gasul. As already stated, the truckfull of Bicol Gas tanks that the KPE
manager arrested on a road in Sorsogon just happened to have mixed up with them one
authentic Gasul tank that belonged to Petron.
The only point left is the question of the liability of the stockholders and members of the board
of directors of Bicol Gas with respect to the charge of unlawfully filling up a steel cylinder or
tank that belonged to Petron. The Court of Appeals ruled that they should be charged along
with the Bicol Gas employees who were pointed to as directly involved in overt acts
constituting the offense.
Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its
officers, directors, and stockholders. It has been held, however, that corporate officers or
employees, through whose act, default or omission the corporation commits a crime, may
themselves be individually held answerable for the crime.[15]
Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with
Bicol Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the
owners of Bicol Gas about it. Subsequently, Bicol Gas declined the offer to swap cylinders for
the reason that the owners wanted to send their captured cylinders to Batangas. The Court of
Appeals seized on this as evidence that the employees of Bicol Gas acted under the direct
orders of its owners and that "the owners of Bicol Gas have full control of the operations of
the business."[16]
The "owners" of a corporate organization are its stockholders and they are to be distinguished
from its directors and officers. The petitioners here, with the exception of Audie Llona, are
being charged in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets
that in a corporation, the management of its business is generally vested in its board of
directors, not its stockholders.[17] Stockholders are basically investors in a corporation. They do
not have a hand in running the day-to-day business operations of the corporation unless they
are at the same time directors or officers of the corporation. Before a stockholder may be held
criminally liable for acts committed by the corporation, therefore, it must be shown that he
14
had knowledge of the criminal act committed in the name of the corporation and that he took
part in the same or gave his consent to its commission, whether by action or inaction.

The finding of the Court of Appeals that the employees "could not have committed the crimes
without the consent, [abetment], permission, or participation of the owners of Bicol Gas"[18] is
a sweeping speculation especially since, as demonstrated above, what was involved was just
one Petron Gasul tank found in a truck filled with Bicol Gas tanks. Although the KPE manager
heard petitioner Llona say that he was going to consult the owners of Bicol Gas regarding the
offer to swap additional captured cylinders, no indication was given as to which Bicol Gas
stockholders Llona consulted. It would be unfair to charge all the stockholders involved, some
of whom were proved to be minors.[19] No evidence was presented establishing the names of
the stockholders who were charged with running the operations of Bicol Gas. The complaint
even failed to allege who among the stockholders sat in the board of directors of the company
or served as its officers.

The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C.

Espiritu, Jr. as the registered owner of the truck that the KPE manager brought to the police
for investigation because that truck carried a tank of Petron Gasul. But the act that R.A. 623
punishes is the unlawful filling up of registered tanks of another. It does not punish the act of
transporting such tanks. And the complaint did not allege that the truck owner connived with
those responsible for filling up that Gasul tank with Bicol Gas LPG.

WHEREFORE, the Court REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-
G.R. SP 87711 dated October 17, 2005 as well as its Resolution dated January 6, 2006, the
Resolutions of the Secretary of Justice dated March 11, 2004 and August 31, 2004, and the
Order of the Office of the Regional State Prosecutor, Region V, dated February 19, 2003. The
Court REINSTATES the Resolution of the Office of the Provincial Prosecutor of Sorsogon in I.S.
2001-9231 (inadvertently referred in the Resolution itself as I.S. 2001-9234), dated February
26, 2002. The names of petitioners Manuel C. Espiritu, Jr., Freida F. Espititu, Carlo F. Espiritu,
Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye
Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De Castro, Geronima A. Almonite and
Manuel C. Dee are ORDERED excluded from the charge.

SO ORDERED.

Carpio, Leonardo-De Castro, Brion, and Del Castillo, JJ., concur.

15
[G.R. No. 149011. June 28, 2005]
SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY J. ABARING,
EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO,
REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE
JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO,
CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA,
DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R.
CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO
CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN,
RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A.
DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-
OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E.
GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEA,
ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T. INVENTOR,
JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD
LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO
MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON
P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO
C. PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA,
EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B.
SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN,
JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE
TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A.
TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER
C. VIYO and the COURT OF APPEALS, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and
Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-
Purpose Cooperative (Sunflower), represented by the Chairman of its Board of Directors Roy
G. Asong, entered into a one-year Contract of Services[1] commencing on January 1, 1993, to
be renewed on a month to month basis until terminated by either party. The pertinent
provisions of the contract read:
1. The cooperative agrees and undertakes to perform and/or provide for the company, on a
non-exclusive basis for a period of one year the following services for the Bacolod Shrimp
Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage[2]
2. To carry out the undertaking specified in the immediately preceding paragraph, the
cooperative shall employ the necessary personnel and provide adequate equipment, materials,
tools and apparatus, to efficiently, fully and speedily accomplish the work and services
undertaken by the cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees to pay the
cooperative the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred
Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per
person/activity whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.
This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth and the
other half, on the end of each month. The cooperative shall pay taxes, fees, dues and other
impositions that shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work and
services herein agreed upon. xxx
4. There is no employer-employee relationship between the company and the cooperative, or
the cooperative and any of its members, or the company and any members of the cooperative.
The cooperative is an association of self-employed members, an independent contractor, and
an entrepreneur. It is subject to the control and direction of the company only as to the result
to be accomplished by the work or services herein specified, and not as to the work herein
contracted. The cooperative and its members recognize that it is taking a business risk in
accepting a fixed service fee to provide the services contracted for and its realization of profit
or loss from its undertaking, in relation to all its other undertakings, will depend on how
efficiently it deploys and fields its members and how they perform the work and manage its
operations.
16
5. The cooperative shall, whenever possible, maintain and keep under its control the premises
where the work under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection, engagement and discharge
of its member-workers or otherwise in the direction and control thereof. The determination
of the wages, salaries and compensation of the member-workers of the cooperative shall be
within its full control. It is further understood that the cooperative is an independent
contractor, and as such, the cooperative agrees to comply with all the requirements of all
pertinent laws and ordinances, rules and regulations. Although it is understood and agreed
between the parties hereto that the cooperative, in the performance of its obligations, is
subject to the control or direction of the company merely as a (sic) result to be accomplished
by the work or services herein specified, and not as to the means and methods of
accomplishing such result, the cooperative hereby warrants that it will perform such work or
services in such manner as will be consistent with the achievement of the result herein
contracted for.
xxx
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as
all benefits, premiums and protection in accordance with the provisions of the labor code,
cooperative code and other applicable laws and decrees and the rules and regulations
promulgated by competent authorities, assuming all responsibility therefor.
The cooperative further undertakes to submit to the company within the first ten (10) days of
every month, a statement made, signed and sworn to by its duly authorized representative
before a notary public or other officer authorized by law to administer oaths, to the effect that
the cooperative has paid all wages or salaries due to its employees or personnel for services
rendered by them during the month immediately preceding, including overtime, if any, and
that such payments were all in accordance with the requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a
period of one (1) year commencing on January 1, 1993. Thereafter, this Contract will be
deemed renewed on a month-to-month basis until terminated by either party by sending a
written notice to the other at least thirty (30) days prior to the intended date of termination.
xxx[3] (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they did, render
services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was
deemed renewed by the parties every month after its expiration on January 1, 1994 and
private respondents continued to perform their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration
Branch No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims
for recovery of all benefits and privileges enjoyed by SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended Complaint[4] to
include illegal dismissal as additional cause of action following SMCs closure of its Bacolod
Shrimp Processing Plant on September 15, 1995[5] which resulted in the termination of their
services.
SMC filed a Motion for Leave to File Attached Third Party Complaint[6] dated November 27,
1995 to implead Sunflower as Third Party Defendant which was, by Order[7] of December 11,
1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of
the Department of Labor and Employment (DOLE) a Notice of Closure[8] of its aquaculture
operations effective on even date, citing serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents
complaint for lack of merit, ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly exercise its management
prerogative to contract out the preparation and processing aspects of its aquaculture
operations. Judicial notice has already been taken regarding the general practice adopted in
government and private institutions and industries of hiring independent contractors to
perform special services. xxx
xxx
Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code
under specific conditions and we do not see how this activity could not be legally undertaken
by an independent service cooperative like the third-party respondent herein.
There is no basis to the demand for regularization simply on the theory that complainants
performed activities which are necessary and desirable in the business of respondent. It has
been held that the definition of regular employees as those who perform activities which are
necessary and desirable for the business of the employer is not always determinative because
any agreement may provide for one (1) party to render services for and in behalf of another
for a consideration even without being hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only contractor is
a sweeping generalization and completely unsubstantiated. xxx In the absence of clear and
convincing evidence showing that third-party respondent acted merely as a labor only
contractor, we are firmly convinced of the legitimacy and the integrity of its service contract
with respondent SMC.
17
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management
decision purely dictated by economic factors which was (sic) mainly serious business losses.
The law recognizes the right of the employer to close his business or cease his operations for
bonafide reasons, as much as it recognizes the right of the employer to terminate the
employment of any employee due to closure or cessation of business operations, unless the
closing is for the purpose of circumventing the provisions of the law on security of tenure. The
decision of respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious
business losses which has (sic) clearly been established, is a management prerogative which
could hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant,
who were accordingly terminated following the legal requisites prescribed by law. The closure,
however, in so far as the complainants are concerned, resulted in the termination of SMCs
service contract with their cooperative xxx[9] (Underscoring supplied)
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding
that third party respondent Sunflower was an independent contractor in light of its
observation that [i]n all the activities of private respondents, they were under the actual
direction, control and supervision of third party respondent Sunflower, as well as the payment
of wages, and power of dismissal.[10]
Private respondents Motion for Reconsideration[11] having been denied by the NLRC for lack of
merit by Resolution of September 10, 1999, they filed a petition for certiorari[12] before the
Court of Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss[13] private respondents petition for non-
compliance with the Rules on Civil Procedure and failure to show grave abuse of discretion on
the part of the NLRC.
SMC subsequently filed its Comment[14] to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision and
accordingly found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1)
REVERSING and SETTING ASIDE both the 29 December 1998 decision and 10 September 1999
resolution of the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in
NLRC Case No. V-0361-97 as well as the 23 September 1997 decision of the labor arbiter in
RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to
GRANT petitioners: (a) separation pay in accordance with the computation given to the regular
SMC employees working at its Bacolod Shrimp Processing Plant with full backwages, inclusive
of allowances and other benefits or their monetary equivalent, from 11 September 1995, the
time their actual compensation was withheld from them, up to the time of the finality of this
decision; (b) differentials pays (sic) effective as of and from the time petitioners acquired
regular employment status pursuant to the disquisition mentioned above, and all such other
and further benefits as provided by applicable collective bargaining agreement(s) or other
relations, or by law, beginning such time up to their termination from employment on 11
September 1995; and ORDERING private respondent SMC to PAY unto the
petitioners attorneys fees equivalent to ten (10%) percent of the total award.
No pronouncement as to costs.
SO ORDERED.[15] (Underscoring supplied)
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court
reasoned:
Although the terms of the non-exclusive contract of service between SMC and [Sunflower]
showed a clear intent to abstain from establishing an employer-employee relationship
between SMC and [Sunflower] or the latters members, the extent to which the parties
successfully realized this intent in the light of the applicable law is the controlling factor in
determining the real and actual relationshipbetween or among the parties.
xxx
With respect to the power to control petitioners conduct, it appears that petitioners were
under the direct control and supervision of SMC supervisors both as to the manner they
performed their functions and as to the end results thereof. It was only after petitioners lodged
a complaint to have their status declared as regular employees of SMC that certain members
of [Sunflower] began to countersign petitioners daily time records to make it appear that they
(petitioners) were under the control and supervision of [Sunflower] team leaders (rollo, pp.
523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is safe
to assume that SMC would never have allowed the petitioners to work within its premises,
using its own facilities, equipment and tools, alongside SMC employees discharging similar or
identical activities unless it exercised a substantial degree of control and supervision over the
petitioners not only as to the manner they performed their functions but also as to the end
results of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent
contractors. [Sunflower] and the petitioners did not have substantial capital or investment in
the form of tools, equipment, implements, work premises, et cetera necessary to actually
perform the service under their own account, responsibility, and method. The only work
18
premises maintained by [Sunflower] was a small office within the confines of a small carinderia
or refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it
owned was a typewriter (rollo, pp. 525-525) and, the only assets it provided SMC were the
bare bodies of its members, the petitioners herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under
the control and supervision of SMC both as to the manner and method in discharging their
functions and as to the results thereof.
Besides, it should be taken into account that the activities undertaken by the petitioners as
cleaners, janitors, messengers and shrimp harvesters, packers and handlers were directly
related to the aquaculture business of SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is
confirmed by the renewal of the service contract from January 1993 to September 1995, a
period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable
workforce and raises the suspicion that the non-exclusive service contract between SMC and
[Sunflower] was designed to evade the obligations inherent in an employer-employee
relationship (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower]
and its [Sunflower] retained counsel are both partners of the local counsel of SMC (rollo, p.
9).
xxx
With these observations, no other logical conclusion can be reached except that [Sunflower]
acted as an agent of SMC, facilitating the manpower requirements of the latter, the real
employer of the petitioners. We simply cannot allow these two entities through the
convenience of a non-exclusive service contract to stipulate on the existence of employer-
employee relation. Such existence is a question of law which cannot be made the subject of
agreement to the detriment of the petitioners (Tabas vs. California Manufacturing, Inc., 169
SCRA 497, 500).
xxx
There being a finding of labor-only contracting, liability must be shouldered either by SMC or
[Sunflower] or shared by both (See Tabas vs. California Manufacturing, Inc., supra, p. 502).
SMC however should be held solely liable for [Sunflower] became non-existent with the
closure of the aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be valid,
reinstatement is no longer feasible. Consistent with the pronouncement in Bustamante, et al.,
vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus entitled to separation pay
(in the computation similar to those given to regular SMC employees at its Bacolod Shrimp
Processing Plant) with full backwages, inclusive of allowances and other benefits or their
monetary equivalent, from the time their actual compensation was withheld from them up to
the time of the finality of this decision. This is without prejudice to differentials pays (sic)
effective as of and from the time petitioners acquired regular employment status pursuant to
the discussion mentioned above, and all such other and further benefits as provided by
applicable collective bargaining agreement(s) or other relations, or by law, beginning such time
up to their termination from employment on 11 September 1995.[16] (Emphasis and
underscoring supplied)
SMCs Motion for Reconsideration[17] having been denied for lack of merit by Resolution of July
11, 2001, it comes before this Court via the present petition for review on certiorari assigning
to the CA the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING
RESPONDENTS PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF
APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS
COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF
APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF
SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT
ENTITLED TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS
DUE TO SERIOUS BUSINESS LOSSES.[18] (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari
as only three out of the ninety seven named petitioners signed the verification and certification
against forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed by all the
plaintiffs or petitioners in a case and the signature of only one of them is insufficient, [19] this
Court has stressed that the rules on forum shopping, which were designed to promote and
19
facilitate the orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective.[20] Strict compliance with
the provisions regarding the certificate of non-forum shopping merely underscores its
mandatory nature in that the certification cannot be altogether dispensed with or its
requirements completely disregarded.[21] It does not, however, thereby interdict substantial
compliance with its provisions under justifiable circumstances.[22]
Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes
Subdivision Homeowners Association,[23] this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as
a group, represented by their homeowners association president who was likewise one of the
plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of action which was the breach
of contractual obligations and payment of damages. They shared a common interest in the
subject matter of the case, being the aggrieved residents of the poorly constructed and
developed Emily Homes Subdivision. Due to the collective nature of the case, there was no
doubt that Mr. Samaon M. Buat could validly sign the certificate of non-forum shopping in
behalf of all his co-plaintiffs. In cases therefore where it is highly impractical to require all the
plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to defeat
the ends of justice, for one of the plaintiffs, acting as representative, to sign the certificate
provided that xxx the plaintiffs share a common interest in the subject matter of the case or
filed the case as a collective, raising only one common cause of action or
defense.[24] (Emphasis and underscoring supplied)
Given the collective nature of the petition filed before the appellate court by herein private
respondents, raising one common cause of action against SMC, the execution by private
respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other
private respondents of the certificate of non-forum shopping constitutes substantial
compliance with the Rules.[25] That the three indeed represented their co-petitioners before
the appellate court is, as it correctly found, subsequently proven to be true as shown by the
signatures of the majority of the petitioners appearing in their memorandum filed before
Us.[26]
Additionally, the merits of the substantive aspects of the case may also be deemed as special
circumstance or compelling reason to take cognizance of a petition although the certification
against forum shopping was not executed and signed by all of the petitioners.[27]
SMC goes on to argue that the petition filed before the CA is fatally defective as it was not
accompanied by copies of all pleadings and documents relevant and pertinent thereto in
contravention of Section 1, Rule 65 of the Rules of Court.[28]
This Court is not persuaded. The records show that private respondents appended the
following documents to their petition before the appellate court: the September 23,
1997 Decision of the Labor Arbiter,[29] their Notice of Appeal with Appeal Memorandum dated
October 16, 1997 filed before the NLRC,[30] the December 29,
[31]
1998 NLRC Decision, their Motion forReconsideration dated March 26, 1999 filed with the
NLRC[32] and the September 10, 1999 NLRC Resolution.[33]
It bears stressing at any rate that it is the appellate court which ultimately determines if the
supporting documents are sufficient to make out a prima facie case.[34] It discerns whether on
the basis of what have been submitted it could already judiciously determine the merits of the
petition.[35] In the case at bar, the CA found that the petition was adequately supported by
relevant and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the accomplishment
of a certificate of non-forum shopping in the following cases: (1) where a rigid application will
result in manifest failure or miscarriage of justice; (2) where the interest of substantial justice
will be served; (3) where the resolution of the motion is addressed solely to the sound and
judicious discretion of the court; and (4) where the injustice to the adverse party is not
commensurate with the degree of his thoughtlessness in not complying with the procedure
prescribed.[36]
Rules of procedure should indeed be viewed as mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in technicalities that
tend to frustrate rather than promote substantial justice, must always be eschewed.[37]
SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions
of the labor arbiter and the NLRC as findings of facts of quasi-judicial bodies like the NLRC are
accorded great respect and finality, and that this principle acquires greater weight and
application in the case at bar as the labor arbiter and the NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency which has
acquired expertise in the particular field of its endeavor are accorded great weight on
appeal.[38] The rule is not absolute and admits of certain well-recognized exceptions, however.
Thus, when the findings of fact of the labor arbiter and the NLRC are not supported by
substantial evidence or their judgment was based on a misapprehension of facts, the appellate
court may make an independent evaluation of the facts of the case.[39]
SMC further faults the appellate court in giving due course to private respondents petition
despite the fact that the complaint filed before the labor arbiter was signed and verified only
by private respondent Winifredo Talite; that private respondents position paper [40] was
verified by only six[41] out of the ninety seven complainants; and that their Joint-
Affidavit[42] was executed only by twelve[43] of the complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it
should not have been considered by the appellate court in establishing the claims of those who
20
did not sign the same, citing this Courts ruling in Southern Cotabato Development and
Construction, Inc. v. NLRC.[44]
SMCs position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being represented
by their counsel of choice. Thus the first sentence of their complaint alleges: xxx complainants,
by counsel and unto this Honorable Office respectfully state xxx. And the complaint was signed
by Atty. Jose Max S. Ortiz as counsel for the complainants. Following Section 6, Rule III of the
1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz
is presumed to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of the
complainants and was causing the preparation of the complaint with the authority of my co-
complainants indubitably shows that Talite was representing the rest of his co-complainants
in signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now
Section 8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. Attorneys and other representatives of parties shall have
authority to bind their clients in all matters of procedure; but they cannot, without a special
power of attorney or express consent, enter into a compromise agreement with the opposing
party in full or partial discharge of a clients claim. (Underscoring supplied)
As regards private respondents position paper which bore the signatures of only six of them,
appended to it was an Authority/Confirmation of Authority[45] signed by the ninety one others
conferring authority to their counsel to file RAB Case No. 06-07-10316-95, entitled Winifredo
Talite et al. v. San Miguel Corporation presently pending before the sala of Labor Arbiter Ray
Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City and appointing him
as their retained counsel to represent them in the said case.
That there has been substantial compliance with the requirement on verification of position
papers under Section 3, Rule V of the 1990 NLRC Rules of Procedure[46] is not difficult to
appreciate in light of the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9,
Rule V of the 1999 NLRC Rules which reads:
Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be non-litigious
in nature. Subject to the requirements of due process, the technicalities of law and procedure
and the rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter
may avail himself of all reasonable means to ascertain the facts of the controversy speedily,
including ocular inspection and examination of well-informed persons. (underscoring supplied)
As regards private respondents Joint-Affidavit which is being assailed in view of the failure of
some complainants to affix their signatures thereon, this Court quotes with approval the
appellate courts ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did not quote
the whole text of paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads:
Clearly then, as to those who opted to move for the dismissal of their complaints, or did not
submit their affidavits nor appear during trial and in whose favor no other independent
evidence was adduced, no award for back wages could have been validly and properly made
for want of factual basis. There is no showing at all that any of the affidavits of the thirty-four
(34) complainants were offered as evidence for those who did not submit their affidavits, or
that such affidavits had any bearing at all on the rights and interest of the latter. In the same
vein, private respondents position paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered as evidence
for those who did not submit theirs, or the affidavits were material and relevant to the rights
and interest of the latter, such affidavits may be sufficient to establish the claims of those
who did not give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97)
complainants (petitioners herein) would readily reveal that the affidavit was offered as
evidence not only for the signatories therein but for all of the complainants. (These ninety-
seven (97) individuals were previously identified during the mandatory conference as the only
complainants in the proceedings before the labor arbiter) Moreover, the affidavit touched on
the common interest of all of the complainants as it supported their claim of the existence of
an employer-employee relationship between them and respondent SMC. Thus, the said
affidavit was enough to prove the claims of the rest of the complainants.[47] (Emphasis supplied,
underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity
do not control proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. In any
proceeding before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of
this Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of substantial justice. [48]
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of Sunflower, an independent
contractor. On the other hand, private respondents assert that Sunflower is a labor-only
contractor.
21
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with
another person for the performance of the formers work, the employees of the contractor and
of the latters subcontractor, if any shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work performed under the contract,
in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out
of labor to protect the rights of workers established under the Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who
among the parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by
Department Order No. 18, distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting,
there exists a trilateral relationship under which there is a contract for a specific job, work or
service between the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its workers. Hence, there are three
parties involved in these arrangements, the principal which decides to farm out a job or service
to a contractor or subcontractor, the contractor or subcontractor which has the capacity to
independently undertake the performance of the job, work or service, and the contractual
workers engaged by the contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement
where the contractor or subcontractor merely recruits, supplies or places workers to perform
a job, work or service for a principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing activities which are directly related
to the main business of the principal, or
ii) The contractor does not exercise the right to control over the performance of the work of
the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the
Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the
case of corporations, tools, equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the performance or completion of the
job, work or service contracted out.
The right to control shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether one claiming to
be an independent contractor has contracted to do the work according to his own methods
and without being subject to the control of the employer, except only as to the results of the
work.[49]
In legitimate labor contracting, the law creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees are paid their wages. The principal
employer becomes jointly and severally liable with the job contractor, only for the payment of
the employees wages whenever the contractor fails to pay the same. Other than that, the
principal employer is not responsible for any claim made by the employees.[50]
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly employed by
the principal employer.[51]
The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed
the existence of an employer-employee relationship between SMC and private
respondents. The language of a contract is not, however, determinative of the parties
relationship; rather it is the totality of the facts and surrounding circumstances of the
case.[52] A party cannot dictate, by the mere expedient of a unilateral declaration in a contract,
the character of its business, i.e., whether as labor-only contractor or job contractor, it being
22
crucial that its character be measured in terms of and determined by the criteria set by
statute.[53]
SMC argues that Sunflower could not have been issued a certificate of registration as a
cooperative if it had no substantial capital.[54]
While indeed Sunflower was issued Certificate of Registration No. IL0-875[55] on February 10,
1992 by the Cooperative Development Authority, this merely shows that it had at
least P2,000.00 in paid-up share capital as mandated by Section 5 of Article 14[56] of Republic
Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be considered
substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or investment in the
form of tools, equipment, machineries, work premises and other materials to qualify it as an
independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all other working tools
utilized by private respondents in carrying out their tasks were owned and provided by SMC.
Consider the following uncontroverted allegations of private respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did not own a
single machinery, equipment, or working tool used in the processing plant. Everything was
owned and provided by respondent SMC. The lot, the building, and working facilities are
owned by respondent SMC. The machineries and equipments (sic) like washer machine, oven
or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic
(sic) jack, tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding
pan used in the processing are also owned by respondent SMC. The gloves and boots used by
the complainants were also owned by respondent SMC. Even the mops, electric floor cleaners,
brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used
by the complainants assigned as cleaners were all owned and provided by respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of tools,
machineries, or facilities used in said prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a small carinderia or
refreshment (sic) owned by the mother of the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. [57]
And from the job description provided by SMC itself, the work assigned to private respondents
was directly related to the aquaculture operations of SMC. Undoubtedly, the nature of the
work performed by private respondents in shrimp harvesting, receiving and packing formed
an integral part of the shrimp processing operations of SMC. As for janitorial and messengerial
services, that they are considered directly related to the principal business of the
employer[58] has been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method, free from the
control and supervision of its principal, SMC, its apparent role having been merely to recruit
persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter
that their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro,
Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that
SMC exercised the power of control and supervision over its employees.[59] And control of the
premises in which private respondents worked was by SMC. These tend to disprove the
independence of the contractor.[60]
More. Private respondents had been working in the aqua processing plant inside the SMC
compound alongside regular SMC shrimp processing workers performing identical jobs under
the same SMC supervisors.[61] This circumstance is another indicium of the existence of a labor-
only contractorship.[62]
And as private respondents alleged in their Joint Affidavit which did not escape the observation
of the CA, no showing to the contrary having been proffered by SMC, Sunflower did not cater
to clients other than SMC,[63] and with the closure of SMCs Bacolod Shrimp Processing Plant,
Sunflower likewise ceased to exist. This Courts ruling in San Miguel Corporation v. MAERC
Integrated Services, Inc.[64] is thus instructive.
xxx Nor do we believe MAERC to have an independent business. Not only was it set up to
specifically meet the pressing needs of SMC which was then having labor problems in its
segregation division, none of its workers was also ever assigned to any other establishment,
thus convincing us that it was created solely to service the needs of SMC. Naturally, with the
severance of relationship between MAERC and SMC followed MAERCs cessation of operations,
the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the
workers.[65] (Underscoring supplied)
All the foregoing considerations affirm by more than substantial evidence the existence of an
employer-employee relationship between SMC and private respondents.
Since private respondents who were engaged in shrimp processing performed tasks usually
necessary or desirable in the aquaculture business of SMC, they should be deemed regular
employees of the latter[66] and as such are entitled to all the benefits and rights appurtenant
to regular employment.[67] They should thus be awarded differential pay corresponding to the
23
difference between the wages and benefits given them and those accorded SMCs other regular
employees.
Respecting the private respondents who were tasked with janitorial and messengerial duties,
this Court quotes with approval the appellate courts ruling thereon:
Those performing janitorial and messengerial services however acquired regular status only
after rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial
and messengerial services are considered directly related to the aquaculture business of SMC,
they are deemed unnecessary in the conduct of its principal business; hence, the distinction
(See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of
Communications v. NLRC, supra, p. 359).[68]
The law of course provides for two kinds of regular employees, namely: (1) those who are
engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer; and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are employed. [69]
As for those of private respondents who were engaged in janitorial and messengerial tasks,
they fall under the second category and are thus entitled to differential pay and benefits
extended to other SMC regular employees from the day immediately following their first year
of service.[70]
Regarding the closure of SMCs aquaculture operations and the consequent termination of
private respondents, Article 283 of the Labor Code provides:
ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of Labor
and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Underscoring supplied)
In the case at bar, a particular department under the SMC group of companies was closed
allegedly due to serious business reverses. This constitutes retrenchment by, and not closure
of, the enterprise or the company itself as SMC has not totally ceased operations but is still
very much an on-going and highly viable business concern.[71]
Retrenchment is a management prerogative consistently recognized and affirmed by this Court.
It is, however, subject to faithful compliance with the substantive and procedural
requirements laid down by law and jurisprudence.[72]
For retrenchment to be considered valid the following substantial requirements must be met:
(a) the losses expected should be substantial and not merely de minimis in extent; (b) the
substantial losses apprehended must be reasonably imminent such as can be perceived
objectively and in good faith by the employer; (c) the retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if
already incurred, and the expected imminent losses sought to be forestalled, must be proved
by sufficient and convincing evidence.[73]
In the discharge of these requirements, it is the employer who has the onus, being in the nature
of an affirmative defense.[74]
Normally, the condition of business losses is shown by audited financial documents like yearly
balance sheets, profit and loss statements and annual income tax returns. The financial
statements must be prepared and signed by independent auditors failing which they can be
assailed as self-serving documents.[75]
In the case at bar, company losses were duly established by financial documents audited by
Joaquin Cunanan & Co. showing that the aquaculture operations of SMCs Agribusiness Division
accumulated losses amounting to P145,848,172.00 in 1992 resulting in the closure of its
Calatrava Aquaculture Center in Negros Occidental, P11,393,071.00 in 1993
and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp Processing
Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its employees.
For termination due to retrenchment to be valid, however, the law requires that written
notices of the intended retrenchment be served by the employer on the worker and on the
DOLE at least one (1) month before the actual date of the retrenchment, [76] in order to give
employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the
opportunity to ascertain the verity of the alleged cause of termination.[77]
Private respondents, however, were merely verbally informed on September 10, 1995 by SMC
Prawn Manager Ponciano Capay that effective the following day or on September 11, 1995,
they were no longer to report for work as SMC would be closing its operations.[78]
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but
the employer failed to comply with the notice requirement, the sanction should be stiff as the
24
dismissal process was initiated by the employers exercise of his management prerogative, as
opposed to a dismissal based on a just cause under Article 282 with the same procedural
infirmity where the sanction to be imposed upon the employer should be tempered as the
dismissal process was, in effect, initiated by an act imputable to the employee. [79]
In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each
private respondent as nominal damages.
awarded by SMC to other regular SMC employees that were terminated as a result of the
retrenchment, depending on which is most beneficial to private respondents; and ten percent
(10%) attorneys fees based on the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the
amount of P50,000.00, representing nominal damages for non-compliance with statutory due
process.

The grant of separation pay as an incidence of termination of employment due to The award of backwages is DELETED.
retrenchment to prevent losses is a statutory obligation on the part of the employer and a
demandable right on the part of the employee. Private respondents should thus be awarded SO ORDERED.
separation pay equivalent to at least one (1) month pay or to at least one-half month pay for Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.
every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the
separation pay awarded by SMC to other regular SMC employees that were terminated as a
result of the retrenchment, depending on which is most beneficial to private respondents.

Considering that private respondents were not illegally dismissed, however, no backwages
need be awarded. It is well settled that backwages may be granted only when there is a finding
of illegal dismissal.[80] The appellate court thus erred in awarding backwages to private
respondents upon the authority of Bustamante v. NLRC,[81] what was involved in that case
being one of illegal dismissal.

With respect to attorneys fees, in actions for recovery of wages or where an employee was
forced to litigate and thus incurred expenses to protect his rights and interests,[82] a maximum
of ten percent (10%) of the total monetary award[83] by way of attorneys fees is justifiable
under Article 111 of the Labor Code,[84] Section 8, Rule VIII, Book III of its Implementing
Rules,[85] and paragraph 7, Article 2208 of the Civil Code.[86] Although an express finding of facts
and law is still necessary to prove the merit of the award, there need not be any showing that
the employer acted maliciously or in bad faith when it withheld the wages. There need only be
a showing that the lawful wages were not paid accordingly, as in this case.[87]

Absent any evidence showing that Sunflower has been dissolved in accordance with law,
pursuant to Rule VIII-A, Section 19[88] of the Omnibus Rules Implementing the Labor Code,
Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents.

WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and
Resolution dated July 11, 2001 of the Court of Appeals are AFFIRMED with MODIFICATION.

Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby
ORDERED to jointly and severally pay each private respondent differential pay from the time
they became regular employees up to the date of their termination; separation pay equivalent
to at least one (1) month pay or to at least one-half month pay for every year of service,
whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay

25