Case Summary (G.R. No. 200094)
Key Dates and Procedural Posture
Relevant dates include MBMSI’s alleged corporate revocation (July 2, 2003), termination of MBMSI’s relationship with PCCr (March 16, 2009), execution/submission of releases, waivers and quitclaims (September 11, 2009), Labor Arbiter decision (July 30, 2010), two NLRC resolutions (February 11, 2011 and April 28, 2011), Court of Appeals decision (September 16, 2011), and Supreme Court decision (June 10, 2013). The matter reached the Supreme Court via a petition for review on certiorari under Rule 45.
Applicable Law and Regulatory Framework
Primary legal sources invoked include Articles 106 and 109 of the Labor Code (contracting-out; responsibility of employers/indirect employers), Articles 1217 and 1222 of the New Civil Code (effects of payment by one solidary debtor; defenses available), Sections 122 and 145 of the Corporation Code (post-dissolution winding up and preservation of liabilities), DOLE Department Order No. 18-02 (implementing rules on contracting-out, including section on solidary liability) and DOLE Department Order No. 18-A (2011) which reiterates effects of a finding of labor-only contracting. The matter is adjudicated under the 1987 Constitution, as the decision date is after 1990.
Procedural Claims and Reliefs Sought by Petitioners
Petitioners filed complaints for illegal dismissal, reinstatement, back wages, separation pay (for a retiree), underpayment, overtime, holiday pay, service incentive leave, and 13th month pay against MBMSI, Atty. Seril, PCCr and Bautista. They alleged they were actually PCCr employees because MBMSI’s corporate certificate had been revoked, PCCr controlled MBMSI operations, no valid contract existed between MBMSI and PCCr, and PCCr participated in selection and hiring.
Labor Arbiter Findings
The Labor Arbiter (LA) found MBMSI to be a labor-only contractor and PCCr to be the real principal employer, holding petitioners to be regular employees of PCCr and that PCCr/Bautista acted in bad faith when dismissing them. The LA awarded reinstatement (except the retired employee), back wages, separation pay for the retiree, service incentive leave pay, moral and exemplary damages, and attorney’s fees. The LA did not address the authenticity or validity of the released waivers and quitclaims which respondents had submitted during the proceedings.
NLRC Resolutions and Reasoning
The NLRC affirmed the LA’s factual findings that MBMSI was a labor-only contractor and PCCr was the real principal employer, thereby creating a ground for joint/solidary liability. However, the NLRC excused respondents from liability for seventeen complainants on the ground that those complainants executed releases, waivers and quitclaims in favor of MBMSI. The NLRC applied Article 1217 of the Civil Code, reasoning that payment/release to one solidary debtor redounds to all solidary debtors. On reconsideration the NLRC modified its ruling to affirm the LA only for two complainants and to find that awards for the remaining 17 had been superseded by the releases.
Court of Appeals Ruling
The Court of Appeals denied petitioners’ Rule 65 petition seeking to overturn the NLRC, upholding the NLRC’s conclusions: (1) factual findings on authenticity and due execution of the individual releases were supported by the presumption of regularity of notarized documents; (2) the releases executed in favor of MBMSI benefited PCCr by reason of solidary liability; and (3) petitioners failed to substantiate forgery allegations or otherwise overcome the presumption attaching to notarized instruments.
Supreme Court Issues Framed
The Supreme Court distilled three central sub-issues: (a) whether petitioners actually executed the releases, waivers and quitclaims; (b) whether a dissolved corporation (MBMSI) could validly execute such instruments beyond the three-year winding-up period under Section 122 of the Corporation Code; and (c) whether a labor-only contractor is solidarily liable with the principal employer, such that a release in favor of the contractor extinguishes the principal’s liability.
Supreme Court on Authenticity and Evidentiary Burden
The Supreme Court upheld the factual findings of the NLRC and CA that the releases were duly notarized and, absent successful and timely contestation, enjoy a presumption of regularity and due execution. The Court emphasized that petitioners were passive during earlier proceedings and did not timely dispute the documents’ genuineness; their later, belated allegations of forgery were unsubstantiated and amounted to mere assertions. The Court noted that Rule 45 requires the petition to be accompanied by the relevant portions of the record supporting the petition, which petitioners failed to provide in adequate form to substantiate forgery claims.
Presumption as to Notarized Instruments and Notarial Report
The Supreme Court applied settled authority that notarization affords prima facie proof of due execution, and a notarial report’s absence does not negate the presumption of proper notarization. The Court cited precedent holding that parties who present documents for notarization should not be required to follow up on a notary’s administrative compliance; failure of the notary to submit his notarial report does not necessarily invalidate the notarized instrument.
Supreme Court on Corporate Dissolution and Validity of Releases
Addressing MBMSI’s alleged revocation of its Certificate of Incorporation in 2003, the Court held that dissolution does not eliminate corporate liabilities and that a dissolved corporation may still validly settle claims and execute instruments related to winding up. Section 122 provides a three-year continuation for winding up but does not bar actions to settle and close affairs thereafter, and Section 145 preserves rights and remedies despite dissolution. The Court relied on precedent (Premiere Development Bank v. Flores) recognizing that liquidation and settlement may extend beyond the formal three-year period and that trustees or continuing directors may complete liquidation functions.
Supreme Court on Labor-only Contracting and Solidary Liability
The Court concluded that MBMSI, as a labor-only contractor, was solidarily liable with PCCr. It relied on the last paragraph of Article 106 of the Labor Code, DOLE Department Order No. 18-02 (and subsequent DOLE Department Order No. 18-A), and jurisprudence (Philippine Bank of Communications, San Miguel Corporation, 7K Corporation) establishing that a labor-only contractor is considered an agent of the principal and that the principal is responsible to the workers “as if” they were directly employed by it. The Court clarified the difference between legitimate job contracting (joint liability limited to wages) and labor-only contracting (comprehensive employer status and solidary liability for all right
Case Syllabus (G.R. No. 200094)
Case Caption, Source and Procedural Posture
- Supreme Court Decision reported at 710 Phil. 809, Third Division, G.R. No. 200094, June 10, 2013; petition for review on certiorari under Rule 45.
- Petitioners: seventeen (17) dismissed maintenance personnel led by Benigno M. Vigilla; respondents: Philippine College of Criminology, Inc. (PCCr) and Gregory Alan F. Bautista; also implicated: Metropolitan Building Maintenance Services, Inc. (MBMSI) and Atty. Florante A. Seril.
- Case assails Court of Appeals (CA) September 16, 2011 Decision in CA-G.R. SP No. 120225 which affirmed National Labor Relations Commission (NLRC) resolutions (Feb. 11, 2011 and Apr. 28, 2011) that modified Labor Arbiter’s (LA) July 30, 2010 Decision.
- Relief sought by petitioners: reversal of CA and NLRC rulings and reinstatement of LA awards in their favor.
Antecedent Facts (Employment Relationship; Corporate Links)
- Petitioners worked as janitors, janitresses and a supervisor in the Maintenance Department at PCCr, under the supervision and control of Atty. Florante A. Seril (Senior Vice President for Administration of PCCr).
- Petitioners understood and were told they were under MBMSI, a corporation engaged in janitorial services; Atty. Seril was President and General Manager of MBMSI while simultaneously PCCr’s Senior VP for Administration.
- MBMSI’s Certificate of Incorporation had been revoked effective July 2, 2003; PCCr discovered the revocation in 2008.
- On March 16, 2009, PCCr, through its President Gregory Alan F. Bautista, terminated PCCr’s relationship with MBMSI citing the revocation, causing dismissal of maintenance personnel under MBMSI (except Alfonso Bongot who retired).
Complaints, Claims and Positions of the Parties
- In September 2009, dismissed employees filed complaints for: illegal dismissal, reinstatement, back wages, separation pay (for Bongot), underpayment of salaries, overtime pay, holiday pay, service incentive leave, and 13th month pay, naming MBMSI, Atty. Seril, PCCr and Bautista as respondents.
- Petitioners’ allegations supporting PCCr as their real employer:
- MBMSI’s Certificate of Incorporation had been revoked.
- PCCr exercised direct control over MBMSI’s operations.
- There was no contract between MBMSI and PCCr.
- PCCr handled selection and hiring of employees.
- PCCr/Bautista’s contentions:
- PCCr was not the direct employer and could not have illegally dismissed complainants.
- MBMSI had complete and direct control over complainants.
- There existed a contractual agreement between PCCr and MBMSI, making MBMSI the direct employer.
- On September 11, 2009, PCCr submitted releases, waivers and quitclaims allegedly executed by the complainants in favor of MBMSI, notarized by one Atty. Ramil Gabao, evidencing payment and release for separation pay.
Form and Substance of the Releases, Waivers and Quitclaims
- Sample language (uniform across instruments) acknowledged receipt of a total amount as separation pay for closure due to serious financial losses and contained a broad release and discharge of MBMSI from any and all claims, demands, causes of action, damages, costs, expenses, attorney’s fees and obligations of any nature whether known or unknown, in law or in equity, relating to employment with MBMSI or third persons.
- Instruments were presented to the Labor Arbiter and relied upon by respondents and the NLRC.
Labor Arbiter Decision (July 30, 2010)
- LA findings:
- MBMSI was a mere adjunct, alter ego or labor-only contractor.
- PCCr was the real principal employer.
- Petitioners were regular employees of PCCr.
- PCCr/Bautista acted in bad faith in dismissing the petitioners.
- LA reliefs granted:
- Reinstatement of petitioners except Bongot (deemed separated/retired).
- Payment of full back wages from dismissal until actual reinstatement (total P2,963,584.25).
- Payment of Bongot’s separation/retirement pay under Labor Code (P254,010.00).
- Payment of service incentive leave pay for three years (amounts specified, e.g., P4,245.60 each, except Vigilla P5,141.40).
- Award of moral and exemplary damages in combined amount P150,000.00.
- Attorney’s fees fixed at 10% of total computable award.
- LA explained PCCr exercised control over means and methods of petitioners’ work through Atty. Seril acting in his PCCr capacity; LA did not address the validity/authenticity or effects of the submitted releases, waivers and quitclaims.
NLRC Proceedings and Resolutions (Feb. 11, 2011 and Apr. 28, 2011)
- Initial NLRC Resolution (Feb. 11, 2011):
- Affirmed LA’s factual findings (MBMSI labor-only contractor; PCCr principal employer; petitioners regular employees).
- Held MBMSI and Atty. Seril are solidarily liable with PCCr and Bautista pursuant to Article 109 of the Labor Code.
- Declared petitioners’ claims effectively expunged by the releases, waivers and quitclaims executed in favor of MBMSI, invoking Article 1217 of the Civil Code: release of one solidary debtor redounds to benefit of others.
- Petitioners’ motion for reconsideration appended affidavits denying execution of the releases; MBMSI/Atty. Seril filed reconsideration challenging NLRC’s declaration of solidary liability.
- Modified NLRC Resolution (Apr. 28, 2011):
- Affirmed LA decision only as to complainants Ernesto B. Ayento and Eduardo B. Salonga.
- Ruled for the remaining seventeen (17) complainants that their awards had been superseded by their respective releases, waivers and quitclaims.
Court of Appeals Ruling (Sept. 16, 2011; Reconsideration denied Jan. 4, 2012)
- CA denied petition for certiorari under Rule 65 and affirmed NLRC resolutions.
- CA reasoning:
- Based on solidary liability principle and Article 1217 Civil Code, petitioners’ releases in favor of MBMSI redounded to benefit respondents.
- Upheld factual findings of NLRC as to authenticity and due execution of the individual releases because petitioners failed to substantiate claims of forgery and could not overcome the presumption of regularity of a notarized document.
- Petitio