De Roca vs. Dabuyan

A lessor of a building who has no participation in the operation of a hotel business conducted by the lessee cannot be held liable as the employer of the lessee's employees, even if the hotel continues to operate under the lessor's building name; and where a strong showing exists that grave miscarriage of justice would result from strict application of procedural rules in labor cases, such rules must yield to substantial justice.

Petitioner Rolando De Roca is the owner of a building called "RAF Mansion Hotel" located along Roxas Boulevard, Baclaran, Parañaque City. On September 25, 2007, he leased the entire premises to Oceanic Travel and Tour Agency, represented by Victoriano Ewayan through attorney-in-fact Marilou Buenafe, for a period of five years at ₱450,000.00 monthly rental. Oceanic continued operating the hotel under the original name "RAF Mansion Hotel." Private respondents were employed by Oceanic/Ewayan as cook, waitress, and housekeeper. When Ewayan absconded, respondents could no longer trace his whereabouts and amended their illegal dismissal complaint to implead De Roca as co-respondent under the designation "new management of RAF Mansion Hotel."

In 2012, private respondents Eduardo C. Dabuyan, Jennifer A. Branzuela, Jennyl Yn A. Ricarte, and Herminigildo F. Sabanate filed a complaint for illegal dismissal against "RAF Mansion Hotel Old Management and New Management and Victoriano Ewayan" before the National Labor Relations Commission. The complaint was subsequently amended to include petitioner Rolando De Roca as co-respondent. Summons was initially sent to petitioner by registered mail but was returned. Thereafter, another summons was personally served by the NLRC bailiff on March 14, 2012. Despite service, petitioner did not attend the mandatory conference or subsequent hearings, prompting the labor arbiter to direct respondents to submit their position paper.

On April 18, 2012, respondents submitted their position paper. On the same day, petitioner filed a motion to dismiss on the ground of lack of jurisdiction, alleging that while he owned the RAF Mansion Hotel building, the same was being leased by Victoriano Ewayan, owner of Oceanic Travel and Tour Agency, who was the true employer of private respondents. Petitioner asserted that no employer-employee relationship existed between him and respondents. The motion to dismiss was filed after the date set for the mandatory conference, rendering it a prohibited pleading under the 2011 NLRC Rules of Procedure.

On June 29, 2012, the labor arbiter rendered a decision finding all respondents liable for illegal dismissal and ordering them to pay backwages and monetary claims, plus 10% attorney's fees. The motion to dismiss was denied for having been filed beyond the reglementary period. Petitioner received the decision on August 3, 2012, but instead of filing an appeal, he instituted a petition for annulment of judgment before the NLRC on September 4, 2012, or thirty-one days after receipt. The NLRC dismissed the petition for being tardy under Section 3, Rule XII of the 2011 NLRC Rules of Procedure. Petitioner's motion for reconsideration was likewise denied.

Petitioner then elevated the matter to the Court of Appeals via a petition for certiorari, reiterating that he was never respondents' employer but merely the owner-lessor of the premises leased to Ewayan and Oceanic, and that his inclusion in the labor case was borne of malice — respondents impleaded him only after discovering that their true employer had absconded, doing so under the pretext that he constituted the "new management of RAF Mansion Hotel." The CA dismissed the petition on June 19, 2014, holding that the issue before it was merely the propriety of the NLRC's dismissal of the petition for annulment as tardy, not the merits of the employer-employee relationship. The CA further noted that petitioner failed to present evidence supporting his claim because he lost the opportunity to submit a position paper, and that resolving the employment relationship issue would require evidence presentation improper in a certiorari petition. Petitioner's motion for reconsideration was denied on October 28, 2014.

In support of his position before the Supreme Court, petitioner attached a Contract of Lease of a Building executed with Oceanic, represented by Ewayan through attorney-in-fact Marilou Buenafe, showing that on September 25, 2007, Oceanic agreed to lease the entire RAF Mansion Hotel premises — including elevator, water pump, airconditioning units, and existing furnishings — for five years (October 15, 2007 to October 15, 2012) at ₱450,000.00 monthly rental, with all expenses, utilities, maintenance, and taxes (except real property taxes) for the lessee's account. Petitioner also submitted a January 23, 2012 demand letter to Ewayan for unpaid rentals, and a written waiver and acknowledgment executed by respondents (except Sabanate) and other Oceanic employees to the effect that petitioner should not be held liable as owner of the premises for the "problems" caused by Ewayan.

• Nullity of Labor Arbiter's Decision: Petitioner argued that the Labor Arbiter's decision is null and void as there was no determination of facts and evidence relative to his supposed liability to respondents.
• Absence of Employer-Employee Relationship: Petitioner maintained that he was not at any time respondents' employer, but merely the owner-lessor of the premises where Ewayan and Oceanic operated the RAF Mansion Hotel; he did not hire respondents, pay their salaries, exercise supervision or control over them, or have the power to terminate their services.
• Lack of Jurisdiction: Petitioner asserted that the labor tribunals did not acquire jurisdiction over him since the element of employer-employee relationship was lacking, rendering their decisions a nullity.
• Malicious Impleader: Petitioner contended that he was impleaded only because respondents could no longer trace the whereabouts of their true employer Ewayan, who had absconded, and that respondents aimed to unduly recover their claims from him.
• Relaxation of Procedural Rules: Petitioner argued that the labor tribunals and the CA strictly applied labor procedural laws and rules, when the rule in labor cases is that technical rules of procedure are not binding and must yield to the merits of the case and the interests of justice and due process.

• Propriety of NLRC Dismissal: Respondents argued that the issue in the case does not involve the merits of the labor arbiter's decision, but merely the propriety of the NLRC's dismissal of petitioner's petition for annulment of judgment.
• Proof of Employment: Respondents contended that they had satisfactorily proved below that petitioner is their employer, through evidence consisting of identification cards issued to them and signed by Ewayan, pay envelopes, and advice slips showing their salaries as the basis for their claims.
• Ownership as Basis of Employment: Respondents argued that since petitioner owned the building which was a hotel, it follows that he is their employer, and consequently the labor arbiter acquired jurisdiction over him.
• Finality of Labor Arbiter's Decision: Respondents maintained that since the decision of the labor arbiter on the merits became final and executory for petitioner's failure to appeal the same, it may no longer be impugned.

• Employer-Employee Relationship: Whether an employer-employee relationship existed between petitioner, as owner-lessor of the building, and private respondents, as employees of the lessee operating the hotel.
• Relaxation of Procedural Rules: Whether the strict application of the 2011 NLRC Rules of Procedure should yield to substantial justice where a grave miscarriage of justice would result.
• Validity of Labor Arbiter's Decision: Whether the labor arbiter's decision is null and void for lack of jurisdiction over petitioner.

• Employer-Employee Relationship: No. The lease agreement between petitioner and Oceanic conclusively showed that petitioner was merely the lessor of the premises and not a party to the employment contract between respondents and Oceanic/Ewayan; contracts take effect only between the parties and do not extend to a non-party lessor.
• Relaxation of Procedural Rules: Yes. Where there is a strong showing that grave miscarriage of justice would result from strict application of the rules, procedural rules must yield to substantial justice, particularly in labor proceedings which are non-litigious in nature and where technicalities of law and procedure shall not strictly apply.
• Validity of Labor Arbiter's Decision: The decision is null and void. Having been rendered without jurisdiction over petitioner, it is a "lawless thing" that creates no rights and imposes no duties, and could not have acquired finality.

• Employer-Employee Relationship: The Contract of Lease of a Building executed between petitioner and Oceanic, represented by Ewayan, established that petitioner owned the building called RAF Mansion Hotel and leased the entire premises to Oceanic for five years at ₱450,000.00 monthly rental. Oceanic continued operating the hotel under the same name. There was no connection between petitioner and Oceanic other than the lease agreement; they were not partners in the operation of RAF Mansion Hotel. Under Article 1311 of the Civil Code, contracts take effect only between the parties, their assigns, and heirs. The employment contract between respondents and Oceanic/Ewayan was effective only between them and did not extend to petitioner, who was not a party thereto. Petitioner's only role was as lessor of the premises. Respondents' sole basis for impleading petitioner was that he owned the building which happened to bear the same name as the hotel operated by Oceanic. Their belated attempt to implead him was an afterthought, and their characterization of petitioner as "new management" betrayed an admission that he had no hand in the "old management" under Ewayan. Allowing respondents to recover monetary claims from petitioner would result in unjust enrichment, as it would permit them to benefit at petitioner's expense without just cause or consideration.

• Relaxation of Procedural Rules: The labor tribunals and the CA resolved the case on pure technicality — the tardiness of petitioner's motion to dismiss and petition for annulment — rather than scrutinizing the facts and the lease agreement which would have exculpated petitioner. In labor disputes, proceedings before the Labor Arbiter and NLRC are non-litigious in nature, and technicalities of law and procedure shall not strictly apply, pursuant to Rule V, Section 2 and Rule VII, Section 10 of the 2011 NLRC Rules of Procedure. The rules of procedure are merely tools designed to facilitate the attainment of justice, and where their application would frustrate rather than promote justice, courts may suspend or except a particular case from their operation. Petitioner's motion to dismiss, though belated, should have been given due attention. Substantive law outweighs procedural technicalities, and where a strong showing exists that grave miscarriage of justice would result from strict application of the rules, the same must be relaxed in the interest of substantial justice.

• Validity of Labor Arbiter's Decision: Because the labor arbiter never acquired jurisdiction over petitioner — there being no employer-employee relationship — the decision rendered against him is grossly erroneous and unjust, and at worst null and void. A void judgment is a "lawless thing, which can be treated as an outlaw and slain at sight, or ignored wherever it exhibits its head." It creates no rights and imposes no duties; any act performed pursuant to it and any claim emanating from it have no legal effect. Consequently, the decision could not have acquired finality, contrary to respondents' belief. The Court found no need to remand the case to the Labor Arbiter, as the issue of the existence or non-existence of an employment relationship was raised in the petition and adequately met by respondents in their comment, making it ripe for adjudication.

• Relativity of Contracts (Article 1311, Civil Code) — Contracts take effect only between the parties, their assigns, and heirs, except where the rights and obligations arising from the contract are not transmissible by their nature, stipulation, or provision of law. Applied to hold that the employment contract between respondents and Oceanic/Ewayan did not extend to petitioner, who was not a party thereto and whose only role was as lessor of the premises.

• Unjust Enrichment — Unjust enrichment exists when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity, and good conscience. The principle requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another. Applied to hold that allowing respondents to recover monetary claims from petitioner would result in their unjust enrichment.

• Relaxation of Procedural Rules in Labor Cases — In labor disputes, proceedings before the Labor Arbiter and NLRC are non-litigious in nature, and technicalities of law and procedure shall not strictly apply. Where a strong showing exists that grave miscarriage of justice would result from strict application of the rules, procedural rules must yield to substantial justice. The rules of procedure are merely tools designed to facilitate the attainment of justice; if their application would tend to frustrate rather than promote justice, it is within the Court's power to suspend the rules or except a particular case from their operation.

• Void Judgment — A judgment rendered without jurisdiction is null and void — a "lawless thing" that creates no rights and imposes no duties. Any act performed pursuant to it and any claim emanating from it have no legal effect. Such a judgment could not have acquired finality.

• "Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law." — This passage invokes Article 1311 of the Civil Code as the controlling principle to establish that the employment contract between respondents and Oceanic/Ewayan does not bind petitioner as lessor, forming the doctrinal core of the ruling on absence of employer-employee relationship.

• "Indeed, where as here, there is a strong showing that grave miscarriage of justice would result from the strict application of the [r]ules, we will not hesitate to relax the same in the interest of substantial justice. It bears stressing that the rules of procedure are merely tools designed to facilitate the attainment of justice." — This passage articulates the Court's rationale for relaxing procedural rules in labor cases, establishing the principle that technicalities must yield to substantive rights where grave injustice would otherwise result.

• "At worst, it is null and void, and, as petitioner correctly put it, it is a 'lawless thing, which can be treated as an outlaw and slain at sight, or ignored wherever it exhibits its head.' Being of such nature, it could not have acquired finality, contrary to what respondents believe — as it 'creates no rights and imposes no duties. Any act performed pursuant to it and any claim emanating from it have no legal effect.'" — This passage defines the legal character of a judgment rendered without jurisdiction and explains why the labor arbiter's decision could not have attained finality, directly countering respondents' argument on finality.

• Flores vs. Spouses Lindo, Jr., 664 Phil. 210 (2011) — Cited for the definition and elements of unjust enrichment, supporting the holding that allowing respondents to recover from petitioner would result in unjust enrichment.

• 7107 Islands Publishing, Inc. vs. The House Printers Corporation, 771 Phil. 161 (2015) — Cited for the principle that technicalities take a backseat against substantive rights in the administration of justice.

• Coronel vs. Hon., 448 Phil. 894 (2003) — Cited for the proposition that courts are not slaves to technical rules and may suspend their application where they would frustrate rather than promote justice.

• Saldana vs. Court of Appeals, 268 Phil. 424 (1990) — Cited for the characterization of a void judgment as a "lawless thing" that can be treated as an outlaw and slain at sight.

• Imperial vs. Armes, G.R. Nos. 178842 & 195509, January 30, 2017 — Cited for the principle that a void judgment creates no rights and imposes no duties, and that any act performed pursuant to it has no legal effect.

• Article 1311, Civil Code — Provides that contracts take effect only between the parties, their assigns, and heirs. Applied to hold that the employment contract between respondents and Oceanic/Ewayan did not extend to petitioner, who was not a party thereto.

• Rule V, Section 2, 2011 NLRC Rules of Procedure — Provides that proceedings before the Labor Arbiter shall be non-litigious in nature and that technicalities of law and procedure shall not strictly apply. Relied upon to justify relaxation of procedural rules in favor of substantial justice.

• Rule VII, Section 10, 2011 NLRC Rules of Procedure — Provides that technical rules of procedure and evidence prevailing in courts shall not be controlling and that the Commission shall use all reasonable means to ascertain facts without regard to technicalities. Relied upon for the same purpose.

• Rule V, Sections 6 and 7, 2011 NLRC Rules of Procedure — Govern the filing of motions to dismiss before the mandatory conference and prohibit such motions after the lapse of the prescribed period. Cited by the labor arbiter in denying petitioner's motion to dismiss, but the Supreme Court held that this procedural rule should have yielded to the interest of substantial justice.

• Section 3, Rule XII, 2011 NLRC Rules of Procedure — Prescribes the 10-day reglementary period for filing a petition for annulment of judgment. Cited by the NLRC in dismissing petitioner's petition as tardy, but the Supreme Court held strict application was unwarranted.

• Section 3, Rule 46, Rules of Court — Cited by the CA as an additional ground for dismissal, relating to the failure to attach material pleadings to the petition.

Chief Justice Maria Lourdes P.A. Sereno (on leave), Associate Justice Teresita J. Leonardo-de Castro, Associate Justice Francis H. Jardeleza, and Associate Justice Noel Gimenez Tijam concurred. No separate concurring opinions were noted.