Source: http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/185280.

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TIMOTEO H. SARONA, G.R. No. 185280

Petitioner,

Present:

CARPIO, J.,

- versus - Chairperson,

PEREZ,

SERENO,

REYES, and

NATIONAL LABOR RELATIONS BERNABE, JJ. 

COMMISSION, ROYALE SECURITY

AGENCY (FORMERLY SCEPTRE

SECURITY AGENCY) and Promulgated:

CESAR S. TAN,

Respondents. January 18, 2012

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

DECISION
REYES, J.:

This is a petition for review under Rule 45 of the Rules of Court from the May 29, 2008
Decision1 of the Twentieth Division of the Court of Appeals (CA) in CA-G.R. SP No. 02127
entitled “Timoteo H. Sarona v. National Labor Relations Commission, Royale Security Agency
(formerly Sceptre Security Agency) and Cesar S. Tan” (Assailed Decision), which affirmed the
National Labor Relations 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).

“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

2. Separation Pay - 5,200.00

3. 13th Month Pay - 583.34

[P]21,383.34 Attorney’s Fees- 2,138.33

Total [P]23,521.67

The appeal of respondent Royal (sic) Security Agency is hereby

DISMISSED for lack of merit.

SO ORDERED.10
 The NLRC partially affirmed LA 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
(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.30 The 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
 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, 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 or certiorari as the law or the Rules of Court may provide, final judgments and
orders of lower courts in x x x all cases in which only an error or question of law is involved.”
Consistent with this constitutional mandate, Rule 45 of the Rules of Court provides the remedy
of an appeal by certiorari from decisions, final orders or resolutions of the CA in any case, i.e.,
regardless of the nature of the action or proceedings
involved, which would be but a continuation of the appellate process over the original case.38
Since an appeal to this Court is not an original and independent action but a continuation of the
proceedings before the CA, the filing of a petition for review under Rule 45 cannot be barred by
the finality of the 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 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 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.

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 reinstatement61 and the length of
service prior to his dismissal is definitely inconsequential.
 As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62 clarified in no
uncertain terms that if reinstatement is no longer possible, backwages should be computed from
the time the employee was terminated until the finality of the decision, finding the dismissal
unlawful.

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

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

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

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

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

6715 instructs:

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

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

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

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

In fine, this Court holds Royale liable to pay the petitioner backwages to be computed
from his dismissal on October 1, 2003 until the finality of this decision. Nonetheless, the amount
received by the petitioner from the respondents in satisfaction of the November 30, 2005
Decision shall be deducted accordingly.
 Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the
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

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

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

SO ORDERED.

SOURCE: http://www.lawphil.net/judjuris/juri2007/jan2007/gr_154975_2007.html

G.R. No. 154975 January 29, 2007

GENERAL CREDIT CORPORATION (now PENTA CAPITAL FINANCE

CORPORATION), Petitioner,
vs.
ALSONS DEVELOPMENT and INVESTMENT CORPORATION and CCC EQUITY
CORPORATION, Respondents.

HELD:

A corporation is an artificial being vested by law with a personality distinct and separate from
those of the persons composing it20 as well as from that of any other entity to which it may be
related.21 The first consequence of the doctrine of legal entity of the separate personality of the
corporation is that a corporation may not be made to answer for acts and liabilities of its
stockholders or those of legal entities to which it may be connected or vice versa.22

The notion of separate personality, however, may be disregarded under the doctrine – "piercing
the veil of corporate fiction" – as in fact the court will often look at the corporation as a mere
collection of individuals or an aggregation of persons undertaking business as a group,
disregarding the separate juridical personality of the corporation unifying the group. Another
formulation of this doctrine is that when two (2) 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 two corporations are distinct entities and treat them
as identical or one and the same.23

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.24 After all, the concept of
corporate entity was not meant to promote unfair objectives.

Authorities are agreed on at least three (3) basic areas where piercing the veil, with which
the law covers and isolates the corporation from any other legal entity to which it may be
related, is allowed.25 These are: 1) defeat of public convenience,26 as when the corporate
fiction is used as vehicle for the evasion of an existing obligation;27 2) fraud cases or when
the corporate entity is used to justify a wrong, protect fraud, or defend a crime;28 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.