Case Summary (G.R. No. 160506)
Procedural Antecedents: The March 9, 2010 Decision and Entry of Judgment
On March 9, 2010, the Court rendered a Decision that determined, in substance, that Promm-Gem was a legitimate independent contractor; SAPS was a labor-only contractor, so its employees were considered employees of P&G; and that the employees were illegally dismissed. The March 9, 2010 Decision further ordered the workers’ reinstatement without loss of seniority rights and with full backwages and other benefits from the time of illegal dismissal up to actual reinstatement. It likewise required P&G to pay each worker considered its employee moral damages and attorney’s fees, based on the finding of oppressive acts and bad faith, and it remanded the case to the Labor Arbiter for computation within a specified period.
P&G filed a Motion for Reconsideration and accompanying pleadings. Petitioners filed a Motion for Partial Reconsideration and corresponding opposition. On June 16, 2010, the Court denied P&G’s motion and also denied petitioners’ partial reconsideration motion. The Entry of Judgment was made on July 27, 2010.
Before any party received the notice of entry, P&G filed, on August 9, 2010, a set of motions seeking leave to refer the case to the Supreme Court En Banc, with a second motion for reconsideration and a motion for clarification. The Court later noted these filings through a January 17, 2011 Resolution, required petitioners to comment, and reiterated its directive through a February 28, 2011 Resolution. On March 16, 2011, petitioners submitted a very urgent manifestation in lieu of comment, challenging P&G’s motions as frivolous and dilatory and emphasizing the propriety of the entry of judgment.
The Core Procedural Issue: Whether Entry of Judgment Was Proper Despite the Absence of a Ruling on a “Second Motion for Reconsideration”
The Court held that the issuance of the Entry of Judgment on July 27, 2010 was proper. It reasoned that finality was reckoned from the time the parties received a copy of the Court’s Resolution denying the first motion for reconsideration, not from the resolution of any later prohibited pleading.
In particular, the Court invoked Section 1, Rule 15 of the Internal Rules of the Supreme Court, emphasizing that the fifteen-day period for finality is counted from receipt of the decision or resolution by the parties, using the registry return card receipt (or counsel’s receipt), and that internal mechanics of entry should not be treated as negating finality once the first motion for reconsideration was denied.
The Court rejected the idea that finality could be postponed because the Court had not first resolved P&G’s purported second motion for reconsideration. It explained that the filing of multiple pleadings after receipt of the resolution denying the first motion did not bar entry of judgment. It also stressed policy concerns: reckoning finality from the denial of a second motion would require the Court to issue orders denying what the Rules explicitly prohibit, which would be absurd and would enable delaying tactics by litigants. The Court treated its prior ruling in Securities and Exchange Commission v. PICOP Resources, Inc. as instructive on the unreasonableness of counting finality from a prohibited second motion.
Finality and Immutability of Judgment: The Court’s Reaffirmation of the Doctrine
The Court then addressed the consequences of finality. It stated that the March 9, 2010 Decision had already attained finality and thus became immutable. The Court reiterated the hornbook rule that once a judgment becomes final and executory, it may no longer be modified, whether the modification is aimed at correcting perceived errors in fact or law, and whether the attempt comes from the court that rendered the judgment or from the highest court.
The Court anchored this conclusion on public policy grounds: litigation must end on a definite date fixed by law. It cited the doctrinal statement from Mocorro, Jr. v. Ramirez, holding that a definitive final judgment, though potentially erroneous, is no longer subject to change or revision. It also identified the narrow exceptions to immutability: (1) correction of clerical errors; (2) nunc pro tunc entries that do not prejudice parties and that make the record speak the truth without supplying omitted judicial action; and (3) void judgments. The Court further explained the character of nunc pro tunc entries—namely, they cannot be used to correct judicial errors by rendering a new judgment, but only to supply omissions in the record of action previously taken.
The Court emphasized that P&G’s “second motion for reconsideration” was a prohibited pleading. It cited Section 2, Rule 52 of the Rules of Court, which bars a second motion for reconsideration by the same party, and Section 3, Rule 15 of the Internal Rules of the Supreme Court, which likewise declares that the Court shall not entertain a second motion for reconsideration and limits possible exceptions to cases where the Court en banc finds it warranted in the highest interest of justice, subject to the specified voting rule.
Consideration of the Merits Only to Dispel Alleged Lack of Due Process
Despite the procedural bar and the immutability of the March 9, 2010 Decision, the Court stated it would still address P&G’s raised issues to dispel any doubt that P&G was denied due process. It clarified that it was not treating the issues as of transcendental importance or as supported by “extraordinarily persuasive reasons,” but only as a precautionary step.
Substantive Labor Law: Determination of SAPS as Labor-Only Contractor and the Proper Test
The Court reaffirmed that the March 9, 2010 Decision correctly determined that SAPS was a labor-only contractor. It rejected P&G’s submission that the Court erred in not applying a “four-fold” test in determining contractor status, including the so-called control test.
The Court explained that the applicable rules were Article 106 of the Labor Code and Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02. Under Article 106, labor-only contracting exists where the person supplying workers does not have substantial capital or investment in the form of tools, equipment, machinery, work premises, among others, and where the workers perform activities directly related to the principal business of the employer. Under Rule VIII-A, labor-only contracting is prohibited, and it exists where the contractor merely recruits, supplies, or places workers and ANY of the following elements is present: (i) absence of substantial capital or investment related to the job while workers perform activities directly related to the principal business, or (ii) absence of the contractor’s exercise of the right to control the performance of work.
The Court stressed that the control test was only one factor. The rule’s “any of the two elements” framework meant that satisfying either indicator justified the labor-only characterization.
Promm-Gem vs. SAPS: The Court’s Evaluation of Capital, Investment, and Operational Indicators
The Court’s discussion distinguished between Promm-Gem and SAPS and treated the record as supporting opposite conclusions.
As to Promm-Gem, the Court stated there was evidence of substantial investment, thereby negating labor-only contracting. It cited financial and operational details from the record: Promm-Gem had authorized capital stock of P1 million and paid-in capital of P500,000.00 as of 1990; it also had long-term assets valued at P432,895.28 and current assets of P719,042.32. It maintained its own warehouse and office space with a floor area of 870 square meters. It also had three registered vehicles used for its promotional/merchandising business and had other clients aside from P&G.
The Court treated these facts as negating element (i) under Section 5(i) of DOLE Department Order No. 18-02, since Promm-Gem had substantial investment related to the work to be performed. It further noted that Promm-Gem supplied workers with materials such as markers, tapes, liners, and cutters, issued uniforms, and already treated the complainants as regular employees rather than merely contractual or project employees. This, in the Court’s view, negated element (ii) under Section 5, and it also refuted any inference of bad faith or intent to circumvent labor laws.
Consequently, the Court concluded that Promm-Gem was a legitimate independent contractor.
As to SAPS, the Court concluded that SAPS lacked substantial capital. It stated that SAPS’s articles of incorporation showed a paid-in capital of only P31,250, and there was no further evidence of its working capital and assets, nor any showing of substantial investment in tools, equipment, or other assets. The Court applied reasoning it had used in Vinoya v. National Labor Relations Commission, where paid-in capitalization of P75,000 was held insufficient to qualify as substantial capital under then-current economic conditions.
In the present case, the Court added factual underlining from the records: SAPS’s payroll for its merchandisers alone for one month would already total P44,561.00, SAPS had six-month contracts with P&G, and yet SAPS did not show that it could complete the six-month contracts using its own capital and investment. The Court held that the paid-in capital of P31,250 was not even sufficient for one month’s payroll, and SAPS failed to demonstrate that its capital was sufficient to sustain independent operations for the period needed to generate revenue. The Court reiterated that “substantial capital” refers to capitalization used in the performance or completion of the job, work, or service contracted out.
On this basis, the Court found that SAPS had no substantial capital and therefore met the statutory indicators for labor-only contracting. It thus reiterated that P&G was the employer for purposes of l
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Case Syllabus (G.R. No. 160506)
- Petitioners were Joeb M. Aliviado, Arthur Corpuz, Eric Aliviado, Monchito Ampe loquio, Abraham Basmayor, Jonathan Mateo, Lorenzo Platon, Jose Fernando Gutierrez, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Julio Rey, Ruben Marquez, Jr., Maximino Pascual, Ernesto Calanao, Rolando Romasanta, Rhu el Aguo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Rhuel Aguo, Bonifacio Ortega, Arsenio Soriano, Jr., and other similarly situated complainants, who sought reinstatement, backwages, damages, and attorney’s fees arising from their dismissal.
- Respondents were Procter & Gamble Phils., Inc. (P&G) and Promm-Gem Inc. (Promm-Gem).
- The Supreme Court decision under review resolved issues on motions filed after its earlier March 9, 2010 Decision and after Entry of Judgment.
- The Court denied respondent P&G’s Motion to Refer the Case to the Supreme Court En Banc with Second Motion for Reconsideration and Motion for Clarification, including its supplement, on the ground of finality and immutability of judgment.
Prior Supreme Court Decision
- The Court’s March 9, 2010 Decision held that Promm-Gem was a legitimate independent contractor.
- The Court’s March 9, 2010 Decision held that Sales and Promotions Services (SAPS) was a labor-only contractor and that its employees were considered employees of P&G.
- The Court’s March 9, 2010 Decision ruled that Promm-Gem was guilty of illegal dismissal.
- The Court’s March 9, 2010 Decision also ruled that SAPS/P&G was likewise guilty of illegal dismissal.
- The Court’s March 9, 2010 Decision ordered reinstatement of the dismissed employees.
- The Court’s March 9, 2010 Decision awarded moral damages and attorney’s fees to the dismissed employees of SAPS/P&G, citing bad faith in the dismissal.
Dispositive Portion of March 9, 2010
- The Court granted the petition and reversed and set aside the Decision dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003.
- The Court ordered P&G and Promm-Gem to reinstate their respective employees immediately without loss of seniority rights and with full backwages and other benefits from the time of illegal dismissal up to actual reinstatement.
- The Court ordered P&G to pay each petitioner considered as its employee PHP 25,000.00 as moral damages plus ten percent of the total sum as attorney’s fees.
- The Court remanded the case to the Labor Arbiter for the computation of backwages and other benefits and attorney’s fees within 30 days from receipt, and directed immediate execution.
Motions and Denials
- After the March 9, 2010 Decision, P&G filed a Motion for Reconsideration, and petitioners opposed and filed a Motion for Partial Reconsideration.
- The Court denied P&G’s Motion for Reconsideration and petitioners’ Motion for Partial Reconsideration on June 16, 2010.
- Entry of Judgment was made on July 27, 2010.
Entry of Judgment and Timing
- Before either party received notice of the Entry of Judgment, P&G filed on August 9, 2010 a Motion for Leave to refer the case to the Supreme Court En Banc, with a Second Motion for Reconsideration and Motion for Clarification.
- P&G also filed a supplement to its motion to refer the case to En Banc.
- In its Resolution dated January 17, 2011, the Court noted the pleadings and required petitioners to comment.
- The Court reiterated its directive in a subsequent Resolution dated February 28, 2011.
- Petitioners filed a Very Urgent Manifestation in lieu of comment on March 16, 2011, asserting that P&G’s motions were frivolous and dilatory.
Core Issue: Finality and Immutability
- The Court held that the issuance of the Entry of Judgment on July 27, 2010 was proper.
- The Court ruled that finality was reckoned from the parties’ receipt of a copy of the Court’s Resolution denying the first motion for reconsideration, not from later attempts to reconsider the case.
- The Court explained that Section 1, Rule 15 of the Internal Rules of the Supreme Court provides that a decision becomes final after the lapse of fifteen days from receipt of the copy by the parties, using the date in the registry return card or by counsel.
- The Court held it was immaterial that the Entry of Judgment was made without resolving P&G’s second motion for reconsideration because the finality period started upon denial of the first motion.
- The Court emphasized that filing several pleadings after receipt of the denial of the first motion did not bar finality or entry of judgment.
No Second Motion Allowed
- The Court reiterated that second motions for reconsideration are prohibited pleadings.
- The Court cited Section 2, Rule 52 of the Rules of Court, which provides that no motion for reconsideration of a judgment or final resolution by the same party shall be entertained.
- The Court also invoked Section 3, Rule 15 of the Internal Rules of the Supreme Court, stating that the Court shall not entertain a second motion for reconsideration, except in the highest interest of justice by the Court En Banc upon a two-thirds vote.
- The Court characterized “reconsideration in the highest interest of justice” as requiring that the assailed decision be not only legally erroneous but also patently unjust and potentially capable of causing unwarranted and irremediable injury or damage.
Reason Against Reckoning From Second Denial
- The Court relied on Securities and Exchange Commission v. PICOP Resources, Inc., which explained the unwise and absurd consequence of reckoning finality from denial of a prohibited second motion.
- The Court cited Dinglasan v. Court of Appeals as the doctrinal basis for holding that courts would have to deny a prohibited motion merely to start the finality period, and that allowing prohibited pleadings would enable delay.
Immutability of Final Judgment
- The Court held that the March 9, 2010 Decision had attained finality and therefore became immutable.
- The Court reiterated the hornbook rule that once a judgment becomes final and executory, it may no longer be modified in any respect.
- The Court applied the doctrine that only ministerial enforcement remains after finality.
- The Court recognized limited exceptions to immutability: correction of clerical errors, nunc pro tunc entries that do not prejudice parties, and void judgments.