AUG 1 5 2018

l\epublic of tbe fjbilippines

$>upreme <!Court
;!OOanila
THIRD DIVISION

MARICALUM MINING G.R. No. 221813

CORPORATION,
Petitioner, Present:

- versus - VELASCO, JR., J., Chairperson,

BERSAMIN,
ELY G. FLORENTINO, GLENN LEONEN,
BUENVIAJE, RUDY J. GOMEZ, MARTIRES, and
represented by his heir THELMA GESMUNDO, JJ
GOMEZ, ALEJANDRO H.
SITCHON, NENET ARITA,
FERNANDO SIGUAN, DENNIS
ABELIDA, NOEL S.
ACCOLADOR,WILFREDO
TAGANILE, SR., MARTIR S.
AGSOY, SR., MELCHOR
APUCA Y, DOMINGO LA VIDA,
JESUS MOSQUEDA, RUELITO
A. VILLARMIA, SOFRONIO M.
AYON, EFREN T. GENISE,
ALQUIN A. FRANCO, PABLO L.
ALEMAN, PEPITO G.
HEPRIANA, ELIAS S.
TRESPECES, EDGAR SOBRINO,
Respondents,

x -- -- -- -- -- -- -- -- -- -- -- -- -- x
G.R. No. 222723
ELY FLORENTINO, GLENN
BUENVIAJE, RUDY J. GOMEZ,
represented by his heir THELMA
GOMEZ, FERNANDO SIGUAN,
DENNIS ABELIDA, NOEL S.
ACCOLADOR,WILFREDO
TAGANILE, SR., MARTIR S.
AGSOY, SR., MELCHOR
APUCA Y, DOMINGO LA VIDA,
JESUS MOSQUEDA, RUELITO

11
DECISION 2 G.R. Nos. 221813
& 222723

A. VILLARMIA, SOFRONIO M.
AYON, EFREN T. GENISE,
ALQUIN A. FRANCO, PABLO L.
ALEMAN, PEPITO G.
HEPRIANA, ELIAS S.
TRESPECES, EDGAR SOBRINO,
ALEJANDRO H. SITCHON,
NENET ARITA, WELILMO T.
NERI, ERLINDA FERNANDEZ,
and EDGARDO PENAFLORIDA,
Petitioners,

- versus -

NATIONAL LABOR RELATIONS

COMMISSION - 7th DIVISION,
CEBU CITY, "G" HOLDINGS,
INC., and TEODORO G.
BERNARDINO, ROLANDO
DEGOJAS, MARICALUM Promulgated:
MINING CORPORATION.
Respondents.

)( -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- __ , __ -- -- --

DECISION

GESMUNDO, J.:

A subsidiary company's separate corporate personality may be

disregarded only when the evidence shows that such separate personality
was being used by its parent or holding corporation to perpetrate a fraud or
evade an existing obligation. Concomitantly, employees of a corporation
have no cause of action for labor-related claims against another unaffiliated
corporation, which does not exercise control over them.

The subjects of the instant consolidated cases are two (2) petitions for
appeal by certiorari filed by the following petitioners:

fa/
DECISION 3 G.R. Nos. 221813
& 222723

1) Mari cal um Mining Corporation (Marica/um Mining) m

G.R. No. 221813; and

2) Ely Florentino, Glenn Buenviaje, Rudy J. Gomez, 1

Fernando Siguan, Dennis Abelida, Noel S. Acollador,
Wilfredo C. Taganile, Sr., Martir S. Agsoy, Sr., Melchor
B. Apucay, Domingo Lavida, Jesus Mosqueda, Ruelito
A. Villarmia, Sofronio M. Ayon, Efren T. Genise, Alquin
A. Franco, Pabio L. Aleman, Pepito G. Hepriana, Elias S.
Trespeces, Edgar M. Sobrino, Alejandro H. Sitchon,
Nenet Arita, Dr. Welilmo T. Neri, Erlinda L. Fernandez,
and Edgardo S. Pefiaflorida (complainants) in G.R. No.
222723.

Both of these petitions are assailing the propriety of the October 29,
2014 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 06835. The
CA upheld the November 29, 2011 Decision 3 and January 31, 2012
Resolution4 of the National Labor Relations Commission (NLRC) in NLRC
Case No. VAC-05-000412-11. In the present petitions, complainants seek to
reinstate the April 20, 2011 Decision 5 of the Labor Arbiter (LA) in
consolidated cases NLRC RAB VI CASE No. 09-10755-10, NLRC RAB VI
CASE No. 12-10915-10, NLRC RAB VI CASE No. 12-10916-10 and
NLRC RAB VI CASE No. 12-10917-10, which granted their joint
complaints for monetary claims against G Holdings, Inc. (G Holdings);
while Maricalum Mining seeks to have the case remanded to the LA for
proper computation of its total monetary liability to the complainants.

The Antecedents

The dispute traces its roots back to when the Philippine National Bank
(PNB, a former government-owned-and-controlled corporation) and the
Development Bank of the Philippines (DBP) transferred its ownership of
Maricalum Mining to the National Government for disposition or
privatization because it had become a non-performing asset. 6

1
Rollo (G.R. No. 222723) p. 12, represented by his heir Thelma G. Gomez, et al.
2 Id. (G.R. No. 221813, Vol. 1) at 67-80; penned by Associate Justice Marie Christine Azcarraga-Jacob and
concurred by Associate Justices Ramon Paul L. Hernando and Ma. Luisa C. Quijano-Padilla.
3
Id. at 381; penned by Presiding Commissioner Violeta Ortiz-Bantug and concurred by Commissioner
Julie C. Rendoque.
4
Id. at 440.
5
Id. at 250; penned by Labor Arbiter Romulo P. Sumalinog.
6
See "G" Holdings, Inc. v. National Mines and Allied Workers Union Local 103 (NAMA WU), et al., 619
Phil. 69, 78 (2009).

)(
DECISION 4 G.R. Nos. 221813
& 222723

On October 2, 1992, the National Government thru the Asset

Privatization Trust (APT) executed a Purchase and Sale Agreement (PSA)
with G Holdings, a domestic corporation primarily engaged in the business
of owning and holding shares of stock of different companies. G Holding
bought 90% of Maricalum Mining's shares and financial claims in the form
of company notes. In exchange, the PSA obliged G Holdings to pay APT
the amount of P673,161,280.00, with a down payment of P98,704,000.00
and with the balance divided into four tranches payable in installment over a
period of ten years. 7 Concomitantly, G Holdings also assumed Maricalum
Mining's liabilities in the form of company notes. The said financial
liabilities were converted into three (3) Promissory Notes (PNs) totaling
P550,000,000.00(Pl14,715,360.00, Pl86,550,560.00 and P248,734,080.00),
which were secured by mortgages over some of Maricalum Mining's
properties. 8 These PNs obliged Maricalum Mining to pay G Holdings the
stipulated amount of P550,000,000.00.

Upon the signing of the PSA and paying the stipulated down payment,
G Holdings immediately took physical possession of Maricalum Mining's
Sipalay Mining Complex, as well as its facilities, and took full control of the
latter's management and operations.9

On January 26, 1999, the Sipalay General Hospital, Inc. (Sipalay

Hospital) was duly incorporated to provide medical services and facilities to
the general public. 10

Afterwards, some of Maricalum Mining's employees retired and

formed several manpower cooperatives, 11 as follow:

COOPERATIVE DATE OF REGISTRATION

San Jose Multi-Purpose Cooperative (SJMPC) December 8, 1998
Centennial Multi-Purpose Cooperative (CeMPC) April 5, 1999
Sipalay Integrated Multi-Purpose Cooperative
April 5, 1999
(SIMPC)
Allied Services Multi-Purpose Cooperative
July 23, 1999
(ASMPC)
Cansibit Multi-Purpose Cooperative (CaMPC) September 16, 1999

7
See Republic of the Philippines v. "G" Holdings, Inc., 512 Phil. 253, 258 (2005).
8
Supra note 5.
9
Id.
10
Rollo (G.R. No. 222723), pp. 437, 447.
11
Id. (G .R. No. 221813, Vol. II), pp. 553, 557.
DECISION 5 G.R. Nos. 221813
& 222723

In 2000, each of the said cooperatives executed identical sets of

Memorandum of Agreement 12 with Maricalum Mining wherein they
undertook, among others, to provide the latter with a steady supply of
workers, machinery and equipment for a monthly fee.

On June 1, 2001, Maricalum Mining's Vice President and Resident

Manager Jesus H. Bermejo wrote a Memorandum 13 to the cooperatives
informing them that Maricalum Mining has decided to stop its mining and
milling operations effective July 1, 2001 in order to avert continuing losses
brought about by the low metal prices and high cost of production.

In July 2001, the properties of Maricalum Mining, which had been

mortgaged to secure the PNs, were extrajudicially foreclosed and eventually
sold to G Holdings as the highest bidder on December 3, 2001. 14

On September 23, 2010, some of Maricalum Mining's workers,

including complainants, and some of Sipalay General Hospital's employees
jointly filed a Complaint 15 with the LA against G Holdings, its president,
and officer-in-charge, and the cooperatives and its officers for illegal
dismissal, underpayment and nonpayment of salaries, underpayment of
overtime pay, underpayment of premium pay for holiday, nonpayment of
separation pay, underpayment of holiday pay, nonpayment of service
incentive leave pay, nonpayment of vacation and sick leave, nonpayment of
13th month pay, moral and exemplary damages, and attorneys fees.

On December 2, 2010, complainants and CeMPC Chairman Alejandro

H. Sitchon surprisingly filed his complaint for illegal dismissal and
corresponding monetary claims with the LA against G Holdings, its officer-
in-charge and CeMPC. 16

Thereafter, the complaints were consolidated by the LA.

During the hearings, complainants presented the affidavits of

Alejandro H. Sitchon and Dennis Abelida which attested that, prior to the
formation of the manpower cooperatives, their services were terminated by
Maricalum Mining as part of its retrenchment program. 17 They claimed that,
in 1999, they were called by the top executives of Maricalum Mining and G

12
Id. at 527-552.
13
Id. (G.R. No. 222723) at 112.
14
Supra note 5.
15 Rollo (G.R. No. 221813, Vol. I), pp. 500-504.
16
17
Id. at 508-509; rollo (G.R. No. 22 I 8 I 3, Vol. II), pp. 510-5 I I.
Id. (G.R. No. 222723) at 171-175.
ti
DECISION 6 G.R. Nos. 221813
& 222723

Holdings and informed that they will have to form a cooperative for the
purpose of providing manpower services in view of the retrenchment
program. Thus, they were "rehired" only after their respective manpower
cooperative services were formed. Moreover, they also submitted the
following documents: (a) Cash Vouchers 18 representing payments to the
manpower cooperatives; (b) a Payment Schedule 19 representing G Holdings'
payment of social security contributions in favor of some Sipalay Hospital
employees (c) Termination Letters 20 written by representatives of G
Holdings, which were addressed to complainants including those employed
by Sipalay Hospital; and (d) Caretaker Schedules21 prepared by G Holdings
to prove the existence of employment relations.

After the hearings were concluded, complainants presented their

Position Paper2 2 claiming that: they have not received any increase in wages
since they were allegedly rehired; except for Sipalay Hospital's employees,
they worked as an augmentation force to the security guards charged with
securing Maricalum Mining's assets which were acquired by G Holdings;
Maricalum Mining's assets have been exposed to pilferage by some of its
rank-and-file employees whose claims for collective bargaining benefits
were undergoing litigation; the Sipalay Hospital is purportedly "among the
assets" of Maricalum Mining acquired by G Holdings; the payrolls for their
wages were supposedly prepared by G Holdings' accounting department;
since the second half of April 2007, they have not been paid their salary; and
some of their services were dismissed without any due process.

Based on these factual claims, complainants posited that: the

manpower cooperatives were mere alter egos of G Holdings organized to
subvert the "tenurial rights" of the complainants; G Holdings implemented a
retrenchment scheme to dismiss the caretakers it hired before the foreclosure
of Maricalum Mining's assets; and G Holdings was their employer because
it allegedly had the power to hire, pay wages, control working methods and
dismiss them.

Correspondingly, G Holdings filed its Position Paper 23 maintaining

that: it was Maricalum Mining who entered into an agreement with the
manpower corporations for the employment of complainants' services for
auxiliary or seasonal mining activities; the manpower cooperatives were the
ones who paid the wages, deducted social security contributions, withheld
taxes, provided medical benefits and had control over the working means
18
Id. at 154-166; 233-245, 251-297, 308-3 14.
19
ld.at 167.
20
Id. at 168-169.
21
Id. at 207-232.
22
Id. at 175-190.

hi
23
Id. (G.R. No. 221813, Vol. I) at 143-159.
 DECISION 7 G.R. Nos. 221813
& 222723

and methods of complainants; despite Maricalum Mining's decision to stop

its mining and milling operations, complainants still continued to render
their services for the orderly winding down of the mines' operations;
Maricalum Mining should have been impleaded because it is supposed to be
the indispensable party in the present suit; (e) Mari cal um Mining, as well as
the manpower cooperatives, each have distinct legal personalities and that
their individual corporate liabilities cannot be imposed upon each other; and
there was no employer-employee relationship between G Holdings and
complainants.

Likewise, the manpower cooperatives jointly filed their Position

Paper24 arguing that: complainants had exhibited a favorable response when
they were properly briefed of the nature and benefits of working under a
cooperative setup; complainants received their fair share of benefits;
complainants were entitled to cast their respective votes in deciding the
affairs of their respective cooperatives; complainants, as member of the
cooperatives, are also co-owners of the said cooperative and they cannot
bargain for higher labor benefits with other co-owners; and the LA has no
jurisdiction over the case because there is no employer-employee
relationship between a cooperative and its members.

The LA Ruling

In its decision dated April 28, 2011, the LA ruled in favor of

complainants. It held that G Holdings is guilty of labor-only contracting with
the manpower cooperatives thereby making all of them solidarily and
directly liable to complainants. The LA reasoned that: G Holdings connived
with Marcalum Mining in orchestrating the formation of manpower
cooperatives to circumvent complainants' labor standards rights; it is highly
unlikely that complainants (except Sipalay Hospital's employees) would
spontaneously form manpower cooperatives on their own and in unison
without the guidance of G Holdings and Maricalum Mining; and
complainants effectively became the employees of G Holdings because their
work had changed from assisting in the mining operations to safeguarding
the properties in the Sipalay Mining Complex, which had already been
acquired by G Holding. On the other hand, the LA denied the claims of
complainants Nenet Arita and Domingo Lavida for lack of factual basis. The
fallo of the LA decision reads:

24
Id. at 162-173.

ft/
DECISION 8 G.R. Nos. 221813
& 222723

WHEREFORE, premises considered, judgment is hereby rendered

DIRECTING respondent "G" HOLDINGS, INC. to pay complainants as
follows:
Un2aid Salaries/
13 111 Month Pay
Wages
(I) Salvador Arceo P81,418.08 P6,784.84
(2) Sofronio Ayon 79,158.50 6,596.54
(3) Glenn Buenviaje 105,558.40 8,796.53
(4) Ely Florentino 102,325.28 8,527.11
(5) Rogelio Fulo 99,352.23 8,279.35
(6) Efren Genise 161,149.18 13,429.10
(7) Rudy Gomez 72,133.41 6,011.12
(8) Jessie Magallanes 239,251.94 19,937.66
(9) Freddie Masicampo 143,415.85 11,951.32
(10) Edgardo Penaflorida 146,483.60 12,206.97
(11) Noel Acollador 89,163.46 7,430.29
(12) Gorgonio Baladhay 220,956.10 18,413.01
(13) Jesus Mosqueda 48,303.22 4,025.27
(14) Alquin Franco 180,281.25 15,023.44
(15) Fabio Aleman 30,000.00 2,500.00
(16) Elias Trespeces 180,000.00 15,000.00
(17) Pepito Hedriana 18,000.00 1,500.00
(18) Dennis Abelida 149,941.00 12,945.08
(19) Melchor Apucay 371,587.01 30,965.58
(20) Martin Agsoy 128,945.08 10,745.42
(21) Ruelito Villarmia 224,486.95 18,707.25
(22) Fernando Siguan 417,039.32 34,753.28
(23) Alejandro Sitchon 380,423.16 31,701.93
(24) Welilmo Neri 456,502.36 38,041.86
(25) Erlinda Fernandez 125,553.88 10,462.82
(26) Edgardo Sobrino 112,521.40 9,376.78
(27) Wildredo Taganile 52,386.82 4,365.57
(28) Bartholomew Jamboy 68,000.00 5,666.67
P4,484,3 3 7.48 P373,694.79

and the amount of P485,803.23 as attorney's fees, or the total amount of

FIVE MILLION THREE HUNDRED FORTY-THREE THOUSAND
EIGHT HUNDRED THIRTY-FIVE and 50/100 PESOS (P5,343,835.50).

The other claims are DISMISSED for lack of merit.

Further, the complaints against respondents SIP ALA Y

INTEGRATED MULTI-PURPOSE COOPERATIVE, ALLIED
SERVICES MULTI-COOPERATIVE, SAN JOSE MULTI-PURPOSE
COOPERATIVE, CANSIBIT MULTI-PURPOSE COOPERATIVE, and
CENTENNIAL MULTI-PURPOSE COOPERATIVE, being mere agents
ofrespondent "G" HOLDINGS, INC., are hereby DISMISSED.

SO ORDERED. 25

25
Id. at 277-278.

#
DECISION 9 G.R. Nos. 221813
& 222723

The pa1iies filed their respective appeals to the NLRC.

On July 18, 2011, Mari cal um Mining filed its Appeal-in-

Intervention 26 seeking to: (a) reverse and set aside the Labor Arbiter's
Decision; (b) declare Mari cal um Mining as the true and proper party-in-
interest; (c) remand the case back to the Labor Arbiter for proper
computation of the money claims of the complainants; and (d) give
Maricalum Mining the opportunity to settle with the complainants.

The NLRC Ruling

In its decision dated November 29, 2011, the NLRC modified the LA
ruling. It held that Dr. Welilmo T. Neri, Erlinda L. Fernandez and Edgar M.
Sobrino are not entitled to the monetary awards because they were not able
to establish the fact of their employment relationship with G Holdings or
Maricalum Mining because Sipalay Hospital has a separate and distinct
corporate personality. As to the remaining complainants, it found that no
evidence was adduced to prove that the salaries/wages and the 13th month
pay had been paid.

However, the NLRC imposed the liability of paying the monetary

awards imposed by the LA against Maricalum Mining, instead of G
Holdings, based on the following observations that: it was Maricalum
Mining-not G Holdings-who entered into service contracts by way of a
Memorandum of Agreement with each of the manpower cooperatives;
complainants continued rendering their services at the insistence of
Maricalum Mining through their cooperatives; Maricalum Mining never
relinquished possession over the Sipalay Mining Complex; Maricalum
Mining continuously availed of the services of complainants through their
respective manpower cooperatives; in G Holdings, Inc. v. National Mines
and Allied Workers Union Local 103 (NAMAWU), et al. 27 (NAMA WU
Case), the Court already held that G Holdings and Maricalum Mining have
separate and distinct corporate personalities. The dispositive portion of the
NLRC ruling states:

WHEREFORE, premises considered, the Decision rendered by the

Labor Arbiter on 20 April 2011 is hereby MODIFIED, to wit:

26
Rollo (G.R. No. 221813, Vol. I), pp. 284-325.
27
619 Phil. 69, 78 (2009).

/(
DECISION 10 G.R. Nos. 221813
& 222723

1) the monetary award adjudged to complainants Jessie

Magallanes, Rogelio E. Fulo, Salvador J. Arceo, Freddie
Masicampo, Welilmo Neri, Erlinda Fernandez and Edgar
Sobrino are CANCELLED;

2) the award of ten percent (10%) attorney's fees is

ADJUSTED commensurate to the award of unpaid
salaries/wages and 13th month pay of the remaining
complainants;

3) the directive for respondent "G" Holdings, Inc. to pay

complainants the monetary awards adjudged by the Labor
Arbiter is CANCELLED;

4) it is intervenor that is, accordingly, directed to pay the

remaining complainants their respective monetary awards.

In all other respects the Decision ST ANDS.

SO ORDERED. 28

Complainants and Maricalum Mining filed their respective motions

for reconsideration before the NLRC. On January 31, 2012, it issued a
resolution modifying its previous decision. The dispositive portion of the
NLRC resolution state:

WHEREFORE, premises considered, intervenor's Motion for

Reconsideration is only PARTIALLY GRANTED. The Decision
promulgated by the Commission on 29 November 2011 modifying the
Labor Arbiter's decision as stated therein, is further MODIFIED to the
effect that the monetary awards adjudged in favor of complainants
Wilfredo Taganile and Bartholomew T. Jamboy are CANCELLED.

SO ORDERED. 29

Undaunted, the parties filed their respective petitions for certiorari

before the CA.

The CA Ruling

In its decision dated October 29, 2014, the CA denied the petitions
and affirmed the decision of the NLRC. It ratiocinated that factual issues are
28
Rollo (G.R. No. 221813, Vol. I), pp. 405-406.
29
Id. at 451.

h
DECISION 11 G.R. Nos. 221813
& 222723

not fit subjects for review via the extraordinary remedy of certiorari. The
CA emphasized that the NLRC's factual findings are conclusive and binding
on the appellate courts when they are supported by substantial evidence.
Thus, it maintained that it cannot review and re-evaluate the evidence all
over again because there was no showing that the NLRC's findings of facts
were reached arbitrarily. The decretal portion of the CA decision states:

WHEREFORE, premises considered, the instant petition for

certiorari is DENIED, and the assailed Decision dated 29 December 2011
and two Resolutions both dated 31 January 2012 of the National Labor
Relations Commission are hereby AFFIRMED in all respects.

Costs against petitioners.

SO ORDERED. 30

Hence, these consolidated petitions essentially raising the following

ISsues:

WHETHER THE COURT OF APPEALS ERRED IN REFUSING TO

RE-EVALUATE THE FACTS AND IN FINDING NO GRAVE ABUSE
OF DISCRETION ON THE PART OF THE NLRC;

II

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE

NLRC'S FINDING OF SUBSTANTIAL EVIDENCE IN GRANTING
THE COMPLAINANTS' MONETARY AWARD AS WELL AS ITS
REFUSAL TO REMAND THE CASE BACK TO THE LABOR
ARBITER FOR RE-COMPUTATION OF SUCH AW ARD;

III

WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING

THAT THE NLRC ALLOWED MARICALUM MINING TO
INTERVENE IN THE CASE ONLY ON APPEAL;

IV

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE

NLRC'S RULING WHICH ALLOWED THE PIERCING OF THE
CORPORATE VEIL AGAINST MARI CALUM MINING BUT NOT
AGAINST SIP ALA Y HOSPITAL.

30
Id. at 27.

fr/
DECISION 12 G.R. Nos. 221813
& 222723

Complainants argue that the CA committed several reversible errors

because: (a) it refused to re-evaluate the facts of the case even if the factual
findings of the NLRC and the LA were conflicting; (b) it failed to consider
that G Holdings had already acquired all of Maricalum Mining's assets and
that Teodoro G. Bernardino (Bernardino) was now the president and
controlling stockholder of both corporations; (c) it failed to take into account
that Maricalum Mining was allowed to intervene only on appeal even though
it was not a real party-in-interest; ( d) it failed to appreciate the LA' s findings
that Maricalum Mining could not have hired complainants because G
Holdings had already acquired in an auction sale all the assets in the Sipalay
Mining Complex; (e) it failed to consider that all resident managers of the
Sipalay Mining Complex were employed by G Holdings; (f) the foreclosure
of the assets in the Sipalay Mining Complex was intended to bring the said
properties outside the reach of complainants; (g) the Sipalay Hospital had
been existing as a hospital for Maricalum Mining's employees long before G
Holdings arrived; (h) Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M.
Sobrino and Wilfredo C. Taganile, Sr. were all hired by Maricalum Mining
but were dismissed by G Holdings; (i) Sipalay Hospital existed without a
board of directors and its employees were receiving orders from Maricalum
Mining and, later on, replaced by G Holdings' officer-in-charge; and G)
Maricalum Mining and G Holdings controlled the affairs of Sipalay
Hospital.

Maricalum Mining contends that the CA committed grave abuse of

discretion because the monetary awards were improperly computed. It
claims that complainants had stopped rendering their services since
September 23, 2010, hence, their monetary claims covering the second half
of April 2007 up to July 2007 have already prescribed as provided pursuant
to Article 291 of the Labor Code. Moreover, it also stressed that the NLRC
should have remanded the case to the LA for the determination of the
manpower cooperatives' net surpluses and how these amounts were
distributed to their members to aid the proper determination of the total
amount of the monetary award. Finally, Maricalum Mining avers that the
awards in favor of some of the complainants are "improbable" and
completely unfounded.

On the other hand, G Holdings argues that piercing the corporate veil
of Maricalum Mining is not proper because: (a) it did not acquire all of
Maricalum Mining's assets; (b) it is primarily engaged in the business of
owning and holding shares of stocks of different companies-not
participating in the operations of its subsidiaries; (c) Mari cal um Mining, the
actual employers of complainants, had already manifested its willingness to
settle the correct money claims; (d) Bernardino is not a controlling
stockholder of Maricalum Mining because the latter's corporate records

;y;'
 DECISION 13 G.R. Nos. 221813
& 222723

show that almost all of its shares of stock are owned by the APT; (e) Joost
Pekelharing-not Bernardino-is G Holdings' president; (f) in the
NAMA WU Case, it was already held that control over Maricalum Mining
was exercised by the APT and not G Holdings; (g) the NLRC did not
commit any grave abuse of discretion when it allowed Maricalum Mining to
intervene after the LA's decision was promulgated; (h) the cash vouchers,
payment schedule, termination letters and caretaker schedules presented by
complainants do not prove the employment relationship with G Holdings
because the signatories thereto were either from Maricalum Mining or the
manpower cooperatives; (i) this Court's pronouncements in the NAMA WU
Case and in Republic v. G Holdings, Inc. 31 prove that Maricalum Mining
never relinquished possession of the Sipalay Mining Complex in favor of G
Holdings; and U) Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M.
Sobrino and Wilfredo C. Taganile, Sr. were employees of the Sipalay
Hospital, which is a separate business entity, and were not members in any
of the manpower cooperatives, which entered into a labor-only arrangement
with Maricalum Mining.

The Court's Ruling

It is basic that only pure questions of law should be raised in petitions

for review on certiorari under Rule 45 of the Rules of Court. 32 It will not
entertain questions of fact as the factual findings of appellate courts are final,
binding or conclusive on the parties and upon this court when supported by
substantial evidence. 33 In labor cases, however, the Court has to examine
the CA' s Decision from the prism of whether the latter had correctly
determined the presence or absence of grave abuse of discretion in the
NLRC's Decision. 34

In this case, the principle that this Court is not a trier of facts applies
with greater force in labor cases. 35 Grave abuse must have attended the
evaluation of the facts and evidence presented by the parties. 36 This Court is
keenly aware that the CA undertook a Rule 65 review-not a review on
appeal-of the NLRC decision challenged before it. 37 It follows that this
Court will not re-examine conflicting evidence, reevaluate the credibility of
witnesses, or substitute the findings of fact of the NLRC, an administrative

31
Supra, note 7.
32
Far Eastern Surety and Insurance Co., Inc. v. People, 721 Phil. 760, 770(2013), citations omitted.
33
Villarama v. Atty. De Jesus, G.R. No. 217004, April 17, 2017, citations omitted.
34
Quebral, et al. v. Angbus Construction, Inc., et al., G.R. No. 221897, November 7, 2016, citations
omitted.
35
Nob/ado, et al. v. Alfonso, 773 Phil. 271, 279 (2015), citations omitted.
36
Pascual v. Burgos, et al., 776 Phil. 167, 186(2016), citations omitted.
37
Philippine National Bank v. Gregorio, G.R. No. 194944, September 18, 2017, citations omitted.

~~
DECISION 14 G.R. Nos. 221813
& 222723

body that has expertise in its specialized field. 38 It may only examine the
facts only for the purpose of resolving allegations and determining the
existence of grave abuse of discretion. 39 Accordingly, with these procedural
guidelines, the Court will now proceed to determine whether or not the CA
had committed any reversible error in affirming the NLRC's Decision.

Propriety of the Monetary Awards

Ordinarily, when there is sufficient evidence before the Court to

enable it to resolve fundamental issues, it will dispense with the regular
procedure of remanding the case to the lower court or appropriate tribunal in
order to avoid a further delay in the resolution of the case. 40 A remand is
only necessary when the proceedings below are grossly inadequate to settle
factual issues. 41 This is in line with the Court's power to issue a process in
order to enforce its own decrees and thus avoid circuitous actions and
vexatious litigation. 42

In the case at bench, Maricalum Mining is seeking to have the case

remanded because the LA allegedly miscomputed the amount of the
monetary awards. However, it failed to offer any reasonable argument or
explanation why the proceedings conducted before the NLRC or LA
were "grossly inadequate to settle factual issues," especially as regards
the computation of monetary awards. Its bare allegations - that the monetary
awards were improperly computed because prescribed claims have been
granted, that the net surpluses of the manpower cooperative were not
properly distributed, and that the awards in favor of some of the
complainants were improbable - do not warrant the invocation of this
Court's power to have the case remanded back to the LA. Bare and
unsubstantiated allegations do not constitute substantial evidence and have
no probative value. 43

Besides, it is not imperative for the Court to remand the case to the
LA for the determination of the amounts of net surpluses that each of the
manpower cooperatives had received from Maricalum Mining. The records
show that Maricalum Mining was guilty of entering into a labor-only
contracting arrangement with the manpower cooperatives, thus, all of them

38
Protective Maximum Security Agency, Inc. v. Fuentes, 753 Phil. 482, 504 (2015), citations omitted.
39
United Coconut Planters Bank v. Looyuko, et al., 560 Phil. 581, 590 (2007), citations omitted.
40
Simon, et al. v. Canlas, 521 Phil. 558, 575 (2006), citations omitted.
41
Tacloban II Neighborhood Association, Inc. v. Office of the President, et al., 588 Phil. 177, 195 (2008),
citations omitted.
42
Cf De Ortega v. Natividad, etc., et al., 71 Phil. 340, 342 ( 1941 ), citations omitted.
43
LNS International Manpower Services v. Padua, Jr., 628 Phil. 223, 224 (2010).

~
DECISION 15 G.R. Nos. 221813
& 222723

are solidarily liable to the complainants by virtue of Article 10644 of the

Labor Code. In DOLE Philippines, Inc. v. Esteva, et al. 45 it was ruled that a
cooperative, despite having a personality separate from its members, 46 is
engaged in a labor-only contracting arrangement based on the following
indicators:

1) The cooperative had a measly paid-up capital of P6,600.00 and had

only managed to increase the same by continually engaging in
labor-only contracting with its client;

2) The cooperative did not carry out an independent business from its
client and its own office and equipment were mainly used for
administrative purposes;

3) The cooperative's members had to undergo instructions and pass

the training provided by the client's personnel before they could
start working alongside regular employees;

4) The cooperative was not engaged to perform a specific and special

job or service; and

5) The cooperative's members performed activities directly related

and vital to the principal business of its client.

Here, the virtually identical sets of memorandum of agreement with

the manpower cooperatives state among others that: (a) the services covered
shall consist of operating loading, drilling and various auxiliary equipments;
and (b) the cooperative members shall abide by the norms and standards of
the Maricalum Mining. These services and guidelines are essential to the
operations of Maricalum Mining. Thus, since the cooperative members
perform the work vital to the operation of the Sipalay Mining Complex, the
they were being contracted in a labor-only arrangement. Moreover, the
burden of proving the supposed status of the contractor rests on the

44
Article I 06. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
xx xx
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as ifthe latter were directly employed by him. (emphasis supplied)
45
538 Phil. 817, 867-869 (2006).
46
See Republic v. Asiapro Cooperative, 563 Phil. 979, I 002 (2007).

~/
DECISION 16 G.R. Nos. 221813
& 222723

principal 47 and Maricalum Mining, being the principal, also failed to present
any evidence before the NLRC that each of the manpower cooperatives had
an independent viable business.

Propriety of Marica/um Mining's Intervention

Intervention is a remedy by which a third party, who is not originally

imp leaded in a proceeding, becomes a litigant for purposes of protecting his
or her right or interest that may be affected by the proceedings. 48 The factors
that should be reckoned in determining whether or not to allow intervention
are whether intervention will unduly delay or prejudice the adjudication of
the rights of the original parties and whether the intervenors rights may be
fully protected in a separate proceeding. 49 A motion to intervene may be
entertained or allowed even if filed after judgment was rendered by the
trial court, especially in cases where the intervenors are indispensable
parties. 50 Parties may be added by order of the court on motion of the party
or on its own initiative at any stage of the action and/or at such times as are
just. s1

In this case, it was never contested by complainants that it was

Maricalum Mining-not G Holdings-who executed several sets of
memorandum of agreement with the manpower cooperatives. The
contractual connection between Maricalum Mining and the manpower
cooperatives is crucial to the determination of labor-related liabilities
especially when it involves a labor-only contracting arrangement.
Accordingly, Maricalum Mining will eventually be held solidarily liable
with the manpower cooperatives. In other words, it stands to be injured by
the incontrovertible fact that it entered into a labor-only arrangement with
the manpower cooperatives. Thus, Maricalum Mining is an indispensable
party and worthy of being allowed to intervene in this case. 52

In order to properly analyze G Holdings's role in the instant dispute,

the Court must discuss its peculiar relationship (or lack thereof) with
Maricalum Mining and Sipalay Hospital.

47
Petron Corporation v. Caberte, et al., 759 Phil. 353, 367 (2015), citations omitted.
48
Neptune Metal Scrap Recycling, Inc. v. Manila Electric Company, et al., 789 Phil. 30, 3 7 (2016),
citations omitted.
49
Salandanan v. Spouses Mendez, 600 Phil. 229, 241.
50
Galicia, et al. v. Manliquez vda. de Mindo, et al., 549 Phil. 595, 605 (2007), citations omitted.
51
Plasabas, et al. v. Court ofAppeals, et al., 60 I Phil. 669, 675-676 (2009).
51
Cf In the Matter of the Heirship (Intestate Estates) of"the late Hermogenes Rodriguez, et al. v. Roh/es,
653 Phil. 396, 404-405 (20 I 0), citations omitted.

¥
DECISION 17 G.R. Nos. 221813
& 222723

G Holdings and Marica/um Mining

The doctrine of piercing the corporate veil applies only in three (3)
basic areas, namely: (a) defeat of public convenience as when the corporate
fiction is used as a vehicle for the evasion of an existing obligation; (b) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud,
or defend a crime; or (c) 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. 53 This principle is basically applied only to determine
established liability. 54 However, piercing of the veil of corporate fiction is
frowned upon and must be done with caution. 55 This is because a
corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal
entity to which it may be related. 56

A parent 57 or holding company 58 is a corporation which owns or is

organized to own a substantial portion of another company's voting 59 shares
of stock enough to control 60 or influence the latter's management, policies or
affairs thru election of the latter's board of directors or otherwise. However,
the term "holding company" is customarily used interchangeably with the
term "investment company" which, in tum, is defined by Section 4 (a) of
Republic Act (R.A.) No. 2629 61 as "any issuer (corporation) which is or
holds itself out as being engaged primarily, or proposes to engage primarily,
in the business of investing, reinvesting, or trading in securities."

In other words, a "holding company" is organized and is basically

conducting its business by investing substantially in the equity securities62 of
another company for the purposes of controlling their policies (as opposed to
directly engaging in operating activities) and "holding" them in a
conglomerate or umbrella structure along with other subsidiaries.
Significantly, the holding company itself-being a separate entity-does not

53
General Credit Corporation v. A/sons Development and Investment Corporation, et al., 542 Phil. 219,
232 (2007), citations omitted.
54
Kukan International Corporation v. Reyes, et al., 646 Phil. 210, 234 (2010), citations omitted.
55
Reynoso, IVv. Court ofAppeals, et al., 399 Phil. 38, 50 (2000).
56
Ever Electrical Manufacturing, Inc., et al. v. Samahang Manggagawa ng Ever Electrical, et al., 687 Phil.
529, 538 (2012).
57
See Section 3 (x) of Republic Act No. 9856 (The Real Estate Investment Trust Act of2009).
58
See Section 3 (g) of Republic Act No. 2629 (Investment Company Act).
59
See Section 3 (ff) of Republic Act No. 2629 (Investment Company Act).
60
See Section 3 (h) of Republic Act No. 2629 (Investment Company Act); supra note 58.
61
The Investment Company Act (June 18, 1960).
62
Equity securities represent ownership in a company (Stice, et al., Intermediate Accounting, l 71h Ed.
[20 IO], p. 839).

¥
DECISION 18 G.R. Nos. 221813
& 222723

own the assets of and does not answer for the liabilities of the subsidiary 63 or
affiliate. 64 The management of the subsidiary or affiliate still rests in the
hands of its own board of directors and corporate officers. It is in keeping
with the basic rule a corporation is a juridical entity which is vested with a
legal personality separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. 65 The corporate form was
created to allow shareholders to invest without incurring personal liability
for the acts of the corporation. 66

While the veil of corporate fiction may be pierced under certain

instances, mere ownership of a subsidiary does not justify the imposition of
liability on the parent company. 67 It must further appear that to
recognize a parent and a subsidiary as separate entities would aid in the
consummation of a wrong. 68 Thus, a holding corporation has a separate
corporate existence and is to be treated as a separate entity; unless the
facts show that such separate corporate existence is a mere sham, or has
been used as an instrument for concealing the truth. 69

In the case at bench, complainants mainly harp their cause on the alter
ego theory. Under this theory, piercing the veil of corporate fiction may be
allowed only if the following elements concur:

1) Control-not mere stock control, but complete domination-not

only of finances, but of policy and business practice in respect to
the transaction attacked, must have been such that the corporate
entity as to this transaction had at the time no separate mind, will
or existence of its own;

2) Such control must have been used by the defendant to commit a

fraud or a wrong, to perpetuate the violation of a statutory or other
positive legal duty, or a dishonest and an unjust act in
contravention of plaintiffs legal right; and

3) The said control and breach of duty must have proximately caused
the injury or unjust loss complained of.7°

63
Section 3 (kk) of Republic Act No. 9856 (The Real Estate Investment Trust Act of 2009).
64
See Section 3 (b) of Republic Act No. 9856 (The Real Estate Investment Trust Act of2009); cf Section 3
(c) of Republic Act No. 2629 (Investment Company Act).
65
Aratea, et al. v. Suico, et al., 547 Phil. 407, 415 (2007), citations omitted.
66
Pearson, et al. v. Component Technology Corporation, et al., 247 F.3d 471 (2001), citations omitted.
67
Parkinson, et al. v. Guidant Corporation, et al., 315 F.Supp.2d 741 (2004), citations omitted.
68
Cf Pacific Rehouse Corporation v. Court of Appeals, et al., 730 Phil. 325, 351 (2014), citations omitted.
69
18 C.J .S. Corporations § 5 ( 1939).
70
Philippine National Bank, et al. v. Andrada Electric & Engineering Company, 430 Phil. 882, 895 (2002),
citations omitted.

/J~
 DECISION 19 G.R. Nos. 221813
& 222723

The elements of the alter ego theory were discussed in Philippine

National Bank v. Hydro Resources Contractors Corporation, 71 to wit:

The first prong is the "instrumentality" or "control" test. This

test requires that the subsidiary be completely under the control and
domination of the parent. It examines the parent corporation's
relationship with the subsidiary. It inquires whether a subsidiary
corporation is so organized and controlled and its affairs are so conducted
as to make it a mere instrumentality or agent of the parent corporation
such that its separate existence as a distinct corporate entity will be
ignored. It seeks to establish whether the subsidiary corporation has no
autonomy and the parent corporation, though acting through the subsidiary
in form and appearance, "is operating the business directly for itself."

The second prong is the "fraud" test. This test requires that the
parent corporation's conduct in using the subsidiary corporation be unjust,
fraudulent or wrongful. It examines the relationship of the plaintiff to the
corporation. It recognizes that piercing is appropriate only if the parent
corporation uses the subsidiary in a way that harms the plaintiff creditor.
As such, it requires a showing of "an element of injustice or fundamental
unfairness."

The third prong is the "harm" test. This test requires the plaintiff
to show that the defendant's control, exerted in a fraudulent, illegal or
otherwise unfair manner toward it, caused the harm suffered. A causal
connection between the fraudulent conduct committed through the
instrumentality of the subsidiary and the injury suffered or the damage
incurred by the plaintiff should be established. The plaintiff must prove
that, unless the corporate veil is pierced, it will have been treated unjustly
by the defendant's exercise of control and improper use of the corporate
form and, thereby, suffer damages.

To summarize, piercing the corporate veil based on the alter ego

theory requires the concurrence of three elements: control of the
corporation by the stockholder or parent corporation, fraud or fundamental
unfairness imposed on the plaintiff, and harm or damage caused to the
plaintiff by the fraudulent or unfair act of the corporation. The absence of
any of these elements prevents piercing the corporate veil. (emphases
and underscoring supplied)

Again, all these three elements must concur before the corporate veil
may be pierced under the alter ego theory. Keeping in mind the parameters,
guidelines and indicators for proper piercing of the corporate veil, the Court
now proceeds to determine whether Maricalum Mining's corporate veil may
be pierced in order to allow complainants to enforce their monetary awards
against G Holdings.

71

¥
706 Phil. 297, 310-312 (2013), citations omitted.
DECISION 20 G.R. Nos. 221813
& 222723

I. Control or Instrumentality Test

In Concept Builders, Inc. v. National Labor Relations Commission, et

al., 72
the Court first laid down the first set of probative factors of identity
that will justify the application of the doctrine of piercing the corporate veil,
vzz:

1) Stock ownership by one or common ownership of both

corporations.

2) Identity of directors and officers.

3) The manner of keeping corporate books and records.

4) Methods of conducting the business.

Later, in Philippine National Bank v. Ritratto Group Inc., et al., 73 the

Court expanded the aforementioned probative factors and enumerated a
combination of any of the following common circumstances that may also
render a subsidiary an instrumentality, to wit:

I) The parent corporation owns all or most of the capital stock of

the subsidiary;

2) The parent and subsidiary corporations have common directors or

officers;

3) The parent corporation finances the subsidiary;

4) The parent corporation subscribes to all the capital stock of the

subsidiary or otherwise causes its incorporation;

5) The subsidiary has grossly inadequate capital;

6) The parent corporation pays the salaries and other expenses or

losses of the subsidiary;

7) The subsidiary has substantially no business except with the parent

corporation or no assets except those conveyed to or by the parent
corporation;

8) In the papers of the parent corporation or in the statements of its

officers, the subsidiary is described as a department or division of
the parent corporation, or its business or financial responsibility is
referred to as the parent corporation's own;

72
326 Phil. 955, 965 (1996), citations omitted.
D 414 Phil. 494, 504-505 (2001).

¥
DECISION 21 G.R. Nos. 221813
& 222723

9) The parent corporation uses the property of the subsidiary as its

own;

10) The directors or executives of the subsidiary do not act

independently in the interest of the subsidiary but take their orders
from the parent corporation; and

11) The formal legal requirements of the subsidiary are not observed.

In the instant case, there is no doubt that G Holdings-being the

majority and controlling stockholder-had been exercising significant
control over Maricalum Mining. This is because this Court had already
upheld the validity and enforceability of the PSA between the APT and G
Holdings. It was stipulated in the PSA that APT shall transfer 90% of
Mari cal um Mining's equity securities to G Holdings and it establishes the
presence of absolute control of a subsidiary's corporate affairs. Moreover,
the Court evinces its observation that Maricalum Mining's corporate name
appearing on the heading of the cash vouchers issued in payment of the
services rendered by the manpower cooperatives is being superimposed with
G Holding's corporate name. Due to this observation, it can be reasonably
inferred that G Holdings is paying for Mari cal um Mining's salary expenses.
Hence, the presence of both circumstances of dominant equity ownership
and provision for salary expenses may adequately establish that Maricalum
Mining is an instrumentality of G Holdings.

However, mere presence of control and full ownership of a parent

over a subsidiary is not enough to pierce the veil of corporate fiction. It has
been reiterated by this Court time and again that mere ownership by a
single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality. 74

II. Fraud Test

The corporate veil may be lifted only if it has been used to shield
fraud, defend crime, justify a wrong, defeat public convenience, insulate bad
faith or perpetuate injustice. 75 To aid in the determination of the presence or

74
Zambrano, et al. v. Philippine Carpet Manufacturing Corporation, et al., G.R. No. 224099, June 21,
2017, citations omitted; Francisco, et al. v. Mejia, et al., 415 Phil. 153, 170 (2001).
75
See San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, et al., 357 Phil. 631, 648-649
( 1998).

fr~
DECISION 22 G.R. Nos. 221813
& 222723

absence of fraud, the following factors in the "Totality of Circumstances

Test" 76 may be considered, viz:

1) Commingling of funds and other assets of the corporation with

those of the individual shareholders;

2) Diversion of the corporation's funds or assets to non-corporate uses

(to the personal uses of the corporation's shareholders);

3) Failure to maintain the corporate formalities necessary for the

issuance of or subscription to the corporation's stock, such as
formal approval of the stock issue by the board of directors;

4) An individual shareholder representing to persons outside the

corporation that he or she is personally liable for the debts or other
obligations of the corporation;

5) Failure to maintain corporate minutes or adequate corporate

records;

6) Identical equitable ownership in two entities;

7) Identity of the directors and officers of two entities who are

responsible for supervision and management (a partnership or sole
proprietorship and a corporation owned and managed by the same
parties);

8) Failure to adequately capitalize a corporation for the reasonable

risks of the corporate undertaking;

9) Absence of separately held corporate assets;

10) Use of a corporation as a mere shell or conduit to operate a single

venture or some particular aspect of the business of an individual
or another corporation;

11) Sole ownership of all the stock by one individual or members of a

single family;

12) Use of the same office or business location by the corporation

and its individual shareholder(s);

13) Employment of the same employees or attorney by the corporation

and its shareholder(s);

14) Concealment or misrepresentation of the identity of the ownership,

management or financial interests in the corporation, and
concealment of personal business activities of the shareholders

76
laya v. Erin Homes, Inc., et al., 352 S.E.2d 93 (1986), cited in: Kinney Shoe Corporation v. Polan, 939
F.2d 209 (1991).

/<!/
DECISION 23 G.R. Nos. 221813
& 222723

(sole shareholders do not reveal the association with a corporation,

which makes loans to them without adequate security);

15) Disregard of legal formalities and failure to maintain proper arm's

length relationships among related entities;

16) Use of a corporate entity as a conduit to procure labor, services or

merchandise for another person or entity;

17) Diversion of corporate assets from the corporation by or to a

stockholder or other person or entity to the detriment of
creditors, or the manipulation of assets and liabilities between
entities to concentrate the assets in one and the liabilities in
another;

18) Contracting by the corporation with another person with the

intent to avoid the risk of nonperformance by use of the
corporate entity; or the use of a corporation as a subterfuge for
illegal transactions; and

19) The formation and use of the corporation to assume the existing
liabilities of another person or entity.

Aside from the aforementioned circumstances, it must be determined

whether the transfer of assets from Maricalum Mining to G Holdings is
enough to invoke the equitable remedy of piercing the corporate veil. The
same issue was resolved in Y-1 Leisure Phils., Inc., et al. v. Yu 77 where this
Court applied the "Nell Doctrine" 78 regarding the transfer of all the assets
of one corporation to another. It was discussed in that case that as a
general rule that where one corporation sells or otherwise transfers all of its
assets to another corporation, the latter is not liable for the debts and
liabilities of the transferor, except:

1) Where the purchaser expressly or impliedly agrees to assume such

debts;

2) Where the transaction amounts to a consolidation or merger of the

corporations;

3) Where the purchasing corporation is merely a continuation of the

selling corporation; and

4) Where the transaction is entered into fraudulently in order to

escape liability for such debts.

77
769 Phil. 279, 293 (2015).
78
The Edward J. Nell Company v. Pacific Farms, Inc., 122 Phil. 825, 827 (1965), citations omitted.

//
DECISION 24 G.R. Nos. 221813
& 222723

If any of the above-cited exceptions are present, then the transferee

corporation shall assume the liabilities of the transferor. 79

In this case, G Holdings cannot be held liable for the satisfaction of

labor-related claims against Maricalum Mining under the fraud test for the
following reasons:

First, the transfer of some Maricalum Mining's assets in favor G

Holdings was by virtue of the PSA as part of an official measure to dispose
of the government's non-performing assets-not to evade its monetary
obligations to the complainants. Even before complainants' monetary
claims supposedly existed in 2007, some of Maricalum Mining's assets had
already been validly extrajudicially foreclosed and eventually sold to G
Holdings in 2001. Thus, G Holdings could not have devised a scheme to
avoid a non-existent obligation. No fraud could be attributed to G Holdings
because the transfer of assets was pursuant to a previously perfected valid
contract.

Settled is the rule that where one corporation sells or otherwise

transfers all its assets to another corporation for value, the latter is not, by
that fact alone, liable for the debts and liabilities of the transferor. 80 In other
words, control or ownership of substantially all of a subsidiary's assets is not
by itself an indication of a holding company's fraudulent intent to alienate
these assets in evading labor-related claims or liabilities. As discussed
earlier, the PSA was not designed to evade the monetary claims of the
complainants. Although there was proof that G Holdings has an office in
Maricalum Mining's premises and that that some of their assets have been
commingled due to the PSA' s unavoidable consequences, there was no
fraudulent diversion of corporate assets to another corporation for the sole
purpose of evading complainants' claim.

Besides, it is evident that the alleged continuing depletion of

Maricalum Mining's assets is due to its disgruntled employees' own acts of
pilferage, which was beyond the control of G Holdings. More so,
complainants also failed to present any clear and convincing evidence that G
Holdings was grossly negligent and failed to exercise the required degree of
diligence in ensuring that Maricalum Mining's assets would be protected
from pilferage. 81 Hence, no fraud can be imputed against G Holdings

79
Supra note 77 at 293.
80
Pantranco Employees Association, et al. v. National labor Relations Commission, et al., 600 Phil. 645,
660 (2009).
81
See Heirs of Fe Tan Uy v. International Exchange Bank, 703 Phil. 477, 486 (2013 ).

,fat!
DECISION 25 G.R. Nos. 221813
& 222723

considering that there is no evidence in the records that establishes it

systematically tried to alienate Maricalum Mining's assets to escape the
liabilities to complainants.

Second, it was not proven that all of Maricalum Mining's assets were
transferred to G Holdings or were totally depleted. Complainants never
offered any evidence to establish that Maricalum Mining had absolutely no
substantial assets to cover for their monetary claims. Their allegation that
their claims will be reduced to a mere "paper victory" has not confirmed
with concrete proof. At the very least, substantial evidence should be
adduced that the subsidiary company's "net realizable value" 82 of "current
assets" 83 and "fair value" 84 of "non-current assets" 85 are collectively
insufficient to cover the whole amount of its liability subject in the instant
litigation.

Third, G Holdings purchased Mari cal um Mining's shares from the

APT not for the purpose of continuing the latter's existence and operations
but for the purpose of investing in the mining industry without having to
directly engage in the management and operation of mining. As discussed
earlier, a holding company's primary business is merely to invest in the
equity of another corporation for the purpose of earning from the latter's
endeavors. It generally does not undertake to engage in the daily operating
activities of its subsidiaries that, in tum, have their own separate sets of
directors and officers. Thus, there should be proof that a holding company
had indeed fraudulently used the separate corporate personality of its
subsidiary to evade an obligation before it can be held liable. Since G
Holdings is a holding company, the corporate veil of its subsidiaries may
only be pierced based on fraud or gross negligence amounting to bad faith.

Lastly, no clear and convincing evidence was presented by the

complainants to conclusively prove the presence of fraud on the part of G
Holdings. Although the quantum of evidence needed to establish a claim for

82
Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale (International Financial Reporting
Standards No. 2.6).
83
Current assets are assets that a company expects to convert to cash or use up within one year or its
operating cycle, whichever is longer (Weygandt, et al., Accounting Principles, I0 1h Ed. [2012], p. 172).
84
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction in the principal (or most advantageous) market at the measurement date under current market
conditions (ie an exit price) regardless of whether that price is directly observable or estimated using
another valuation technique (International Financial Reporting Standards No. 19.24).
85
Non-current assets are those which are not likely to be converted into unrestricted cash within a year of
the balance sheet date (see: https://www.accountingcoach.com/blog/what-is-a-noncurrent-asset [last visited:
May 28, 2018]).

;/
DECISION 26 G.R. Nos. 221813
& 222723

illegal dismissal in labor cases is substantial evidence,s 6 the quantum need to

establish the presence of fraud is clear and convincing evidence.s 7 Thus, to
disregard the separate juridical personality of a corporation, the wrongdoing
must be established clearly and convincingly-it cannot be presumed.ss

Here, the complainants did not satisfy the requisite quantum of

evidence to prove fraud on the part of G Holdings. They merely offered
allegations and suppositions that, since Maricalum Mining's assets appear to
be continuously depleting and that the same corporation is a subsidiary, G
Holdings could have been guilty of fraud. As emphasized earlier, bare
allegations do not prove anything. There must be proof that fraud-not the
inevitable effects of a previously executed and valid contract such as the
PSA-was the cause of the latter's total asset depletion. To be clear, the
presence of control per se is not enough to justify the piercing of the
corporate veil.

III. Harm or Casual Connection Test

In WPM International Trading, Inc., et al. v. Labayen, s9 the Court laid

down the criteria for the harm or casual connection test, to wit:

In this connection, we stress that the control necessary to invoke

the instrumentality or alter ego rule is not majority or even complete stock
control but such domination of finances, policies and practices that the
controlled corporation has, so to speak, no separate mind, will or existence
of its own, and is but a conduit for its principal. The control must be
shown to have been exercised at the time the acts complained of took
place. Moreover, the control and breach of duty must proximatelv cause
the injury or unjust loss for which the complaint is made. (emphases and
underscoring supplied)

Proximate cause is defined as that cause, which, in natural and

continuous sequence, unbroken by any efficient intervening cause, produces
the injury, and without which the result would not have occurred. 90 More
comprehensively, the proximate legal cause is that "acting first and
producing the injury, either immediately or by setting other events in
motion, all constituting a natural and continuous chain of events, each
having a close causal connection with its immediate predecessor, the final

86
Functional, Inc. v. Granjil, 676 Phil. 279, 2S7 (2011 ).
87
Republic v. Guerrero, 520 Phil. 296, 311 (2006).
88
Mcleod v. National labor Relations Commission, et al., 541 Phil. 214, 239 (2007).
89
743 Phil. 192, 201-202 (2014).
90
Mendoza, et al. v. Spouses Gomez, 736 Phil. 460, 475 (2014).

~
DECISION 27 G.R. Nos. 221813
& 222723

event in the chain immediately effecting the injury as a natural and probable
result of the cause which first acted, under such circumstances that the
person responsible for the first event should, as an ordinary prudent and
intelligent person, have reasonable ground to expect at the moment of his act
or default that an injury to some person might probably result therefrom." 91
Hence, for an act or event to be considered as proximate legal cause, it
should be shown that such act or event had indeed caused injury to another.

In the case at bench, complainants have not yet even suffered any
monetary injury. They have yet to enforce their claims against
Maricalum Mining. It is apparent that complainants are merely anxious
that their monetary awards will not be satisfied because the assets of
Maricalum Mining were allegedly transferred surreptitiously to G Holdings.
However, as discussed earlier, since complainants failed to show that G
Holdings' s mere exercise of control had a clear hand in the depletion of
Maricalum Mining's assets, no proximate cause was successfully
established. The transfer of assets was pursuant to a valid and legal PSA
between G Holdings and APT.

Accordingly, complainants failed to satisfy the second and third tests

to justify the application of the alter ego theory. This inevitably shows that
the CA committed no reversible error in upholding the NLRC's Decision
declaring Maricalum Mining as the proper party liable to pay the monetary
awards in favor of complainants.

G Holdings and Sipalay Hospital

Sipalay Hospital was incorporated by Romulo G. Zafra, Eleanore B.

Gutierrez, Helen Grace B. Fernandez, Evelyn B. Badajos and Helen Grace
L. Arbolario. 92 However, there is absence of indication that G Holdings
subsequently acquired the controlling interests of Sipalay Hospital. There is
also no evidence that G Holdings entered into a contract with Sipalay
Hospital to provide medical services for its officers and employees. This
lack of stockholding or contractual connection signifies that Sipalay Hospital
is not affiliated93 with G Holdings. Thus, due to this absence of affiliation,

91
Ramos v. C.O.l. Realty Corporation, 614 Phil. 169, 177 (2009).
92
Rollo (G.R. No. 222723), p. 441.
93
See Section 3 (c) of Republic Act No. 2629 (Investment Company Act).
(c) "Affiliated person" of another person means (I) any person directly or indirectly owning. controlling
or holding with power to vote, ten per centum or more of the outstanding voting securities of such other
person; (2) any 'person ten per centum or more of whose outstanding voting securities are directly or
indirectly owned. controlled. or held with power to vote, by such other person; (3) any person directly or
indi"otly oontmlling, oontmllod by, oc undoc oommon oontml with, '"'h othoc P'"on; ~"·
DECISION 28 G.R. Nos. 221813
& 222723

the Court must apply the tests used to determine the existence of an
employee-employer relationship; rather than piercing the corporate veil.

Under the four-fold test, the employer-employee relationship is

determined if the following are present: a) the selection and engagement of
the employee; b) the payment of wages; c) the power of dismissal; and d) the
power to control the employee's conduct, or the so-called "control test." 94
Here, the "control test" is the most important and crucial among the four
tests. 95 However, in cases where there is no written agreement to base the
relationship on and where the various tasks performed by the worker bring
complexity to the relationship with the employer, the better approach would
therefore be to adopt a two-tiered test involving: a) the putative employer's
power to control the employee with respect to the means and methods by
which the work is to be accomplished; and b) the underlying economic
realities of the activity or relationship. 96

In applying the second tier, the determination of the relationship

between employer and employee depends upon the circumstances of the
whole economic activity (economic reality or multi-factor test), such as: a)
the extent to which the services performed are an integral part of the
employer's business; b) the extent of the worker's investment in equipment
and facilities; c) the nature and degree of control exercised by the employer;
d) the worker's opportunity for profit and loss; e) the amount of initiative,
skill, judgment or foresight required for the success of the claimed
independent enterprise; f) the permanency and duration of the relationship
between the worker and the employer; and g) the degree of dependency of
the worker upon the employer for his continued employment in that line of
business. 97 Under all of these tests, the burden to prove by substantial
evidence all of the elements or factors is incumbent on the employee for he
or she is the one claiming the existence of an employment relationship. 98

In light of the present circumstances, the Court must apply the four-
fold test for lack of relevant data in the case records relating to the
underlying economic realities of the activity or relationship of Sipalay
Hospital's employees.

director, partner, copartner, or employee of such other person; and (5) if such other person is an investment
company, any investment adviser thereof or any member of an advisory board thereof. (emphasis supplied)
94
South East International Rattan, Inc., et al. v. Coming, 729 Phil. 298, 306 (2014).
95
Alba v. Espinosa, et al., G.R. No. 227734, August 9, 2017, citations omitted.
96
Valeroso, et al. v. Skycable Corporation, 790 Phil. 93, 103 (2016).
97
Francisco v. National labor Relations Commission, et al., 532 Phil. 399, 408-409 (2006).
98
See Valencia v. Classique Vinyl Products Corporation, et al., G.R. No. 206390, January 30, 2017, 816
SCRA 144, 156, citations omitted.

A/
DECISION 29 G.R. Nos. 221813
& 222723

To prove the existence of their employment relationship with G

Holdings, complainants Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar
M. Sobrino and Wilfredo C. Taganile, Sr. presented the following
documents:

1) Affidavit99 of Dr. Welilmo T. Neri attesting among others that he

was the Medical Director of Sipalay Hospital which is allegedly
owned and operated by G Holdings/Maricalum Mining;

2) Several cash vouchers 100 issued by G Holdings!Maricalum Mining

representing Dr. Welilmo T. Neri's payment for services rendered
to "various" personnel;

3) Schedules of social security premium payments 101 in favor of Dr.

Welilmo T. Neri, Edgar M. Sobrino and Wilfredo C. Taganile, Sr.
stamped paid by G Holdings;

4) Notice of termination 102 dated July 3, 2010 issued by Rolando G.

Degojas (OIC of G-Holdings Inc.) issued to Dr. Welilmo T. Neri
and some of his companions who are not complainants in this case;

5) Notice of termination 103 addressed to Dr. Welilmo T. Neri, Erlinda

L. Fernandez, Edgar M. Sobrino and some of their co-employees
who are not complainants in this case with a collatilla stating that
the services of Dr. Welilmo T. Neri and nurse Erlinda L.
Fernandez will be engaged on per call basis; and

6) A "Statement of Unpaid Salaries of Employees of G Holdings, Inc.

Assigned to the Sipalay General Hospital" 104 prepared by Dr.
Welilmo T. Neri which included his own along with complainants
Erlinda L. Fernandez, Wilfredo C. Taganile, [Sr.] and Edgar M.
[Sobrino].

A perusal of the aforementioned documents fails to show that the

services of complainants Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar
M. Sobrino and Wilfredo C. Taganile, Sr. were indeed selected and engaged
by either Maricalum Mining or G Holdings. This gap in evidence clearly
shows that the first factor of the four-fold test, or the selection and
engagement of the employee, was not satisfied and not supported by
substantial evidence.

99
Rollo (G.R. No. 222723), p. 153.
100
Id. at 154-165.
101
Id. at 166-167.
102 Id. at 168.
103
Id. at 169.
104
Id. at 170.

M
DECISION 30 G.R. Nos. 221813
& 222723

However, the same cannot be said as to the second and third factors of
the four-fold test (the payment of wages and the power of dismissal). Since
substantial evidence is defined as that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion, 105 the cash
vouchers, social security payments and notices of termination are reasonable
enough to draw an inference that G Holdings and Maricalum Mining may
have had a hand in the complainants' payment of salaries and dismissal.

Notwithstanding the absence of the first factor and the presence of the
second and third factors of the four-fold test, the Court still deems it best to
examine the fourth factor-the presence of control-in order to determine
the employment connection of complainants Dr. Welilmo T. Neri, Erlinda L.
Fernandez, Edgar M. Sobrino and Wilfredo C. Taganile, Sr. with G
Holdings.

Under the control test, an employer-employee relationship exists

where the person for whom the services are perfonned reserves the right to
control not only the end achieved, but also the manner and means to be used
in reaching that end. 106 As applied in the healthcare industry, an employment
relationship exists between a physician and a hospital if the hospital controls
both the means and the details of the process by which the physician is to
accomplish his task. 107 But where a person who works for another performs
his job more or less at his own pleasure, in the manner he sees fit, not
subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists. 108

A corporation may only exercise its powers within the definitions

provided by law and its articles of incorporation. 109 Accordingly, in order to
determine the presence or absence of an employment relationship between G
Holdings and the employees of Sipalay Hospital by using the control test,
the Court deems it essential to examine the salient portion of Sipalay
Hospital's Articles of Incorporation imparting its 'primary purpose,' 110 to
wit:

105
Skippers United Pacific, Inc. v. National Labor Relations Commission, et al., 527 Phil. 248, 257 (2006).
106
Atok Big Wedge Company, Inc. v. Gison, 670 Phil. 615, 627 (2011).
107
Calamba Medical Center, Inc. v. National Labor Relations Commission, et al., 592 Phil. 318, 326
(2008).
108
Orozco v. Court of Appeals, et al., 584 Phil. 35, 52 (2008).
109
See University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et al., 776 Phil. 40 I, 428 (2016).
110
Rollo (G.R. No. 222723), p. 438.

#
DECISION 31 G.R. Nos. 221813
& 222723

To own, manage, lease or operate hospitals or clinics offering and

providing medical services and facilities to the general public, provided
that purely professional, medical or surgical services shall be performed
by duly qualified physicians or surgeons who may or may not be
connected with the corporation and who shall be freely and individually
contracted by patients. (emphasis supplied)

It is immediately apparent that Sipalay Hospital, even if its facilities

are located inside the Sipalay Mining Complex, does not limit its medical
services only to the employees and officers of Maricalum Mining and/or G
Holdings. Its act of holding out services to the public reinforces the fact of
its independence from either Maricalum Mining or G Holdings because it is
free to deal with any client without any legal or contractual restriction.
Moreover, G Holdings is a holding company primarily engaged in investing
substantially in the stocks of another company-not in directing and
managing the latter's daily business operations. Because of this corporate
attribute, the Court can reasonably draw an inference that G Holdings
does not have a considerable ability to control means and methods of
work of Sipalay Hospital employees. Markedly, the records are simply
bereft of any evidence that G Holdings had, in fact, used its ownership to
control the daily operations of Sipalay Hospital as well as the working
methods of the latter's employees. There is no evidence showing any
subsequent transfer of shares from the original incorporators of Sipalay
Hospital to G Holdings. Worse, it appears that complainants Dr. Welilmo T.
Neri, Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M. Sobrino
are trying to derive their employment connection with G Holdings merely on
an assumed premise that the latter owns the controlling stocks of Mari cal um
Mining.

On this score, the CA committed no reversible error in allowing the

NLRC to delete the monetary awards of Dr. Welilmo T. Neri, Erlinda L.
Fernandez, Wilfredo C. Taganile, Sr. and Edgar M. Sobrino imposed by the
Labor Arbiter against G Holdings.

Conclusion

A holding company may be held liable for the acts of its subsidiary
only when it is adequately proven that: a) there was control over the
subsidiary; (b) such control was used to protect a fraud (or gross negligence
amounting to bad faith) or evade an obligation; and c) fraud was the
proximate cause of another's existing injury. Further, an employee is duly-
burdened to prove the crucial test or factor of control thru substantial

?'/
DECISION 32 G.R. Nos. 221813
& 222723

evidence in order to establish the existence of an employment relationship-

especially as against an unaffiliated corporation alleged to be exercising
control.

In this case, complainants have not successfully proven that G

Holdings fraudulently exercised its control over Maricalum Mining to
fraudulently evade any obligation. They also fell short of proving that G
Holdings had exercised operational control over the employees of Sipalay
Hospital. Due to these findings, the Court sees no reversible error on the
part of the CA, which found no grave abuse of discretion and affirmed in
toto the factual findings and legal conclusions of the NLRC.

WHEREFORE, the Court AFFIRMS in toto the October 29, 2014

Decision of the Court of Appeals in CA-G.R. SP No. 06835.

No pronouncement as to costs.

SO ORDERED.
DECISION 33 G.R. Nos. 221813
& 222723

WE CONCUR:

PRESBITE~O J. VELASCO, JR.

sociate Justice
Chairperson

</-dAHuit. Ja ~ ~

s ~~TIRES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had bee~ ~ached in
consultation before the case was assigned to the writer of the ogmion of the
Court's Division.

PRESBIT=R J. VELASCO, JR.

As ciate Justice
Chairp son, Third Division

-¥
 DECISION 34 G.R. Nos. 221813
& 222723

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the

Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

C}.z:_T(_ . ' 1

ANTONIO T. C A;;%..L....J
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)

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