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 of the Twentieth
1 

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 - [₱]150,000.00

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, the dispositive portion of which states:
9 

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 - [₱]15,600.00
2. Separation Pay - 5,200.00
3. 13th Month Pay - 583.34
[₱]21,383.34 Attorney's Fees - 2,138.33
Total [₱]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 ₱95,600.00 to ₱15,600.00.
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:

[₱]5,200.00 x 3 months = [₱]15,600.00 12

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. According to the CA,
14 

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. (citations omitted)
15 

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. (citations omitted)
16 

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. The
17 

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; (ii) Sceptre and Royal have
19 

the same officers and employees; (iii) on October 14, 1994, Roso, the sole proprietor of Sceptre, sold to Aida, and
20 

her husband, Wilfredo Gracia K. Tan (Wilfredo), the property used by Sceptre as its principal place of business; (iv)
21  22 

Wilfredo is one of the incorporators of Royale; (v) on May 3, 1999, Roso ceded the license to operate Sceptre
23 

issued by the Philippine National Police to Aida; (vi) on July 28, 1999, the business name "Sceptre Security &
24 

Detective Agency" was registered with the Department of Trade and Industry (DTI) under the name of Aida; (vii) 25 

Aida exercised control over the affairs of Sceptre and Royale, as she was, in fact, the one who dismissed the
petitioner from employment; (viii) Karen, the daughter of Aida, was Sceptre’s Operation Manager and is one of the
26 

incorporators of Royale; and (ix) Cesar Tan II, the son of Aida was one of Sceptre’s officers and is one of the
27 

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 Decision and the respondents paid him the full amount of the monetary award thereunder
29 

shortly after the writ of execution was issued. The respondents likewise maintain that Royale’s separate and distinct
30 

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. However, he claims that this does not preclude this Court from
31 

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
₱21,521.67 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 ₱23,521.67 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., this Court ruled that the prevailing party’s receipt of the full
34 

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. 1avvphi1

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 ₱3,649,800.00, 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
decision will only give rise to the prevailing party’s right to move for the execution thereof but will not prevent the CA
36 

from taking cognizance of a petition for certiorari on jurisdictional and due process considerations. In turn, the
37 

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. Since an appeal to this Court is not an original and independent action but a continuation of the proceedings
38 

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, the NLRC shall limit itself to reviewing and deciding only the issues that were elevated on appeal. The
42 

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. This Court may choose not to encumber itself with technicalities
44 

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. As further proof of Aida’s acquisition of the rights as Sceptre’s sole proprietor,
50 

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. As far as Royale is concerned, the
51 

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. However, the manner by which the petitioner was made to resign from Sceptre and how he
52 

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
lavvphil

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 creation or which could not have been intended by law to which it owed its being.
53  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., it is the act of hiding behind the separate and distinct personalities of juridical
55 

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. Royale, shortly after its incorporation, started to hold office in the same
57 

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., the
58 

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. In awarding backwages, the primordial consideration
60 

is the income that should have accrued to the employee from the time that he was dismissed up to his
reinstatement and the length of service prior to his dismissal is definitely inconsequential.
61 

As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al., clarified in no uncertain terms that if
62 

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. (emphasis supplied)
63 

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. (citation omitted)
65 

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. Otherwise, the employer-employee relationship subsists and the illegally dismissed
66 

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. It is the obligation of the employer to pay an
67 

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 ₱25,000.00 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

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 (₱25,000.00); and

e) exemplary damages of Twenty-Five Thousand Pesos (₱25,000.00).

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

SO ORDERED.