G.R. No. 126428. January 25, 2007.

*
attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to
ELCEE FARMS, INC. and CORAZON SAGUEMULLER,
good morals, good customs or public policy.—Moral
petitioners, vs. NATIONAL LABOR RELATIONS damages are recoverable when the dismissal of an
COMMISSION (FOURTH DIVISION) and SUGAR employee is attended by bad faith or fraud or
AGRICULTURAL INDUSTRY LABOR ORGANIZATION constitutes an act oppressive to labor, or is done in a
(SAILO), PAMPELO SEMILLANO, ARMANDO manner contrary to good morals, good customs or
FERNANDEZ, BIENVENIDO GAUPO, CONSEJO public policy. Exemplary damages, on the other hand,
NICOR, RODOLFO NICOR, EDWIN NICOR, are recoverable when the dismissal was done in a
DOMINARDO NICOR, SR., FELIZARDO NICOR, wanton, oppressive, or malevolent manner. Bad faith
ARLINE NICOR, RONILO NICOR, MARIA LUZ NICOR, on the part of Elcee Farms is shown by the act of
simulating a lease agreement with Garnele in order to
DENNIS NICOR, LOURDES NICOR, PABLO LINGCO,
evade paying private respondents the proper amount
GILDA LINGCO, JOVEN LINGCO, VICENTE of separation benefits based on the number of years
GRANADA, LOLITA GRANADA, JONATHAN they worked in the hacienda, as provided by the Labor
GRANADA, EDUARDO FERNANDEZ, JOEY Code. Records show that Elcee Farms did not pay any
FERNANDEZ, JESSIE FERNANDEZ, ESTELITA separation benefits to the private respondents when
FERNANDEZ, GREGORIO TOMALIN, MARTIN they allegedly leased the hacienda to Garnele, and
TOMALIN, SOCORRO MATIONG, GREGORIO again when the hacienda was leased to Daniel Hilado.
MATIONG, JORIE MANALO, ENRIQUE MANALO, When the employees filed their complaint
604
MARIO MANALO, CRISANTO MANALO, GEORGE
BIANGCO, SIGFREDO VILLACANAS, SONIA
604 SUPREME
VILLACANAS, EDUARDO PABILARIO, NOEL
SALANO, MERLITA PUNO, CRISANTO LUMANAG, COURT REPORTS
GORGINA GAUPO, DAN GAUPO, ROMEO ANNOTATED
SEMILLANO, BARBARA CABALES, ERNIE JUNGCO, Elcee Farms, Inc. vs.
EDGAR JUNGCO, ROEL BENIGNOS, BELLIE
National Labor Relations
BENIGNOS, JUAN SEMILLANO, ROMEO POJAS,
JOELITA NOBLE, GLORIA NOBLE, RONNIE LINGCO, Commission
IMELDA LINGCO, RAMON BANTANG, BARBARA with the Labor Arbiter, Elcee Farms, using the
simulated lease agreement with Garnele, tried to deny
BANTANG, FAUSTINO SEMILLANO, RAQUEL
liability by claiming that their claims had already
PLASIDO, BERNIE PLASIDO, MARTIN NICOR, prescribed. It claimed that the lease agreement with
DOMINADOR NICOR, JR., ROLAND NICOR, Garnele, which was allegedly executed in 1987,
PRODINCIO NICOR, RADNIE NICOR, DIOSDADO effectively terminated the employer-employee
NICOR, JOEY NICOR, AMPARO NICOR, REGALADO relationship before the complaint was filed in 1990, or
NICOR, REYNALDO NICOR, JOCELYN GARCIA, more than three years after. These unlaudable acts
MARLON NICOR, JOSEFINA LINGCO, JOSIE LINGCO, undermine the workers’ statutory rights for which
ELENITA LINGCO, CIRILO LINGCO, SR., ROGELIO moral damages may be awarded.
LINGCO, MAURA LINGCO, GARY LINGCO, VICTORIA Same; Same; Separation Pay; Closure of
GRANDA, Establishment; Requisites.—Liability for separation pay
_______________
is provided under Article 283 of the Labor Code, as it
existed in 1990, for the following circumstances,
*
 THIRD DIVISION.
particularly the cessation of operations: Article
283. Closure of establishment and reduction of
603 personnel.—The employer may also terminate the
employment of any employee due to the installation of
VOL. 512, JANUARY 25, 603
labor-saving devices, redundancy, retrenchment to
2007 prevent losses or the closing or cessation of operations
Elcee Farms, Inc. vs. National of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of
Labor Relations Commission this Title, by serving a written notice on the workers
SOTERO GRANADA, ROSENDO FERNANDEZ, ROY and the Department of Labor and Employment at least
TOMOLIN, GENEBELLE MATIONG, CELSO ALIPIO, one (1) month before the intended date thereof. x x x.
AFOLONIO SEMILLANO, RAMONITA SEMILLANO, In case of retrenchment to prevent losses and in cases
ABNER MANALO, ZOSIMO BIANGCO, ROGELIO of closure or cessation of operations of establishment
ANECITO, PEPITO NOBLE, PATERNO LUMANAG, or undertaking not due to serious business losses or
ANITA PABILARIO, RENATO CABALES, JOMARIE financial reverses, the separation pay shall be
equivalent to at least one (1) month pay or at least
JUNGCO, MERLINDA CANJA, ANACITA ORCADA,
one-half (1/2) month pay for every year of service,
BIENVINIDO GARCIA, ROGELIO GABIANDAN, NINFA whichever is higher. A fraction of at least six (6)
UMALI, DOMINGO SALCEDO, FERNANDO months shall be considered as one (1) whole year.
SALCEDO, RENATO SUERTE, LORNA PABALINAS, (Emphases supplied.) From this provision, three
SOLEDAD NOBLE, ANITA ARROYO, ALFREDO requirements are enumerated in cases of cessation of
NICOR, SR., CONSORCIA MATIONG, ERLINDA business operations of an employer company not due
NICOR, CAMELIA NICOR, ALFREDO NICOR, JR., to business reverses: (1) service of a written notice to
JULIANA NICOR, CRISELDA NICOR, ROSITA NICOR, the employees and to the MOLE (now the Secretary of
JULIETO LINGCO, NIYA LINGCO, ROZENIE Labor and Employment) at least one month before the
intended date thereof; (2) the cessation of or
GRANADA, ELSA SEMILLANO, ROSALINDA
withdrawal from business operations must be bona
FERNANDEZ, REMEZILDO FERNANDEZ, ROSALITA fide in character; and (3) payment to the employees of
MATIONG, DIANA ALIPIO, EVA MANALO, ARTURO termination pay amounting to at least one-half month
MANALO, RITA ANECITO, SARAH GAUPO, ALAN pay for each year of service, or one month pay,
BANTANG, MARISSA BANTANG, SIMPLICIO whichever is higher.
BANTANG, MARIANITA POJAS, MERLITA
GABIANDAN, JUANA VICENTINO, and PRECY Corporation Law; It is basic that a corporation is
invested by law with a personality separate and
PLACIDO, respondents.
distinct from those of the persons composing it as well
Labor Law; Dismissals; Damages; Moral damages as from that of any other legal entity to which it may
are recoverable when the dismissal of an employee is
be related.—This Court, nonetheless, finds merit in the for illegal dismissal with prayer for reinstatement
peti- with back wages, or in the alternative, separation
605
pay, with damages against Elcee Farms, Corazon
Saguemuller, Hilla Corporation (HILLA), Rey
VOL. 512, 605
Hilado, and Roberto Montaño.  Private
2

JANUARY 25, 2007 respondents alleged that they were all regular
Elcee Farms, Inc. vs. farm workers in Hacienda Trinidad, which was
National Labor Relations owned and operated by petitioner corporation
Elcee Farms. Complainants alleged that petitioner
Commission
Corazon Saguemuller was the president of Elcee
tioners’ allegation that Corazon Saguemuller
should not be subsidiarily liable with Elcee Farms for Farms, but records disclosed that it was her son,
separation pay and damages. It is basic that a Konrad Saguemuller, who was the president
corporation is invested by law with a personality thereof.  Some of the complainants allegedly
3

separate and distinct from those of the persons worked in Hacienda Trinidad as early as 1960.  On 4

composing it as well as from that of any other legal 27 April 1987, Elcee Farms entered into a Lease
entity to which it may be related. Mere ownership by a Agreement with Garnele Aqua Culture
single stockholder or by another corporation of all or Corporation (Garnele).  Nevertheless, most of the
5

nearly all of the capital stock of a corporation is not of private respondents continued to work in
itself sufficient ground for disregarding the separate
Hacienda Trinidad. On appeal, they presented
corporate personality. In the case of Santos v. National
Labor Relations Commission, a corporate officer was payrolls and Social Security System
_______________
not held liable for the obligations incurred by the
corporation, where the corporate officer was not even 1
 Penned by Commissioner Amorito V. Cañete with
shown to have had a direct hand in the dismissal of the
Presiding Commissioner Irenea E. Ceniza and Commissioner
employee enough to attribute to him an unlawful act. Bernabe S. Batuhan, concurring; Rollo, pp. 55-64.
2
 Rollo, p. 65.
Labor Law; Extending help to the employees by 3
 Records, pp. 329-330.
the mother of the officers of the corporation does not 4
 Id., at p. 2.
automatically vest upon her the position of President of 5
 Id., at pp. 329-330.
the corporation.—In the present case, the NLRC took
into account the testimony of the witness Roel 607
Benignos who said that they believed that petitioner VOL. 512, JANUARY 25, 607
Corazon Saguemuller was the president of Elcee Farms
because the employees would approach her if they
2007
needed help, as well as the fact that her sons were the Elcee Farms, Inc. vs. National
officers of Elcee Farms and Garnele. Beyond these bare Labor Relations Commission
suppositions, no evidence, oral or documentary, was
(SSS) Forms E-4 issued during the period that
presented to prove that Corazon Saguemuller was truly
the President of Elcee Farms. Nor was there even proof Garnele leased the hacienda, naming Elcee Farms
that she was in active management of the corporation as their employer. 6

and had dictated policies for implementation by the On 15 November 1990, Garnele sub-leased
corporation. Extending help to private respondents Hacienda Trinidad to Daniel Hilado, who operated
certainly did not automatically vest upon her the HILLA. The contract of lease executed between
position of President of the corporation. There, likewise, Garnele and Daniel Hilado stipulated the
appears to be no evidence on record that she had continued employment of 120 of the former’s
acted maliciously or in bad faith in terminating the employees by the latter, but the contract was
services of the private respondents; nor has it been
silent as to the benefits which may accrue to the
shown that she has in any way consented to the
simulated lease contract executed by her sons which employees as a consequence of their
effectively terminated the services of the private employment with Elcee Farms.  Thus, private
7

respondents. respondents were allowed to continue working in

Hacienda Trinidad, under the management of
SPECIAL CIVIL ACTION in the Supreme Court. HILLA.  Soon after HILLA took over, Daniel Hilado
8

Certiorari. entered into a Collective Bargaining Agreement

The facts are stated in the opinion of the Court. (CBA) with the United Sugar Farmers’
     Gil Marie M. Alba for petitioners. Organization (USFO). The CBA contained a closed
     The Solicitor General for respondents. shop provision stating that:
606 “Sec. 2. Employees/laborers, who at the time of the
606 SUPREME COURT execution of this Agreement are not yet members of
the UNION be required by the EMPLOYER to join the
REPORTS ANNOTATED
UNION within thirty (30) days from the signing of this
Elcee Farms, Inc. vs. National Agreement, and remain members in good standing as
Labor Relations Commission condition of continued employment. Should these
employees/laborers refuse and fail to join and affiliate
with the UNION within such a period of time, said
CHICO-NAZARIO,  J.: employees/laborers shall be dismissed by the
EMPLOYER upon recommendation by the UNION.” 9

This is a Petition for Certiorari, under Rule 65 of

the Rules of Court, assailing the Resolution, dated Due to their refusal to join the labor union, the
29 May 1996, promulgated by the National Labor private respondents were terminated by HILLA.
Relations Commission (NLRC), Fourth On 26 December 1990, SAILO and 144
Division,  ordering the petitioners, Elcee Farms,
1 complainants, including the 131 private
Inc. (Elcee Farms) and Corazon Saguemuller, to respondents herein, filed against Elcee Farms,
pay each private respondent separation pay and Corazon Saguemuller, HILLA and its officers, Ray
moral damages. Hilado and Roberto Montaño, a complaint for
Pampelo Semillano and one hundred forty- illegal dismissal with reinstatement with back
three (143) other complainants, represented by wages and separation pay with damages before
the labor union, Sugar Agricultural Industrial the Labor Arbiter.  In a Decision,
10

Labor Organization (SAILO), filed this complaint _______________

 6
 Id., at pp. 512-518. (3) HILLA, Rey Hilado and Roberto Montaño, filed
 Id., at pp. 341-345.
their own Motions for Reconsideration. In a
7

8
 Records, p. 343.
9
 Rollo, p. 268. Resolution, dated 29 May 1996, the NLRC
10
 Records, pp. 1-12. admitted that it overlooked vital points in its
earlier Decision and made a finding that the lease
608
contract between Elcee Farms and Garnele was
608 SUPREME COURT simulated and that the former continued to act as
REPORTS ANNOTATED the employer of the complainants, until Hacienda
Elcee Farms, Inc. vs. National Trinidad was sub-leased to HILLA in 1990. It took
into account the fact that the complainants’
Labor Relations Commission
payrolls named Elcee Farms as the employer
dated 20 October 1993, the Labor Arbiter noted when the hacienda was supposed to have been
that of the 144 complainants, only three were leased to Garnele. During the same period, the
able to testify and only twenty-eight SSS Forms E-4 used in paying the complainants’
complainants, including the three who testified, contributions which named Elcee Farms as
signed the joint affidavit executed in support of employer were also included in the records. The
their claims. Complainants who were unable to NLRC ruled that the simulation of the lease
sign the said joint affidavit were dropped as party agreement between Elcee Farms and Garnele
complainants for failure to adduce evidence in smacks of bad faith and is the basis for its award
their favor.  The 11
remaining twenty-eight of Five Thousand Pesos in moral and exemplary
complainants were considered by the Labor damages. 17

Arbiter as regular employees of HILLA entitled to In its Resolution, the NLRC also explained that
separation pay, equivalent to one month pay as Elcee Farms should have informed its employees
they were employed by HILLA for a period less of the lease made in favor of HILLA. Further,
than one year.  The Labor Arbiter dismissed their
12

Elcee Farms was obligated to pay its workers’

claim for damages and denied all claims made separation pay and other benefits due since the
against Elcee Farms, Corazon Saguemuller, Rey lease to HILLA was a virtual termination of the
Hilado and Roberto Montaño. 13

employer-employee relationship. Moreover, there

Complainants appealed and argued that they is no showing that HILLA assumed Elcee Farms’s
had an employer-employee relationship with obligation to pay the various benefits due to the
Elcee Farms before HILLA took possession of the workers from their employment with Elcee
hacienda in November 1990. They pointed out _______________
that Elcee Farms failed to present proof that they
were employed by Garnele to substantiate the 16
 Id., at pp. 276-277.
existence of a valid lease agreement between 17
 Id., at pp. 279-281.
Elcee Farms and Garnele. They also pleaded that 610
the closed shop provision of the CBA between
HILLA and USFO cannot be made to apply to the 610 SUPREME COURT
complainants, who were members of another REPORTS ANNOTATED
union. 14
Elcee Farms, Inc. vs. National
In a Decision dated 29 March 1995, the NLRC Labor Relations Commission
affirmed the amount awarded by the Labor Farms. Thus, Elcee Farms and Corazon
Arbiter as separation pay, but modified the
Saguemueller were held liable to pay the
assailed Decision by holding Elcee Farms, complainants separation pay equivalent to one-
Corazon Saguemuller, Rey Hilado and Roberto
half month pay for each year of service or one
Montaño liable for the payment of the month pay for those who worked for only one
aforementioned separation pay, and added to
year. 18

their liability Five Thousand Pesos (P5,000.00) for On the other hand, the NLRC absolved HILLA
moral damages to each of the 28
and its officers from any liability to the workers
complainants.  The dispositive portion of this since the dismissal of the complainants was due
15

Decision reads:
_______________
to their failure to join USFO, in accordance with
the closed shop clause found in its CBA with the
11
 Rollo, p. 21. USFO. The NLRC found that there was no existing
12
 Id., at pp. 72-73. labor union at the time HILLA took legal
13
 Id., at pp. 73-74. possession of Hacienda Trinidad. On the other
 Records, pp. 498-500.
hand, SAILO filed a petition for certification
14

15
 Rollo, pp. 53-54.
elections only on 26 December 1990, after Daniel
609 Hilado entered into the CBA with USFO. 19

VOL. 512, JANUARY 25, 609 Finally, the NLRC significantly modified the
2007 Decision rendered by the Labor Arbiter. The
earlier Decision rendered by the Labor Arbiter
Elcee Farms, Inc. vs. National granted the claims of only 28 out of the 144
Labor Relations Commission complainants. The NLRC ruled that the claim of
“WHEREFORE, respondents Elcee Farms Inc., Corazon 131 employees should be granted and that only
Saguemuller, Hilla Corporation, Rey Hillado & Roberto 14 of the 144 complainants were to be excluded,
Montaño are ordered to pay the complainants based on the testimony of Pampelo Semillano.
separation pay as awarded.
Incidentally, the NLRC erroneously included
The respondents are further ordered to pay the
complainants P5,000.00 each as moral damages for all
Alfredo Nicor, Sr. in the list of 131 employees who
their troubles and suffering from the disturbance of were awarded separation pay and damages even
their rights to labor. when it had specifically identified him in its
Appealed decision is hereby modified.”
16 Resolution among the fourteen complainants who
were not bona fide employees of Elcee Farms. 20

The three sets of parties—(1) the complainants;

(2) Elcee Farms and Corazon Saguemuller; and
 As a result, petitioners filed the present _______________
Petition for Certiorari, assigning to the NLRC the
following acts of grave abuse of discretion:
21
 Id., at pp. 18-19.

612
1. “1.In impleading and adjudging Corazon 612 SUPREME COURT
Saguemuller as party respondent equally REPORTS ANNOTATED
liable with Elcee Farms, Inc., public
respondent has exercised its discretion Elcee Farms, Inc. vs. National
whimsically, capriciously, arbitrarily and Labor Relations Commission
with grave abuse of discretion; provided for a uniform minimal rent for a period
of fifteen years, and had not provided for the
_______________ employment status of the employees of Elcee
Farms. Furthermore, the lease agreement was
 Id., at pp. 58-59.
18
entered into by the corporate officers of Garnele
 Id., at p. 59.
and Elcee Farms, who are members of the same
19

 Id., at pp. 59-60.

20

family. In addition, the employees were not

611 informed of the lease agreement and were not
VOL. 512, JANUARY 25, 611 paid by Elcee Farms the separation pay due at
2007 the time Garnele was supposed to have taken
over and leased the hacienda.
Elcee Farms, Inc. vs. National The above findings show that even after the
Labor Relations Commission execution of the lease agreement between Elcee
Farms and Garnele, Elcee Farms continued to act
1. 2.In issuing the assailed decision and as the employer of the farm workers of Hacienda
resolution, public respondent has Trinidad. The employer-employee relationship
contravened its own rules and between the farm workers and Elcee Farms was
established jurisprudence that findings of severed only when Garnele, acting in behalf of
facts of a labor arbiter as the trier of Elcee Farms, entered into a lease agreement with
facts based on substantial evidence Daniel Hilado and, thereafter, HILLA took over the
should be respected and given weight; management of Hacienda Trinidad in November
2. 3.The 29 May 1996 resolution which 1990. The NLRC, then, concluded that the claims
deliberately misappreciated extraneous, of the private respondents against Elcee Farms
incompetent and discredited evidences had not yet prescribed at the time their complaint
already passed upon by the Labor Arbiter was filed on 26 December1990.
was issued capriciously, whimsically and The main issue in this case is whether the
arbitrarily by public respondent; and private respondents are entitled to the award of
3. 4.Public respondent gravely abused its separation pay and moral damages. This Court
discretion tantamount to excess of finds that the NLRC’s award of separation pay
jurisdiction in awarding moral damages and moral damages are in accordance with law.
of P5,000.00 to each individual private Moral damages are recoverable when the
respondents, without any legal and dismissal of an employee is attended by bad faith
factual basis, and without regard to the or fraud or constitutes an act oppressive to labor,
individual private respondents’ length of or is done in a manner contrary to good morals,
service and employment history.” 21
good customs or public policy. Exemplary
damages, on the other hand, are recoverable
when the dismissal was done in a wanton,
Petitioners insist that the factual findings of the
oppressive, or malevolent manner. 22

Labor Arbiter should be given preference over _______________

those made by the NLRC. However, there is no
merit in the petitioners’ insistence that the 22
 Kay Products Inc. v. Court of Appeals, G.R. No. 162472,
findings of fact of the Labor Arbiter, which 28 July 2005, 464 SCRA 544, 559; Norkis Trading Co., Inc. v.
happened to favor them, are infallible. The National Labor Relations Commission, G.R. No. 168159, 19
August 2005, 467 SCRA 461, 473.
findings of the Labor Arbiter may be overturned
by the NLRC if unsupported by the records. In this 613
case, most of the factual findings made by the VOL. 512, JANUARY 25, 613
NLRC are better supported by the records than
2007
those made by the Labor Arbiter.
The NLRC made a crucial modification when it Elcee Farms, Inc. vs. National
overturned the findings of the Labor Arbiter and Labor Relations Commission
held that the lease contract between Elcee Farms Bad faith on the part of Elcee Farms is shown by
and Garnele is simulated. Records show that the act of simulating a lease agreement with
Elcee Farms was the employer named in the Garnele in order to evade paying private
payrolls at the time when the hacienda was respondents the proper amount of separation
supposed to have been leased to Garnele. During benefits based on the number of years they
the same period, the SSS Forms E-4 submitted worked in the hacienda, as provided by the Labor
before the SSS that were used in paying the Code. Records show that Elcee Farms did not pay
complainants’ contributions also named Elcee any separation benefits to the private
Farms as employer. Although these pieces of respondents when they allegedly leased the
evidence were submitted only during the appeal hacienda to Garnele, and again when the
before the NLRC, the petitioners had ample hacienda was leased to Daniel Hilado. When the
opportunity to submit opposing evidence, but employees filed their complaint with the Labor
failed to do so. The lease agreement between Arbiter, Elcee Farms, using the simulated lease
Garnele and Elcee Farms was a haphazardly agreement with Garnele, tried to deny liability by
drafted two-page document, which only claiming that their claims had already prescribed.
It claimed that the lease agreement with Garnele, _______________
which was allegedly executed in 1987, effectively
terminated the employer-employee relationship
23
 Mobil Employees Association v. National Labor Relations
Commission, G.R. No. 79329, 28 March 1990, 183 SCRA 737,
before the complaint was filed in 1990, or more 745.
than three years after. These unlaudable acts 24
 Records, pp. 92, 170.
undermine the workers’ statutory rights for which 25
 Id., at p. 318.
moral damages may be awarded.
26
 Id., at p. 343.
27
 Id., at p. 344.
Liability for separation pay is provided under
Article 283 of the Labor Code, as it existed in 615
1990, for the following circumstances, particularly VOL. 512, JANUARY 25, 615
the cessation of operations: 2007
“Article 283. Closure of establishment and reduction of
personnel.—The employer may also terminate the Elcee Farms, Inc. vs. National
employment of any employee due to the installation of Labor Relations Commission
labor-saving devices, redundancy, retrenchment to
there was a cessation of operations of Elcee
prevent losses or the closing or cessation of operations
of the establishment or undertaking unless the closing
Farms, which renders it liable for separation pay
is for the purpose of circumventing the provisions of to its employees, under Section 283 of the Labor
this Title, by serving a written notice on the workers Code.
and the Department of Labor and Employment at least In a similar case, Abella v. National Labor
one (1) month before the intended date thereof. x x x. Relations Commission,  the Court ruled that an
28

In case of retrenchment to prevent losses and in cases employer whose lease agreement had already
of closure or cessation of operations of establishment expired, and therefore no longer manages and
or undertaking not due to serious business losses or controls the hacienda, is still required to pay the
financial reverses, the separation pay shall be separation pay due to its former employees in
equivalent to at least one (1) month pay or at least
onehalf (1/2) month pay for every year of service,
connection with their employment with such
whichever is higher. A fraction of at least six (6) employer, even if the said employees were
months shall be considered as one (1) whole year.” terminated by the new employer. It justified this
(Emphases supplied.) position thus:
“The purpose of Article 284 as amended is obvious—
614 the protection of the workers whose employment is
614 SUPREME COURT terminated because of the closure of establishment
and reduction of personnel. Without said law,
REPORTS ANNOTATED employees like private respondents in the case at bar
Elcee Farms, Inc. vs. National will lose the benefits to which they are entitled—for the
Labor Relations Commission thirty three years of service in the case of Dionele and
fourteen years in the case of Quitco. Although they
From this provision, three requirements are were absorbed by the new management of the
enumerated in cases of cessation of business hacienda, in the absence of any showing that the latter
operations of an employer company not due to has assumed the responsibilities of the former
business reverses: (1) service of a written notice employer, they will be considered as new employees
to the employees and to the MOLE (now the and the years of service behind them would amount to
Secretary of Labor and Employment) at least one nothing.” 29

month before the intended date thereof; (2) the

cessation of or withdrawal from business There is a conspicuous change in the number of
operations must be bona fide in character; and employees who were awarded separation
(3) payment to the employees of termination pay benefits and moral damages, but it is supported
amounting to at least one-half month pay for by the evidence on record. Initially the Labor
each year of service, or one month pay, Arbiter awarded separation pay only to 28
whichever is higher. 23
complainants, which the NLRC increased to 131
In the present case, Elcee Farms effectively complainants. However, it should be noted that
ceased to operate and manage Hacienda Trinidad there should only be 130 complainants to whom
when, through Garnele, it leased the hacienda to the NLRC awarded separation pay and moral
Daniel Hilado. The validity of the aforementioned damages since one of the complainants, Alfredo
lease was not questioned by any of the parties. Nicor, Sr., was named as one of the 14
There is no question that the lease to Daniel complainants who were not bona fide workers
Hilado effectively terminated the employer- entitled to benefits, but was inadvertently
_______________
employee relationship between Elcee Farms and
the farmworkers. Private respondents Pampelo  G.R. No. L-71813, 20 July 1987, 152 SCRA 140.
28

Semillano and Roel Benignos testified that HILLA  Abella v. National Labor Relations Commission, Id., at pp.
29

took possession of the hacienda in 1990 and 145-146.

managed the same.  This was corroborated by
24

616
the testimony of Anonio Sidayon, the
administrator of HILLA.  After the said lease was
25
616 SUPREME COURT
executed, the employer-employee relationship REPORTS ANNOTATED
between the farm employees and Elcee Farms Elcee Farms, Inc. vs. National
was severed. The lease agreement between Labor Relations Commission
Garnele and Daniel Hilado identified the included again as one of the 131 complainants
employees who will continue working with the who were awarded said benefits.
new management and stipulated that workers As regards the big increase in the number of
who were not in the list, whether new or employees who were awarded separation pay
employed in the past, will not be employed by the and damages, the records, indeed, show that only
lessee.  The lease contract even specified that
26

28 complainants signed the affidavit, and only

Daniel Hilado will only be liable for all future labor three were able to testify. Thus, the Labor Arbiter
cases, the cause of which arose during or by considered the claims of only the 28
virtue of the sublease.  Clearly,
27

complainants who signed the affidavit, including

the three who testified. The Labor Arbiter and due obligations. The doctrine of “piercing the veil
reasoned that the other complainants failed to of corporate fiction” was thus clearly
adduce evidence in their favor. The NLRC, appropriate. Chua likewise involved another family
however, took critical note of the testimony of corporation, and this time the conflict was between two
brothers occupying the highest ranking positions in the
private respondent Pampelo Semillano identifying company. There were incontrovertible facts which
who among the complainants were bona pointed to extreme personal animosity that resulted,
fide employees and those who no longer worked evidently in bad faith, in the easing out from the
in the hacienda.  In addition, HILLA had submitted
30
company of one of the brothers by the other.” 36

as its Exhibit “4” the list of 120 Hacienda Trinidad

_______________
laborers that it was required to absorb,  which is a
31

corollary affirmation that there were other 33

 Sunio v. National Labor Relations Commission, G.R. No.
laborers employed by Elcee Farms who were not L-57767, 31 January 1984, 127 SCRA 390, 397-398.
required to be absorbed by HILLA. The private 34
 G.R. No. 101699, 13 March 1996, 254 SCRA 673, 681-
respondents were also able to present payroll 682.
documents showing the names of some of the
35
 G.R. No. 113907, 20 April 2001, 357 SCRA 77, 93-94.
36
 Santos v. National Labor Relations Commission,
private respondents. In stark contrast, the supra note 34 at pp. 683-684.
petitioners were not able to present evidence to
support the fact that the private respondents 618
were not bona fide employees.  Thus, the NLRC’s
32
618 SUPREME COURT
award to 130 employees, excluding Alfredo Nicor, REPORTS ANNOTATED
Sr., is justified.
Elcee Farms, Inc. vs. National
This Court, nonetheless, finds merit in the
petitioners’ allegation that Corazon Saguemuller Labor Relations Commission
should not be subsidiarily liable with Elcee Farms In the case of Naguiat v. National Labor Relations
for separation pay and damages. It is basic that a Commission,  the Court applied the doctrine
37

corporation is invested by law with a personality found in the case of A. C. Ransom Labor Union-
separate and distinct from those of the persons CCLU v. National Labor Relations Commission.
composing it as well as from that of any other There was a cessation of the operations of the
legal entity to which it may be related. Mere employer-corporation and, thus, a problem as to
ownership by a single stockholder or by another who shall pay the employees. In holding the
corporation of all or nearly all of the capital stock president solidarily liable, the Court considered
of a corporation is not of itself sufficient ground that he had actively engaged in the management
for disregarding and operations of the corporation. Nevertheless,
_______________ it absolved from liability the vice-president, since
no evidence on the extent of his participation in
 Rollo, pp. 59-60.
30
the management or operation of the business
 Records, pp. 405-406. was proffered.
31

 Id., at pp. 517-518.

32

In the present case, the NLRC took into

617 account the testimony of the witness Roel
VOL. 512, JANUARY 25, 617 Benignos who said that they believed that
2007 petitioner Corazon Saguemuller was the president
of Elcee Farms because the employees would
Elcee Farms, Inc. vs. National approach her if they needed help, as well as the
Labor Relations Commission fact that her sons were the officers of Elcee
the separate corporate personality.  In the case
33
Farms and Garnele. Beyond these bare
of Santos v. National Labor Relations suppositions, no evidence, oral or documentary,
Commission,  a corporate officer was not held
34
was presented to prove that Corazon
liable for the obligations incurred by the Saguemuller was truly the President of Elcee
corporation, where the corporate officer was not Farms. Nor was there even proof that she was in
even shown to have had a direct hand in the active management of the corporation and had
dismissal of the employee enough to attribute to dictated policies for implementation by the
him an unlawful act. corporation. Extending help to private
In the case of Malayang Samahan ng mga respondents certainly did not automatically vest
Manggagawa sa M. Greenfield v. Ramos,  the 35
upon her the position of President of the
Court restated the rule that corporate directors corporation. There, likewise, appears to be no
and officers are solidarily liable with the evidence on record that she had acted
corporation for the termination of employees maliciously or in bad faith in terminating the
done with malice or bad faith. Bad faith was services of the private respondents; nor has it
defined by the Court thus: “It has been held that been shown that she has in any way consented to
bad faith does not connote bad judgment or the simulated lease contract executed by her
negligence; it imports a dishonest purpose or sons which effectively terminated the services of
some moral obliquity and conscious doing of the private respondents.
wrong; it means breach of a known duty through IN VIEW OF THE FOREGOING, the instant
some motive or interest or ill will; it partakes of Petition is partially granted. This Court AFFIRMS
the nature of fraud.” the award of separation pay and moral damages
In the aforecited Santos case, the Court in favor of the private respondents as decreed in
discussed the attendance of exceptional facts the assailed Resolution of the NLRC, to be
and circumstances that could rightly sanction _______________
personal liability on the part of the company
 G.R. No. 116123, 13 March 1997, 269 SCRA 564, 581-
officer:
37

585.
“In A.C. Ransom, the corporate entity was a family
corporation and execution against it could not be 619
implemented because of the disposition post-haste of
its leviable assets evidently in order to evade its just
VOL. 512, JANUARY 25, 619
 2007
Elcee Farms, Inc. vs. National
Labor Relations Commission
paid by Elcee Farms with the modification that
Corazon Saguemuller should not be held
subsidiarily liable. This Court further orders that
Alfredo Nicor, Sr. be excluded from the list of
employees who are to be paid separation pay and
moral damages, for reason that he was
inadvertently included in the said list. Costs
against the petitioners.
SO ORDERED.
     Ynares-Santiago (Chairperson),  Austria-
Martinez and Callejo, Sr., JJ., concur.
Petition partially granted, award of separation
pay and moral damages affirmed.
Notes.—It is only in instance of “retrenchment
to prevent losses and in cases of closures or
cessations of operations of establishment or
undertaking not due to serious business losses or
financial reverses” that employees whose
employment has been terminated as a result are
entitled to separation pay. To require an
employer to be generous when it is no longer in a
position to do so would be unduly oppressive,
unjust, and unfair to the employer. (Cama vs.
Joni’s Food Services, Inc., 425 SCRA 259 [2004])
The employer’s prerogative to close or abolish
a department or section of his establishment for
economic reasons such as to minimize expenses
and reduce capitalization is as much recognized
as management’s prerogative to close the entire
establishment and cease operations due to
adverse economic conditions. (Danzas
Intercontinental, Inc. vs. Daguman, 456 SCRA
382 [2005])

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