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THIRD DIVISION

G.R. No. 201701, June 03, 2013

UNILEVER PHILIPPINES, INC., Petitioner, v. MARIA RUBY M. RIVERA, Respondent.

DECISION

MENDOZA, J.:

Subject of this disposition is the petition for review on certiorari1 under Rule 45 of the Rules of Court filed by petitioner
Unilever Philippines, Inc. (Unilever) questioning the June 22, 2011 Decision2 and the April 25, 2012 Resolution3 of the Court
of Appeals (CA)-Cagayan de Oro City, in CA-G.R. SP No. 02963-MIN, an Illegal Dismissal case filed by respondent Maria Ruby
M. Rivera (Rivera). The CA affirmed with modification the March 31, 2009 Resolution of the National Labor Relations
Commission (NLRC) finding Rivera’s dismissal from work to be valid as it was for a just cause and declaring that she was not
entitled to any retirement benefit. The CA, however, awarded separation pay in her favor as a measure of social justice.

The Facts

Unilever is a company engaged in the production, manufacture, sale, and distribution of various food, home and personal
care products, while Rivera was employed as its Area Activation Executive for Area 9 South in the cities of Cotabato and
Davao. She was primarily tasked with managing the sales, distribution and promotional activities in her area and supervising
Ventureslink International, Inc. (Ventureslink), a third party service provider for the company’s activation projects. Unilever
enforces a strict policy that every trade activity must be accompanied by a Trade Development Program (TDP) and that the
allocated budget for a specific activity must be used for such activity only.4

Sometime in 2007, Unilever’s internal auditor conducted a random audit and found out that there were fictitious billings and
fabricated receipts supposedly from Ventureslink amounting to P11,200,000.00. It was also discovered that some funds
were diverted from the original intended projects. Upon further verification, Ventureslink reported that the fund deviations
were upon the instruction of Rivera.

On July 16, 2007, Unilever issued a show-cause notice to Rivera asking her to explain the following charges, to wit: a)
Conversion and Misappropriation of Resources; b) Breach of Fiduciary Trust; c) Policy Breaches; and d) Integrity Issues.

Responding through an email, dated July 16, 2007, Rivera admitted the fund diversions, but explained that such actions were
mere resourceful utilization of budget because of the difficulty of procuring funds from the head office.5 She insisted that the
diverted funds were all utilized in the company’s promotional ventures in her area of coverage.

Through a letter, dated August 23, 2007, Unilever found Rivera guilty of serious breach of the company’s Code of Business
Principles compelling it to sever their professional relations. In a letter, dated September 20, 2007, Rivera asked for
reconsideration and requested Unilever to allow her to receive retirement benefits having served the company for fourteen
(14) years already. Unilever denied her request, reasoning that the forfeiture of retirement benefits was a legal consequence
of her dismissal from work.

On October 19, 2007, Rivera filed a complaint for Illegal Dismissal and other monetary claims against Unilever.

On April 28, 2008, the Labor Arbiter (LA) dismissed her complaint for lack of merit and denied her claim for retirement
benefits, but ordered Unilever to pay a proportionate 13th month pay and the corresponding cash equivalent of her unused
leave credits. The decretal portion of the LA decision reads: cralavvonl inelawl ibra ry

WHEREFORE, premises considered, judgment is hereby rendered dismissing for lack of merit the illegal dismissal
complaint. However, UNILEVER PHILIPPINES, INC. is hereby ordered to pay complainant the total amount of PESOS: FIFTY
SEVEN THOUSAND EIGHTY TWO & 90/100 ONLY (P57,082.90) representing proportionate 13th month pay and unused leave
credits.

The complaint against individual respondents Recto Sampang and Alejandro Concha are likewise dismissed for it was not
shown that they acted in bad faith in the dismissal of complainant. Moreover, their legal personality is separate and distinct
from that of the corporation.

All other money claims are dismissed for lack of basis.6

On appeal, the NLRC partially granted Rivera’s prayer. In its Resolution, dated November 28, 2008, the NLRC held that
although she was legally dismissed from the service for a just cause, Unilever was guilty of violating the twin notice
requirement in labor cases. Thus, Unilever was ordered to pay her P30,000.00 as nominal damages, retirement benefits and
separation pay. The dispositive portion reads: c ralavvon linel awlib rary

WHEREFORE, foregoing premises considered, the appeal is PARTIALLY GRANTED. The assailed Decision dated 28 April 2008
is hereby MODIFIED in the sense that respondent UNILEVER PHILIPPINES, INC. is hereby ordered to pay the
following sums:c ralavvonl inelawl ibra ry

1. The amount of P30,000.00 representing nominal damages for violation of complainant’s right to procedural due

1
process;chan roble svi rtualawl ib rary

2. Retirement benefits under the company’s applicable retirement policy or written agreement, and in the absence of
which, to pay complainant her retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year; chan roble svirtualawl ibra ry

3. Separation pay under the company’s applicable policy or written agreement, and in the absence of which, to
pay separation pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year.

The rest of the Decision is hereby AFFIRMED.

SO ORDERED.7 nadcralavvonli nelawli bra ry

Unilever asked for a reconsideration of the NLRC decision. In its Resolution, dated March 31, 2009, the NLRC modified its
earlier ruling by deleting the award of separation pay and reducing the nominal damages from P30,000.00 to P20,000.00,
but affirmed the award of retirement benefits to Rivera. The fallo reads: cralavvon linelaw lib rary

WHEREFORE, foregoing premises considered, the instant Motion for Partial Reconsideration is PARTLY GRANTED. The
Resolution dated 28 November 2008 of the Commission is hereby RECONSIDERED as follows: c ralavvonl inelawl ibra ry

(1)The award of separation pay is hereby deleted for lack of factual and legal basis; and

(2)The award of nominal damages is hereby tempered and reduced to the amount of P20,000.00.

The rest of the award for retirement benefits is affirmed in toto.

SO ORDERED.8

Unsatisfied with the ruling, Unilever elevated the case to CA-Cagayan de Oro City via a petition for certiorari under Rule 65 of
the Rules of Court.

On June 22, 2011, the CA affirmed with modification the NLRC resolution. Justifying the deletion of the award of retirement
benefits, the CA explained that, indeed, under Unilever’s Retirement Plan, a validly dismissed employee cannot claim any
retirement benefit regardless of the length of service. Thus, Rivera is not entitled to any retirement benefit. It stated,
however, that there was no proof that she personally gained any pecuniary benefit from her infractions, as her instructions
were aimed at increasing the sales efficiency of the company and competing in the local market. For said reason, the CA
awarded separation pay in her favor as a measure of social justice.9 The decretal portion of the CA decision reads: cralavvon line lawlib rary

WHEREFORE, the assailed Resolution dated March 31, 2009 of the NLRC (Branch 5), Cagayan De Oro City is
hereby AFFIRMED with MODIFICATION. Consequently, UNILEVER is directed to pay MARIA RUBY M. RIVERA the
following: cra lavvonli nelawlib ra ry

a) Separation pay, to be computed based on the company’s applicable policy or written agreement, or in the absence
thereof, the equivalent of at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year; chan rob lesvi rtua lawlib rary

b) P20,000.00 as nominal damages; and

c) Proportionate 13th month pay and unused leave credits, to be computed based on her salary during the period relevant to
the case.

The award of retirement benefits is hereby DELETED.

SO ORDERED.10
Unilever filed a motion for partial reconsideration,11 but it was denied in a Resolution, dated April 25, 2012.

Hence, this petition.12

In support of its position, Unilever submits for consideration the following

GROUNDS

I.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN GRANTING
AFFIRMATIVE RELIEFS IN FAVOR OF RIVERA EVEN IF SHE DID NOT FILE ANY PETITION FOR CERTIORARI TO
CHALLENGE THE NLRC RESOLUTIONS.

II.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN AWARDING
SEPARATION PAY IN FAVOR OF RIVERA CONSIDERING THAT THE LATTER WAS VALIDLY DISMISSED FROM
EMPLOYMENT BASED ON JUST CAUSES UNDER THE LAW.

III.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN RULING THAT THE

2
COMPANY VIOLATED RIVERA’S RIGHT TO PROCEDURAL DUE PROCESS BEFORE TERMINATING HER
EMPLOYMENT, AND CONSEQUENTLY, IN AWARDING NOMINAL DAMAGES.13 nadcralavvo nlinelawl ib rary

Unilever argues that Rivera did not file any separate petition for certiorari before the CA. Neither did she file any comment on
its petition. Hence, it was erroneous for the CA to grant an affirmative relief because it was inconsistent with the doctrine
that a party who has not appealed cannot obtain from the appellate court any affirmative relief other than the ones granted
in the appealed decision. The petitioner stresses that Rivera misappropriated company funds amounting to millions of pesos
and that granting her separation pay undermines the serious misdeeds she committed against the company. Moreover, the
length of her service with Unilever does not mitigate her offense, but even aggravates the depravity of her acts.14

The petition is partly meritorious.

The pivotal issue in the case at bench is whether or not a validly dismissed employee, like Rivera, is entitled to an award of
separation pay.

As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 28215 of the
Labor Code is not entitled to a separation pay.16 Section 7, Rule I, Book VI of the Omnibus Rules Implementing the Labor
Code provides: c ralavvon linelawl ibra ry

Sec. 7. Termination of employment by employer. — The just causes for terminating the services of an employee shall be
those provided in Article 282 of the Code. The separation from work of an employee for a just cause does not entitle him to
the termination pay provided in the Code, without prejudice, however, to whatever rights, benefits and privileges he may
have under the applicable individual or collective agreement with the employer or voluntary employer policy or practice.

In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act of "social
justice" or on "equitable grounds." In both instances, it is required that the dismissal (1) was not for serious misconduct;
and (2) did not reflect on the moral character of the employee.17 The leading case of Philippine Long Distance Telephone Co.
vs. NLRC18 is instructive on this point: cra lavvonl inelawli bra ry

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the
reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit
sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring
employee for his offense. And we do not agree that the punishment is his dismissal only and the separation pay has nothing
to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted
separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment
because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do
labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and
concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best, it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social
justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the
guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply
because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have
proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own
character.19

In the subsequent case of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v. National Labor Relations
Commission,20 it was further elucidated that "in addition to serious misconduct, in dismissals based on other grounds under
Art. 282 like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a
crime against the employer or his family, separation pay should not be conceded to the dismissed employee."21 In Reno
Foods, Inc, v. Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan,22 the Court wrote that "separation pay is only
warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 283
and 284 of the Labor Code, as well as in cases of illegal dismissal in which reinstatement is no longer feasible. It is not
allowed when an employee is dismissed for just cause."23

In this case, Rivera was dismissed from work because she intentionally circumvented a strict company policy, manipulated
another entity to carry out her instructions without the company’s knowledge and approval, and directed the diversion of
funds, which she even admitted doing under the guise of shortening the laborious process of securing funds for promotional
activities from the head office. These transgressions were serious offenses that warranted her dismissal from employment
and proved that her termination from work was for a just cause. Hence, she is not entitled to a separation pay.

More importantly, Rivera did not appeal the March 31, 2009 ruling of the NLRC disallowing the award of separation pay to
her. It was Unilever who elevated the case to the CA. It is axiomatic that a party who does not appeal, or file a petition
for certiorari, is not entitled to any affirmative relief.24 Due process prevents the grant of additional awards to parties who
did not appeal.25 An appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the
judgment, but he cannot seek modification or reversal of the judgment or claim affirmative relief unless he has also
appealed.26 It was, therefore, erroneous for the CA to grant an affirmative relief to Rivera who did not ask for it.

Lastly, Unilever questions the grant of nominal damages in favor of Rivera for its alleged non-observance of the requirements
of procedural due process. It insists that she was given ample opportunity "to explain her side, interpose an intelligent
defense and adduce evidence on her behalf."27

The Court is not persuaded. Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code expressly states: cralavvonl inelawli bra ry

3
Section 2. Standard of due process: requirements of notice. — In all cases of termination of employment, the following
standards of due process shall be substantially observed.

I. For termination of employment based on just causes as defined in Article 282 of the Code: cralavvon line lawlib rary

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side; cha nrob les virtua lawlib rary

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires,
is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and

(c) A written notice [of] termination served on the employee indicating that upon due consideration of all the circumstance,
grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the employee’s last known address.

King of Kings Transport, Inc. v. Mamac28 detailed the steps on how procedural due process can be satisfactorily complied
with. Thus:cralavvonline lawlib rary

To clarify, the following should be considered in terminating the services of employees: cralavvo nli nelawlib rary

(1) The first written notice to be served on the employees should contain the specific causes or grounds for termination
against them, and a directive that the employees are given the opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period
of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against
the complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice
should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the
employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company
rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the
employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2) present
evidence in support of their defenses; and (3) rebut the evidence presented against them by the management. During the
hearing or conference, the employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the employees a written notice
of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and
(2) grounds have been established to justify the severance of their employment.29

In this case, Unilever was not direct and specific in its first notice to Rivera. The words it used were couched in general
terms and were in no way informative of the charges against her that may result in her dismissal from
employment. Evidently, there was a violation of her right to statutory due process warranting the payment of indemnity in
the form of nominal damages. Hence, the Court finds no compelling reason to reverse the award of nominal damages in her
favor. The Court, however, deems it proper to increase the award of nominal damages from P20,000.00 to P30,000.00, as
initially awarded by the NLRC, in accordance with existing jurisprudence.30

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The June 22, 2011 Decision and the April 25, 2012 Resolution
of the Court of Appeals (CA)-Cagayan de Oro City in CA-G.R. SP No. 02963-MIN are AFFIRMED with
MODIFICATION. The dispositive portion should read as follows:

WHEREFORE, the March 31, 2009 Resolution of the NLRC (Branch 5), Cagayan de Oro City, is hereby AFFIRMED with
MODIFICATION. UNILEVER PHILIPPINES, INC., is hereby directed to pay MARIA RUBY M. RIVERA the following: cralavvo nline lawlib rary

a) P30,000.00 as nominal damages; and

b) Proportionate 13th month pay and unused leave credits, to be computed based on her salary during the period relevant to
the case.

The award of retirement benefit is DELETED.

SO ORDERED.

Velasco, Jr., (Chairperson), Peralta, Abad, and Leonen, JJ., concur.

June 10, 2013

N O T I C E OF J U D G M E N T

Sirs/Mesdames: cralavvon linelawl ibra ry

4
Please take notice that on June 3, 2013 a Decision, copy attached herewith, was rendered by the Supreme Court in the
above-entitled case, the original of which was received by this Office on June 10, 2013 at 2:50 a.m.

Very truly yours,

(SGD)
LUCITA ABJELINA SORIANO
Division Clerk of Court

By: cralavvonl inelawl ibra ry

WILFREDO V. LAPITAN
Deputy Division Clerk of Court

Endnotes:

Rollo, pp. 15-52.


1
c ralawl ibra ry

2
Id. at 54-71. Penned by Associate Justice Rodrigo F. Lim, Jr., with Associate Justice Pamela Ann Abella Maxino and
Associate Justice Zenaida T. Galapate-Laguilles, concurring. cralawli bra ry

3
Id. at 73-74. cralawlibra ry

4
Id. at 20. cralawlibra ry

5
Id. at 58. cralawlibra ry

6
Id. at 24. cralawlibra ry

7
Id. at 25. cralawlibra ry

8
Id. at 26. cralawlibra ry

9
Id. at 64-67. cralawlibra ry

10
Id. at 69-70. cralawlib rary

11
Id. at 75-94. cralawlib rary

12
Id. at 15-52. cralawlib rary

13
Id. at 28. cralawlibra ry

14
Id. at 35. cralawlibra ry

15
ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes: cralavvon linel awlib rary

a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work; chan roblesv irtualawli bra ry

b. Gross and habitual neglect by the employee of his duties; cha nrob lesvi rtua lawlib rary

c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; chanro blesvi rt ualawlib ra ry

d. Commission of a crime or offense by the employee against the person of his employer or any immediate member of his
family or his duly authorized representative; and
e. Other causes analogous to the foregoing.

Tirazona v. Philippine Eds Techno-Service Inc. (PWT, Inc.), G.R. No. 169712, January 20, 2009, 576 SCRA 625, 628-
16

629. cralawli bra ry

17
Yrasuegui v. Philippine Airlines, Inc., G.R. No. 168081, October 17, 2008, 569 SCRA 467, 502. cralawlibra ry

18
247 Phil. 641 (1988). cra lawlib rary

19
Philippine Long Distance Telephone Co. vs. NLRC, 247 Phil. 641, 649-650 (1988). cra lawlib rary

20
G.R. Nos. 158786 & 158789, October 19, 2007, 537 SCRA 171. cralawlib rary

Toyota Motor Philippines Corporation Workers Association (TMPCWA) v. National Labor Relations Commission, G.R. Nos.
21

158786 & 158789, October 19, 2007, 537 SCRA 171, 223. cralawli bra ry

22
G.R. No. 164016, March 15, 2010, 615 SCRA 240. cralawlibra ry

Reno Foods, Inc, v. Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan, G.R. No. 164016, March 15, 2010, 615 SCRA
23

240, 249. cralawlib ra ry

24
Corinthian Gardens Association Inc. v. Tanjangco, G.R. No. 160795, June 27, 2008, 556 SCRA 154, 166, citing Alauya, Jr v.
Commission on Elections, 443 Phil. 893, 907 (2003). cralawl ibra ry

5
Aklan College, Inc. v. Enero, G.R. No. 178309, January 27, 2009, 577 SCRA 64, 79-80.
25
cralawl ibra ry

Corinthian Gardens Association Inc. v. Tanjangco, supra note 25, citing Acebedo Optical Company, Inc. v. Court of
26

Appeals, 385 Phil. 956, 976 (2000). cralaw lib rary

Rollo, pp. 44
27

28
553 Phil. 108 (2007). cra lawlib rary

King of Kings Transport, Inc. v. Mamac, 553 Phil. 108, 115-116 (2007).
29
cra lawlib rary

Agabon v. NLRC, 485 Phil. 248, 287-288 (2004).


30

6
SECOND DIVISION

G.R. No. 167291 : January 12, 2011

PRINCE TRANSPORT, INC. and MR. RENATO CLAROS, Petitioners, v. DIOSDADO GARCIA, LUISITO GARCIA,
RODANTE ROMERO, REX BARTOLOME, FELICIANO GASCO, JR., DANILO ROJO, EDGAR SANFUEGO, AMADO
GALANTO, EUTIQUIO LUGTU, JOEL GRAMATICA, MIEL CERVANTES, TERESITA CABANES, ROE DELA CRUZ,
RICHELO BALIDOY, VILMA PORRAS, MIGUELITO SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO
TORRES, ESMAEL RAMBOYONG, ROBETO* MANO, ROGELIO BAGAWISAN, ARIEL SNACHEZ, ESTAQULO
VILLAREAL, NELSON MONTERO, GLORIA ORANTE, HARRY TOCA, PABLITO MACASAET and RONALD
GARCITA, Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court praying for the annulment of the
Decision1 and Resolution2 of the Court of Appeals (CA) dated December 20, 2004 and February 24, 2005, respectively, in
cra law c ralaw

CA-G.R. SP No. 80953. The assailed Decision reversed and set aside the Resolutions dated May 30, 20033 and September cralaw

26, 20034 of the National Labor Relations Commission (NLRC) in CA No. 029059-01,while the disputed Resolution denied
cralaw

petitioners' Motion for Reconsideration.

The present petition arose from various complaints filed by herein respondents charging petitioners with illegal dismissal,
unfair labor practice and illegal deductions and praying for the award of premium pay for holiday and rest day, holiday pay,
service leave pay, 13th month pay, moral and exemplary damages and attorney's fees.

Respondents alleged in their respective position papers and other related pleadings that they were employees of Prince
Transport, Inc. (PTI), a company engaged in the business of transporting passengers by land; respondents were hired either
as drivers, conductors, mechanics or inspectors, except for respondent Diosdado Garcia (Garcia), who was assigned as
Operations Manager; in addition to their regular monthly income, respondents also received commissions equivalent to 8 to
10% of their wages; sometime in October 1997, the said commissions were reduced to 7 to 9%; this led respondents and
other employees of PTI to hold a series of meetings to discuss the protection of their interests as employees; these meetings
led petitioner Renato Claros, who is the president of PTI, to suspect that respondents are about to form a union; he made
known to Garcia his objection to the formation of a union; in December 1997, PTI employees requested for a cash advance,
but the same was denied by management which resulted in demoralization on the employees' ranks; later, PTI acceded to
the request of some, but not all, of the employees; the foregoing circumstances led respondents to form a union for their
mutual aid and protection; in order to block the continued formation of the union, PTI caused the transfer of all union
members and sympathizers to one of its sub-companies, Lubas Transport (Lubas); despite such transfer, the schedule of
drivers and conductors, as well as their company identification cards, were issued by PTI; the daily time records, tickets and
reports of the respondents were also filed at the PTI office; and, all claims for salaries were transacted at the same office;
later, the business of Lubas deteriorated because of the refusal of PTI to maintain and repair the units being used therein,
which resulted in the virtual stoppage of its operations and respondents' loss of employment.

Petitioners, on the other hand, denied the material allegations of the complaints contending that herein respondents were no
longer their employees, since they all transferred to Lubas at their own request; petitioners have nothing to do with the
management and operations of Lubas as well as the control and supervision of the latter's employees; petitioners were not
aware of the existence of any union in their company and came to know of the same only in June 1998 when they were
served a copy of the summons in the petition for certification election filed by the union; that before the union was registered
on April 15, 1998, the complaint subject of the present petition was already filed; that the real motive in the filing of the
complaints was because PTI asked respondents to vacate the bunkhouse where they (respondents) and their respective
families were staying because PTI wanted to renovate the same.

Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision,5 the dispositive portion of which reads as follows:cralaw chanrob 1esvi rtwallaw lib rary

WHEREFORE, judgment is hereby rendered: cha nro b1esvi rtwal lawlib rary

1. Dismissing the complaints for Unfair Labor Practice, non-payment of holiday pay and holiday premium, service incentive
leave pay and 13 th month pay; chanrob lesvi rtualaw lib rary

Dismissing the complaint of Edgardo Belda for refund of boundary-hulog; chan roblesv irt ualawli bra ry

2. Dismissing the complaint for illegal dismissal against the respondents Prince Transport, Inc. and/or Prince Transport Phils.
Corporation, Roberto Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy, Mario Feranil and Peter Buentiempo; chan roblesv irt ualawli bra ry

3. Declaring that the complainants named below are illegally dismissed by Lubas Transport; ordering said Lubas Transport to
pay backwages and separation pay in lieu of reinstatement in the following amount: chanro b1esvi rtwal lawlib rary

Complainants Backwages Separation Pay

Complainants Backwages Separation Pay


7
(1) Diosdado
Garcia P222,348.70 P79,456.00
(2) Feliciano Gasco,
Jr. 203,350.00 54,600.00
(3) Pablito
Macasaet 145,250.00 13,000.00
(4) Esmael
Ramboyong 221,500.00 30,000.00
(5) Joel
Gramatica 221,500.00 60,000.00
(6) Amado
Galanto 130,725.00 29,250.00
(7) Miel
Cervantes 265,800.00 60,000.00
(8) Roberto
Mano 221,500.00 50,000.00
(9) Roe dela
Cruz 265,800.00 60,000.00
(10) Richelo
Balidoy 130,725.00 29,250.00
(11) Vilma
Porras 221,500.00 70,000.00
(12) Miguelito
Salcedo 265,800.00 60,000.00
(13) Cristina
Garcia 130,725.00 35,100.00
(14) Luisito
Garcia 145,250.00 19,500.00
(15) Rogelio
Bagawisan 265,800.00 60,000.00
(16) Rodante H.
Romero 221,500.00 60,000.00
(17) Dindo
Torres 265,800.00 50,000.00
(18) Edgar
Sanfuego 221,500.00 40,000.00
(19) Ronald
Gacita 221,500.00 40,000.00
(20) Harry
Toca 174,300.00 23,400.00
(21) Amado
Galanto 130,725.00 17,550.00
(22) Teresita
Cabañes 130,725.00 17,550.00
(23) Rex
Bartolome 301,500.00 30,000.00
(24) Mario
Nazareno 221,500.00 30,000.00
(25) Eustaquio
Villareal 145,250.00 19,500.00
(26) Ariel
Sanchez 265,800.00 60,000.00
(27) Gloria
Orante 263,100.00 60,000.00
(28) Nelson
Montero 264,600.00 60,000.00

8
(29) Rizal
Beato 295,000.00 40,000.00
(30) Eutiquio
Lugtu 354,000.00 48,000.00
(31) Warlito
Dickensomn 295,000.00 40,000.00
(32) Edgardo
Belda 354,000.00 84,000.00
(33) Tita
Go 295,000.00 70,000.00
(34) Alex
Lodor 295,000.00 50,000.00
(35) Glenda
Arguilles 295,000.00 40,000.00
(36) Erwin
Luces 354,000.00 48,000.00
(37) Jesse
Celle 354,000.00 48,000.00
(38) Roy
Adorable 295,000.00 40,000.00
(39) Marlon
Bangcoro 295,000.00 40,000.00
(40)Edgardo
Bangcoro 354,000.00 36,000.00
chanro blesvi rtua lawlib rary

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of the total monetary award; and

6. Ordering the dismissal of the claim for moral and exemplary damages for lack merit.

SO ORDERED.6 cralawredlaw

The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of evidence to show that they
violated respondents' right to self-organization. The Labor Arbiter also held that Lubas is the respondents' employer and that
it (Lubas) is an entity which is separate, distinct and independent from PTI. Nonetheless, the Labor Arbiter found that Lubas
is guilty of illegally dismissing respondents from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be held equally liable as Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and disposed as follows: chanro b1esv irtwal lawlib rary

WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED. Accordingly, the Decision appealed from
is SUSTAINED subject to the modification that Complainant-Appellant Edgardo Belda deserves refund of his boundary-hulog
in the amount of P 446,862.00; and that Complainants-Appellants Danilo Rojo and Danilo Laurel should be included in the
computation of Complainants-Appellants claim as follows: chanro b1esv irtwal lawlib rary

Complainants Backwages Separation Pay


41. Danilo
Rojo P355,560.00 P48,000.00
42. Danilo
Laurel P357,960.00 P72,000.00

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

SO ORDERED.7 cralawredlaw

Respondents filed a Motion for Reconsideration, but the NLRC denied it in its Resolution8 dated September 26, 2003. cra law

Respondents then filed a special civil action for certiorari with the CA assailing the Decision and Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents' petition. The CA ruled that
petitioners are guilty of unfair labor practice; that Lubas is a mere instrumentality, agent conduit or adjunct of PTI; and that

9
petitioners' act of transferring respondents' employment to Lubas is indicative of their intent to frustrate the efforts of
respondents to organize themselves into a union. Accordingly, the CA disposed of the case as follows: chanrob1e svi rtwallawl ibra ry

WHEREFORE , the Petition for Certiorari is hereby GRANTED. Accordingly, the subject decision is hereby REVERSED and SET
ASIDE and another one ENTERED finding the respondents guilty of unfair labor practice and ordering them to reinstate the
petitioners to their former positions without loss of seniority rights and with full backwages.

With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in the computation of petitioner's claim for
backwages and with respect to the portion ordering the refund of Edgardo Belda's boundary-hulog in the amount
of P 446,862.00, the NLRC decision is affirmed and maintained.

SO ORDERED.9 cralawredlaw

Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution10 dated February 24, 2005.
cralaw

Hence, the instant petition for review on certiorari based on the following grounds: cha nrob1e svirtwallawl ibra ry

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE COURSE TO THE RESPONDENTS'
PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS OF THE LABOR ARBITER AND AFFIRMED BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION

3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION WITH RESPECT TO RESPONDENTS
REX BARTOLOME, FELICIANO GASCO, DANILO ROJO, EUTIQUIO LUGTU, AND NELSON MONTERO AS THEY FAILED TO FILE
AN APPEAL TO THE NLRC

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE TRANSPORT, INC. AND MR. RENATO
CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION AND THUS, LIABLE IN SOLIDUM TO
RESPONDENTS.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE REINSTATEMENT OF RESPONDENTS
TO THEIR PREVIOUS POSITION WHEN IT IS NOT ONE OF THE ISSUES RAISED IN RESPONDENTS' PETITION
FOR CERTIORARI.11 cralaw redlaw

Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC are accorded not only
respect but even finality; that the CA should have outrightly dismissed the petition filed before it because
in certiorariproceedings under Rule 65 of the Rules of Court it is not within the province of the CA to evaluate the sufficiency
of evidence upon which the NLRC based its determination, the inquiry being limited essentially to whether or not said tribunal
has acted without or in excess of its jurisdiction or with grave abuse of discretion. Petitioners assert that the CA can only
pass upon the factual findings of the NLRC if they are not supported by evidence on record, or if the impugned judgment is
based on misapprehension of facts - which circumstances are not present in this case. Petitioners also emphasize that the
NLRC and the Labor Arbiter concurred in their factual findings which were based on substantial evidence and, therefore,
should have been accorded great weight and respect by the CA.

Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed error in re-evaluating the
NLRC's factual findings since such findings are not in accord with the evidence on record and the applicable law or
jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules of Court has been
settled as early as this Court's decision in St. Martin Funeral Homes v. NLRC.12 In said case, the Court held that the proper
cralaw

vehicle for such review is a special civil action for certiorari under Rule 65 of the said Rules, and that the case should be filed
with the CA in strict observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9 of
Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA - pursuant to the exercise of its original jurisdiction
over petitions forcertiorari - is specifically given the power to pass upon the evidence, if and when necessary, to resolve
factual issues.13 Section 9 clearly states:
cralaw chan rob1esv irtwallawlib ra ry

xxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the power to
grant and conduct new trials or further proceedings. x x x

10
However, equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in
matters within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.14 But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in
cralaw

disregard of the evidence on record, they may be examined by the courts.15 The CA can grant the petition for certiorari if it
cralaw

finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence.16 It cralaw

is within the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings of the
NLRC.17 cralawredlaw

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are generally binding on the
appellate court, unless there was a showing that they were arrived at arbitrarily or in disregard of the evidence on record. In
respondents' petition for certiorari with the CA, these factual findings were reexamined and reversed by the appellate court
on the ground that they were not in accord with credible evidence presented in this case. To determine if the CA's
reexamination of factual findings and reversal of the NLRC decision are proper and with sufficient basis, it is incumbent upon
this Court to make its own evaluation of the evidence on record.18 c ralawred law

After a thorough review of the records at hand, the Court finds that the CA did not commit error in arriving at its own
findings and conclusions for reasons to be discussed hereunder.

Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached verification and certificate
against forum shopping was signed only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs in a case and the
signature of only one of them is insufficient, the Court has stressed that the rules on forum shopping, which were designed to
promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective.19 Strict compliance with the provision regarding the certificate of non-
c ralaw

forum shopping underscores its mandatory nature in that the certification cannot be altogether dispensed with or its
requirements completely disregarded.20 It does not, however, prohibit substantial compliance therewith under justifiable
c ralaw

circumstances, considering especially that although it is obligatory, it is not jurisdictional.21 cralaw redlaw

In a number of cases, the Court has consistently held that when all the petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them in the certification against forum shopping
substantially complies with the rules.22 In the present case, there is no question that respondents share a common interest
cra law

and invoke a common cause of action. Hence, the signature of respondent Garcia is a sufficient compliance with the rule
governing certificates of non-forum shopping. In the first place, some of the respondents actually executed a Special Power
of Attorney authorizing Garcia as their attorney-in-fact in filing a petition for certiorari with the CA.23 cralawredlaw

The Court, likewise, does not agree with petitioners' argument that the CA should not have given due course to the petition
filed before it with respect to some of the respondents, considering that these respondents did not sign the verification
attached to the Memorandum of Partial Appeal earlier filed with the NLRC. Petitioners assert that the decision of the Labor
Arbiter has become final and executory with respect to these respondents and, as a consequence, they are barred from filing
a petition for certiorari with the CA.

With respect to the absence of some of the workers' signatures in the verification, the verification requirement is deemed
substantially complied with when some of the parties who undoubtedly have sufficient knowledge and belief to swear to the
truth of the allegations in the petition had signed the same. Such verification is deemed a sufficient assurance that the
matters alleged in the petition have been made in good faith or are true and correct, and not merely speculative. Moreover,
respondents' Partial Appeal shows that the appeal stipulated as complainants-appellants "Rizal Beato, et al.", meaning that
there were more than one appellant who were all workers of petitioners.

In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified, may be given due
course even without a verification if the circumstances warrant the suspension of the rules in the interest of justice.24 Indeed, cra law

the absence of a verification is not jurisdictional, but only a formal defect, which does not of itself justify a court in refusing
to allow and act on a case.25 Hence, the failure of some of the respondents to sign the verification attached to their
cralaw

Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.

Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil with respect to Lubas,
because the said doctrine is applicable only to corporations and Lubas is not a corporation but a single proprietorship; that
Lubas had been found by the Labor Arbiter and the NLRC to have a personality which is separate and distinct from that of
PTI; that PTI had no hand in the management and operation as well as control and supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A settled formulation of
the doctrine of piercing the corporate veil is that when two business enterprises are owned, conducted and controlled by the
same parties, both law and equity will, when necessary to protect the rights of third parties, disregard the legal fiction that
these two entities are distinct and treat them as identical or as one and the same.26 In the present case, it may be true that
cralaw

Lubas is a single proprietorship and not a corporation. However, petitioners' attempt to isolate themselves from and hide
behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is precisely what the classical
doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit: chan rob1e svirtwallawli bra ry

11
As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was Prince Transport who
made the decision to transfer its employees to the former? Besides, Prince Transport never regarded Lubas Transport as a
separate entity. In the aforesaid letter, it referred to said entity as "Lubas operations." Moreover, in said letter, it did not
transfer the employees; it "assigned" them. Lastly, the existing funds and 201 file of the employees were turned over not to
a new company but a "new management."27 cralawred law

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent from PTI why is it that the
latter decides which employees shall work in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner company admitted that
Lubas is one of its sub-companies.28 In addition, PTI, in its letters to its employees who were transferred to Lubas, referred
cralaw

to the latter as its "New City Operations Bus."29 cralawred law

Moreover, petitioners failed to refute the contention of respondents that despite the latter's transfer to Lubas of their daily
time records, reports, daily income remittances of conductors, schedule of drivers and conductors were all made, performed,
filed and kept at the office of PTI. In fact, respondents' identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving different groups of
employees transferred by PTI to other companies, the Labor Arbiter handling the cases found that these companies and PTI
are one and the same entity; thus, making them solidarily liable for the payment of backwages and other money claims
awarded to the complainants therein.30 cra lawred law

Petitioners likewise aver that the CA erred and committed grave abuse of discretion when it ordered petitioners to reinstate
respondents to their former positions, considering that the issue of reinstatement was never brought up before it and
respondents never questioned the award of separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are seeking reinstatement.31 cralaw redlaw

In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief sought, but may add a
general prayer for such further or other reliefs as may be deemed just and equitable. Under this rule, a court can grant the
relief warranted by the allegation and the proof even if it is not specifically sought by the injured party; the inclusion of a
general prayer may justify the grant of a remedy different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant.32 cralawredlaw

Moreover, in BPI Family Bank v. Buenaventura,33 this Court ruled that the general prayer is broad enough "to justify
cralaw

extension of a remedy different from or together with the specific remedy sought." Even without the prayer for a specific
remedy, proper relief may be granted by the court if the facts alleged in the complaint and the evidence introduced so
warrant. The court shall grant relief warranted by the allegations and the proof even if no such relief is prayed for. The
prayer in the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not otherwise
specifically prayed for.34 In the instant case, aside from their specific prayer for reinstatement, respondents, in their
cra law

separate complaints, prayed for such reliefs which are deemed just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent reason to depart from the findings of
the CA that respondents' transfer of work assignments to Lubas was designed by petitioners as a subterfuge to foil the
former's right to organize themselves into a union. Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of
unfair labor practice if it interferes with, restrains or coerces its employees in the exercise of their right to self-organization or
if it discriminates in regard to wages, hours of work and other terms and conditions of employment in order to encourage or
discourage membership in any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after respondents' transfer to
Lubas, petitioners left them high and dry insofar as the operations of Lubas was concerned. The Court finds no error in the
findings and conclusion of the CA that petitioners "withheld the necessary financial and logistic support such as spare parts,
and repair and maintenance of the transferred buses until only two units remained in running condition." This left
respondents virtually jobless.

WHEREFORE , the instant petition is denied. The assailed Decision and Resolution of the Court of Appeals, dated December
20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953, are AFFIRMED.

SO ORDERED .

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

CARPIO, J., Chairperson, NACHURA, ABAD, and ____,** JJ.

cralaw Endnotes:

12
* Referred to as Roberto in some parts of the SC and CA rollo.
cralaw

* cralaw
* Designated as an additional member in lieu of Associate Justice Jose Catral Mendoza, per raffle dated ____________.

1
Penned by Associate Justice Jose Catral Mendoza (now a member of this Court), with Associate Justices Godardo A. Jacinto and Edgardo P.
cralaw

Cruz, concurring; rollo, pp. 44-49.

2
cralaw Id . at 61-62

3 cralaw Id . at. 85-98.

4
cralaw Id . at 100-102.

5 cralaw Id . at 210-233.

6
cralaw Id . at 230-233.

7 cralaw Id . at 97-98.

8 cralaw Id . at 100-102.

9 cralaw Id . at 318.

10 cralaw Id . at 61-62.

11 cralaw Id . at 23-24.

12 cralaw 356 Phil. 811 (1998).

13
PICOP Resources Incorporated (PRI) v. Anacleto Tañeca , et al., G.R. No. 160828, August 9, 2010; Maralit v. Philippine National Bank,
cralaw

G.R. No. 163788, August 24, 2009, 596 SCRA 662, 682-683; Triumph International (Phils.), Inc. v. Apostol, G.R. No. 164423, June 16, 2009,
589 SCRA 185, 197.

14 cralaw Philippine Veterans Bank v. National Labor Relations Commission , G.R. No. 188882, March 30, 2010.

15 cralaw Faeldonia v. Tong Yak Groceries , G.R. No. 182499, October 2, 2009, 602 SCRA 677, 684.

16 cralaw Emcor Incorporated v. Sienes , G.R. No. 152101, September 8, 2009, 598 SCRA 617, 632.

17
cralaw Id .

18
cralaw Triumph International (Phils.), Inc. v. Apostol , supra note 13, at 198.

19 Juaban v. Espina , G.R. No. 170049, March 14, 2008, 548 SCRA 588, 603, citing Cua v. Vargas, 506 SCRA 374, 389-390 (2006); Pacquing
cralaw

v. Coca-Cola, Philippines, Inc., G.R. No. 157966, January 31, 2008, 543 SCRA 344, 353.

20 cralaw Id .

21 cralaw Id .

22 cralaw Id .

23 cralaw See Special Power of Attorney, CA rollo, p. 22.

24 Heirs of the Late Jose De Luzuriaga v. Republic , G.R. Nos. 168848 & 169019, June 30, 2009, 591 SCRA 299, 313; Woodridge School v. Pe
cralaw

Benito, G.R. No. 160240, October 29, 2008, 570 SCRA 164, 175; Linton Commercial Co., Inc. v. Hellera, G.R. No. 163147, October 10, 2007,
535 SCRA 434, 446.

25Spic N' Span Services Corp. v. Paje , G.R. No. 174084, August 25, 2010; Sari-Sari Group of Companies, Inc. v. Piglas Kamao (Sari-Sari
cralaw

Chapter), G.R. No. 164624, August 11, 2008, 561 SCRA 569, 579-580.

26 cralaw Pantranco Employees Association (PEA-PTGWO) v. NLRC , G.R. Nos. 170689 and 170705, March 17, 2009, 581 SCRA 598, 613-614.

27 cralaw Rollo , p. 55.

28
cralaw CA rollo, p. 69.

29 cralaw Id . at 87-121.

30 See Decisions in NLRC-NCR Case Nos. 00-01-00438-01, 00-03-01882-01, 00-04-02108-01, 00-04-04129-01 and NLRC-NCR Case No. 00-
cralaw

04-02129-2001, id. at 193-256.

31
cralaw See Amended Complaints, CA rollo, pp. 45-68; 122-136.

13
32
Philippine Charter Insurance Corporation v. Philippine National Construction Corporation , G.R. No. 185066, October 2, 2009, 602 SCRA
cralaw

723, 735-736.

33 cralaw 508 Phil. 423, 436 (2005).

34 cralaw Gutierrez v. Valiente , G.R. No. 166802, July 4, 2008, 557 SCRA 211, 226.

14
SECOND DIVISION

G.R. No. 206716, June 18, 2014

RUBEN C. JORDAN, Petitioner, v. GRANDEUR SECURITY & SERVICES, INC., Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by petitioner Ruben Jordan to challenge the April 22, 2013
decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 119715.

The Factual Antecedents

On May 23, 2007, Jordan, together with his co-employees, Valentino Galache and Ireneo Esguerra, (collectively,
the complainants) filed individual complaints for money claims against Nicolas Pablo and respondent Grandeur
Security and Services Corp. (Grandeur Security).3 They alleged that Grandeur Security did not pay them minimum
wages, holiday, premium, service incentive leave, and thirteenth month pays as well as the cost of living allowance.
They likewise claimed that Grandeur Security illegally deducted from their wages the amount of five hundred pesos
(P500.00) per annum as premiums of their insurance policies. Galache additionally asked for the payment of overtime
pay for work he allegedly rendered beyond eight hours.4 On May 28, 2007, Jordan amended his complaint and
included illegal dismissal as his additional cause of action. The case was docketed as NLRC-NCR Case No. 05-
05003-07.5 cra lawred

In defense, Grandeur Security denied that it terminated Jordan from employment. It claimed that it merely issued
Jordan a memorandum6 re-assigning him from Quezon City7 to Taguig City.8 It further insisted that Jordan abandoned
his work and opted to file an illegal dismissal case against it instead of complying with the memorandum. Grandeur
Security also denied non-payment of money claims to the complainants.9 cralaw red

The Labor Arbiter’s Ruling

In a decision dated May 27, 2008,10 the Labor Arbiter (LA) held that Jordan had merely been transferred to another
workplace. The LA also ruled that Jordan’s immediate filing of illegal dismissal case after the issuance of the subject
memorandum belied Grandeur Security’s claim of abandonment. Thus, the LA ordered Grandeur Security to
“reinstate” Jordan in employment. The LA further awarded the complainants monetary claims for Grandeur Security’s
failure to adduce evidence of payment except Galache’s claim for overtime pay due to lack of proof that he rendered
work beyond eight hours. The dispositive part of the decision states: ChanRoblesVi rtua lawlib rary

“WHEREFORE, premises considered, judgment is hereby rendered dismissing the charge of illegal dismissal of
complainant Ruben C. Jordan, for lack of merit. Respondents Grandeur Security Services through
respondent Nicolas T. Pablo is hereby ordered to reinstate complainant Ruben C. Jordan to his former
position without any backwages and to pay herein complainants their salary differentials, holiday pay differential,
cost of living allowance, and 13th month differentials pay and service incentive leave pay and the return of the
deductions of P500.00 per year for three (3) years in the total aggregate sum of:

1. Ruben C. Jordan – P88,883.23

2. Valentino Galache – P172,800.27

3. Irineo Esguerra – P75,544.50

Or the sum total of Three Hundred Thirty-Seven Thousand Two Hundred Twenty-Eight and 01/100 (P337,228.01)
pesos as computed by Ms. Amalia Celino, Financial Analyst, this Commission, which computation has been made part
of the records, within ten (10) days from receipt hereof.

Further, an order of reinstatement in this jurisdiction being not only immediately executory but likewise
self-executory even pending appeal, respondents are hereby directed to submit Compliance Report
therewith indicating therein their option taken as to whether the reinstatement of Ruben C. Jordan
undertaken was physical or merely in their payroll likewise within ten (10) days from receipt hereof.

SO ORDERED.”11

Proceedings after the May 27, 2008 Decision

Grandeur Security partially appealed the May 27, 2008 decision before the NLRC with respect to the grant of
monetary awards.12 However, it did not contest the “reinstatement order” as it allegedly mailed Jordan a return to
work order dated July 11, 2008 (letter).13 The letter was addressed to Jordan’s residence14 and was evidenced by
Registry Receipt No. 00299 as well as the registry return card bearing the recipient’s signature.15 cralawred

15
The NLRC denied Grandeur Security’s partial appeal and the subsequent motion for reconsideration. 16 The May 27,
2008 decision became final and executory on January 20, 2010 and the NLRC correspondingly issued an entry of
judgment in NLRC-NCR Case No. 05-05003-07.17 Subsequently, the complainants sought to execute the May 27, 2008
decision.18 After the NLRC issued a writ of execution, Grandeur Security paid the amount of P80,000.00 to Jordan who
executed a quitclaim on his money claims on March 3, 2010. Notably, the quitclaim states that “the issue on
reinstatement is still pending for [the] determination by the Labor Arbiter.”19
cralawred

On December 15, 2010, the LA pronounced the proceedings in NLRC-NCR Case No. 00-05-05003-07 closed
and terminated in view of: (1) the complainant’s individual quitclaims; and (2) Jordan’s waiver of his
right to be reinstated. The LA found that Jordan did not report for work despite his receipt of Grandeur
Security’s letter.20 cralawred

On January 10, 2011, Jordan appealed the December 15, 2010 order before the NLRC and insisted that he did not
receive the letter.21 He asserted that the signature in the registry return card neither belonged to him nor to his wife,
Evelyn Jordan.22 As proof, he attached to his appeal his and his wife’s specimen signatures.23 He also submitted a
letter from Meycauayan, Bulacan Post Office which states that it could not grant a certification of mailing due to the
damage of its delivery books in 2009.24 Jordan thus claimed backwages and separation pay for failure of Grandeur
Security to comply with the reinstatement order in the May 27, 2008 decision, thus: ChanRob les Vi rtualaw lib rary

Wherefore, premises considered, it is most respectfully prayed that this Honorable Commission reverse and set aside
LA’s decision and order respondents to pay complainants the following:

1. Backwages from June 2008 until full payment is made;

2. Separation pay, in lieu of reinstatement.

In Velasco v. NLRC reiterated in Panfilo Macadero vs. Southern Industrial Gases Philippines, the Supreme Court: ChanRoblesVirt ualawli bra ry

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical
or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded if the
employee decides not to be reinstated.

3. An additional 10% of all amount collected as attorney’s fees.

Respectfully submitted. 10 January 2011.25 (emphasis ours)

The NLRC Ruling

In a decision dated February 21, 2011,26 the NLRC set aside the December 15, 2010 order. The NLRC gave weight to
Jordan and his wife’s specimen signatures in finding that Jordan did not receive the subject letter. It further observed
that the signature appearing in the registry return card was “more similar” to Esguerra’s signature. The NLRC thus
ruled that Jordan was entitled to backwages and separation pay for Grandeur Security’s failure to comply with the
reinstatement order in the May 27, 2008 decision. The dispositive part of the NLRC decision states: ChanRoblesVi rtualaw lib rary

WHEREFORE, premises considered, judgment is hereby rendered finding the appeal impressed with merit.
Respondent-appellee, Grandeur Security and Services Corporation is hereby ordered to pay complainant the
aggregate amount of P977,255.20 representing his reinstatement wages and separation pay plus ten
percent (10%) thereof as attorney’s fees. Accordingly, the Order of the Labor Arbiter dated December 15, 2010
is hereby VACATED and SET ASIDE.

SO ORDERED.27 (emphasis ours)

On March 28, 2011, the NLRC denied28 the motion for reconsideration29 that Grandeur Security and Pablo subsequently
filed, prompting the employer company to seek relief from the CA through a petition for certiorari under Rule 65 of the
Rules of Court.30
cra lawred

The CA Ruling

On April 22, 2013, the CA nullified the NLRC ruling. The CA held that the NLRC gravely abused its discretion when it
ordered Grandeur Security to pay Jordan backwages, separation pay, and attorney’s fees despite the immutability of
the May 27, 2008 decision. Citing Section 9, Rule 11 of the 2011 NLRC Rules of Procedure, the CA declared that the
consequence of the employer’s refusal to reinstate an employee was to cite the employer in contempt, and not to
order the payment of backwages and separation pay.

The CA also concluded that Jordan’s claim of non-receipt was merely a ploy to demand from Grandeur Security
additional monetary awards when he clearly did not desire to be reinstated. It observed that Jordan repeatedly and
categorically prayed in his pleadings the payment of backwages and separation pay in lieu of reinstatement. Even
assuming that Jordan did not waive his right to reinstatement, the CA ruled that his denial of the receipt of the letter
would not prevail over the presumption that the postman had regularly delivered the mail to its recipient. Moreover,
the registry receipt and the registry return card substantially proved that the letter was delivered to Jordan.31 cra lawred

The Petition

In the petition before this Court, Jordan insists that the NLRC did not alter the May 27, 2008 decision. He posits that
the issue of his entitlement to backwages, separation pay, and attorney’s fees only arose after Grandeur Security’s
non-compliance with the reinstatement order. He reiterates that he is entitled to backwages and separation pay due
to his non-receipt of the letter ordering him to return to work.

The Respondent’s Position

16
In its Comment,32 Grandeur Security argues that the NLRC had no jurisdiction to alter the May 27, 2008 decision
which has already attained finality. It also points out that nothing prevented Jordan from reporting for work especially
since the LA has already ruled on the continued existence of his employment. Since Jordan was not dismissed from
work, he is not entitled to backwages and separation pay. Grandeur Security additionally submits that the registry
receipt and the registry return card substantially prove Jordan’s receipt of the subject letter. It also wants this Court
to take cognizance of its previous successful mails to Jordan’s home address.

The Issues

This case presents to us the following issues:


(1) Whether an employee who is not terminated from employment may be reinstated to work;

(2) Whether the CA correctly ruled that NLRC rulings dated February 21 and March 28, 2011 are null and
void; and

(a) Whether the NLRC has jurisdiction over the “memorandum of appeal” dated January 10, 2011; and

(b) Whether the NLRC gravely abused its discretion in substantially altering the May 27, 2008 decision;
and

(3) Whether Jordan waived his right to work in Grandeur Security.


Our Ruling

We find the petition unmeritorious.

I. The Court should harmonize the seemingly conflicting dispositions of the Labor Arbiter’s final and
executory judgment

A. The dispositive part must be harmonized with the whole body of the decision where uncertainty exists
in the dispositive part.

It does not escape this Court’s attention that the dispositive part of the May 27, 2008 decision contains two
contradictory judgments. The dispositive part states that Jordan’s complaint for illegal dismissal is dismissed for
lack of merit. In the same breath, the LA ordered Grandeur Security to reinstate Jordan in employment, whether
physically or in the payroll. These conflicting judgments are absurd because an employee who has not
been dismissed, much less illegally dismissed, cannot be reinstated. In legal parlance, reinstatement without
loss of seniority rights is merely a consequence of the employer’s illegal dismissal; 33 it merely restores the employee
who is unjustly dismissed to his former position.34 cralawred

As a rule, the court’s resolution in a given issue is embodied in the decision’s dispositive part. The dispositive part is
the controlling factor on the settlement of parties’ rights, notwithstanding the confusing statement in the body of the
decision or order. However, this rule only applies when the decision’s dispositive part is definite, clear and
unequivocal.35Where a doubt or uncertainty exists between the dispositive part and the body of the
decision, the Court must harmonize the former with the latter in order to give effect to the decision’s
intention, purpose and substantive terms.36 cralawred

We see no reason why this Court should not apply this exception in construing the LA’s rulings in the May 27, 2008
decision. While the contradictory statements appear in the dispositive part, the Court should also scrutinize the whole
body of the May 27, 2008 decision in order to judiciously give effect to the LA’s intended rulings. In other words, we
should read the May 27, 2008 decision in its entirety and construe it as a whole so as to bring all of its parts into
harmony as far as this can be done by fair and reasonable interpretation. “Doubtful or ambiguous judgments are to
have a reasonable intendment to do justice and avoid wrong. When a judgment is susceptible of two interpretations,
that will be adopted which renders it the more reasonable, effective, and conclusive, and which makes the judgment
harmonize with the facts and law of the case and be such as sought to have been rendered.”37 cralawre d

To shed light on the May 27, 2008 decision, we re-examined the body of the decision whose relevant part states: ChanRoblesVi rtualawl ib rary

“For our resolution are the following issues, to wit:

1. Whether or not complainant Ruben C. Jordan has been illegally dismissed from service;

2. Whether or not complainants are entitled to their monetary claims.

On the first issue, We find for respondents. Indeed, the records clearly show that respondent never
dismissed complainant Jordan from the service neither did they intend to do so in the first place for in spite of
the serious offenses said complainant had committed in the early years of his employment with respondent such as
sleeping while on duty, said respondents never attempted to rid themselves of said complainant’s services.
It appears on record that complainant Jordan was merely relieved of his duty and was being transferred on 24 May
2007, to another client of respondents, the Cacho Construction located at Taguig City for guarding duties.
Nothing on the memorandum sent him on 23 May 2007 indicated his termination of employment. Instead
of reporting to respondent’s office to effect his transfer of assignment he filed the instant complaint. Thus,
respondent’s intimation that complainant had abandoned his job has been rendered untenable under this
circumstance, “a charge of abandonment is totally inconsistent with the immediate filing for illegal dismissal: (Icawat

17
vs. NLRC, 334 SCRA 75, June 20, 2000). The records thus lead us to the conclusion that complainant Jordan resented
his relief and subsequent re-assignment to another post for guarding duty.

This being the case, We find no illegal dismissal extant in this case nor abandonment of job to speak
of. We likewise find no justification whatsoever for complainant Jordan’s allegation of strained relations
between him and respondents to warrant the grant of separation pay as prayed for by him. Hence,
pursuant to law and jurisprudence and under the aforedescribed circumstances obtaining in his case,
complainant Ruben C. Jordan should be as he is hereby ordered to return to his position as security guard
with respondents and the latter in like manner, hereby ordered to accept him back without any
backwages.” (emphasis and underlining ours)

For easy reference, we juxtapose the above-quoted body of the May 27, 2008 decision with the dispositive part which
provides:ChanRoblesVirtualawl ibra ry

“WHEREFORE, premises considered, judgment is hereby rendered dismissing the charge of illegal dismissal of
complainant Ruben C. Jordan, for lack of merit. Respondents Grandeur Security Services through
respondent Nicolas T. Pablo is hereby ordered to reinstate complainant Ruben C. Jordan to his former
position without any backwages and to pay herein complainants their salary differentials, holiday pay differential,
cost of living allowance, and 13th month differentials pay and service incentive leave pay and the return of the
deductions of P500.00 per year for three (3) years in the total aggregate sum of:

1. Ruben C. Jordan – P88,883.23

2. Valentino Galache – P172,800.27

3. Irineo Esguerra – P75,544.50

Or the sum total of Three Hundred Thirty-Seven Thousand Two Hundred Twenty-Eight and 01/100 (P337,228.01)
pesos as computed by Ms. Amalia Celino, Financial Analyst, this Commission, which computation has been made part
of the records, within ten (10) days from receipt hereof.

Further, an order of reinstatement in this jurisdiction being not only immediately executory but likewise
self-executory even pending appeal, respondents are hereby directed to submit Compliance Report
therewith indicating therein their option taken as to whether the reinstatement of Ruben C. Jordan
undertaken was physical or merely in their payroll likewise within ten (10) days from receipt hereof.

SO ORDERED.” (emphasis and underlining ours)

It clearly appears from the entirety of the May 27, 2008 decision that Grandeur Security did not dismiss
Jordan from employment. The LA in fact stated that Grandeur Security “never attempted” to terminate his services.
Rather, Grandeur Security merely transferred him to another workplace, a valid exercise of management prerogative.
That Jordan remained in Grandeur Security’s employ is further supported by the LA’s finding that Jordan did not
abandon his work. Too, the dispositive part of the May 27, 2008 decision contains a categorical dismissal of the illegal
dismissal case for lack of merit.

This interpretation, however, leaves us with the question of the import of the words “reinstate” and “reinstatement” in
the dispositive part of the May 27, 2008 decision. A close reading of the entire decision shows that the LA meant
“physically return to work” – a grossly erroneous yet literal concept of reinstatement in the context of this case. This
is so because the body of the decision states, “Ruben C. Jordan xxx is hereby ordered to return to his position
as security guard with respondents and the latter in like manner, [is] hereby ordered to accept him back
without any backwages.” We also discern the correctness of this interpretation in light of the LA’s two crucial
factual findings: first, Jordan remained in Grandeur Security’s employ; and second, Jordan did not abandon his work
despite his continuous absence from work. This is the only plausible interpretation of the words “reinstate” and
“reinstatement” if we are to harmonize them with the LA’s finding of non-termination.

B. The Court may correct clerical errors in a final and executory judgment

It seems to us that the word “payroll” in the dispositive part of the May 27, 2008 decision is a mere surplusage —
a clerical error that was beyond the LA’s contemplation in rendering that decision. The reason is simple: the payroll
reinstatement order manifestly and patently contradicts the LA’s unequivocal statement in the body of the decision
that there were no strained relations between Grandeur Security and Jordan. In fact, the LA categorically
declared that there was “no justification whatsoever for complainant Jordan’s allegation of strained
relations.” The rationales for payroll reinstatement under Article 223 of the Labor Code are to avoid the intolerable
presence of the unwanted employee as when there exist strained relations between labor and management or due
to the non-availability of positions.38 Since these circumstances are remarkably absent in the present case, coupled
with the fact that Jordan was never separated from employment, we delete the word “payroll” in the dispositive part
of the May 27, 2008 decision.

In Potenciano v. Court of Appeals,39 we held that courts may correct clerical errors, mistakes or omissions in the
dispositive part of a final and executory decision due to the inadvertence or negligence by the lower court or tribunal
as an exception to the principle of immutability of judgments. Pursuant to this jurisprudential exception, we hold that
the word “payroll” is a mere mistake that should have been and should be disregarded by the concerned parties in the
May 27, 2008 decision.

In sum, the LA rendered the following dispositions in the May 27, 2008 decision with respect to Jordan:
(1) Jordan’s complaint for illegal dismissal against Grandeur Security and Pablo is dismissed because
Grandeur Security did not terminate Jordan from employment;
18
(2) Jordan is ordered to physically return to work in Grandeur Security; Grandeur Security and Pablo are
directed to submit Compliance Report on the return to work order within ten (10) days from the receipt of
the May 27, 2008 decision; and

(3) Grandeur Security and Pablo are ordered to pay Jordan the total amount of P88,883.23, representing his
salary differential, cost of living allowance, thirteenth month, service incentive, and holiday pays as well
the return of the paid insurance premiums in the amount of P1,500.00.
II. The CA correctly ruled that the NLRC rulings dated February 21 and March 28, 2011 are null and void

A. The NLRC has no original jurisdiction over termination disputes

We should understand the procedural recourse that Jordan had taken after the issuance of the December 15, 2010
order to fully comprehend the CA’s nullification of the NLRC rulings dated February 21 and March 28, 2011. In the
proceedings below, Jordan appealed the December 15, 2010 order before the NLRC to contest his alleged receipt of
the subject letter. Significantly, Jordan prayed for backwages and separation pay, in lieu of reinstatement, in his
“memorandum of appeal” dated January 10, 2011.

It is a basic rule that the averments in the body of the pleading and the character of the relief sought determine the
nature of the action and which court has jurisdiction over the case. It is not the title of the pleading but its allegations
that must control.40 A plain reading of the “memorandum of appeal” shows that this pleading was in fact
another complaint for illegal dismissal. Jordan alleged in his “memorandum of appeal” that his claims for
backwages, separation pay, and attorney’s fees arose after Grandeur Security refused to heed the LA’s return to work
order in the May 27, 2008 decision; he vehemently insisted that he did not receive Grandeur Security’s letter ordering
him to return to work. Also, Jordan specifically asked for backwages beginning June 2008 or after the promulgation
of the May 27, 2008 decision.

This procedural recourse is a serious error that the NLRC and the CA should have immediately spotted. The NLRC and
the CA should have immediately dismissed the “memorandum of appeal” for lack of jurisdiction. Under Article 217 (a)
(2), and (b) of the Labor Code, the LA has original and exclusive jurisdiction over termination disputes; the NLRC
only has exclusive appellate jurisdiction over these cases. Furthermore, Jordan’s remedy against Grandeur’s
Security alleged disobedience to the return to work order is not to file a complaint for illegal dismissal, but to ask the
NLRC to hold Grandeur Security in indirect contempt.41 cralaw red

B. As a general rule, a tribunal has no jurisdiction to substantially alter a final and executory judgment

Even assuming that the NLRC has jurisdiction over Jordan’s “memorandum of appeal”, we agree with the CA that the
NLRC gravely abused its discretion in substantively altering the dispositive part of the May 27, 2008 decision. While
tribunals and courts may correct clerical errors in a judgment that has attained finality, its final and executory
character precludes these bodies from substantively altering its dispositive part, except: (1) in cases of void
judgments, and (2) whenever circumstances transpire after the finality of the decision rendering its execution unjust
and inequitable.42 As a rule, a definitive final judgment, however erroneous, is no longer subject to substantial change
or revision.43
cralawred

The CA correctly ruled that the NLRC acted outside of its jurisdiction in replacing the LA’s return to work order. The
NLRC’s judgments ordering Grandeur Security to pay backwages, separation pay, and attorney’s fees are
unwarranted, unprecedented, and arbitrary. These, in effect, vacated the May 27, 2008 decision which already found
the continued existence of Jordan’s employment. To the point of being repetitive, we reiterate that backwages and
separation pay are mere consequences of illegal dismissal.44 We only award separation pay in lieu of reinstatement
when: (1) reinstatement is no longer possible as where the dismissed employee’s position is no longer available; (2)
the continued relationship between the employer and the employee is no longer viable due to the strained relations
between them; and (3) when the dismissed employee opted not to be reinstated, or the payment of separation
benefits would be for the best interest of the parties involved.45 cralawred

For these reasons, we affirm the CA’s nullification of the NLRC rulings dated February 21 and March 28, 2011 for
having been issued without jurisdiction.

III. Jordan did not waive his right to return to work in Grandeur Security

From the promulgation of the May 27, 2008 decision, this case had been fraught with procedural infirmities that
delayed the determination of whether the proceedings in NLRC-NCR Case No. 00-05-05003-07 should be declared
closed and terminated. Because Jordan promptly moved for the execution of the May 27, 2008 decision, we take up
this matter to see the speedy termination of NLRC-NCR Case No. 00-05-05003-07.

At the outset, we clarify that whether Jordan received Grandeur Security’s letter directing him to report to work is
irrelevant in determining his waiver of employment in Grandeur Security. In labor cases, rules of procedure should not
be applied in a very rigid and technical sense because they are merely tools designed to facilitate the attainment of
justice.46That Jordan was actually informed of the return to work order and that Grandeur Security never
prohibited him from reporting for work are sufficient compliance with the LA’s return to work order.

Nonetheless, we are unprepared to declare NLRC-NCR Case No. 00-05-05003-07 to be closed and terminated because
the mere absence or failure to report for work, even after notice to return, does not necessarily amount to
abandonment. Abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts. To
constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the employer-
19
employee relationship. The operative act is still the employee’s ultimate act of putting an end to his employment.47
cralawred

In the present case, Jordan’s filing of a complaint for illegal dismissal – in the form of a “memorandum of appeal”
before the NLRC – is inconsistent with abandonment of employment. The filing of this complaint is a proof of his desire
to return to work, effectively negating any suggestion of abandonment.48 We also cannot fault him for his continuous
absence because he faithfully relied on the void NLRC rulings which ordered Grandeur Security to pay backwages,
separation pay, and attorney’s fees in lieu of the LA’s return to work order.

WHEREFORE, premises considered, we hereby DENY the petition. We PARTIALLY AFFIRM the May 27, 2008
decision of the Court of Appeals in CA-G.R. SP No. 119715. Petitioner Ruben Jordan is hereby ordered to RETURN
TO WORK within fifteen days from the receipt of this Decision. Respondent Grandeur Security and Services, Inc. is
likewise ordered to ACCEPT petitioner Ruben Jordan. No costs.

SO ORDERED.

Del Castillo, Perez, Mendoza,** and Perlas-Bernabe, JJ., concur.

Endnotes:

*
Designated as Acting Chairperson, per Special Order No. 1699 dated June 13, 2014.

**
Designated as Additional Member vice Associate Justice Antonio T. Carpio, per Special Order No. 1696 dated June
13, 2014.

1
Dated May 3, 2013 and filed under Rule 45 of the Rules of Court; rollo, pp. 3-13.

2
Id. at 15-26; penned by Associate Justice Manuel M. Barrios, and concurred in by Associate Justices Remedios A.
Salazar-Fernando and Normandie B. Pizarro.

3
Id. at 71, 133.

4
Id. at 35.

5
Id. at 133.

6
Dated May 23, 2007; id. at 18.

7
Id. at 30.

Supra note 6.
8

9
Id. at 29-31.

10
Id. at 28-36.

11
Id. at 36.

12
Id. at 18.

13
Dated July 11, 2008; id. at 17.

14
Petitioner Ruben Jordan’s residence address was 363 Maligaya Village, Pajo, Meycauayan, Bulacan. Id. at 53.

15
Id. at 23.

16
Id. at 18.

17
Id. at 71.

18
Id. at 37.

19
Id. at 48.

20
Id. at 50.

21
Id. at 52-60.

22
Id. at 57.

23
Id. at 61-62.

24
Id. at 63.

20
25
Id. at 58.

26
Id. at 70-74.

27
Id. at 73-74.

28
Id. at 107-109.

29
Id. at 77-97.

30
Id. at 110-131.

Supra note 2.
31

32
Id. at 190-212.

Reyes v. RP Guardians Security Agency, Inc., G.R. No. 193756, April 10, 2013, 695 SCRA 620-621, 625-627.
33

De Guzman v. NLRC, 371 Phil. 193, 201 (1999).


34

Suntay v. Suntay, 360 Phil. 933-934, 944-945 (1998).


35

Republic v. de los Angeles, 148-B Phil. 902, 903, 922-923 (1971).


36

37
Id. at 924-925, citing 49 C.J.S., pp. 865-866.

Radio Philippines Network, Inc. v. Yap, G.R. No. 187713, August 1, 2012, 678 SCRA 150, 165-166.
38

39
104 Phil. 156-157, 160-161 (1958).

Spouses Munsalud v. National Housing Authority, G.R. No. 167181, December 23, 2008, 575 SCRA 145, 157-158;
40

and Spouses Genato v. Viola, G.R. NO. 169706, February 5, 2010, 611 SCRA 677, 686.

41
2011 NLRC RULES OF PROCEDURE, Rule 9, Section 2 (d).

FGU Insurance Corp. v. Regional Trial Court, G.R. No. 161282, February 23, 2011, 644 SCRA 51, 56; and Mendoza
42

v. Fil-Homes Realty Development Corp., G.R. No. 194653, February 8, 2012, 665 SCRA 628, 634.

Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, December 4, 2009, 607 SCRA 200-201, 213.
43

44
LABOR CODE, Article 279.

45
IMPLEMENTING RULES AND REGULATIONS OF THE LABOR CODE, Book VI, Rule 1, Section 4 (b).

Millenium Erectors Corp. v. Magallanes, G.R. No. 184362, November 15, 2010, 634 SCRA 708, 713.
46

MZR Industries v. Colambot, G.R. No. 179001, August 28, 2013.


47

48
Ibid.

21
SECOND DIVISION

[G.R. No. 185280 : January 18, 2012]

TIMOTEO H. SARONA, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, ROYALE SECURITY
AGENCY (FORMERLY SCEPTRE SECURITY AGENCY) AND CESAR S. TAN, RESPONDENTS.

DECISION

REYES, J.:

This is a petition for review under Rule 45 of the Rules of Court from the May 29, 2008 Decision 1 of the Twentieth
Division of the Court of Appeals (CA) in CA-G.R. SP No. 02127 entitled “Timoteo H. Sarona v. National Labor Relations
Commission, Royale Security Agency (formerly Sceptre Security Agency) and Cesar S. Tan” (Assailed Decision), which
affirmed the National Labor Relations Commission’s (NLRC) November 30, 2005 Decision and January 31, 2006
Resolution, finding the petitioner illegally dismissed but limiting the amount of his backwages to three (3) monthly
salaries. The CA likewise affirmed the NLRC’s finding that the petitioner’s separation pay should be computed only on
the basis of his length of service with respondent Royale Security Agency (Royale). The CA held that absent any
showing that Royale is a mere alter ego of Sceptre Security Agency (Sceptre), Royale cannot be compelled to
recognize the petitioner’s tenure with Sceptre. The dispositive portion of the CA’s Assailed Decision states:

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

SO ORDERED.2

Factual Antecedents

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

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

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

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

In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the petitioner’s favor and found him
illegally dismissed. For being unsubstantiated, LA Gutierrez denied credence to the respondents’ claim that the
termination of the petitioner’s employment relationship with Royale was on his accord following his alleged
employment in another company. That the petitioner was no longer interested in being an employee of Royale cannot
be presumed from his request for a certificate of employment, a claim which, to begin with, he vehemently denies.
Allegation of the petitioner’s abandonment is negated by his filing of a complaint for illegal dismissal three (3) days
after he was informed that he would no longer be given any assignments. LA Gutierrez ruled:

In short, respondent wanted to impress before us that complainant abandoned his employment. We are not however,
convinced.

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

“Abandonment of position is a matter of intention expressed in clearly certain and unequivocal acts,
however, an interim employment does not mean abandonment.” (Jardine Davis, Inc. vs. NLRC, 225 SCRA
757).

22
“In abandonment, there must be a concurrence of the intention to abandon and some overt acts from
which an employee may be declared as having no more interest to work.” (C. Alcontin & Sons, Inc. vs.
NLRC, 229 SCRA 109).

“It is clear, deliberate and unjustified refusal to severe employment and not mere absence that is required
to constitute abandonment.” x x x” (De Ysasi III vs. NLRC, 231 SCRA 173).

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

“The immediate filing of a complaint for [i]llegal [d]ismissal by an employee is inconsistent with
abandonment.”7

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

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

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

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

Bruno M. Kuizon - [P]150,000.00


Wilfredo K. Tan - 100,000.00
Karen Therese S. Tan - 100,000.00
Cesar Antonio S. Tan - 100,000.00
Gabeth Maria K. Tan - 50,000.00

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

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

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

WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the illegal dismissal of complainant is
hereby AFFIRMED.

However[,] We modify the monetary award by limiting the grant of backwages to only three (3) months in view of
complainant’s very limited service which lasted only for one month and three days.

1. Backwages - [P]15,600.00

23
2. Separation - 5,200.00
Pay
3. 13 Month -
th
583.34
Pay
[P]21,383.34
Attorney’s 2,138.33
Fees-
Total [P]23,521.67
The appeal of respondent Royal (sic) Security Agency is hereby DISMISSED for lack of merit.

SO ORDERED.10
The NLRC partially affirmed LA Gutierrez’s May 11, 2005 Decision. It concurred with the latter’s finding that the
petitioner was illegally dismissed and the manner by which his separation pay was computed, but modified the
monetary award in the petitioner’s favor by reducing the amount of his backwages from P95,600.00 to P15,600.00.
The NLRC determined the petitioner’s backwages as limited to three (3) months of his last monthly salary, considering
that his employment with Royale was only for a period for one (1) month and three (3) days, thus: 11

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

Backwages:

[P]5,200.00 x 3 months = [P]15,600.0012

The petitioner, on the other hand, did not appeal LA Gutierrez’s May 11, 2005 Decision but opted to raise the validity
of LA Gutierrez’s adverse findings with respect to piercing Royale’s corporate personality and computation of his
separation pay in his Reply to the respondents’ Memorandum of Appeal. As the filing of an appeal is the prescribed
remedy and no aspect of the decision can be overturned by a mere reply, the NLRC dismissed the petitioner’s efforts
to reverse LA Gutierrez’s disposition of these issues. Effectively, the petitioner had already waived his right to question
LA Gutierrez’s Decision when he failed to file an appeal within the reglementary period. The NLRC held:

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

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

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

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

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

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

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

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

In the instant case, We find no evidence to show that Royale Security Agency, Inc. (hereinafter “Royale”), a
corporation duly registered with the Securities and Exchange Commission (SEC) and Sceptre Security Agency

24
(hereinafter “Sceptre”), a single proprietorship, are one and the same entity.

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

On the other hand, private respondents declared that Royale was incorporated only on March 10, 2003 as evidenced
by the Certificate of Incorporation issued by the SEC on the same date; that Royale’s incorporators are Bruino M.
Kuizon, Wilfredo Gracia K. Tan, Karen Therese S. Tan, Cesar Antonio S. Tan II and [Gabeth] Maria K. Tan.

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

“SECTION 1. Burden of proof. - Burden of proof is the duty of a party to present evidence on the facts in issue
necessary to establish his claim or defense by the amount of evidence required by law.”

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

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

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

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

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

ISSUES

Considering the conflicting submissions of the parties, a judicious determination of their respective rights and
obligations requires this Court to resolve the following substantive issues:

a. Whether Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner’s
length of service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his
employment with Sceptre; and

25
b. Whether the petitioner’s backwages should be limited to his salary for three (3) months.

OUR RULING

Because his receipt of the


proceeds of the award
under
the NLRC’s November
30, 2005 Decision is
qualified and without
prejudice to the CA’s
resolution of his petition
for certiorari/b>, the
petitioner is not barred
from exercising his right
to elevate the decision of
the CA to this Court.

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

The respondents fail to convince.

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

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

Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed despite the
pendency of a petition for certiorari, unless it is restrained by the proper court. In the present case, petitioners
already paid Villamater’s widow, Sonia, the amount of P3,649,800.00, representing the total and permanent disability
award plus attorney’s fees, pursuant to the Writ of Execution issued by the Labor Arbiter. Thereafter, an Order was
issued declaring the case as "closed and terminated". However, although there was no motion for reconsideration of
this last Order, Sonia was, nonetheless, estopped from claiming that the controversy had already reached its end with
the issuance of the Order closing and terminating the case. This is because the Acknowledgment Receipt she signed
when she received petitioners’ payment was without prejudice to the final outcome of the petition
for certiorari pending before the CA.35

The finality of the NLRC’s decision does not preclude the filing of a petition for certiorari under Rule 65 of the Rules of
Court. That the NLRC issues an entry of judgment after the lapse of ten (10) days from the parties’ receipt of its
decision36 will only give rise to the prevailing party’s right to move for the execution thereof but will not prevent the
CA from taking cognizance of a petition for certiorari on jurisdictional and due process considerations.37 In turn, the
decision rendered by the CA on a petition for certiorari may be appealed to this Court by way of a petition for review
on certiorari under Rule 45 of the Rules of Court. Under Section 5, Article VIII of the Constitution, this Court has the
power to “review, revise, reverse, modify, or affirm on appeal orcertiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in x x x all cases in which only an error or question of law is
involved.” Consistent with this constitutional mandate, Rule 45 of the Rules of Court provides the remedy of an appeal
by certiorari from decisions, final orders or resolutions of the CA in any case, i.e., regardless of the nature of the
action or proceedings involved, which would be but a continuation of the appellate process over the original
case.38 Since an appeal to this Court is not an original and independent action but a continuation of the proceedings
before the CA, the filing of a petition for review under Rule 45 cannot be barred by the finality of the NLRC’s decision
in the same way that a petition for certiorari under Rule 65 with the CA cannot.

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

A Rule 45 Petition
should be confined to
questions of
26
law. Nevertheless, this
Court has the power to
resolve a question of
fact, such as whether a
corporation is a mere
alter ego of another
entity or whether the
corporate fiction was
invoked for fraudulent
or malevolent ends, if
the findings in assailed
decision is not
supported by the
evidence on record or
based on a
misapprehension of
facts.

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

As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45 of the Rules of
Court must exclusively raise questions of law. Moreover, if factual findings of the NLRC and the LA have been affirmed
by the CA, this Court accords them the respect and finality they deserve. It is well-settled and oft-repeated that
findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the
CA.41

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

A resolution of an issue that has supposedly become final


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

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

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

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

Royale is a continuation or successor of Sceptre.

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

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

Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court should be
mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an
extent that injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be
clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may
27
result from an erroneous application.47

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

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

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

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

Aida’s control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction. There must be a
showing that a fraudulent intent or illegal purpose is behind the exercise of such control to warrant the piercing of the
corporate veil.52 However, the manner by which the petitioner was made to resign from Sceptre and how he became
an employee of Royale suggest the perverted use of the legal fiction of the separate corporate personality. It is
undisputed that the petitioner tendered his resignation and that he applied at Royale at the instance of Karen and
Cesar and on the impression they created that these were necessary for his continued employment. They orchestrated
the petitioner’s resignation from Sceptre and subsequent employment at Royale, taking advantage of their
ascendancy over the petitioner and the latter’s lack of knowledge of his rights and the consequences of his actions.
Furthermore, that the petitioner was made to resign from Sceptre and apply with Royale only to be unceremoniously
terminated shortly thereafter leads to the ineluctable conclusion that there was intent to violate the petitioner’s rights
as an employee, particularly his right to security of tenure. The respondents’ scheme reeks of bad faith and fraud and
compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling Royale to credit and
recognize the petitioner’s length of service with Sceptre. The respondents cannot use the legal fiction of a separate
corporate personality for ends subversive of the policy and purpose behind its creation53 or which could not have been
intended by law to which it owed its being.54

For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole proprietorship. As ruled in Prince
Transport, Inc., et al. v. Garcia, et al.,55 it is the act of hiding behind the separate and distinct personalities of juridical
entities to perpetuate fraud, commit illegal acts, evade one’s obligations that the equitable piercing doctrine was
formulated to address and prevent:

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

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

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

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

28
Taking the foregoing in conjunction with Aida’s control over Sceptre’s and Royale’s business affairs, it is patent that
Royale was a mere subterfuge for Aida. Since a sole proprietorship does not have a separate and distinct personality
from that of the owner of the enterprise, the latter is personally liable. This is what she sought to avoid but cannot
prosper.

Effectively, the petitioner cannot be deemed to have changed employers as Royale and Sceptre are one and the same.
His separation pay should, thus, be computed from the date he was hired by Sceptre in April 1976 until the finality of
this decision. Based on this Court’s ruling in Masagana Concrete Products, et al. v. NLRC, et al.,58 the intervening
period between the day an employee was illegally dismissed and the day the decision finding him illegally dismissed
becomes final and executory shall be considered in the computation of his separation pay as a period of “imputed” or
“putative” service:
Separation pay, equivalent to one month's salary for every year of service, is awarded as an alternative to
reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of
employment up to the time of termination, including the imputed service for which the employee is entitled to
backwages, with the salary rate prevailing at the end of the period of putative service being the basis for
computation.59

It is well-settled, even axiomatic, that if reinstatement


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

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

As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62 clarified in no uncertain terms that if
reinstatement is no longer possible, backwages should be computed from the time the employee was terminated until
the finality of the decision, finding the dismissal unlawful.

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

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

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

Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:

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

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

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

In fine, this Court holds Royale liable to pay the petitioner backwages to be computed from his dismissal on October
1, 2003 until the finality of this decision. Nonetheless, the amount received by the petitioner from the respondents in
satisfaction of the November 30, 2005 Decision shall be deducted accordingly.
29
Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the petitioner’s dismissal, which
was tainted by bad faith and fraud, are in order. Moral damages may be recovered where the dismissal of the
employee was tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner
contrary to morals, good customs or public policy while exemplary damages are recoverable only if the dismissal was
done in a wanton, oppressive, or malevolent manner.69

WHEREFORE, premises considered, the Petition is hereby GRANTED. We REVERSE and SET ASIDE the CA’s May
29, 2008 Decision in C.A.-G.R. SP No. 02127 and order the respondents to pay the petitioner the following minus the
amount of (P23,521.67) paid to the petitioner in satisfaction of the NLRC’s November 30, 2005 Decision in NLRC Case
No. V-000355-05:

a) full backwages and other benefits computed from October 1, 2003 (the date Royale illegally dismissed the

petitioner) until the finality of this decision;

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

of service;

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

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

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

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

SO ORDERED.

Carpio, (Chairperson), Perez, Sereno, and Bernabe, JJ.*, concur.

Endnotes:

* Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012.

1Penned by Associate Justice Francisco P. Acosta, with Associate Justices Amy C. Lazaro-Javier and Florito S. Macalino,
concurring; rollo, pp. 19-30.

2 Id. at 29.

3 Id. at 3, 4 and 21.

4 Id. at 4-5, 21.

5 Id. at 5-6.

6 Id. at 5-6, 21.

7 Id. at 55.

8 Id. at 53-54.

9 Id. at 58-65.

10 Id. at 64-65.

11 Id. at 64.

12 Id.
30
13 Id.

14 Id. at 24-25.

15 Id.

16 Id. at 26-27.

17 Id. at 13-15.

18 Id. at 7-13.

19 Id. at 5, 6 and 9.

20 Id. at 8-9.

21 Id. at 74-80.

22 Id. at 82.

23 Id. at 44.

24 Id. at 73-79.

25 Id. at 73-80.

26 Id. at 12.

27 Id. at 8, 44, 73-74.

28 Id.

29 Id. at 58-65.

30 Id. at 49.

31 Id. at 77.

32 Id.

33 Id. at 67.

34 G.R. No. 179169, March 3, 2010, 614 SCRA 182.

35 Id. at 193-194.

36 2011 NLRC Rules of Procedure, Rule VII, Section 14.

37 Id.

38 Cua, Jr. v. Tan, G.R. No. 181455-56, December 4, 2009, 607 SCRA , 686-687.

39 Leonis Navigation Co., Inc. v. Villamater, supra note 34 at 192.

40 China Banking Corporation v. Dyne-Sem Electronics Corporation, 527 Phil 80 (2006).

41 Reyes v. National Labor Relations Commission, G.R. No. 160233, August 8, 2007, 529 SCRA 499.

42New Rules of Procedure of the National Labor Relations Commission (as amended by NLRC Resolution No. 01-02,
Series of 2002).

31
43 Del Monte Philippines, Inc. v. NLRC, G.R. No. 87371, August 6, 1990, 188 SCRA 370.

44 Government Service Insurance System v. NLRC, G.R. No. 180045, November 17, 2010, 635 SCRA 258.

General Credit Corporation v. Alsons Development and Investment Corporation, G.R. No. 154975, January 29, 2007,
45

513 SCRA 237-238.

46 Philippine National Bank v. Andrada Electric Engineering Company, 430 Phil 894 (2002).

47 Id. at 894-895; citations omitted.

48 Supra note 45 at 238.

49 Id. at 238-239.

50 Rollo, p. 79.

51 Id. at 80.

52NASECO Guards Association-PEMA (NAGA-PEMA) v. National Service Corporation, G.R. No. 165442, August 25, 2010,
629 SCRA 101.

53 Cf. Emiliano Cano Enterprises, Inc. v. CIR, et al., 121 Phil 276 (1965).

54 Land Bank of the Philippines v. Court of Appeals, 416 Phil 774, 783 (2001).

55 G.R. No. 167291, January 12, 2011, 639 SCRA 312.

56 Id. at 328.

57 Rollo, pp. 5, 54, 74 and 82.

58 372 Phil 459 (1999).

59 Id. at 481.

60 De Guzman v. National Labor Relations Commission, 371 Phil 202 (1999).

61 Velasco v. NLRC, et al., 525 Phil 749, 761-762, (2006).

62 332 Phil 833 (1996).

63 Id. at 843.

64 G.R. No. 181913, March 5, 2010, 614 SCRA 342.

65 Id. at 350-351.

66 Rasonable v. NLRC, 324 Phil 191, 200 (1996).

67 Id.

St. Louis College of Tuguegarao v. NLRC, 257 Phil 1008 (1989), citing East Asiatic Co., Ltd. v. Court of Industrial
68

Relations, 148-B Phil 401, 429 (1971).

69 Norkis Trading Co., Inc. v. NLRC, 504 Phil 709, 719-720 (2005).

32
SECOND DIVISION

[G.R. No. 185280 : January 18, 2012]

TIMOTEO H. SARONA, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, ROYALE SECURITY
AGENCY (FORMERLY SCEPTRE SECURITY AGENCY) AND CESAR S. TAN, RESPONDENTS.

DECISION

REYES, J.:

This is a petition for review under Rule 45 of the Rules of Court from the May 29, 2008 Decision 1 of the Twentieth
Division of the Court of Appeals (CA) in CA-G.R. SP No. 02127 entitled “Timoteo H. Sarona v. National Labor Relations
Commission, Royale Security Agency (formerly Sceptre Security Agency) and Cesar S. Tan” (Assailed Decision), which
affirmed the National Labor Relations Commission’s (NLRC) November 30, 2005 Decision and January 31, 2006
Resolution, finding the petitioner illegally dismissed but limiting the amount of his backwages to three (3) monthly
salaries. The CA likewise affirmed the NLRC’s finding that the petitioner’s separation pay should be computed only on
the basis of his length of service with respondent Royale Security Agency (Royale). The CA held that absent any
showing that Royale is a mere alter ego of Sceptre Security Agency (Sceptre), Royale cannot be compelled to
recognize the petitioner’s tenure with Sceptre. The dispositive portion of the CA’s Assailed Decision states:

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

SO ORDERED.2

Factual Antecedents

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

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

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

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

In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the petitioner’s favor and found him
illegally dismissed. For being unsubstantiated, LA Gutierrez denied credence to the respondents’ claim that the
termination of the petitioner’s employment relationship with Royale was on his accord following his alleged
employment in another company. That the petitioner was no longer interested in being an employee of Royale cannot
be presumed from his request for a certificate of employment, a claim which, to begin with, he vehemently denies.
Allegation of the petitioner’s abandonment is negated by his filing of a complaint for illegal dismissal three (3) days
after he was informed that he would no longer be given any assignments. LA Gutierrez ruled:

In short, respondent wanted to impress before us that complainant abandoned his employment. We are not however,
convinced.

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

33
“Abandonment of position is a matter of intention expressed in clearly certain and unequivocal acts,
however, an interim employment does not mean abandonment.” (Jardine Davis, Inc. vs. NLRC, 225 SCRA
757).

“In abandonment, there must be a concurrence of the intention to abandon and some overt acts from
which an employee may be declared as having no more interest to work.” (C. Alcontin & Sons, Inc. vs.
NLRC, 229 SCRA 109).

“It is clear, deliberate and unjustified refusal to severe employment and not mere absence that is required
to constitute abandonment.” x x x” (De Ysasi III vs. NLRC, 231 SCRA 173).

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

“The immediate filing of a complaint for [i]llegal [d]ismissal by an employee is inconsistent with
abandonment.”7

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

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

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

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

Bruno M. Kuizon - [P]150,000.00


Wilfredo K. Tan - 100,000.00
Karen Therese S. Tan - 100,000.00
Cesar Antonio S. Tan - 100,000.00
Gabeth Maria K. Tan - 50,000.00

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

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

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

WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the illegal dismissal of complainant is
hereby AFFIRMED.

However[,] We modify the monetary award by limiting the grant of backwages to only three (3) months in view of
complainant’s very limited service which lasted only for one month and three days.
34
1. Backwages - [P]15,600.00
2. Separation - 5,200.00
Pay
3. 13 Month -
th
583.34
Pay
[P]21,383.34
Attorney’s 2,138.33
Fees-
Total [P]23,521.67
The appeal of respondent Royal (sic) Security Agency is hereby DISMISSED for lack of merit.

SO ORDERED.10
The NLRC partially affirmed LA Gutierrez’s May 11, 2005 Decision. It concurred with the latter’s finding that the
petitioner was illegally dismissed and the manner by which his separation pay was computed, but modified the
monetary award in the petitioner’s favor by reducing the amount of his backwages from P95,600.00 to P15,600.00.
The NLRC determined the petitioner’s backwages as limited to three (3) months of his last monthly salary, considering
that his employment with Royale was only for a period for one (1) month and three (3) days, thus: 11

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

Backwages:

[P]5,200.00 x 3 months = [P]15,600.0012

The petitioner, on the other hand, did not appeal LA Gutierrez’s May 11, 2005 Decision but opted to raise the validity
of LA Gutierrez’s adverse findings with respect to piercing Royale’s corporate personality and computation of his
separation pay in his Reply to the respondents’ Memorandum of Appeal. As the filing of an appeal is the prescribed
remedy and no aspect of the decision can be overturned by a mere reply, the NLRC dismissed the petitioner’s efforts
to reverse LA Gutierrez’s disposition of these issues. Effectively, the petitioner had already waived his right to question
LA Gutierrez’s Decision when he failed to file an appeal within the reglementary period. The NLRC held:

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

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

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

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

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

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

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

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

35
In the instant case, We find no evidence to show that Royale Security Agency, Inc. (hereinafter “Royale”), a
corporation duly registered with the Securities and Exchange Commission (SEC) and Sceptre Security Agency
(hereinafter “Sceptre”), a single proprietorship, are one and the same entity.

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

On the other hand, private respondents declared that Royale was incorporated only on March 10, 2003 as evidenced
by the Certificate of Incorporation issued by the SEC on the same date; that Royale’s incorporators are Bruino M.
Kuizon, Wilfredo Gracia K. Tan, Karen Therese S. Tan, Cesar Antonio S. Tan II and [Gabeth] Maria K. Tan.

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

“SECTION 1. Burden of proof. - Burden of proof is the duty of a party to present evidence on the facts in issue
necessary to establish his claim or defense by the amount of evidence required by law.”

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

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

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

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

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

ISSUES

Considering the conflicting submissions of the parties, a judicious determination of their respective rights and
obligations requires this Court to resolve the following substantive issues:

36
a. Whether Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner’s
length of service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his
employment with Sceptre; and

b. Whether the petitioner’s backwages should be limited to his salary for three (3) months.

OUR RULING

Because his receipt of the


proceeds of the award
under
the NLRC’s November
30, 2005 Decision is
qualified and without
prejudice to the CA’s
resolution of his petition
for certiorari/b>, the
petitioner is not barred
from exercising his right
to elevate the decision of
the CA to this Court.

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

The respondents fail to convince.

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

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

Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed despite the
pendency of a petition for certiorari, unless it is restrained by the proper court. In the present case, petitioners
already paid Villamater’s widow, Sonia, the amount of P3,649,800.00, representing the total and permanent disability
award plus attorney’s fees, pursuant to the Writ of Execution issued by the Labor Arbiter. Thereafter, an Order was
issued declaring the case as "closed and terminated". However, although there was no motion for reconsideration of
this last Order, Sonia was, nonetheless, estopped from claiming that the controversy had already reached its end with
the issuance of the Order closing and terminating the case. This is because the Acknowledgment Receipt she signed
when she received petitioners’ payment was without prejudice to the final outcome of the petition
for certiorari pending before the CA.35

The finality of the NLRC’s decision does not preclude the filing of a petition for certiorari under Rule 65 of the Rules of
Court. That the NLRC issues an entry of judgment after the lapse of ten (10) days from the parties’ receipt of its
decision36 will only give rise to the prevailing party’s right to move for the execution thereof but will not prevent the
CA from taking cognizance of a petition for certiorari on jurisdictional and due process considerations.37 In turn, the
decision rendered by the CA on a petition for certiorari may be appealed to this Court by way of a petition for review
on certiorari under Rule 45 of the Rules of Court. Under Section 5, Article VIII of the Constitution, this Court has the
power to “review, revise, reverse, modify, or affirm on appeal orcertiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in x x x all cases in which only an error or question of law is
involved.” Consistent with this constitutional mandate, Rule 45 of the Rules of Court provides the remedy of an appeal
by certiorari from decisions, final orders or resolutions of the CA in any case, i.e., regardless of the nature of the
action or proceedings involved, which would be but a continuation of the appellate process over the original
case.38 Since an appeal to this Court is not an original and independent action but a continuation of the proceedings
before the CA, the filing of a petition for review under Rule 45 cannot be barred by the finality of the NLRC’s decision
in the same way that a petition for certiorari under Rule 65 with the CA cannot.

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

37
A Rule 45 Petition
should be confined to
questions of
law. Nevertheless, this
Court has the power to
resolve a question of
fact, such as whether a
corporation is a mere
alter ego of another
entity or whether the
corporate fiction was
invoked for fraudulent
or malevolent ends, if
the findings in assailed
decision is not
supported by the
evidence on record or
based on a
misapprehension of
facts.

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

As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45 of the Rules of
Court must exclusively raise questions of law. Moreover, if factual findings of the NLRC and the LA have been affirmed
by the CA, this Court accords them the respect and finality they deserve. It is well-settled and oft-repeated that
findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the
CA.41

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

A resolution of an issue that has supposedly become final


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

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

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

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

Royale is a continuation or successor of Sceptre.

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

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

38
Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court should be
mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an
extent that injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be
clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may
result from an erroneous application.47

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

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

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

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

Aida’s control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction. There must be a
showing that a fraudulent intent or illegal purpose is behind the exercise of such control to warrant the piercing of the
corporate veil.52 However, the manner by which the petitioner was made to resign from Sceptre and how he became
an employee of Royale suggest the perverted use of the legal fiction of the separate corporate personality. It is
undisputed that the petitioner tendered his resignation and that he applied at Royale at the instance of Karen and
Cesar and on the impression they created that these were necessary for his continued employment. They orchestrated
the petitioner’s resignation from Sceptre and subsequent employment at Royale, taking advantage of their
ascendancy over the petitioner and the latter’s lack of knowledge of his rights and the consequences of his actions.
Furthermore, that the petitioner was made to resign from Sceptre and apply with Royale only to be unceremoniously
terminated shortly thereafter leads to the ineluctable conclusion that there was intent to violate the petitioner’s rights
as an employee, particularly his right to security of tenure. The respondents’ scheme reeks of bad faith and fraud and
compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling Royale to credit and
recognize the petitioner’s length of service with Sceptre. The respondents cannot use the legal fiction of a separate
corporate personality for ends subversive of the policy and purpose behind its creation53 or which could not have been
intended by law to which it owed its being.54

For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole proprietorship. As ruled in Prince
Transport, Inc., et al. v. Garcia, et al.,55 it is the act of hiding behind the separate and distinct personalities of juridical
entities to perpetuate fraud, commit illegal acts, evade one’s obligations that the equitable piercing doctrine was
formulated to address and prevent:

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

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

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

39
Royale also claimed a right to the cash bond which the petitioner posted when he was still with Sceptre. If Sceptre
and Royale are indeed separate entities, Sceptre should have released the petitioner’s cash bond when he resigned
and Royale would have required the petitioner to post a new cash bond in its favor.

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

Effectively, the petitioner cannot be deemed to have changed employers as Royale and Sceptre are one and the same.
His separation pay should, thus, be computed from the date he was hired by Sceptre in April 1976 until the finality of
this decision. Based on this Court’s ruling in Masagana Concrete Products, et al. v. NLRC, et al.,58 the intervening
period between the day an employee was illegally dismissed and the day the decision finding him illegally dismissed
becomes final and executory shall be considered in the computation of his separation pay as a period of “imputed” or
“putative” service:
Separation pay, equivalent to one month's salary for every year of service, is awarded as an alternative to
reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of
employment up to the time of termination, including the imputed service for which the employee is entitled to
backwages, with the salary rate prevailing at the end of the period of putative service being the basis for
computation.59

It is well-settled, even axiomatic, that if reinstatement


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

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

As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62 clarified in no uncertain terms that if
reinstatement is no longer possible, backwages should be computed from the time the employee was terminated until
the finality of the decision, finding the dismissal unlawful.

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

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

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

Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:

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

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

In case separation pay is awarded and reinstatement is no longer feasible, backwages shall be computed from the
time of illegal dismissal up to the finality of the decision should separation pay not be paid in the meantime. It is the
employee’s actual receipt of the full amount of his separation pay that will effectively terminate the employment of an
illegally dismissed employee.66Otherwise, the employer-employee relationship subsists and the illegally dismissed
employee is entitled to backwages, taking into account the increases and other benefits, including the 13 thmonth pay,
that were received by his co-employees who are not dismissed.67 It is the obligation of the employer to pay an illegally
dismissed employee or worker the whole amount of the salaries or wages, plus all other benefits and bonuses and
general increases, to which he would have been normally entitled had he not been dismissed and had not stopped
working.68
40
In fine, this Court holds Royale liable to pay the petitioner backwages to be computed from his dismissal on October
1, 2003 until the finality of this decision. Nonetheless, the amount received by the petitioner from the respondents in
satisfaction of the November 30, 2005 Decision shall be deducted accordingly.

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

WHEREFORE, premises considered, the Petition is hereby GRANTED. We REVERSE and SET ASIDE the CA’s May
29, 2008 Decision in C.A.-G.R. SP No. 02127 and order the respondents to pay the petitioner the following minus the
amount of (P23,521.67) paid to the petitioner in satisfaction of the NLRC’s November 30, 2005 Decision in NLRC Case
No. V-000355-05:

a) full backwages and other benefits computed from October 1, 2003 (the date Royale illegally dismissed the

petitioner) until the finality of this decision;

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

of service;

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

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

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

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

SO ORDERED.

Carpio, (Chairperson), Perez, Sereno, and Bernabe, JJ.*, concur.

Endnotes:

* Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012.

1Penned by Associate Justice Francisco P. Acosta, with Associate Justices Amy C. Lazaro-Javier and Florito S. Macalino,
concurring; rollo, pp. 19-30.

2 Id. at 29.

3 Id. at 3, 4 and 21.

4 Id. at 4-5, 21.

5 Id. at 5-6.

6 Id. at 5-6, 21.

7 Id. at 55.

8 Id. at 53-54.

9 Id. at 58-65.

10 Id. at 64-65.

41
11 Id. at 64.

12 Id.

13 Id.

14 Id. at 24-25.

15 Id.

16 Id. at 26-27.

17 Id. at 13-15.

18 Id. at 7-13.

19 Id. at 5, 6 and 9.

20 Id. at 8-9.

21 Id. at 74-80.

22 Id. at 82.

23 Id. at 44.

24 Id. at 73-79.

25 Id. at 73-80.

26 Id. at 12.

27 Id. at 8, 44, 73-74.

28 Id.

29 Id. at 58-65.

30 Id. at 49.

31 Id. at 77.

32 Id.

33 Id. at 67.

34 G.R. No. 179169, March 3, 2010, 614 SCRA 182.

35 Id. at 193-194.

36 2011 NLRC Rules of Procedure, Rule VII, Section 14.

37 Id.

38 Cua, Jr. v. Tan, G.R. No. 181455-56, December 4, 2009, 607 SCRA , 686-687.

39 Leonis Navigation Co., Inc. v. Villamater, supra note 34 at 192.

40 China Banking Corporation v. Dyne-Sem Electronics Corporation, 527 Phil 80 (2006).

41 Reyes v. National Labor Relations Commission, G.R. No. 160233, August 8, 2007, 529 SCRA 499.
42
42New Rules of Procedure of the National Labor Relations Commission (as amended by NLRC Resolution No. 01-02,
Series of 2002).

43 Del Monte Philippines, Inc. v. NLRC, G.R. No. 87371, August 6, 1990, 188 SCRA 370.

44 Government Service Insurance System v. NLRC, G.R. No. 180045, November 17, 2010, 635 SCRA 258.

General Credit Corporation v. Alsons Development and Investment Corporation, G.R. No. 154975, January 29, 2007,
45

513 SCRA 237-238.

46 Philippine National Bank v. Andrada Electric Engineering Company, 430 Phil 894 (2002).

47 Id. at 894-895; citations omitted.

48 Supra note 45 at 238.

49 Id. at 238-239.

50 Rollo, p. 79.

51 Id. at 80.

52NASECO Guards Association-PEMA (NAGA-PEMA) v. National Service Corporation, G.R. No. 165442, August 25, 2010,
629 SCRA 101.

53 Cf. Emiliano Cano Enterprises, Inc. v. CIR, et al., 121 Phil 276 (1965).

54 Land Bank of the Philippines v. Court of Appeals, 416 Phil 774, 783 (2001).

55 G.R. No. 167291, January 12, 2011, 639 SCRA 312.

56 Id. at 328.

57 Rollo, pp. 5, 54, 74 and 82.

58 372 Phil 459 (1999).

59 Id. at 481.

60 De Guzman v. National Labor Relations Commission, 371 Phil 202 (1999).

61 Velasco v. NLRC, et al., 525 Phil 749, 761-762, (2006).

62 332 Phil 833 (1996).

63 Id. at 843.

64 G.R. No. 181913, March 5, 2010, 614 SCRA 342.

65 Id. at 350-351.

66 Rasonable v. NLRC, 324 Phil 191, 200 (1996).

67 Id.

St. Louis College of Tuguegarao v. NLRC, 257 Phil 1008 (1989), citing East Asiatic Co., Ltd. v. Court of Industrial
68

Relations, 148-B Phil 401, 429 (1971).

69 Norkis Trading Co., Inc. v. NLRC, 504 Phil 709, 719-720 (2005).

43
THIRD DIVISION

[G.R. No. 186557 : August 25, 2010]

NEGROS METAL CORPORATION, PETITIONER, VS. ARMELO J. LAMAYO, RESPONDENT.

DECISION

CARPIO MORALES, J.:

Armelo J. Lamayo (respondent) began working for Negros Metal Corporation (petitioner or the
company) in September 1999 as a machinist.

Sometime in May 2002, while respondent was at the company's foundry grinding some tools he
was using, William Uy, Sr. (Uy), company manager, called his attention why he was using the
grinder there to which he replied that since the machine there was bigger, he would finish his
work faster.

Respondent's explanation was found unsatisfactory, hence, he was, via memorandum, charged of
loitering and warned.[1] Taking the warning as a three-day suspension as penalized under
company rules, respondent reported for work after three days, only to be meted with another 10-
day suspension[2] ─ from May 30 to June 10, 2002, for allegedly failing to sign the memorandum
suspending him earlier.

After serving the second suspension, respondent reported for work on June 11, 2002 but was
informed by Uy that his services had been terminated and that he should draft his resignation
letter, drawing respondent to file on June 17, 2002 a complaint[3] for illegal dismissal.

In lieu of a position paper, petitioner submitted a Manifestation[4] contending that the complaint
should be dismissed because the Labor Arbiter had no jurisdiction over it since, under their
Collective Bargaining Agreement[5] (CBA), such matters must first be brought before the
company's grievance machinery.

By Decision[6] of December 29, 2004, the Labor Arbiter, brushing aside petitioner's position, held
that respondent was illegally dismissed. The dispositive portion of the said Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. DECLARING that complainant was illegally dismissed by respondents;


2. ORDERING respondent to pay complainant the total amount of P178,978.48
representing payment for separation pay, back wages and 13th month pay, plus
10% thereof as attorney's fees in the amount of P17,897.85, or in the total
amount of

ONE HUNDRED NINETY SIX THOUSAND EIGHTH HUNDRED SEVENTY SIX PESOS & 33/100
(P196,876.33) the same to be deposited with the Cashier of this Office, within ten (10) calendar
days from receipt of this Decision.

On petitioner's appeal, the National Labor Relations Commission (NLRC), by Resolution[7] of March
30, 2006, set aside the ruling of, and remanded the case to, the Labor Arbiter for disposition
based on the company's grievance procedure. It held that based on a letter of the company union
president Arturo Ronquillo (Ronquillo), respondent invoked the CBA provision on grievance
procedure. Respondent's Motion for Reconsideration was denied by the NLRC by Resolution[8] of
June 27, 2006. He thereupon appealed to the Court of Appeals.

By Decision[9] of March 25, 2008, the appellate court set aside the NLRC Resolutions
and reinstated the Labor Arbiter's Decision. It held that the Labor Arbiter had jurisdiction to hear
the complaint; that as respondent's dismissal did not proceed from the parties' interpretation of or
implementation of the CBA, it is not covered by the grievance machinery procedure; that the laws
and rules governing illegal dismissal are not to be found in the parties' CBA but in the labor
statutes, hence, the Labor Arbiter had jurisdiction; and that although the option to go through the
grievance machinery was stated in Ronquillo's letter[10] to petitioner, respondent denied having
made that option as he had ceased to be a member of the union, as evidenced by a March 20,
2001 Certification[11] of the union's past president Alex Sanio that he had resigned effective March
18, 2001. The appellate court went on to hold that, at that point, it was too late to direct the
parties to go through the grievance machinery.

In holding that respondent was illegally dismissed, the appellate court noted that he was not
allowed to go back to work after serving two suspensions, without affording him the requisite
notice and hearing; and that respondent's failure to seek reinstatement did not negate his claim
for illegal dismissal, there being nothing wrong in opting for separation pay in lieu of
reinstatement.

Petitioner's motion for reconsideration having been denied by Resolution[12] of January 21, 2009, it
interposed the present petition for review on certiorari, maintaining that the grievance machinery
procedure should have been followed first before respondent's complaint for illegal dismissal could
be given due course.

44
The petition fails.

Articles 217, 261, and 262 of the Labor Code outline the jurisdiction of labor arbiters and voluntary
arbitrators as follows:

Art. 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits,
all other claims arising from employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining agreements
and those arising from the interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements. (emphasis and underscoring supplied)

xxxx

Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. - The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction
to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except those which
are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this article, gross violations
of Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the
economic provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the
Collective Bargaining Agreement. (emphasis and underscoring supplied)

ART. 262. Jurisdiction over other labor disputes. - The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all
other labor disputes including unfair labor practices and bargaining deadlocks. (emphasis and
underscoring supplied)

Under Art. 217, it is clear that a labor arbiter has original and exclusive jurisdiction
over termination disputes. On the other hand, under Article 261, a voluntary
arbitrator has original and exclusivejurisdiction over grievances arising from the interpretation or
enforcement of company policies.

As a general rule then, termination disputes should be brought before a labor arbiter, except when
the parties, under Art. 262, unmistakably express that they agree to submit the same to voluntary
arbitration.[13]

In the present case, the CBA provision on grievance machinery being invoked by petitioner does
not expressly state that termination disputes are included in the ambit of what may be brought
before the company's grievance machinery. Thus, the pertinent provision in the parties' CBA
reads:

Article IV
GRIEVANCE MACHINERY

Section 1. The parties hereto agree on principle that all disputes between labor and management
may be settled through friendly negotiations that the parties have the same interest in the
45
continuity of work until all points in dispute shall have been discussed and settled. x x x For this
purpose, a grievance is defined as any disagreementbetween the UNION and the
EMPLOYER or between a worker or group of workers on one hand and the EMPLOYER on
the one hand as to the application and interpretation of any of the provisions of this
contract. Other matters subject of collective bargaining or regulated by existing labor laws shall
not be considered as grievances. (emphasis and underscoring supplied)

Even assuming, however, that the suspension of an employee may be considered as a


"disagreement" which bears on the "application and interpretation of any of the provisions" of the
CBA, respondent could not have bound himself to bring the matter of his suspension to grievance
procedure or voluntary arbitration in light of the documented fact that he had resigned from the
union more than a year before his suspension, not to mention the fact that he denied having a
hand in the preparation of the union president Ronquillo's letter invoking the grievance
procedure. In fine, the labor tribunal had original and exclusive jurisdiction over respondent's
complaint for illegal dismissal.

On the merits, as did the appellate court, the Court sustains the Labor Arbiter's ruling that
respondent was illegally dismissed absent a showing that he was accorded due process when he
was summarily terminated. The Court is not a trier of facts. It is not tasked to review the
evidence on record, documentary and testimonial, and reassess the probative weight thereof,
especially in view of the well-entrenched rule that findings of fact of administrative officials, such
as labor arbiters, who have acquired expertise on account of their specialized jurisdiction are
accorded by the courts not only respect but, most often, with finality, particularly when affirmed
on appeal.

WHEREFORE, the petition is DENIED.

SO ORDERED.

Brion, Bersamin, Villarama, Jr., and Sereno, JJ., concur.

Endnotes:

[1]
NLRC records, p. 107.

[2]
Id. at 109

[3]
Id. at 1-3.

[4]
Id. at 11-12.

[5]
Id. at 121-134.

[6]
Id. at 58-65. Penned by Labor Arbiter Phibun Pura.

Id. at 257-262. Penned by Commissioner Aurelio D. Menzon and concurred in by Commissioner


[7]

Oscar S. Uy and Presiding Commissioner Gerardo C. Nograles.

CA rollo, pp. 102-103. Penned by Commissioner Aurelio D. Menzon and concurred in by


[8]

Commissioner Oscar S. Uy and Presiding Commissioner Gerardo C. Nograles.

Id. at 190-198- Penned by Associate Justice Amy C. Lazaro-Javier and concurred in by


[9]

Associate Justices Pampio A. Abarintos and Francisco P. Acosta.

[10]
NLRC records, p. 111.

[11]
Id. at 16.

[12]
Rollo, pp. 36-37. Penned by Associate Justice Amy C. Lazaro-Javier and concurred in by
Associate Justices Franchito N. Diamante and Francisco P. Acosta.

[13]
Vide San Miguel Corporation v. NLRC, G.R. No. 108001, March 15, 1996, 255 SCRA 133.

46
Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION
MANILA PAVILION HOTEL, G.R. No. 189947
owned and operated by ACESITE
(PHILS.) HOTEL Present:
CORPORATION,
Petitioner, CARPIO, J.,
Chairperson,
PEREZ,
SERENO,
- versus - REYES, and
PERLAS-BERNABE, JJ.

Promulgated:
HENRY DELADA,
Respondent. January 25, 2012
x--------------------------------------------------x

DECISION

SERENO, J.:

Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Revised
Rules of Court, assailing the 27 July 2009 Decision and 12 October 2009 Resolution of the Court
of Appeals (CA).[1]

Facts

The present Petition stems from a grievance filed by respondent Henry Delada against petitioner
Manila Pavilion Hotel (MPH). Delada was the Union President of the Manila Pavilion
Supervisors Association at MPH. He was originally assigned as Head Waiter of Rotisserie, a fine-
dining restaurant operated by petitioner. Pursuant to a supervisory personnel reorganization
program, MPH reassigned him as Head Waiter of Seasons Coffee Shop, another restaurant
operated by petitioner at the same hotel. Respondent declined the inter-outlet transfer and instead
asked for a grievance meeting on the matter, pursuant to their Collective Bargaining Agreement
(CBA). He also requested his retention as Head Waiter of Rotisserie while the grievance
procedure was ongoing.

MPH replied and told respondent to report to his new assignment for the time being,
without prejudice to the resolution of the grievance involving the transfer. He adamantly refused
to assume his new post at the Seasons Coffee Shop and instead continued to report to his previous
assignment at Rotisserie. Thus, MPH sent him several memoranda on various dates, requiring
him to explain in writing why he should not be penalized for the following offenses: serious
misconduct; willful disobedience of the lawful orders of the employer; gross insubordination;
gross and habitual neglect of duties; and willful breach of trust.

Despite the notices from MPH, Delada persistently rebuffed orders for him to report to his
new assignment. According to him, since the grievance machinery under their CBA had already
47
been initiated, his transfer must be held in abeyance. Thus, on 9 May 2007, MPH initiated
administrative proceedings against him. He attended the hearings together with union
representatives.

Meanwhile, the parties failed to reach a settlement during the grievance meeting
concerning the validity of MPHs transfer order. Respondent then elevated his grievance to the
Peers Resources Development Director. Still, no settlement between the parties was reached.
Respondent appealed the matter to the Grievance Committee level. The committee recommended
that he proceed to the next level of the grievance procedure, as it was unable to reach a decision
on the matter. Consequently, on 20 April 2007, Delada lodged a Complaint before the National
Conciliation and Mediation Board. On 25 May 2007, the parties agreed to submit the following
issues for voluntary arbitration:
I. WHETHER OR NOT THE TRANSFER OF THE UNION PRESIDENT FROM HEAD
WAITER AT ROTISSERIE TO HEAD WAITER AT SEASONS RESTAURANT IS
VALID AND JUSTIFIED;

II. WHETHER OR NOT THE PREVENTIVE SUSPENSION OF THE COMPLAINANT IS


VALID AND JUSTIFIED;

III. WHETHER OR NOT THE PREVENTIVE SUSPENSION OF THE COMPLAINANT IS


A VALID GROUND TO STRIKE;

IV. WHETHER OR NOT THE RESPONDENT MAY BE HELD LIABLE FOR MORAL
AND EXEMPLARY DAMAGES AND ATTORNEYS FEES; AND

V. WHETHER OR NOT THE COMPLAINANT MAY BE HELD LIABLE FOR MORAL


AND EXEMPLARY DAMAGES AND ATTORNEYS FEES. [2]

While respondents Complaint concerning the validity of his transfer was pending before
the Panel of Voluntary Arbitrators (PVA), MPH continued with the disciplinary action against
him for his refusal to report to his new post at Seasons Coffee Shop. Citing security and safety
reasons, petitioner also placed respondent on a 30-day preventive suspension. On 8 June 2007,
MPH issued a Decision, which found him guilty of insubordination based on his repeated and
willful disobedience of the transfer order. The Decision imposed on Delada the penalty of 90-day
suspension. He opposed the Decision, arguing that MPH had lost its authority to proceed with the
disciplinary action against him, since the matter had already been included in the voluntary
arbitration.

On 14 December 2007, the PVA issued a Decision and ruled that the transfer of Delada
was a valid exercise of management prerogative. According to the panel, the transfer order was
done in the interest of the efficient and economic operations of MPH, and that there was no
malice, bad faith, or improper motive attendant upon the transfer of Delada to Seasons Coffee
Shop. They found that the mere fact that he was the Union President did not put color or ill motive
and purpose to his transfer. On the contrary, the PVA found that the real reason why he refused
to obey the transfer order was that he asked for additional monetary benefits as a condition for
his transfer. Furthermore, the panel ruled that his transfer from Rotisserie to Seasons Coffee
Shop did not prejudice or inconvenience him. Neither did it result in diminution of salaries or
demotion in rank. The PVA thus pronounced that Delada had no valid and justifiable reason to
refuse or even to delay compliance with the managements directive.

The PVA also ruled that there was no legal and factual basis to support petitioners
imposition of preventive suspension on Delada. According to the panel, the mere assertion of
MPH that it is not far-fetched for Henry Delada to sabotage the food to be prepared and served
48
to the respondents dining guest and employees because of the hostile relationship then existing
was more imagined than real. It also found that MPH went beyond the 30-day period of preventive
suspension prescribed by the Implementing Rules of the Labor Code when petitioner proceeded
to impose a separate penalty of 90-day suspension on him. Furthermore, the PVA ruled that MPH
lost its authority to continue with the administrative proceedings for insubordination and willful
disobedience of the transfer order and to impose the penalty of 90-day suspension on respondent.
According to the panel, it acquired exclusive jurisdiction over the issue when the parties
submitted the aforementioned issues before it. The panel reasoned that the joint submission to it
of the issue on the validity of the transfer order encompassed, by necessary implication, the issue
of respondents insubordination and willful disobedience of the transfer order. Thus, MPH
effectively relinquished its power to impose disciplinary action on Delada.[3]

As to the other issues, the panel found that there was no valid justification to conduct any
strike or concerted action as a result of Deladas preventive suspension. It also ruled that since the
30-day preventive suspension and the penalty of 90-day suspension was invalid, then MPH was
liable to pay back wages and other benefits.

The CA affirmed the Decision of the PVA and denied petitioners Motion for
Reconsideration. Consequently, MPH filed the instant Petition.

Issue
Despite the various issues surrounding the case, MPH limited its appeal to the following:

I. Whether MPH retained the authority to continue with the administrative case
against Delada for insubordination and willful disobedience of the transfer
order.

II. Whether MPH is liable to pay back wages.

Discussion
Petitioner argues that it did not lose its authority to discipline Delada notwithstanding the
joint submission to the PVA of the issue of the validity of the transfer order. According to
petitioner, the specific issue of whether respondent could be held liable for his refusal to assume
the new assignment was not raised before the PVA, and that the panels ruling was limited to the
validity of the transfer order. Thus, petitioner maintains that it cannot be deemed to have
surrendered its authority to impose the penalty of suspension.

In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin,[4] we ruled that the voluntary
arbitrator had plenary jurisdiction and authority to interpret the agreement to arbitrate and to
determine the scope of his own authority subject only, in a proper case, to the certiorari
jurisdiction of this Court. In that case, the specific issue presented was the issue of performance
bonus. We then held that the arbitrator had the authority to determine not only the issue of whether
or not a performance bonus was to be granted, but also the related question of the amount of
bonus, were it to be granted. We then said that there was no indication at all that the parties to the
arbitration agreement had regarded the issue of performance bonus as a two-tiered issue, only one
aspect of which was being submitted to arbitration; thus, we held that the failure of the parties to
specifically limit the issues to that which was stated allowed the arbitrator to assume jurisdiction
over the related issue.

A more recent case is Ludo & Luym Corporation v. Saornido.[5] In that case, we recognized that
voluntary arbitrators are generally expected to decide only those questions expressly delineated
49
by the submission agreement; that, nevertheless, they can assume that they have the necessary
power to make a final settlement on the related issues, since arbitration is the final resort for the
adjudication of disputes. Thus, we ruled that even if the specific issue brought before the
arbitrators merely mentioned the question of whether an employee was discharged for just cause,
they could reasonably assume that their powers extended beyond the determination thereof to
include the power to reinstate the employee or to grant back wages. In the same vein, if the
specific issue brought before the arbitrators referred to the date of regularization of the employee,
law and jurisprudence gave them enough leeway as well as adequate prerogative to determine the
entitlement of the employees to higher benefits in accordance with the finding of regularization.
Indeed, to require the parties to file another action for payment of those benefits would certainly
undermine labor proceedings and contravene the constitutional mandate providing full protection
to labor and speedy labor justice.

Consequently, could the PVA herein view that the issue presented before it the question of the
validity of the transfer order necessarily included the question of respondent Deladas
insubordination and willful disobedience of the transfer order?

Pursuant to the doctrines in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA was
authorized to assume jurisdiction over the related issue of insubordination and willful
disobedience of the transfer order. Nevertheless, the doctrine in the aforementioned cases is
inapplicable to the present Petition. In those cases, the voluntary arbitrators did in fact assume
jurisdiction over the related issues and made rulings on the matter. In the present case, however,
the PVA did not make a ruling on the specific issue of insubordination and willful disobedience
of the transfer order. The PVA merely said that its disagreement with the 90-day penalty of
suspension stemmed from the fact that the penalty went beyond the 30-day limit
for preventive suspension:
But to us, what militates against the validity of Deladas preventive suspension is the fact
that it went beyond the 30-day period prescribed by the Implementing Rules of the Labor Code
(Section 4, Rules XIV, Book V). The preventive suspension of Delada is supposed to expire on 09
June 2007, but without notifying Delada, the MPH proceeded to impose a separate penalty of 90-
days suspension to him which took effect only on 18 June 2007, or way beyond the 30-day rule
mandated by the Rules. While the intention of the MPH is to impose the 90-day suspension as a
separate penalty against Delada, the former is already proscribed from doing so because as of 05
June 2007, the dispute at hand is now under the exclusive jurisdiction of the panel of arbitrators.
In fact, by its own admission, the MPH categorically stated in its Position Paper that as of 25 May
2007, or before the suspension order was issued, MPH and Delada had already formulated and
submitted the issues for arbitration. For all legal intents and purposes, therefore, the MPH has now
relinquished its authority to suspend Delada because the issue at this juncture is now within the
Panels ambit of jurisdiction. MPHs authority to impose disciplinary action to Delada must now
give way to the jurisdiction of this panel of arbitrators to rule on the issues at hand. By necessary
implication, this Panel is thus constrained to declare both the preventive suspension and the
separate suspension of 90-days meted to Delada to be not valid and justified.[6]

First, it must be pointed out that the basis of the 30-day preventive suspension imposed on Delada
was different from that of the 90-day penalty of suspension. The 30-day preventive suspension
was imposed by MPH on the assertion that Delada might sabotage hotel operations if preventive
suspension would not be imposed on him. On the other hand, the penalty of 90-day suspension
was imposed on respondent as a form of disciplinary action. It was the outcome of the
administrative proceedings conducted against him. Preventive suspension is a disciplinary
measure resorted to by the employer pending investigation of an alleged malfeasance or
misfeasance committed by an employee.[7] The employer temporarily bars the employee from
working if his continued employment poses a serious and imminent threat to the life or property
50
of the employer or of his co-workers.[8] On the other hand, the penalty of suspension refers to the
disciplinary action imposed on the employee after an official investigation or administrative
hearing is conducted.[9] The employer exercises its right to discipline erring employees pursuant
to company rules and regulations.[10] Thus, a finding of validity of the penalty of 90-day
suspension will not embrace the issue of the validity of the 30-day preventive suspension. In any
event, petitioner no longer assails the ruling of the CA on the illegality of the 30-
day preventive suspension.[11]

It can be seen that, unlike in Sime Darby Pilipinas and Ludo & Luym Corporation, the
PVA herein did not make a definitive ruling on the merits of the validity of the 90-day suspension.
The panel only held that MPH lost its jurisdiction to impose disciplinary action on respondent.
Accordingly, we rule in this case that MPH did not lose its authority to discipline respondent for
his continued refusal to report to his new assignment. In relation to this point, we recall our
Decision in Allied Banking Corporation v. Court of Appeals.[12]

In Allied Banking Corporation,[13] employer Allied Bank reassigned respondent Galanida


from its Cebu City branch to its Bacolod and Tagbilaran branches. He refused to follow the
transfer order and instead filed a Complaint before the Labor Arbiter for constructive dismissal.
While the case was pending, Allied Bank insisted that he report to his new assignment. When he
continued to refuse, it directed him to explain in writing why no disciplinary action should be
meted out to him. Due to his continued refusal to report to his new assignment, Allied Bank
eventually terminated his services. When the issue of whether he could validly refuse to obey the
transfer orders was brought before this Court, we ruled thus:
The refusal to obey a valid transfer order constitutes willful disobedience of a lawful order of an
employer. Employees may object to, negotiate and seek redress against employers for rules
or orders that they regard as unjust or illegal. However, until and unless these rules or orders
are declared illegal or improper by competent authority, the employees ignore or disobey
them at their peril. For Galanidas continued refusal to obey Allied Bank's transfer orders, we
hold that the bank dismissed Galanida for just cause in accordance with Article 282(a) of the Labor
Code. Galanida is thus not entitled to reinstatement or to separation pay. (Emphasis supplied,
citations omitted).[14]

It is important to note what the PVA said on Deladas defiance of the transfer order:
In fact, Delada cannot hide under the legal cloak of the grievance machinery of the CBA or the
voluntary arbitration proceedings to disobey a valid order of transfer from the management of the
hotel. While it is true that Deladas transfer to Seasons is the subject of the grievance machinery in
accordance with the provisions of their CBA, Delada is expected to comply first with the said
lawful directive while awaiting the results of the decision in the grievance proceedings. This issue
falls squarely in the case of Allied Banking Corporation vs. Court of Appeals x x x.[15]

Pursuant to Allied Banking, unless the order of MPH is rendered invalid, there is a
presumption of the validity of that order. Since the PVA eventually ruled that the transfer order
was a valid exercise of management prerogative, we hereby reverse the Decision and the
Resolution of the CA affirming the Decision of the PVA in this respect. MPH had the authority
to continue with the administrative proceedings for insubordination and willful disobedience
against Delada and to impose on him the penalty of suspension. As a consequence, petitioner is
not liable to pay back wages and other benefits for the period corresponding to the penalty of 90-
day suspension.

WHEREFORE, the Petition is GRANTED. The Decision and the Resolution of the Court of
Appeals are hereby MODIFIED. We rule that petitioner Manila Pavilion Hotel had the authority
51
to continue with the administrative proceedings for insubordination and willful disobedience
against Delada and to impose on him the penalty of suspension. Consequently, petitioner is not
liable to pay back wages and other benefits for the period corresponding to the penalty of 90-day
suspension.

SO ORDERED.

MARIA LOURDES P. A. SERENO


Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

JOSE PORTUGAL PEREZ BIENVENIDO L. REYES


Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

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

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

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

52
RENATO C. CORONA
Chief Justice


Designated as Acting Member of the Second Division vice Associate Justice Arturo D. Brion per Special Order No. 1174 dated January
9, 2012.
[1]
Both the Decision and the Resolution in CA-G.R. SP No. 101931 were penned by Associate Justice Sixto C. Marella Jr. and concurred
in by Associate Justices Rebecca de Guia-Salvador and Japar B. Dimaampao.
[2]
Decision of PVA, pp. 1-2; rollo, pp. 66-67.
[3]
Decision of PVA, p. 13; rollo p. 78.
[4]
Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin, 259 Phil. 658 (1989).
[5]
Ludo & Luym Corporation v. Saornido, 443 Phil. 554 (2003).
[6]
Decision of PVA, p. 13; rollo, p. 78.
[7]
Gatbonton v. National Labor Relations Commission, 515 Phil. 387 (2006).
[8]
Id.
[9]
See Deles v. National Labor Relations Commission, 384 Phil. 271 (2000).
[10]
Id.
[11]
Petition of MPH, p. 21; rollo, p. 34.
[12]
461 Phil. 517 (2003).
[13]
Id.
[14]
Id.
[15]
Decision of PVA, p. 11; rollo, p. 76.

53
SECOND DIVISION

G.R. No. 204142, November 19, 2014

HONDA CARS PHILIPPINES, INC., Petitioner, v. HONDA CARS TECHNICAL SPECIALIST AND SUPERVISORS
UNION, Respondent.

DECISION

BRION, J.:

We resolve the present petition for review on certiorari1 seeking to nullify the March 30, 2012 decision2and October 25, 2012
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 109297. These rulings were penned by Associate Justice Noel G.
Tijam and concurred in by Associate Justices Romeo F. Barza and Edwin D. Sorongon. cralawred

The Factual Antecedents

On December 8, 2006, petitioner Honda Cars Philippines, Inc., (company) and respondent Honda Cars Technical Specialists
and Supervisory Union (union), the exclusive collective bargaining representative of the company’s supervisors and technical
specialists, entered into a collective bargaining agreement (CBA)effective April 1, 2006 to March 31, 2011.4 chanRoblesvirt ualLawlib rary

Prior to April 1, 2005, the union members were receiving a transportation allowance of P3,300.00 a month. On September
3, 2005, the company and the union entered into a Memorandum of Agreement5(MOA) converting the transportation
allowance into a monthly gasoline allowance starting at 125 liters effective April 1, 2005. The allowance answers for the
gasoline consumed by the union members for official business purposes and for home to office travel and vice-versa.

The company claimed that the grant of the gasoline allowance is tied up to a similar company policy for managers and
assistant vice-presidents (AVPs), which provides that in the event the amount of gasoline is not fully consumed, the gasoline
not used may be converted into cash, subject to whatever tax may be applicable. Since the cash conversion is paid in the
monthly payroll as an excess gas allowance, the company considers the amount as part of the managers’ and AVPs’
compensation that is subject to income tax on compensation.

Accordingly, the company deducted from the union members’ salaries the withholding tax corresponding to the conversion to
cash of their unused gasoline allowance.

The union, on the other hand, argued that the gasoline allowance for its members is a “negotiated item” under Article XV,
Section 15 of the new CBA on fringe benefits. It thus opposed the company’s practice of treating the gasoline allowance
that, when converted into cash, is considered as compensation income that is subject to withholding tax.

The disagreement between the company and the union on the matter resulted in a grievance which they referred to the CBA
grievance procedure for resolution. As it remained unsettled there, they submitted the issue to a panel of voluntary
arbitrators as required by the CBA.cralawred

The Voluntary Arbitration Decision

On February 6, 2009, the Panel of Voluntary Arbitrators6 rendered a decision/award7 declaring that the cash conversion of
the unused gasoline allowance enjoyed by the members of the union is a fringe benefit subject to the fringe benefit tax, not
to income tax. The panel held that the deductions made by the company shall be considered as advances subject to refund
in future remittances of withholding taxes.

The company moved for partial reconsideration of the decision, but the panel denied the motion in its June 3, 2009
order,8 prompting the company to appeal to the CA through a Rule 43 petition for review. The core issue in this appeal was
whether the cash conversion of the unused gasoline allowance is a fringe benefit subject to the fringe benefit tax, and not to
a compensation income subject to withholding tax. cralawred

The CA Ruling

The CA Eight Division denied the petition and upheld with modification the voluntary arbitration decision. It agreed with the
panel’s ruling that the cash conversion of the unused gasoline allowance is a fringe benefit granted under Section 15, Article
XV of the CBA on “Fringe Benefits.” Accordingly, the CA held that the benefit is not compensation income subject to
withholding tax.

This conclusion notwithstanding, the CA clarified that while the gasoline allowance or the cash conversion of its unused
portion is a fringe benefit, it is “not necessarily subject to fringe benefit tax.”9 It explained that Section 33 (A) of the
National Internal Revenue Code (NIRC) of 1997 imposed a fringe benefit tax, effective January 1, 2000 and thereafter, on
the grossed-up monetary value of fringe benefit furnished or granted to the employee (except rank-and-file employees) by
the employer (unless the fringe benefit is required by the nature of, or necessary to the trade, business or profession of the
employer, or when the fringe benefit is for the convenience or advantage of the employer).

According to the CA, “it is undisputed that the reason behind the grant of the gasoline allowance to the union members is

54
primarily for the convenience and advantage of Honda, their employer.”10 It thus declared that the gasoline allowance or the
cash conversion of the unused portion thereof is not subject to fringe benefit tax.11 cha nRoblesvi rt ua lLawli bra ry

The Petition

Its motion for reconsideration denied, the company appeals to this Court to set aside the CA’s dispositions, raising the very
same issue it brought to the appellate court — whether the cash conversion of the gasoline allowance of the union members
is a fringe benefit or compensation income, for taxation purposes.

The company reiterates its position that the cash conversion of the union members’ gasoline allowance is compensation
income subject to income tax, and not to a fringe benefit tax. It argues that the tax treatment of a benefit extended by the
employer to the employees is governed by law and the applicable tax regulations, and not by the nomenclature or definition
provided by the parties. The fact that the CBA erroneously classified the gasoline allowance as a fringe benefit is immaterial
as it is the law – Section 33 of the NIRC – that provides for the legal classification of the benefit.

It adds that there is no basis for the CA conclusion that the cash conversion of the unused gasoline allowance redounds to
the benefit of management. Common sense dictates that it is the individual union members who solely benefit from the cash
conversion of the gasoline allowance as it goes into their compensation income.

In any event, the company submits that even assuming that the cash conversion of the unused gasoline allowance is a tax-
exempt fringe benefit and that it erred in withholding the income taxes due, still the union members would have no cause of
action against it for the refund of the amounts withheld from them and remitted to the Bureau of Internal Revenue (BIR).

Citing Section 204 of the NIRC, the company contends that an action for the refund of an erroneous withholding and
payment of taxes should be in the nature of a tax refund claim with the BIR. It further contends that when it withheld the
income tax due from the cash conversion of the unused gasoline allowance of the union members, it was simply acting as an
agent of the government for the collection and payment of taxes due from the members.

The Union’s Position

In its Comment12 dated April 19, 2013, the union argues for the denial of the petition for lack of merit. It posits that its
members’ gasoline allowance and its unused gas equivalent are fringe benefits under the CBA and the law [Section 33 (A) of
NIRC] and is therefore not subject to withholding tax on compensation income. Moreover, under that law and BIR Revenue
Regulations 2-98, the same benefit is not subject to the fringe benefit tax because it is required by the nature of, or
necessary to the trade or business of the company.

The union further submits that in 2007, the BIR ruled that fixed and/or pre-computed transportation allowance given to
supervisory employees in pursuit of the business of the company, shall not be taxable as compensation or fringe
benefits of the employees.13 It maintains that the gasoline allowance is already pre-computed by the company as
sufficient to cover the gasoline consumption of the supervisors whenever they perform work for the company. The fact that
the company allowed its members to convert it to cash when not fully consumed is no longer their problem because the
benefit was already given. cralaw red

Our Ruling

We partly grant the petition.

The Voluntary Arbitrator has no


jurisdiction to settle tax matters

The Labor Code vests the Voluntary Arbitrator original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies.14 Upon agreement of the parties, the
Voluntary Arbitrator shall also hear and decide all other labor disputes, including unfair labor practices and bargaining
deadlocks.15chanRoble svi rtual Lawli bra ry

In short, the Voluntary Arbitrator’s jurisdiction is limited to labor disputes. Labor dispute means “any controversy or
matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in
the proximate relation of employer and employee.”16 cha nRoblesv irt ual Lawlib rary

The issues raised before the Panel of Voluntary Arbitrators are: (1) whether the cash conversion of the gasoline allowance
shall be subject to fringe benefit tax or the graduated income tax rate on compensation; and (2) whether the company
wrongfully withheld income tax on the converted gas allowance.

The Voluntary Arbitrator has no competence to rule on the taxability of the gas allowance and on the propriety of the
withholding of tax. These issues are clearly tax matters, and do not involve labor disputes. To be exact, they involve
tax issues within a labor relations setting as they pertain to questions of law on the application of Section 33 (A) of the NIRC.
They do not require the application of the Labor Code or the interpretation of the MOA and/or company personnel policies.
Furthermore, the company and the union cannot agree or compromise on the taxability of the gas allowance. Taxation is the
State’s inherent power; its imposition cannot be subject to the will of the parties.

Under paragraph 1, Section 4 of the NIRC, the CIR shall have the exclusive and original jurisdictionto interpret the
provisions of the NIRC and other tax laws, subject to review by the Secretary of Finance. Consequently, if the company
and/or the union desire/s to seek clarification of these issues, it/they should have requested for a tax ruling17 from the
Bureau of Internal Revenue (BIR). Any revocation, modification or reversal of the CIR’s ruling shall not be given retroactive
application if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases: chanrob lesvi rtua llawlib ra ry

55
(a) Where the taxpayer deliberately misstates or omits material facts from his return
or any document required of him by the BIR;
(b) Where the facts subsequently gathered by the BIR are materially different from the
facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.18
On the other hand, if the union disputes the withholding of tax and desires a refund of the withheld tax, it should have filed
an administrative claim for refund with the CIR. Paragraph 2, Section 4 of the NIRC expressly vests the CIR original
jurisdiction over refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other tax
matters.

The union has no cause of


action against the company

Under the withholding tax system, the employer as the withholding agent acts as both the government and the taxpayer’s
agent. Except in the case of a minimum wage earner, every employer has the duty to deduct and withhold upon the
employee’s wages a tax determined in accordance with the rules and regulations to be prescribed by the Secretary of
Finance, upon the CIR’s recommendation.19 As the Government’s agent, the employer collects tax and serves as the payee
by fiction of law.20 As the employee’s agent, the employer files the necessary income tax return and remits the tax to the
Government.21 chanRoble svirtual Lawlib ra ry

Based on these considerations, we hold that the union has no cause of action against the company. The company
merely performed its statutory duty to withhold tax based on its interpretation of the NIRC, albeit that interpretation may
later be found to be erroneous. The employer did not violate the employee’s right by the mere act of withholding the tax that
may be due the government.22 chanRoble svirtual Lawlib ra ry

Moreover, the NIRC only holds the withholding agent personally liable for the tax arising from the breach of his legal duty to
withhold, as distinguished from his duty to pay tax.23 Under Section 79 (B) of the NIRC, if the tax required to be deducted
and withheld is not collected from the employer, the employer shall not be relieved from liability for any penalty or addition
to the unwithheld tax.

Thus, if the BIR illegally or erroneously collected tax, the recourse of the taxpayer, and in proper cases, the withholding
agent, is against the BIR, and not against the withholding agent.24 The union’s cause of action for the refund or non-
withholding of tax is against the taxing authority, and not against the employer. Section 229 of the NIRC provides: chan roble svirtuallaw lib rary

Sec. 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall be maintained in any
court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.

WHEREFORE, premises considered, we PARTLY GRANT the petition for review on certiorari filed by Honda Cars Philippines,
Inc. We REVERSE AND SET ASIDE the March 30, 2012 decision and the October 25, 2012 resolution of the Court of
Appeals in CA-G.R. SP No. 109297. We declare NULL AND VOID the February 6, 2009 decision and June 3, 2009 resolution
of the Panel of Voluntary Arbitrators. No costs.

SO ORDERED. cralawlawlibra ry

Carpio, (Chairperson), Del Castillo, Mendoza, and Leonen, JJ., concur.

Endnotes:

Rollo, pp.10-31, filed pursuant to Rule 45 of the Rules of Court.


1

2
Id. at 38-51.

3
Id, at 53-56.

4
Id. at 103-120.

5
Id. at 14-16.

6
Composed of Jane Peralta Viana, Chairperson and Arnel V. Lajada and Delia T. Uy, members.

Rollo, pp. 79-85.


7

8
Id. at 86-87.

Supra note 2, p. 12, par. 1.


9

10
Supra note 2, p. 13, par.1.

11
Id. at 14, dispositive portion.

56
12
Rollo, pp. 325-330.

13
BIR Ruling DA-233-2007 dated April 17, 2007.

14
LABOR CODE, Article 261.

15
LABOR CODE, Article 262.

16
LABOR CODE, Article 212 (l).

17
Section 1 of Revenue Memorandum Order defines “tax ruling” as follows:

Sec. 1. Tax Rulings

Tax rulings are official position of the Bureau on inquiries of taxpayers, who request clarification on certain provisions of the
National Internal Revenue Code (NIRC), other tax laws, or their implementing regulations, usually for the purpose of seeking
tax exemptions. Rulings are based on particular facts and circumstances presented and are interpretations of the law at a
specific point in time.

The Bureau also issues rulings to answer written questions of individuals and juridical entities regarding their status as
taxpayers and the effects of their transactions for taxation purposes.

18
NATIONAL INTERNAL REVENUE CODE, Article 246.

19
NATIONAL INTERNAL REVENUE CODE, Section 79 (A).

Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corp., G.R. No. L-66838, December 2,
20

1991, 204 SCRA 377.

21
Id.

Heirs of MagdalenoYpon v. Ricaforte, G.R. No. 198680, July 8, 2013, 700 SCRA 778.
22

Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 170257, September 7, 2011, 657
23

SCRA 70.

Commissioner of Internal Revenue v. Smart Communication, Inc., G.R. Nos. 179045-46, August 25, 2010, 629 SCRA 342.
24

57
FIRST DIVISION

G.R. No. 220605, September 21, 2016

COCA-COLA FEMSA PHILIPPINES, INC.,* Petitioner, v. BACOLOD SALES FORCE UNION-CONGRESS OF


INDEPENDENT ORGANIZATION-ALU, Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 assailing the Decision2 dated December 22, 2014 and the
Resolution3 dated September 8, 2015 of the Court of Appeals (CA) in CA-G.R. CEB-SP. No. 06892, which denied petitioner
Coca-Cola Femsa Philippines, Inc.'s (petitioner) petition for review and upheld the Decision4 dated February 3, 2012 of the
Panel of Voluntary Arbitrators (VA) of the National Conciliation and Mediation Board (NCMB)-Department of Labor and
Employment in Case Nos. AC-777-RB6-06-01-10-2011, AC-782-RB6-06-01-10-2011, and AC-960-RB6-06-01-10-2011 on
the ground that the same had already attained finality.

The Facts

Petitioner is a corporation engaged in the manufacture of nonalcoholic beverages. Sometime in 2001, Cosmos Bottling
Corporation (Cosmos) ceded its sales functions to petitioner which resulted in the integration of a number of Cosmos's
salesmen, including Fernando T. Oquiana, Norman F. Vinarta, and Santiago B. Espino, Jr. (Cosmos integrees) into petitioner's
workforce as route salesmen. The Cosmos integrees were given salary adjustments that would align with that of petitioner's
own route salesmen. At the time of integration, petitioner's system of product distribution was by direct selling, but it
subsequently adopted the route-to-market (RTM) system of distribution which led to the abolition of the route salesman
position and its replacement by the account developer (AD) position. Thus, through an internal selection process, the Cosmos
integrees' positions were eventually designated as ADs.5 chanrobles law

Meanwhile, petitioner hired new ADs who were, however, subject to a different set of qualifications from the Cosmos
integrees. The newly-hired ADs received a higher basic monthly pay although, allegedly, occupying the same position, job
description, and functions as that of the Cosmos integrees. Furthermore, the newly-hired ADs were given, upon union
membership, a monthly 45-kilogram (kg.) rice provision with a corresponding monthly deduction of the amount of P550.00
from their salaries.6
chan rob leslaw

Aggrieved by the difference in treatment, respondent Bacolod Sales Force Union-Congress of Independent Organization-ALU,
the recognized collective bargaining agent of the rank-and-file sales personnel of petitioner's Bacolod Plant7 (respondent),
submitted its concerns to the grievance machinery in accordance with the Collective Bargaining Agreement (CBA),
demanding, among others, that: (a) the salary rates of the Cosmos integrees be readjusted to equal to that of the newly-
hired ADs' salary rates;8(b) the conversion of the P550.00 monthly deduction from the salaries of the Bacolod Plant sales
personnel into a 45-kg. rice provision be declared as a violation of the non-diminution rule under Article 1009 of the Labor
Code, as amended; and (c) the employees concerned be reimbursed for the amounts illegally deducted.10 chan roble slaw

After the grievance process failed, the parties agreed to submit the unresolved matters to voluntary arbitration pursuant to
Article 5 of the CBA, and filed a preventive mediation case before the NCMB raising the aforesaid issues.11 chanro bles law

Respondent claimed that the Cosmos integrees were being discriminated against the newly-hired ADs, in light of the disparity
between their salaries12 and reiterated that the monthly P550.00 deduction from the basic salaries of the new union
members constitutes a violation of the non diminution rule.13 chan rob leslaw

For its part, petitioner maintained that the fixing of hiring rates is a management prerogative, adding that the Cosmos
integrees and the newly hired ADs were not similarly situated due to the apparent variance in the manner by which they
were appointed and hired, as well as their qualifications, skills, and responsibilities for the position.14 Further, it claimed that
the Cosmos integrees failed to meet all the basic qualifications for the AD position, such as age and educational
attainrnent.15 For another, it contended that the rice subsidy of P550.00 per month to non-union members was automatically
converted into an actual 45-kg. sack of rice upon union membership, which is, in reality, valued more than the amount of
said subsidy and, thus, was not tantamount to any diminution of benefits.16 chan robles law

The VA's Ruling

In a Decision17 dated February 3, 2012 (VA Decision), the VA: (a) declared that the disparity in the wages of the Cosmos
integrees and the newly-hired ADs was discriminatory for lack of substantial basis or valid criteria; (b) directed petitioner to
realign or readjust the Cosmos integrees' basic salaries at par with that of the newly-hired ADs; (c) declared that the
P550.00 deduction from the union members' basic salary in lieu of one (1) 45-kg. sack of rice every month was a violation of
Article X18 of the CBA and Article 100 of the Labor Code, as amended; and (d) directed petitioner to comply with Article X of
the CBA by giving rice ration free of charge, and to cease and desist from deducting P550.00 from the monthly salaries of the
concerned employees, effective February 2012.19 chan roble slaw

The VA held that the lower salary rate given to the Cosmos integrees smacks of discrimination given that they hold the same
position, perform the same work, share the same functions, and have the same job description as that of the newly-hired
ADs. Thus, under the principle of "equal pay for equal work," the Cosmos integrees' failure to meet the new set of

58
qualifications for ADs in view of their "over-age and lack of educational attainment" did not justify their lower salary
rates.20 Moreover, the P550.00 deduction from a union member's monthly salary and its conversion into a 45-kg. sack of rice
ration constituted: (a) non-compliance with Article X of the CBA, which clearly provides that the grant of rice ration to
employees shall be free of charge; and (b) a violation of the non-diminution rule under Article 100 of the Labor Code, as
amended, because the said benefit has become part of the employment contract.21 chanrob leslaw

Petitioner moved for reconsideration,22 which was denied in a Resolution23 dated April 25, 2012 (VA Resolution).

The CA Proceedings

Petitioner received notice of the VA Resolution on May 21, 2012,24 and filed its petition for review25 under Rule 43 of the c ralaw red

Rules of Court (Rules) before the CA on June 5, 2012.26 chanro bleslaw

Respondent countered,27 among others, that the VA Decision had become final and executory after ten (10) calendar days
from receipt thereof pursuant to Article 262-A28 of the Labor Code, as amended; hence, the CA petition must, perforce,
fail.29
chan roble slaw

Subsequently, a writ of execution30 dated July 26, 2013 was issued by the VA and served upon petitioner. Thereafter,
petitioner: (a) aligned the salaries of the Cosmos integrees with the newly-hired ADs; (b) paid the corresponding wage
differentials; (c) refunded the amounts deducted from the union members' salaries; and (d) stopped the P550.00 monthly
deductions from their salaries.31 chan robles law

In a Decision32 dated December 22, 2014, the CA denied the petition on the ground that the VA Decision had attained finality
pursuant to Section 5,33 Article 5 of the CBA, which explicitly provides that "[t]he decision of the Arbitration Committee shall
be final and binding upon the COMPANY and the UNION, and the employees and may be enforced in any court of competent
jurisdiction."34 chanrobles law

Petitioner filed its motion for reconsideration,35 which was, however, denied in a Resolution36 dated September 8, 2015;
hence, this petition.

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the CA correctly held that the VA Decision can no longer be
the subject of its review for having attained finality pursuant to the express provision under Section 5, Article 5 of the CBA.

The Court's Ruling

In the context of labor law, arbitration is the reference of a labor dispute to an impartial third person for determination on
the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the
arbitrator as final and binding.37 However, in view of the nature of their functions, voluntary arbitrators act in a quasi-judicial
capacity;38hence, their judgments or final orders which are declared final by law are not so exempt from judicial
review when so warranted.39 "Any agreement stipulating that 'the decision of the arbitrator shall be final and
unappealable' and 'that no further judicial recourse if either party disagrees with the whole or any part of the
arbitrator's award may be availed of' cannot be held to preclude in proper cases the power of judicial review
which is inherent in courts."40 chanroble slaw

Case law holds that the proper remedy to reverse or modify a Voluntary Arbitrator's or a Panel of Voluntary Arbitrators'
decision or award is to appeal the award or decision before the CA under Rule 43 of the Rules41 on questions of fact, of law,
mixed questions of fact and law,42 or a mistake of judgment.43However, in several cases, the Court allowed the filing of a
petition for certiorari from the VA's judgment to the CA under Rule 65 of the same Rules,44 where the VA was averred to
have acted without or in excess of his jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction.45 chan roble slaw

In this case, petitioner availed of the correct mode of review of the VA Decision by filing a petition for review with the CA
under Rule 43 of the Rules, and in conformity with prevailing jurisprudence. In said petition, petitioner assailed the arbitral
award, first, on the ground that "[t]he Panel seriously erred in declaring [that] the disparity between the wages of [the]
Cosmos [i]ntegrees and [the] newly-hired [ADs] as discriminatory, and [in] directing [petitioner] to [realign] or [readjust]
the basic salary rate of the Cosmos [i]ntegrees equivalent to that of the newly-hired [ADs]."46 In this light, petitioner pointed
out that the Cosmos [i]ntegrees "were not hired by [petitioner] for the AD Position because they met the qualifications
therefor. Rather they were appointed as such because they passed the internal selection process which [petitioner]
specifically applied to them" and, "[i]n fact, x x x all three (3) Cosmos [i]ntegrees failed to meet all the basic qualifications
for the AD position, such as age and educational attainment."47 On the other hand, the newly-hired ADs "were engaged on
the basis of the qualifications they presented to [petitioner] at the time they applied for the job," and ''were no longer
required to undergo the same selection process applied to the Cosmos [i]ntegrees inasmuch as they already possessed, at
the time of their application, the minimum requirements for the job."48 Based on the differences in the selection processes
and qualifications, petitioner claimed that the "doctrine [of] 'equal pay for equal work' x x x has no application in the present
case."49 Further, it added that the measure of providing for higher salary rates was not done arbitrarily and illegally to
discriminate against the Cosmos [i]ntegrees. Moreover, it claimed that "[b]eing an exercise of management prerogative,
[petitioner] may very well offer newly-hired ADs a more competitive compensation scheme in order to attract more qualified
candidates for the position."50 chan roble slaw

In its petition before the Court, petitioner, citing certain cases on the matter,51 restated the same position, postulating that
"the unilateral adoption [of] an upgraded salary scale that increased hiring rates of newly-hired employees without increasing
the salary rates of the old employees [should be treated as] a valid exercise of business judgment prerogative, based on the
high productivity of that particular group and the need to increase the company's hiring rate[;] otherwise[,] the employer's
hands would be completely tie[d], and [it would be] discourage[d] from adjusting the salary rates for fear that it would result
to x x x [the] demand [by] all employees, for a similar increase, especially if the financial condition of the business cannot
address an across the board increase."52 chanrob leslaw

The Court sees the prima facie reasonableness of petitioner's asseverations and finds that the merits of its case, based on

59
such argumentation, properly warrant judicial review. As such, the CA should look into the soundness of the VA rulings in
relation to the nuances averred, particularly, the impact of the differences in the selection processes applied and relevant
qualifications between the Cosmos integrees and the newly-hired ADs. Moreover, the CA ought to determine the proper
application of the "equal pay for equal work" principle vis-a-vis the business decision of an employer to adopt a more
competitive compensation scheme in light of the demands in human resource. Thus, borrowing the language in Chung Fu
Industries (Phils.) Inc. v. CA53 - which similarly involved a restrictive stipulation on appeal from an arbitral award the Court
fmds that the CA erred in refusing "to look into the merits of [this] case, despite [a] prima facie showing of the existence of
grounds warranting judicial review," which, thus, "effectively deprived petitione[r] of [the] opportunity to prove or
substantiate [its] allegations."54 chanrob leslaw

In fact, aside from the above stated-issue, the following separate issues were left untouched by the CA: (a) as raised by
petitioner, whether or not the conversion of the monthly P550.00 rice subsidy into one (1) 45-kg. sack of rice upon union
membership constitutes a violation of Article 100 of the Labor Code, as amended, and non-compliance with Article X of the
CBA;55 and (b) as raised by respondent, whether or not the petition for review was filed out of time.56 The materiality of
these issues all the more reinforces the conclusion that the CA should not have refused to exercise judicial review of the
assailed VA rulings, notwithstanding the CBA stipulation that the decision of the Arbitration Committee, i.e., the VA, shall be
final and binding upon the parties. In fine, a remand to the CA for the prompt resolution of all these issues, including any
other ancillary issues which the parties may have raised before it, is, therefore, in order. Verily, courts "should not shirk from
exercising their power to review, where under applicable laws and jurisprudence, such power may be rightfully
exercised,"57 as in this case.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated December 22, 2014 and the Resolution dated
September 8, 2015 of the Court of Appeals (CA) in CA-G.R. CEB-SP. No. 06892 are hereby SET ASIDE. The case
is REMANDED to the CA for the prompt resolution of the aforementioned issues, including any other ancillary issues which
the parties may have raised before it.

SO ORDERED. chanRoblesvirt ual Lawlib rary

Sereno, C.J., Leonardo-De Castro, Bersamin, and Caguioa, JJ., concur.

Endnotes:

*
"Coca-Cola Bottlers Philippines, Inc." in the CA proceedings (see rollo, pp. 64 and 73). "Coca-Cola Bottles Phils., Inc." in the
Department of Labor and Employment arbitration proceedings (see id. at 129 and 141).

1
Id. at 10-52.

2
Id. at 64-70. Penned by Associate Justice Marilyn B. Lagura-Yap with Associate Justices Edgardo L. Delos Santos and
Jhosep Y. Lopez concurring.

3
Id. at 73-75.

4
Id. at 129-140. Penned by Chairman Jose I. Lapak, Jr. with Members Juvy A. Victoriano-Dioso and Elias A. Gatanela, Jr.
concurring.

5
Id. at 64-65. See also id. at 129-130.

6
Id. at 65. See also id. at 130.

7
Id. at 64 and 129.

8
Id. at 65.

9
Article 100 of the Labor Code reads: ChanRobles Vi rt ualawlib ra ry

Article 100. Prohibition Against Elimination or Diminution of Benefits. - Nothing in this Book shall be construed to eliminate or
in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code."
10
See respondent's position paper dated November 8, 2011; rollo, p. 322.

11
Id. at 65. See also id. at 160-161.

12
Id. at 131.

13
Id. at 133. See also discussions in respondent's position paper; id. at 317-319.

14
Id. at 132.

15
Id. at 133.

16
Id. See also discussions in petitioner's position paper dated November 2, 2011; id. at 165-166, 170-171, and 174-175.

17
Id. at 129-140.

18
Article X of the CBA, reads: ChanRobles Vi rtualaw lib rary

ARTICLE X - RICE RATION

The COMPANY shall continue the practice in connection with the granting of the rice ration and the employee in active service
shall, as heretofore, continue to receive, free of charge, one (1) sack of rice (45 kilos) per month. (See id. at 191.)

60
19
See id. at 66 and 139-140.

20
See id. at 135-137.

21
See id. at 138-139.

22
See motion for reconsideration dated February 22, 2012; id. at 353-375.

23
Id. at 141-148. Signed by Panel Members Juvy A. Victoriano-Dioso and Elias A. Gatanela, Jr. Panel Chairman Jose I. Lapak,
Jr. filed a separate Concurring Opinion dated April 27, 2012; see id. at 149-155.

24
See id. at 77.

25
cralaw red Dated June 4, 2012. Id. at 76-119.

26
See id. at 76.

27
See Comments of the Respondent dated November 6, 2012; id. at 389-394.

28
Article 262-A of the Labor Code, as amended (now Article 276 of the Labor Code, as renumbered under Republic Act No.
10151 entitled "AN ACT ALLOWING THE EMPLOYMENT OF NIGHT WORKERS, THEREBY REPEALING ARTICLES 130 AND 131
OF PRESIDENTIAL DECREE NUMBER FOUR HUNDRED FORTY-TWO, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE
OF THE PHILIPPINES" approved on June 21, 2011; see also See Department of Labor and Employment Department Advisory
No. 01, Series of 2015 entitled "RENUMBERING OF THE LABOR CODE OF THE PHILIPPINES, As AMENDED," approved on April
21, 2015) provides: ChanRo bles Vi rtualaw lib rary

Art. 262-A Procedures. - x x x.

xxxx

The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall contain the facts and the law on
which it is based. It shall be final and executory after ten (10) calendar days from receipt of the copy of the award or
decision by the parties.

xxxx
Rollo, p. 390.
29

30
Not attached to the rollo.

31
See Affidavit dated December 14, 2015 of Cyrus U. Javelosa, a regular employee of petitioner with a position of AD; rollo,
p. 463.

32
Id. at 6470.

33
Article 5 (Voluntary Arbitration), Section 5 of the CBA reads: ChanRobles Vi rtua lawlib rary

Section 5. During the effectivity of this Agreement, the Arbitration Committee shall have no power to add, to subtract from,
or modify any of the terms of this Agreement or any terms made supplementary thereto. The decision of the Arbitration
Committee shall be final and binding upon the COMPANY and the UNION, and the employees and may be
enforced in any court of competent jurisdiction. (Emphasis supplied; see id. at 187.)
34
Id. at 68-69.

35
See motion for reconsideration dated February 18, 2015; id. at 411-442.

36
Id. at 73-75.

Luzon Dev. Bank v. Association of Luzon Dev. Bank Employees, 319 Phil. 262, 266 (1995).
37

38
See id. at 271. See also Chung Fu Industries (Phils.), Inc. v. CA, G.R. No. 96283, February 25, 1992, 206 SCRA 545, 556.

39
See Chung Fu Industries (Phils.), Inc. v. CA, id.

40
See ABS-CBN Broadcasting Corp. v. World Interactive Network Systems (WINS) Japan Co., LTD., 568 Phil. 282, 293
(2008).

41
See Philippine Electric Corporation v. CA, G.R. No. 168612, December 10, 2014, 744 SCRA 361, 377-378; Royal Plant
Workers Union v. Coca-Cola Bottlers Philippines, Inc.-Cebu Plant, 709 Phil. 350, 361 (2013); Samahan ng mga Manggagawa
sa Hyatt v. Magsalin, 665 Phil. 584, 594-595 (2011); Samahan ng mga Manggagawa sa Hyatt-Nuwhrain-APL v. Bacungan,
601 Phil. 365, 370 (2009); AMA Computer College-Santiago City, Inc. v. Nacino, 568 Phil. 465, 470 (2008); Leyte IV Electric
Cooperative, Inc. v. LEYECO IV Employees Union-ALU, 562 Phil. 743, 754 (2007); Centro Escolar University Faculty and
Allied Workers Union-Independent v. CA, 523 Phil. 427, 436-437 (2006); Manila Midtown Hotel v. Borromeo, 482 Phil. 137,
141-142 (2004); and Sevilla Trading Company v. Semana, 472 Phil. 220, 229 (2004). See also ABS-CBN Broadcasting Corp.
v. World Interactive Network Systems (WINS) Japan Co., LTD., id. at 292-294.

42
See Section 3, Rule 43 of the Rules.

Centro Escolar University Faculty and Allied Workers Union-Independent v. CA, supra note 41, at 438.
43

44
See Mora v. Avesco Marketing Corporation, 591 Phil. 827, 834-836 (2008); and Unicraft Industries Int'l. Corp. v. CA, 407
Phil. 527, 538-540 (2001). See also Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-ALU, supra note 41,
at 754-756.

61
45
See ABS-CBN Broadcasting Corp. v. World Interactive Network Systems (WINS) Japan Co., LTD., supra note 40, at 294;
and Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-ALU, supra note 41, at 756.

Rollo, p. 90.
46

47
Id. at 98.

48
Id.

49
Id.

50
Id. at 96.

51
See id.

52
Id. at 38-39.

53
Supra note 38.

54
Id. at 558.

Rollo, p. 107.
55

56
See id. at 390.

Chung Fu Industries (Phils.), Inc. v. CA, supra note 38, at 558.


57

62
EN BANC

G.R. No. 188492, August 28, 2018

GUAGUA NATIONAL COLLEGES, Petitioner, v. COURT OF APPEALS, GNC FACULTY AND LABOR UNION AND GNC
NON-TEACHING MAINTENANCE LABOR UNION, Respondents.

DECISION

BERSAMIN, J.:

This case focuses on the correct period for appealing the decision or award of the Voluntary Arbitrator or Panel of Arbitrators.
The issue arises because the decision or award of the Voluntary Arbitrator or Panel of Arbitrators is appealable to the Court of
Appeals (CA) by petition for review under Rule 43 of the Rules of Court, which provides a period of 15 days from notice of
the decision or award within which to file the petition for review. On the other hand, Article 262-A (now Article 276)1 of
the Labor Code sets 10 days as the period within which the appeal is to be made.

The Case

Petitioner Guagua National Colleges (GNC) hereby assails by petition for certiorari the resolution promulgated on December
15, 2008,2 whereby the Court of Appeals (CA) denied its Motion to Dismissfiled vis-à-vis the respondents' petition
for certiorari in the following manner:

This Court resolves:

1. x x x

2. To Deny:

a) respondent's Motion to Dismiss dated 22 July 2008. While it is true that Coca-Cola Bottlers Philippines, Inc., Sales
Force Union-PTGWO-Balais vs. Coca-Cola Bottlers Philippines, Inc. held in part:

"x x x [U]nder Section 6, Rule VII of the same guidelines implementing Article 262-A of the Labor Code, this Decision, as a
matter of course, would become final and executory after ten (10) calendar days from receipt of copies of the decision by the
parties x xx unless, in the meantime, a motion for reconsideration or a petition for review to the Court of Appeals under Rule
43 of the Rules of Court is filed within the same 10-day period. x xx;",

We, more importantly recognize the pronouncement of the Supreme Court in Manila Midtown vs. Borromeo which reads
in part:

"Upon receipt of a copy of the Voluntary Arbitrator's Decision, petitioner should have filed with the Court of Appeals, within
the 15-day reglementary period, a petition for review x xx"

Coca-Cola Bottlers is not in direct conflict with Manila Midtown as there is no categorical ruling in the former that the
petition for review under Rule 43 of the Rules of Court assailing the decision of the Voluntary Arbitrator should be filed within
ten (10) days from receipt thereof and not the customary reglementary period of fifteen (15) days. Likewise, Leyte IV
Electric Cooperative, Inc. vs. LEYECO IV Employees Unio-ALU, reiterating the landmark Case of Luzon Development
Bank vs. Association of Luzon Development Bank Employees, declared that the proper remedy from the award of a
voluntary arbitrator is a petition for review to the CA, following Revised Administrative Circular No. 1-95, which in turn
provides for a reglementary period of fifteen (15) days within which to appeal.

Keeping in mind Article 4 of the Labor Code which mandates that all doubts in the implementation and interpretation of its
provisions, including its implementing rules and regulations, should be resolved in favor of labor and considering that
technicalities are not supposed to stand in the way of equitably and completely resolving the rights and obligations of labor
arid capital, We rule that the Petition for Review was seasonably filed. Moreso that We have already granted petitioners'
Urgent Motion for Extension.

3. x x x

SO ORDERED.

Antecedents

Under Section 5(2)3 of Republic Act No. 6728 (Government Assistance To Students and Teachers In Private Education Act),
70% of the increase in tuition fees shall go to the payment of salaries, wages, allowances and other benefits of the teaching

63
and non-teaching personnel. Pursuant to this provision, the petitioner imposed a 7% increase of its tuition fees for school
year 2006-2007.4

Shortly thereafter, and in order to save the depleting funds of the petitioner's Retirement Plan, its Board of Trustees
approved the funding of the retirement program out of the 70% net incremental proceeds arising from the tuition fee
increases.5 Respondents GNC-Faculty Labor Union and GNC Non-Teaching Maintenance Labor Union challenged the
petitioner's unilateral decision by claiming that the increase violated Section 5(2) of R.A. No. 6728.

The parties referred the matter to voluntary arbitration after failing to settle the controversy by themselves.6

Decision of the Voluntary Arbitrator

After hearing the parties, Voluntary Arbitrator Froilan M. Bacungan rendered his decision dated June 16, 2008 in favor of
GNC,7 holding that retirement benefits fell within the category of "other benefits" that could be charged against the 70% net
incremental proceeds pursuant to Section 5(2) of R.A. No. 6728.

After receiving a copy of the decision on June 16, 2008, the respondents filed an Urgent Motion for Extension praying that
the CA grant them an extension of 15 days from July 1, 2008, or until July 16, 2008, within which to file their petition for
review.8

Ruling of the CA

On July 2, 2008, the CA issued a resolution granting the Urgent Motion for Extension.9 The respondents filed the petition for
review10 on July 16, 2008.11

Subsequently, the petitioner filed its Motion to Dismiss,12 asserting that the decision of the Voluntary Arbitrator had already
become final and executory pursuant to Article 276 of the Labor Code and in accordance with the ruling in Coca-Cola Bottlers
Philippines, Inc. Sales Force Union PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc.13

The CA acted on the Motion to Dismiss on December 15, 2008 through the now assailed resolution denying the Motion to
Dismiss.14

The petitioner sought reconsideration,15 but the CA denied the motion for reconsideration on January 30, 2009.16

Hence, the petitioner instituted its petition for certiorari.

Issue

The petitioner submits the lone issue that—

THE COURT OF APPEALS, WITH ALL DUE RESPECT, IS ACTING WITHOUT OR IN EXCESS OF ITS JURISDICTION IN CA-G.R.
SP NO. 104109 CONSIDERING THAT THE DECISION OF THE VOLUNTARY ARBITRATOR IN AC-025-RB3-04-01-03-2007,
FOLLOWING RULE [276] OF THE LABOR CODE AND THE DECISION OF THE HONORABLE COURT IN COCA-COLA BOTTLERS
PHILIPPINES, INC. SALES FORCE UNION-PTGWO BALAIS v. COCA-COLA BOTTLERS PHILIPPINES, INC. XXXX, HAD ALREADY
BECOME FINAL AND EXECUTORY, HENCE UNCHALLENGEABLE SINCE THE "URGENT MOTION FOR EXTENSION" DATED 30
JUNE 2008 AND 16 JULY 2008 RESPECTIVELY, OR TEN (10) DAYS AFTER THE UNIONS AND THEIR COUNSEL OF RECORD
WERE PERSONALLY SERVED THE VOLUNTARY ARBITRATOR'S DECISION ON 16 JUNE 2008.17

The petitioner argues that the CA went beyond its jurisdiction when it denied the Motion to Dismissdespite the finality of the
decision of the Voluntary Arbitrator pursuant to Article 276 of the Labor Code; that following the pronouncement in Coca-Cola
Bottlers Philippines, Inc. Sales Force Union-PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc.18 the CA was no longer
authorized to exercise its appellate jurisdiction;19 that the CA's reliance on the rulings in Manila Midtown Hotel v.
Borromeo20 and Leyte IV Electric Cooperative, Inc. v. Leyeco IV Employees Union-ALU21 was misplaced because said rulings
did not define the reglementary period to appeal the decision or award of the Voluntary Arbitrator;22 and that the CA
misapplied the rule on equity in the absence of strong or compelling reasons to suspend the rules of procedure.23

The petitioner emphasizes the need to harmonize Rule 43 of the Rules of Court with Article 276 of the Labor Code in view of
their conflicting provisions on the period for the appeal from the decision of the Voluntary Arbitrator. It maintains that unless
Congress amends Article 276 of the Labor Code, the reglementary period within which to appeal the decision or award of the
Voluntary Arbitrator is 10 days following the ruling in Coca-Cola Bottlers Philippines, Inc. Sales Force Union-PTGWO-Balais v.
Coca-Cola Bottlers Philippines, Inc., instead of 15 days under Rule 43 of the Rules of Court.

In contrast, the respondents insist that they have a meritorious case because the controversy involves the interpretation of
Section 5(2) of R.A. No. 6728 on the disposition of the tuition fee increase;24 that the CA did not abuse its discretion given
the rule on the liberal application of rules of procedure to achieve substantial justice, and the policy on the liberal
construction of laws in favor of labor;25 that a long line of jurisprudence26 set the remedy of appeal under Rule 43 of
the Rules of Court as applicable in challenging the decisions or awards of the Voluntary Arbitrator.

Did the CA gravely abuse its discretion in denying the petitioner's Motion to Dismiss despite the finality of the decision of the
Voluntary Arbitrator pursuant to Article 276 of the Labor Code?

Ruling of the Court

We dismiss the petition for certiorari.


64
I
The petition for review shall be filed within 15 days
pursuant to Section 4, Rules 43 of the Rules of Court;
the 10-day period under Article 276 of the Labor Code
refers to the filing of a motion for reconsideration
vis-à-vis the Voluntary Arbitrator's decision or award

In resolving whether or not the CA committed grave abuse of discretion, the Court has first to determine which between the
two periods found in Article 276 of the Labor Code and Section 4 of Rule 43 of the Rules of Court governs the appeal from
the decision or award by the Voluntary Arbitrator or Panel of Arbitrators.

The petitioner posits that the appeal from the decision or award of the Voluntary Arbitrator should be filed within 10 days in
view of Article 276 of the Labor Code which reads in full:

Article 276. Procedures. – The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have the power to hold hearings,
receive evidences and take whatever action is necessary to resolve the issue or issues subject of the dispute, including
efforts to effect a voluntary settlement between parties.

All parties to the dispute shall be entitled to attend the arbitration proceedings. The attendance of any third party or the
exclusion of any witness from the proceedings shall be determined by the Voluntary Arbitrator or panel of Voluntary
Arbitrators. Hearings may be adjourned for cause or upon agreement by the parties.

Unless the parties agree otherwise, it shall be mandatory for the Voluntary Arbitrator or panel of Voluntary Arbitrators to
render an award or decision within twenty (20) calendar days from the date of submission of the dispute to voluntary
arbitration.

The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall contain the facts and
the law on which it is based. It shall be final and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties.

Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary Arbitrators or the Labor Arbiter in the
region where the movant resides, in case of the absence or incapacity of the Voluntary Arbitrator or panel of Voluntary
Arbitrators, for any reason, may issue a writ of execution requiring either the sheriff of the Commission or regular courts or
any public official whom the parties may designate in the submission agreement to execute the final decision, order or
award. (Bold underscoring supplied for emphasis)

Article 276 is an amendment introduced by R.A. No. 6715.27 Prior to the effectivity of the amendment on March 21,
1989,28 Article 262 (the predecessor provision) stated that voluntary arbitration decisions or awards would be final,
unappealable and executory. Despite such immediately executory nature of the decisions and awards of the Voluntary
Arbitrators, however, the Court pronounced in Oceanic Bic Division (FFW) v. Romero29 that the decisions or awards of the
Voluntary Arbitrators involving interpretations of law were within the scope of the Court's power of review. The Court
explained:

x x x x We agree with the petitioner that the decisions of voluntary arbitrators must be given the highest respect and as a
general rule must be accorded a certain measure of finality. This is especially true where the arbitrator chosen by the parties
[enjoys] the first rate credentials of Professor Flerida Ruth Pineda Romero, Director of the U.P. Law Center and an
academician of unquestioned expertise in the field of Labor Law. It is not correct, however, that this respect precludes the
exercise of judicial review over their decisions. Article 262 of the Labor Code making voluntary arbitration awards final,
inappealable, and executory except where the money claims exceed P100,000.00 or 40% of paid-up capital of the employer
or where there is abuse of discretion or gross incompetence refers to appeals to the National Labor Relations Commission
and not to judicial review.

Inspite of statutory provisions making '"final" the decisions of certain administrative agencies, we have taken cognizance of
petitions questioning these decisions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of
substantial justice, or erroneous interpretation of the law were brought to our attention. There is no provision for appeal in
the statute creating the Sandiganbayan but this has not precluded us from examining decisions of this special court brought
to us in proper petitions. Thus, we have ruled:

"Yanglay raised a jurisdictional question which was not brought up by respondent public officials. He contends that this Court
has no jurisdiction to review the decisions of the NLRC and the Secretary of Labor 'under the principle of separation of
powers' and that judicial review is not provided for in Presidential Decree No. 21.

"That contention is a flagrant error, it is generally understood that as to administrative agencies exercising quasi judicial or
legislative power there is an underlying power in the courts to scrutinize the acts of such agencies on questions of law and
jurisdiction even though no right of review is given by statute' (73 C.J.S. 506, note 56).

"The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect substantial rights of
parties affected by its decisions' (73 C.J.S. 507, Sec. 165). It is part of the system of checks and balances which restricts the
separation of powers and forestalls arbitrary and unjust adjudications.

"Judicial review is proper in case of lack of jurisdiction, grave abuse of discretion, error of law, fraud or collusion (Timbancaya
vs. Vicente, 62 O.G. 9424; Macatangay vs. Secretary of Public Works and Communications, 63 O.G. 11236; Ortua vs.
Singson Encarnacion, 59 Phil. 440).

65
"'The courts may declare an action or resolution of an administrative authority to be illegal (1) because it violates or fails to
comply with some mandatory provision of the law or (2) because it is corrupt, arbitrary or capricious' (Borromeo vs. City of
Manila and Rodriguez Lanuza, 62 Phil. 512, 516; Villegas vs. Auditor General, L-21352, November 29, 1966, 18 SCRA 877,
891). [San Miguel Corporation v. Secretary of Labor, 64 SCRA 60].

xxx xxx xxx

"It is now settled rule that under the present Labor Code, (Presidential Decree No. 442, as amended [1974] if lack of power
or arbitrary or improvident exercise of authority be shown, thus giving rise to a jurisdictional question, this Court may, in
appropriate certiorari proceedings, pass upon the validity of the decisions reached by officials or administrative agencies in
labor controversies. So it was assumed in Maglasang v. Ople, (L-38813, April 29, 1975, 63 SCRA 508). It was explicitly
announced in San Miguel Corporation v. Secretary of Labor, (L-39195, May 16, 1975, 64 SCRA 56) the opinion being penned
by Justice Aquino. Accordingly, cases of that character continue to find a place in our docket. (Cf. United Employees Union of
Gelmart Industries v. Noriel, L-40810, Oct. 3, 1975, 67 SCRA 267) The present suit is of that category. [Kapisanan ng mga
Manggagawa sa La Suerte-Foitaf vs. Noriel, 77 SCRA 415-416].

A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity. There is no reason why her decisions
involving interpretation of law should be beyond this Court's review. Administrative officials are presumed to act in
accordance with law and yet we do not hesitate to pass upon their work where a question of law is involved or where a
showing of abuse of authority or discretion in their official acts is properly raised in petitions for certiorari.30

Accordingly, the decisions and awards of Voluntary Arbitrators, albeit immediately final and executory, remained subject to
judicial review in appropriate cases through petitions for certiorari.31

Such was the state of things until the promulgation in 1995 of the ruling in Luzon Development Bank v. Association of Luzon
Development Bank Employees.32 Therein, the Court noted the silence of R.A. No. 6715 on the availability of appeal from the
decisions or awards of the Voluntary Arbitrators. In declaring the Voluntary Arbitrators or Panels of Voluntary Arbitrators as
quasi-judicial instrumentalities, Luzon Development Bank v. Association of Luzon Development Bank Employees pronounced
the decisions or awards of the Voluntary Arbitrators to be appealable to the CA, viz.:

It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite
limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National Labor Relations
Commission (NLRC) for that matter. The state of our present law relating to voluntary arbitration provides that "(t)he award
or decision of the Voluntary Arbitrator x x x shall be final and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties," while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions,
awards, or orders." Hence, while there is an express mode of appeal from the decision of a labor arbiter, Republic Act No.
6715 is silent with respect to an appeal from the decision of a voluntary arbitrator.

Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme
Court itself on a petition for certiorari, in effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In
the view of the Court, this is illogical and imposes an unnecessary burden upon it.

In Volkschel Labor Union, et al. v. NLRC, et al., on the settled premise that the judgments of courts and awards of [quasi-
judicial] agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators
determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court. In Oceanic Bic
Division (FFW), et al. v. Romero, et al., this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a
quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel,
enjoys in law the status of a quasi-judicial agency but independent of, and apart from, the NLRC since his decisions are not
appealable to the latter.

Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:

"xxx xxx xxx (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional
Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Employees' Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

xxx xxx xxx"

Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a
[quasi-judicial] agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-
judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial
functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the
Construction Industry Arbitration Commission, that the broader term "instrumentalities" was purposely included in the
above-quoted provision.

An "instrumentality" is anything used as a means or agency. Thus, the terms governmental "agency" or "instrumentality" are
synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act
or function is performed. The word "instrumentality," with respect to a state, contemplates an authority to which the state
delegates governmental power for the performance of a state function. An individual person, like an administrator or
executor, is a judicial instrumentality in the settling of an estate, in the same manner that a sub-agent appointed by a
bankruptcy court is an instrumentality of the court, and a trustee in bankruptcy of a defunct corporation is an instrumentality
of the state.

66
The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the
provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in the
aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place him
within the exceptions to said Sec.. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that,
although the Employees' Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the
forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its
decisions to the Court of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in
amending Sec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court
of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial
agencies, boards and commissions enumerated therein.

This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure
for the appellate review of adjudications of all quasi-judicial entities not expressly excepted from the coverage of Sec. 9 of
B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of
the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the
voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter.33

In other words, the remedy of appeal by petition for review under Rule 43 of the Rules of Court became available to the
parties aggrieved by the decisions or awards of the Voluntary Arbitrators or Panels of Arbitrators.

In the 2004 ruling in Sevilla Trading Company v. Semana,34 the Court ruled that the decision of the Voluntary Arbitrator
became final and executory after the expiration of the 15-day reglementary period within which to file the petition for review
under Rule 43. Manila Midtown Hotel v. Borromeo35 also ruled so. The 15-day period was likewise adverted to in the ruling
in Nippon Paint Employees Union-Olalia v. Court of Appeals,36 promulgated in November 2004.

In 2005, the Court promulgated the decision in Coca-Cola Bottlers Philippines, Inc., Sales Force Union-PTGWO-Balais v.
Coca-Cola Bottlers Philippines, Inc.,37 wherein it made reference for the first time to the 10-day period for the filing of the
petition for review vis-a-vis decisions or awards of the Voluntary Arbitrator provided in Article 262-A (now Article
276).38 Within the same year, Philex Gold Philippines, Inc. v. Philex Bulawan Supervisors Union39 applied the period of 10
days in declaring the appeal to have been timely filed.

Thereafter, the Court has variantly applied either the 15-day or the 10- day period as the time within which to appeal the
decisions or awards of the Voluntary Arbitrators or Panels of Arbitrators. Thus, in the 2007 ruling in Leyte IV Electric
Cooperative, Inc. v. Leyeco IV Employees Union-ALU,40 the Court recognized the 15-day reglementary period under Rule 43.
This was reiterated in AMA Computer College-Santiago City, Inc. v. Nacino (2008),41Mora v. Avesco Marketing
Corporation42 (2008), Samahan Ng Mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan (2009),43Saint Luis University,
Inc. v. Cobarrubias44(2010), Samahan ng mga Manggagawa sa Hyatt (SAMASAH-NUWHRAIN) v. Magsalin45 (2011) and Royal
Plant Workers Union v. Coca Cola Bottlers Philippines, Inc.-Cebu Plant (2013). 46

But in Philippine Electric Corporation (PHILEC) v. Court of Appeals47 (2014), Baronda v. Court of Appeals48 (2015), and NYK-
FIL Ship Management, Inc. v. Dabu49 (2017), the Court, citing Article 276 of the Labor Code, applied the 10-day period.
Notably, the Court opined in Philippine Electric Corporation (PHILEC) v. Court of Appeals that despite the period provided in
Rule 43, the 10-day period should apply in determining the timeliness of appealing the decision or award of the Voluntary
Arbitrator or Panel of Arbitrators, to wit:

Despite Rule 43 providing for a 15-day period to appeal, we rule that the Voluntary Arbitrator's decision must be appealed
before the Court of Appeals within 10 calendar days from receipt of the decision as provided in the Labor Code.

Appeal is a "statutory privilege," which may be exercised "only in the manner and in accordance with the provisions of the
law." "Perfection of an appeal within the reglementary period is not only mandatory but also jurisdictional so that failure to
do so rendered the decision final and executory, and deprives the appellate court of jurisdiction to alter the final judgment
much less to entertain the appeal."

We ruled that Article 262-A of the Labor Code allows the appeal of decisions rendered by Voluntary Arbitrators. Statute
provides that the Voluntary Arbitrator's decision "shall be final and executory after ten (10) calendar days from receipt of the
copy of the award or decision by the parties." Being provided in the statute, this 10-day period must be complied with;
otherwise, no appellate court will have jurisdiction over the appeal. This absurd situation occurs when the decision is
appealed on the 11th to 15th day from receipt as allowed under the Rules, but which decision, under the law, has already
become final and executory.

Furthermore, under Article VIII, Section 5 (5) of the Constitution, this court "shall not diminish, increase, or modify
substantive rights" in promulgating rules of procedure in courts. The 10-day period to appeal under the Labor Code being a
substantive right, this period cannot be diminished, increased, or modified through the Rules of Court.

In Shioji v. Harvey, this Court held that the "rules of court, promulgated by authority of law, have the force and effect of law,
if not in conflict with positive law." Rules of Court are "subordinate to the statute." In case of conflict between the law and
the Rules of Court, "the statute will prevail."

The rule, therefore, is that a Voluntary Arbitrator's award or decision shall be appealed before the Court of Appeals within 10
days from receipt of the award or decision. Should the aggrieved party choose to file a motion for reconsideration with the
Voluntary Arbitrator, the motion must be filed within the same 10-day period since a motion for reconsideration is filed
"within the period for taking an appeal."50

67
The ratiocination in Philippine Electric Corporation (PHILEC) v. Court of Appeals backstopped the ruling in NYK-FIL Ship
Management, Inc. v. Dabu.

Given the variable rulings of the Court, what should now be the period to be followed in appealing the decisions or awards of
the Voluntary Arbitrators or Panel of Arbitrators?

In the 2010 ruling in Teng v. Pagahac,51 the Court clarified that the 10-day period set in Article 276 of the Labor Code gave
the aggrieved parties the opportunity to file their motion for reconsideration, which was more in keeping with the principle of
exhaustion of administrative remedies, holding thusly:

In the exercise of its power to promulgate implementing rules and regulations, an implementing agency, such as the
Department of Labor, is restricted from going beyond the terms of the law it seeks to implement; it should neither modify
nor improve the law. The agency formulating the rules and guidelines cannot exceed the statutory authority granted to it by
the legislature.

By allowing a 10-day period, the obvious intent of Congress in amending Article 263 to Article 262-A is to
provide an opportunity for the party adversely affected by the VA's decision to seek recourse via a motion for
reconsideration or a petition for review under Rule 43 of the Rules of Court filed with the CA. Indeed, a motion
for reconsideration is the more appropriate remedy in line with the doctrine of exhaustion. of administrative
remedies. For this reason, an appeal from administrative agencies to the CA via Rule 43 of the Rules of Court
requires exhaustion of available remedies as a condition precedent to a petition under that Rule.

The requirement that administrative remedies be exhausted is based on the doctrine that in providing for a remedy before an
administrative agency, every opportunity must be given to the agency to resolve the matter and to exhaust all opportunities
for a resolution under the given remedy before bringing an action in, or resorting to, the courts of justice. Where Congress
has not clearly required exhaustion, sound judicial discretion governs, guided by congressional intent.

By disallowing reconsideration of the VA's decision, Section 7, Rule XIX of DO 40-03 and Section 7 of the 2005
Procedural Guidelines went directly against the legislative intent behind Article 262-A of the Labor Code. These
rules deny the VA the chance to correct himself and compel the courts of justice to prematurely intervene with
the action of an administrative agency entrusted with the adjudication of controversies coming under its special
knowledge, training and specific field of expertise. In this era of clogged court dockets, the need for specialized
administrative agencies with the special knowledge, experience and capability to hear and determine promptly disputes on
technical matters or intricate questions of facts, subject to judicial review, is indispensable. In Industrial Enterprises, Inc. v.
Court of Appeals, we ruled that relief must first be obtained in an administrative proceeding before a remedy will be supplied
by the courts even though the matter is within the proper jurisdiction of a court.52 (Emphasis supplied)

Hence, the 10-day period stated in Article 276 should be understood as the period within which the party adversely affected
by the ruling of the Voluntary Arbitrators or Panel of Arbitrators may file a motion for reconsideration. Only after the
resolution of the motion for reconsideration may the aggrieved party appeal to the CA by filing the petition for review under
Rule 43 of the Rules of Court within 15 days from notice pursuant to Section 4 of Rule 43.

The Court notes that despite the clarification made in Teng v. Pagahac, the Department of Labor and Employment (DOLE)
and the National Conciliation and Mediation Board (NCMB) have not revised or amended the Revised Procedural Guidelines in
the Conduct of Voluntary Arbitration Proceedings insofar as its Section 7 of Rule VII53 is concerned. This inaction has
obviously sown confusion, particularly in regard to the filing of the motion for reconsideration as a condition precedent to the
filing of the petition for review in the CA. Consequently, we need to direct the DOLE and the NCMB to cause the revision or
amendment of Section 7 of Rule VII of the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration
Proceedings in order to allow the filing of motions for reconsideration in line with Article 276 of the Labor Code.

II
Certiorari does not lie in assailing
the CA's denial of a motion to dismiss

Generally, the denial of a motion to dismiss cannot be assailed by petition for certiorari. As we indicated in Biñan Rural Bank
v. Carlos:54

The denial of a motion to dismiss generally cannot be questioned in a special civil action for certiorari, as this remedy is
designed to correct only errors of jurisdiction and not errors of judgment. Neither can a denial of a motion to dismiss be the
subject of an appeal which is available only after a judgment or order on the merits has been rendered. Only when the denial
of the motion to dismiss is tainted with grave abuse of discretion can the grant of the extraordinary remedy of certiorari be
justified.

Although it admits being aware of this rule, the petitioner insists on the propriety of its petition for certiorari based on its
belief that the CA had gravely abused its discretion in assuming jurisdiction over the respondents' petition. It argues that the
decision rendered by Voluntary Arbitrator Bacungan had already become final pursuant to Article 276 of the Labor Code, and,
accordingly, the CA could no longer exercise its appellate jurisdiction.

The petitioner is mistaken.

Grave abuse of discretion means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or
virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board
exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to lack of
jurisdiction.55

68
Here, the CA did not act arbitrarily in denying the petitioner's Motion to Dismiss. It correctly noted that Coca-Cola Bottlers
Philippines, Inc. Sales Force Union-PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc. did not make a definitive ruling on
the correct reglementary period for the filing of the petition for review. Given the varying applications of the periods defined
in Article 276 and Section 4 of Rule 43, the CA could not be objectively held to be guilty of grave abuse of discretion in
applying the equitable rule on construction in favor of labor. To be underscored is that the underlying aim for the
requirement of strict adherence to procedural rules, particularly on appeals, should always be the prevention of needless
delays that could enable the unscrupulous employers to wear out the efforts and meager resources of their workers to the
point that the latter would be constrained to settle for less than what were due to them.56

ACCORDINGLY, the Court DISMISSES the unmeritorious petition for certiorari; AFFIRMS the decision promulgated on
December 15, 2008 by the Court of Appeals; and DIRECTS the Department of Labor and Employment and the National
Conciliation and Mediation Board to revise or amend the Revised Procedural Guidelines in the Conduct of Voluntary
Arbitration Proceedings to amend the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings to
reflect the foregoing ruling herein.

No pronouncement on costs of suit.

SO ORDERED.

Leonardo-De Castro, C.J., Carpio, Peralta, Del Castillo, Perlas-Bernabe , Leonen, Jardeleza, Caguioa, Tijam, A. Reyes, Jr.,
Gesmundo, and J. Reyes, Jr., JJ., concur.

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on August 28, 2018 a Decision, copy attached herewith, was rendered by the Supreme Court in the
above-entitled case, the original of which was received by this Office on September 27, 2018 at 2:22 p.m.

Very truly yours,

(SGD.) EDGAR O. ARICHETA


Clerk of Court

Endnotes:

1
See DOLE Department Advisory No. 01, Series of 2015.

2
Rollo, pp. 32-35; penned by Associate Justice Vicente S.E. Veloso, with Associate Justice Rebecca De Guia-Salvador and
Associate Justice Ricardo R. Rosario concurring.

3
Section 5. Tuition Fee Supplement for Students in Private High School. (1) x x x

(a) x x x
(b) x x x

(2) Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and tuition fees under subparagraph (c) may
be increased, on the condition that seventy percent (70%) of the amount subsidized allotted for tuition fee or of the tuition
fee increases shall go to the payment of salaries, wages, allowances and other benefits of teaching and non-teaching
personnel except administrators who are principal stockholders of the school, and may be used to cover increases as
provided for in the collective bargaining agreements existing or in force at the time when this Act is approved and made
effective: Provided, That government subsidies are not used directly for salaries of teachers of non-secular subjects. At least
twenty percent (20%) shall go to the improvement or modernization of buildings, equipment, libraries, laboratories,
gymnasia and similar facilities and to the payment of other costs of operation. For this purpose, school shall maintain a
separate record of accounts for all assistance received from the government, any tuition fee increase, and the detailed
disposition and use thereof, which record shall be made available for periodic inspection as may be determined by the State
Assistance Council, during business hours, by the faculty, the non-teaching personnel, students of the school concerned, the
Department of Education, Culture and Sports and other concerned government agencies.

Rollo, p. 43.
4

5
Id. at 43-44.

6
Id. at 57.
69
7
Id. at 42-52.

8
Id. at 6.

9
Id. at 55.

10
Id. at 56-78.

11
Id. at 7.

12
Id. at 79-81.

13
G.R. No. 155651, July 28, 2005, 464 SCRA 507.

14
Rollo, pp. 32-35.

15
Id. at 95-104.

16
Id. at 38-39.

17
Id. at 8-9.

18
Supra, note 13.

19
Rollo, p. 9.

20
G.R. No. 138305, September 22, 2004, 438 SCRA 653.

21
G.R. No. 157775, October 19, 2007, 537 SCRA 154

22
Rollo, pp. 14-17.

23
Id. at 20-21.

24
Id. at 125.

25
Id. at 137.

26
Notably: Oceanic Bic Division (FFW) v. Romero, No. L- 43890, July 16, 1984, 130 SCRA 392; Mantrade/FMMC Division
Employees and Workers' Union v. Bacungan, No. L-48437, September 30, 1986, 144 SCRA 510; Continental Marble Corp. v.
NLRC, No. L-43825, May 9, 1988, 161 SCRA 151; Luzon Development Bank v. Association of Luzon Development Bank
Employees, G.R. No. 120319, October 6, 1995, 249 SCRA 162; National Steel Corporation v. Court of Appeals, G.R. No.
134468, August 29, 2002, 388 SCRA 85; Mora v. Avesco Marketing Corporation, G.R. No. 177414, November 14, 2008, 571
SCRA 226; Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan, G.R. No. 149050, March 25, 2009, 582
SCRA 369; and Manila Midtown Hotel v. Borromeo, G.R. No. 138305, September 22, 2004, 438 SCRA 653.

27
Entitled An Act to Extend Protection To Labor, Strengthen The Constitutional Rights Of Workers To Self-Organization,
Collective Bargaining And Peaceful Concerted Activities, Foster Industrial Peace and Harmony, Promote The Preferential Use
Of Voluntary Modes Of Settling Labor Disputes, And Reorganize The National Labor Relations Commission, Amending For
These Purposes Certain Provisions Of Presidential Decree No. 442, As Amended, Otherwise Known As The Labor Code Of The
Philippines, Appropriating Funds Therefore And For Other Purposes.

28
See Omnibus Rules Implementing the Labor Code.

29
G.R. No. L-43890, July 16, 1984, 130 SCRA 392.

30
G.R. No. L-43890, July 16, 1984, 130 SCRA 392, 399- 401.

31
Sime Darby Pilipinas, Inc. v. Magsalin, G.R. No. 90426, December 15, 1989, 180 SCRA 177, 182.

32
G.R. No. 120319, October 6, 1995, 249 SCRA 162.

33
Id. at 167-171.

34
G.R. No. 152456, April 28, 2004, 428 SCRA 239.

35
G.R. No. 138305, September 22, 2004, 438 SCRA 653.

36
G.R. No. 159010, November 19, 2004, 443 SCRA 286.

70
37
G.R. No. 155651, July 28, 2005, 464 SCRA 507.

38
The Court declared: "[T]he Decision of the Panel was in the form of a dismissal of petitioner's complaint. Naturally, this
dismissal was contained in the main decision and not in the dissenting opinion. Thus, under Section 6, Rule VII of the same
guidelines implementing Article 262-A of the Labor Code, this Decision, as a matter of course, would become final and
executory after ten (10) calendar days from receipt of copies of the decision by the parties even without receipt of the
dissenting opinion unless, in the meantime, a motion for reconsideration or a petition for review to the Court of Appeals
under Rule 43 of the Rules of Court is filed within the same 10-day period. (Id., pp. 515-516)

39
G.R. No. 149758, August 25, 2005, 468 SCRA 111.

40
G.R. No. 157775, October 19, 2007, 537 SCRA 154.

41
G.R. No. 162739, February 12, 2008, 544 SCRA 502.

42
G.R. No. 177414, November 14, 2008, 571 SCRA 226.

43
G.R. No. 149050, March 25, 2009, 582 SCRA 369.

44
G.R. No. 187104, August 3, 2010, 626 SCRA 649.

45
G.R. No. 164939, June 6, 2011, 650 SCRA 445.

46
G.R. No. 198783, April 15, 2013, 696 SCRA 357.

47
G.R. No. 168612, December 10, 2014, 744 SCRA 361.

48
G.R. No. 161006, October 14, 2015, 772 SCRA 276.

49
G.R. No. 225142, September 13, 2017.

Philippine Electric Corporation (PHILEC) v. Court of Appeals, G.R. No. 168612, December 10, 2014, 744 SCRA 361, 387-
50

389.

51
G.R. No. 169704, November 17, 2010, 635 SCRA 173.

Teng v. Pagahac, G.R. No. 169704, November 17, 2010, 635 SCRA 173, 184-185.
52

53
Section 7. Motions for Reconsideration. The decision of the voluntary arbitrator is not subject of a motion for
reconsideration.

54
G.R. No. 193919, June 15, 2015, 757 SCRA 459, 463.

Biñan Rural Bank v. Carlos, G.R. No. 193919, June 15, 2015, 757 SCRA 459, 463; Bordomeo v. Court of Appeals, G.R. No.
55

161596, February 20, 2013, 691 SCRA 269, 289.

Opinaldo v. Ravina, G.R. No. 196573, October 16, 2013, 707 SCRA 545, 557.
56

71