THIRD DIVISION

G. R. No. 148848 - August 5, 2003

JACINTO RETUYA, PRISCILA B. VALE, BALTAZAR QUILAT, ABDON DAYSON and ELEUTERIO
ENSALADA, petitioners, vs. HON. SALIC B. DUMARPA, (Presiding Commissioner); Hon. OSCAR
N. ABELLA and Hon. LEON G. GONZAGA JR. (Commissioners); NATIONAL LABOR RELATIONS
COMMISSION (Fifth Division), Cagayan de Oro City; INSULAR BUILDERS, INC./ANTONIO
MURILLO, President and General Manager; and RODOLFO MURILLO, respondents.

PANGANIBAN,  J.:

Illegally dismissed employees are entitled to back wages that should not be diminished or reduced by
the amount they have earned from another employment during the period of their illegal dismissal. On
the other hand, the computation of the separation pay and the circumstances showing the existence of
an employer-employee relationship are questions of fact that are generally not proper in a petition for
review on certiorari.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the February 9, 2001
Decision2 and the June 11, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 55340. The
dispositive portion of the challenged Decision reads as follows:

"WHEREFORE, the assailed resolutions of the National Labor Relations Commission dated March 8,
1999 and July 22, 1999 are hereby REVERSED and SET ASIDE, and the decision of Labor Arbiter
Newton R. Sancho dated March 10, 1998 is REINSTATED. No costs."4

The assailed Resolution denied petitioners' Motion for Reconsideration.

The Facts

The facts of the case are narrated by the CA in this manner:

"Private respondent, Insular Builders, Inc., is a family-owned corporation managed and operated
principally by Antonio Murillo, father, and his son, Rodolfo Murillo. It is engaged in the construction
business. Petitioners, on the other hand, were workers who have rendered services in various
corporations of private respondents, namely Mindanao Integrated Builders, Inc., Sta. Clara Plywood,
Inc., Insular Builders, Inc. and Queen City Builders, Inc.

"Early 1993, at the height of the feud between private respondents Antonio Murillo and Rodolfo
Murillo, the former discharged the latter from his position as manager of Insular Builders, Inc. and
assumed control of the company. Petitioners found themselves in the middle of the crossfire and were
told to temporarily stop working. Later, or on July 26, 1993, private respondent Antonio Murillo
dismissed petitioners and reported the matter to the Department of Labor and Employment (DOLE).
Petitioners were however made to continue their work, rendering the same services, in the same
place, locality and at the same office but under a different company, the Queen City Builders, Inc.,
managed and controlled by private respondent Rodolfo Murillo.

"On August 3, 1993, petitioners filed with the NLRC, Regional Arbitration Branch No. X, Davao City, a
complaint for illegal dismissal, non-payment of wages, 13th month pay, and retirement pay as regards
petitioner Abdon Dayson. Petitioners averred that they were terminated from employment on July 26,
1993 without prior notice and also in absence of any valid cause. They alleged that their termination
was an off-shoot of the supposed personal rift and disagreements between private respondents
Antonio Murillo and Rodolfo Murillo.

"On the other hand, private respondents Insular Builders, Inc. and Antonio Murillo deny having
employed petitioners Baltazar Quilat, Abdon Dayson and Eleuterio Ensalada as they were personal
employees of and rendering services to private respondent Rodolfo Murillo." 5

On December 19, 1994, Labor Arbiter Newton R. Sancho rendered a Decision finding private
respondents guilty of illegal dismissal. On June 21, 1996, the NLRC (Fifth Division) of Cagayan de Oro
City denied their appeal and affirmed the labor arbiter's Decision in toto.
On reconsideration, however, the NLRC set aside in a Resolution dated July 31, 1996, the Decision it
had issued on June 21, 1996. It then remanded the case to the labor arbiter for further proceedings.

Subsequently, Labor Arbiter Sancho, in his March 10, 1998 Decision, ruled in this wise:

"WHEREFORE, judgment is hereby rendered:

1. Declaring the dismissal of complainants Jacinto Retuya, Priscila Vale, Baltazar Quilat, Abdon Dayson
and Eleuterio Ensalada as ILLEGAL;

2. Ordering respondents Insular Builders, Inc. and Antonio Murillo to PAY complainants their monetary
award above recomputed in the total amount of P307,067.34, inclusive of attorney's fees;

3. Absolving Rodolfo Murillo from any liability to the complainants for lack of employer-employee
relationship;

4. Awarding the total adjudicated amount of P103,221.60 to the legal heirs of the late complainant
Abdon Dayson; and

5. Dismissing all other claims for lack of merit." 6

Both parties appealed to the NLRC which, in a March 8, 1999 Resolution, reversed and set aside the
labor arbiter's ruling. The Commission ruled that petitioners had not been illegally dismissed and were
therefore not entitled to reinstatement or to separation pay and back wages. Affirmed, however, as
the sole liability of respondent corporation was the award to Complainant Abdon Dayson of salary
differential, service incentive leave pay, 13th month pay differentials, 13th month pay for 1993, and
retirement pay.7

Ruling of the Court of Appeals

Declaring that Antonio Murillo and Insular Builders, Inc. had illegally dismissed petitioners from
employment, the CA reversed the NLRC and upheld the Decision of the labor arbiter. Moreover, the
appellate court held that Rodolfo Murillo had incurred no liability. That no employer-employee
relationship existed between him and petitioners was shown by the fact that, as manager of Insular
Builders, Inc., he had likewise been dismissed from employment by the elder Murillo.

By paying the wages of petitioners and controlling their work conduct, Antonio Murillo and Insular
Builders, Inc. showed themselves to be the former's employers. It was Antonio Murillo who exercised
the power to dismiss petitioners, as evidenced by a Dismissal Report he submitted to the Department
of Labor and Employment (DOLE). He failed to show that their dismissal was for a just cause.

The CA added that the NLRC had erred in declaring that Insular Builders, Inc. and Queen City Builders,
Inc. were one and the same entity. The corporate veil may be pierced only when it is used to defeat
public convenience, justify a wrong, inflict a fraud or defend a crime.

The CA reinstated, in favor of petitioners, the labor arbiter's award inclusive of attorney's fees. 8 It also
affirmed the reduction of the separation pay and the deletion of the award of back wages as follows:

"Anent the prayer of petitioners that full backwages should be granted to them, we find the labor
arbiter's findings as correct and justifiable under the circumstances of this case. Thus:

'As to complainant's 'wish' for the recomputation of award to full backwages, inclusive of allowances,
and to their other benefits or their equivalent computed from the time their compensation was
withheld from them up to the time of their actual reinstatement, pursuant to Art. 279 of the Labor
Code and Supreme Court's ruling in Osmalik S. Bustamante vs. NLRC, the same cannot be granted at
this stage since it is not among the issues remanded for further proceedings. Nor was it seasonably
raised and ventilated on appeal.

'On the contrary, what is called for is not the recomputation of the award of backwages to make it
higher but its deletion. Right after complainants were dismissed on July 26, 1993, they were employed
by Queen City Builders, Inc./Rodolfo Murillo effective August 1, 1993 as shown by the Check Vouchers
marked as Annexes 'A', 'B', 'C', 'D', and 'E' of Rodolfo Murillo's Motion for Reconsideration dated July
10, 1996. Otherwise, it would result in double compensation on the part of complainants -- a situation
which is anathema the principles of no work-no pay and unjust enrichment at the expense of Antonio
Murillo and his firm.'"9

Hence, this Petition.10

Petitioners raise the following issues for our consideration:

"I

Whether the Court of Appeals' Decision and its refusal to reconsider it in its Resolution by its failure to
grant the appropriate affirmative reliefs due x x x illegally dismissed employee[s] such as petitioners
is in accord with Article 279 of Presidential Decree No. 442, otherwise known as the Labor Code of the
Philippines, as amended by Section 34 of Republic Act 6715 and the controlling settled jurisprudence
thereon; and

"II

Whether the said questioned dispositions by the Court of Appeals which adversely affect petitioners,
are in accord with applicable jurisprudence, the law and established records, in disregard of what had
been raised in the assigned errors and submissions thereunder presented in the Petition filed
thereat."11

In the main, the issues boil down to two: 1) whether petitioners are entitled to full back wages and
separation pay in accordance with Article 279 of the Labor Code; and 2) whether an employer-
employee relationship existed between them and Rodolfo Murillo.

The Court's Ruling

The Petition is partly meritorious.

Preliminary Matter:
Appeal by Certiorari

Before proceeding to the merits of the case, we shall take up a preliminary procedural matter.

Respondents Antonio Murillo and Insular Builders, Inc. argue that petitioner's prayer for the
reinstatement of the labor arbiter's Decision was already granted by the CA. Hence, petitioners
supposedly had no more reason to appeal to this Court.

We hold that petitioners had the right to file this Petition for Review under Rule 45. Whether they are
satisfied with the CA's Decision is not for private respondents to determine. The Rules give both
parties the option to appeal and seek further relief, if in their opinion they deserve a bigger or more
generous award than that allowed below. Their entitlement to their prayer is to be ruled upon by this
Court, not by respondents.

First Issue:
Back Wages and Separation Pay

Petitioners contend that because the CA reinstated the labor arbiter's finding of illegal dismissal, it
should not have reduced the amount of their separation pay, but should have instead awarded them
full back wages in accordance with Article 279 of the Labor Code.

They add that the CA Decision did not follow settled jurisprudence, specifically Bustamante v.
NLRC,12 on the amount of back wages that illegally dismissed employees were entitled to.

On the other hand, Antonio Murillo and Insular Builders, Inc. counter that petitioners were not illegally
dismissed from employment, because there was no cessation of work when they were transferred
from Insular Builders, Inc. to Queen City Builders, Inc. Allegedly, what transpired was a mere transfer
of employees from one sister company to another, because petitioners continued to work in the same
office, receive the same salaries and perform the same kind of work.

In contrast, Rodolfo Murillo claims that the CA correctly ruled that he could not be held liable for back
wages and separation pay, because he had no employer-employee relationship with petitioners. He
insists that it was his father -- Antonio Murillo -- who, as president and general manager of Insular
Builders, Inc., dismissed both him and petitioners.

Petitioners' contentions are partly meritorious.

Bustamante v. NLRC13 held that illegally dismissed employees were entitled to full back wages that
should not be diminished or reduced by the amount they had earned from another employment during
the period of their illegal dismissal. While litigating, employees must still earn a living. Furthermore, as
penalty for their illegal dismissal, their employers must pay them full back wages. This rule has been
uniformly applied in subsequent cases.14

In the present case, petitioners were dismissed because of a "change of management." 15 They were
not given any prior written notice, but simply told that their services were terminated on the day they
stopped working for Insular Builders, Inc. Under the circumstances, the CA was correct in upholding
the labor arbiter's finding that they had been illegally dismissed.

Having been illegally dismissed, petitioners should be awarded back wages in accordance
with Bustamante v. NLRC. The fact that they worked for a sister company 16 immediately after being
dismissed from Insular Builders, Inc. should not preclude such award. The contention that they will be
unjustly enriched thereby has been squarely addressed by the Court in Bustamante,  from which we
quote:

"On 21 March 1989, Republic Act No. 6715 took effect, amending the Labor Code. Article 279 thereof
states in part:

'ART. 279. Security of Tenure. x x x An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation is withheld from him up to the time of his actual reinstatement.' (Italics supplied)

"In accordance with the above provision, an illegally dismissed employee is entitled to his full
backwages from the time his compensation was withheld from him (which as a rule is from the time of
his illegal dismissal) up to the time of his actual reinstatement. It is true that this Court had ruled in
the case of Pines City Educational Center vs. NLRC (G.R. No. 96779, 10 November 1993, 227 SCRA
655) that 'in ascertaining the total amount of backwages payable to them (employees), we go back to
the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by
the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted
therefrom.' The rationale for such ruling was that, the earnings derived elsewhere by the dismissed
employee while litigating the legality of his dismissal, should be deducted from the full amount of
backwages which the law grants him upon reinstatement, so as not to unduly or unjustly enrich the
employee at the expense of the employer.

"The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educational Center case, by now holding that comfortably
with the evident legislative intent as expressed in Rep. Act. No. 6715, above-quoted, backwages to be
awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced
by the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying
reason for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must
still earn a living to support himself and family, while full backwages have to be paid by the employer
as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative
intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously
given them under the Mercury Drug rule or the 'deduction of earnings elsewhere' rule. Thus, a closer
adherence to the legislative policy behind Rep. Act. No. 6715 points to 'full backwages' as meaning
exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned
employee during the period of his illegal dismissal. In other words, the provision calling for 'full
backwages' to illegally dismissed employees is clear, plain and free from ambiguity and, therefore,
must be applied without attempted or strained interpretation. Index animi sermo est.

"Therefore, in accordance with R.A. No. 6715, petitioners are entitled to their full backwages, inclusive
of allowances and other benefits or their monetary equivalent, from the time their actual
compensation was withheld from them up to the time of their actual reinstatement." 17

While it may be true that petitioners continued to work in the same place and office as in their
previous employment, it is equally true that they had in fact been illegally dismissed by their previous
employer. Thus, they lost their former work status and benefits in a manner violative of the law. Be it
noted that, without their consent, their employment was changed -- from Insular, which was
controlled by Antonio Morillo; to Queen City, which was "managed and controlled by private
respondent Rodolfo Morillo." Thus, they became new employees of the latter firm and, as such, were
deprived of seniority and other employment benefits they had when they were still with their former
employer.

Had their employment in Insular been legally ended and that in Queen City properly constituted with
their consent, this illegal dismissal suit could have been avoided or could have had a different result.
As it is, however, the fact remains that their employment was illegally terminated; thus, the legal
consequences must be borne by the ones who caused it -- Antonio Murillo and Insular Builders.
The records indicate that reinstatement is no longer feasible. Insular Builders, Inc. has ceased
operations. Absent any showing that its business was deliberately stopped to avoid reinstating the
complaining employees, the amount of back wages shall be computed from the time of their illegal
termination on July 26, 1993, up to the time of the cessation of the business operations. 18 "Computing
backwages beyond x x x the date of [cessation of business], would not only be unjust but confiscatory
as well as violative of the Constitution depriving the [respondent] of his property rights." 19

Moreover, petitioners are entitled to separation pay. As provided by Article 279 of the Labor Code, an
illegally dismissed employee is entitled to the twin reliefs of 1) either reinstatement or separation pay,
if reinstatement is no longer feasible; and 2) back wages. These are distinct and separate reliefs given
to alleviate the economic setback brought about by the employee's dismissal. 20 The award of one does
not bar the other. Back wages may be awarded without reinstatement, and reinstatement may be
ordered without awarding back wages.21

However, the computation of the correct amount of separation pay is a factual issue. Its resolution
entails a review of the factual conclusions of the appellate court and the evidentiary basis thereof. This
kind of assessment is not, as a rule, proper in appeals from the CA. Such appeals should be confined
to a determination only of legal issues, because the appellate court's findings of fact are generally
conclusive.22 In a petition for review on certiorari, this Court's jurisdiction is limited to reviewing errors
of law in the absence of any showing that the factual findings complained of are devoid of support in
the records or are glaringly erroneous.23

In the present case, petitioners failed to show any cogent reason why we should disturb the labor
arbiter's computation (affirmed by the CA), which had resulted in a reduction of the amount of
separation pay. Reckoned from the respective dates of hiring of petitioners up to the date of their
dismissal, the labor arbiter computed their separation pay by multiplying their respective monthly
salaries by their respective years of service -- a fraction of six months was deemed equivalent to one
whole year.24 Although the result was a reduction in amount, petitioners have not shown why this
manner of computation was not in accord with prevailing jurisprudence. 25

Second Issue:
Employer-Employee Relationship

Petitioners contend that Insular Builders, Inc. and Queen City Builders, Inc. are one and the same;
and that, as a consequence, Rodolfo Murillo was solidarily liable with Antonio Murillo and Insular
Builders, Inc.

We disagree.

The circumstances showing whether an employee-employer relationship exists between parties also
involve a question of fact.26 So long as substantial evidence supports it, the CA's factual finding would
be binding upon this Court, even if different from that of the lower court or of an administrative
body.27

Rodolfo Murillo was not the employer of petitioners when they were dismissed from Insular Builders,
Inc. It was not he but Antonio Murillo who dismissed them, as evidenced by the Dismissal Report
submitted to the DOLE. In fact, Rodolfo himself was dismissed together with them.

The corporate veil of related companies may not be pierced in the absence of proof that the corporate
fiction is being used to defeat public convenience, justify a wrong, inflict a fraud or defend a crime. 28

Finally, it may not be amiss to add that piercing the corporate veil and considering Insular and Queen
City as one entity would be disadvantageous to petitioners, because doing so would no longer entitle
them to back wages and separation pay. Indeed, if the two entities were one and the same company,
then there would have been no dismissal from one and transfer to the other to speak about.

WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the CA is AFFIRMEDwith

SO ORDERED.

Puno, Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.