Hacienda Cataywa/Manuel Villanueva vs. Rosario Lorezo

A sugarcane farm worker who is called to work season after season is a regular seasonal employee, not a casual worker, and is entitled to compulsory SSS coverage; the employer's liability for delinquent contributions is computed on the basis of six months of service per year, and the 3% monthly penalty and the damages for misrepresentation under the Social Security Law are mandatory and cannot be waived. The corporate veil may not be pierced absent clear and convincing proof that the corporation is a mere alter ego or instrumentality of the individual stockholder.

Hacienda Cataywa is a sugarcane farm owned by Manuel Villanueva and managed by Joemarie Villanueva, with Mancy and Sons Enterprises, Inc. impleaded as a co-petitioner; Talisay Farms, Inc. was brought into the case by virtue of an Investment Agreement with Mancy and Sons Enterprises. Rosario Lorezo claimed to have worked as a farm laborer on the hacienda from 1970 until 1995, with SSS contributions deducted from her wages but not fully remitted. The Social Security Law, Republic Act No. 1161 as amended by Republic Act No. 8282, requires compulsory coverage of employees and conditions retirement benefits on a minimum of 120 months of contributions, and it imposes on delinquent employers both a monthly penalty on unremitted premiums and damages where the true date of employment is misrepresented.

Rosario Lorezo worked as a farm laborer at Hacienda Cataywa, a sugarcane farm owned by Manuel Villanueva and managed by Joemarie Villanueva, with Mancy and Sons Enterprises, Inc. also impleaded as her employer. She claimed that she began working on the hacienda in 1970 but was reported to the Social Security System only in 1978, and that although SSS contributions were deducted from her wages from 1970 to 1995, not all of them were remitted, which ultimately caused the rejection of her claim. Talisay Farms, Inc. was later impleaded by virtue of its Investment Agreement with Mancy and Sons Enterprises.

On October 22, 2002, upon inquiry, Lorezo received a letter from the SSS Western Visayas Group informing her that she could not avail of retirement benefits because her records showed only sixteen months of paid contributions — 104 months short of the 120-month minimum. The letter also stated that the System's investigation of her alleged employment under Hda. Cataywa could not be confirmed because Manuel Villanueva was permanently residing in Manila and Joemarie Villanueva denied having managed the farm. She was advised of her options: to continue paying contributions as a voluntary member, to request a refund, to leave her contributions in trust with the System, or to file a petition before the Social Security Commission so that any employer liability could be determined.

Aggrieved, Lorezo filed an Amended Petition dated September 30, 2003 before the Commission, alleging employment as a laborer in Hda. Cataywa managed by Jose Marie Villanueva beginning in 1970, reporting for SSS coverage only in 1978, and non-remittance of contributions deducted from her wages from 1970 to 1995. She impleaded Talisay Farms, Inc. and prayed that the veil of corporate fiction be pierced on the theory that Mancy and Sons Enterprises and Manuel and Jose Marie Villanueva were one and the same.

Manuel and Jose Villanueva answered that all farm workers of Hda. Cataywa were reported and their contributions duly paid and remitted to the SSS, and that it was the late Domingo Lizares, Jr. who managed and administered the hacienda. Talisay Farms, Inc. moved to dismiss on the ground of lack of cause of action, there being no allegation of an employer-employee relationship between it and Lorezo.

The Commission found Lorezo to have been a regular employee subject to compulsory coverage from 1970 to February 25, 1990. It gave weight to the Joint Affidavit of Demetria Denaga and Susano Jugue, who stated that Denaga and Lorezo both started working at Hda. Cataywa in 1970 and that Denaga, like Lorezo, was reported to the SSS only on December 19, 1978; the records also showed that the Commission had found Denaga employed by Manuel Villanueva at Hda. Cataywa from 1970 to December 1987. The Commission noted that no ill will on the part of Denaga and Jugue had been shown, and that the SSS Form R-1A relied upon by the petitioners merely reflected the date on which Lorezo was reported for coverage, not the date she actually began working. The petitioners' claim that all farm records had been destroyed by termites and elements, and their characterization of Lorezo as a very casual worker who had rendered only sixteen months of contributions, were rejected.

• Procedural Rigidity: Petitioners argued that the Court of Appeals committed reversible error in strictly and rigidly applying the technical rules of procedure and dismissing the case on technicality without evaluating its merits.
• Speculative Findings on Employment Period: Petitioners maintained that the Commission made conclusions founded on speculations and surmises in ruling that respondent worked from 1970 to February 25, 1990, and that it gave no credence or weight to the existing SSS Form R-1A and to farm bookkeeper Wilfredo Ibalobor.
• Destruction of Records and Casual Employment: Petitioners insisted that after thirty long years all farm records had already been destroyed by termites and elements, leaving SSS Form R-1A as the only remaining source of information, and that respondent was a very casual worker.
• Six-Month Cultivation Period: Petitioners asserted that sugarcane cultivation covers only a period of six months, thereby disproving the allegation that respondent worked eleven months a year for twenty-five years.
• Impropriety of the 3% Penalty: Petitioners alleged that the imposition of the 3% per month penalty on delayed payment of contributions was not proper.
• Absence of Basis for Damages: Petitioners insisted that the award of damages for misrepresentation was without basis.
• No Basis for Piercing the Corporate Veil: Petitioners averred that there was no legal basis to pierce the veil of the corporate entity.

• Procedural Technicalities: Whether the Court of Appeals erred in strictly and rigidly applying the technical rules of procedure and dismissing the case on technicality without evaluating its merits.
• Period of Employment: Whether respondent worked for petitioners from 1970 to February 25, 1990, or only from 1978 as reflected in SSS Form R-1A.
• Nature of Employment: Whether respondent was a regular seasonal employee or a mere casual worker.
• Delinquent Contributions: Whether petitioners are liable for delinquent SSS contributions.
• Three Percent Monthly Penalty: Whether petitioners are liable for the 3% per month penalty on delayed payment of contributions.
• Damages for Misrepresentation: Whether petitioners are liable for damages due to misrepresentation of the true date of respondent's employment.
• Piercing the Corporate Veil: Whether Mancy and Sons Enterprises, Inc. and Manuel Villanueva are one and the same, warranting the piercing of the corporate veil.

• Procedural Technicalities: No. The Court of Appeals' outright dismissal was relaxed, the petitioners having substantially complied with the Rules when they attached the secretary's certificate of authority and the required pleadings and documents to their Motion for Reconsideration.
• Period of Employment: Yes — respondent worked from 1970 to February 25, 1990. SSS Form R-1A merely recorded the date she was reported for coverage, and the unrebutted Joint Affidavit of Denaga and Jugue established the 1970 start of employment.
• Nature of Employment: Regular seasonal employee, not casual. Farm workers are seasonal employees who become regular when called to work from time to time, and the nature of the services performed, not their duration, determines coverage.
• Delinquent Contributions: Yes. Proof that respondent began working in 1970 established the deficiency in contributions, although the amount must be computed on the basis of six months of service per year.
• Three Percent Monthly Penalty: Yes. The imposition of the 3% penalty for late remittance is mandatory and cannot be waived by the System, the Commission's power being limited to prescribing the manner of payment.
• Damages for Misrepresentation: Yes. Section 24(b) of the Social Security Law imposes damages on an employer who misrepresents the true date of employment of an employee member.
• Piercing the Corporate Veil: No. Respondent failed to substantiate that Mancy and Sons Enterprises, Inc. and Manuel and Jose Marie Villanueva were one and the same; the case against the individual Villanuevas was accordingly dismissed.

• Procedural Technicalities: Procedural rules are to be treated with utmost respect because they facilitate adjudication and remedy delay, but exceptions exist for the most compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends of justice. Citing Obut vs. Court of Appeals, the Court reiterated that a party-litigant must be given the fullest opportunity to establish the merits of his complaint or defense rather than lose life, liberty, honor or property on technicalities. When the Court of Appeals dismisses a petition outright and the petitioner files a motion for reconsideration appending the requisite pleadings, documents or order/resolution, this constitutes substantial compliance with the Revised Rules of Court. Here, the petitioners attached a secretary's certificate giving Joemarie Villanueva authority to sign on behalf of the corporation, together with the necessary attachments, to their Motion for Reconsideration. Because the issues could be resolved on the pleadings and documents filed, and because respondent herself asked for early resolution, the Court resolved the controversy once and for all instead of remanding the case to the Court of Appeals.

• Period of Employment: Although the Court is not a trier of facts, the issues raised were resolvable on the record. There is no particular form of evidence required to prove the existence of an employer-employee relationship; any competent and relevant evidence may be admitted, and it may be entirely testimonial, for otherwise no scheming employer would be brought before the bar of justice. The petitioners erred in insisting that SSS Form R-1A was the only remaining source of information, since that form merely reflected the time at which they reported respondent for SSS coverage; they failed to substantiate their claim that she reported for work only in 1978. The records contained no showing that Demetria Denaga and Susano Jugue harbored ill will against the petitioners that would have prompted them to execute false affidavits, and their Joint Affidavit stated that Denaga and respondent both began working at Hda. Cataywa in 1970 and were both reported to the SSS on December 19, 1978. The Commission had likewise found Denaga employed by Manuel Villanueva at Hda. Cataywa from 1970 to December 1987.

• Nature of Employment: Article 280 of the Labor Code classifies employees as regular, project, or casual. Farm workers generally fall under the definition of seasonal employees, and seasonal employees may be considered regular employees when they are called to work from time to time; they are in regular employment because of the nature of the job and not because of the length of time they have worked, although seasonal workers who have worked for only one season may not be considered regular. The nature of the services performed, not the duration thereof, is determinative of coverage. To be exempted as a casual employee, the services must not merely be irregular, temporary or intermittent but must also be unconnected with the business or occupation of the employer. Applying De Leon vs. NLRC, the primary standard for regular employment is the reasonable connection between the particular activity performed and the usual business or trade of the employer, measured by the nature of the work and its relation to the scheme of the business in its entirety; an employee who has performed the job for at least one year, even if intermittently, is deemed regular with respect to that activity. The petitioners failed to dispute that respondent performed hacienda work such as planting sugarcane point, fertilizing, weeding, replanting dead sugarcane fields, and routine miscellaneous hacienda work; they merely alleged that she was a casual worker because she had only sixteen months of contributions, which did not prove that her job was unconnected with the employer's business. Respondent was therefore a regular seasonal worker, not a casual one. Because the petitioners themselves provided that sugarcane cultivation covers only six months, respondent could not be considered a regular employee during the months when there was no cultivation, and the delinquent contributions had to be computed at six months per year of service.

• Delinquent Contributions: Having been proven by sufficient evidence that respondent began working for the hacienda in 1970, it followed that the petitioners were liable for the deficiency in SSS contributions, subject to the modification that the computation be based on six months of service per year.

• Three Percent Monthly Penalty: The imposition upon and payment by the delinquent employer of the 3% penalty for late remittance of premium contributions is mandatory and cannot be waived by the System. The law merely gives the Commission the power to prescribe the manner of paying the premiums; the power to remit or condone the penalty for late remittance is not embraced therein. The petitioners therefore erred in alleging that the imposition of the penalty was improper.

• Damages for Misrepresentation: The law provides that where the employer misrepresents the true date of employment of the employee member, the employer shall pay the SSS damages equivalent to the difference between the amount of benefit to which the employee member or his beneficiary is entitled had the proper contributions been remitted and the amount payable on the basis of the contributions actually remitted; where the employee member or beneficiary is entitled to pension benefits, the damages shall be equivalent to the accumulated pension due as of the date of settlement of the claim or to the five years' pension, whichever is higher, including the dependent's pension. The award of damages for misrepresentation was thus proper.

• Piercing the Corporate Veil: Under Rivera vs. United Laboratories, Inc., a corporation may be merged with the persons composing it when its corporate legal entity is used as a cloak for fraud or illegality. The doctrine applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made a shield to confuse legitimate issues, or where the corporation is the mere alter ego or business conduit of a person, or where it is so organized and controlled and its affairs so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and convincingly; it cannot be presumed. The corporate veil may be pierced only if it becomes a shield for fraud, illegality or inequity committed against a third person, and in alter ego cases, where the stock of a corporation is owned by one person such that the corporation functions only for the benefit of that individual owner, the corporation and the individual should be deemed the same. Respondent failed to substantiate her claim that Mancy and Sons Enterprises, Inc. and Manuel and Jose Marie Villanueva were one and the same; she based it on the SSS form in which Manuel Villanueva appeared as employer, which did not prove that the corporation was used to defeat public convenience, justify wrong, protect fraud, or defend crime, or as a shield to confuse legitimate issues. It was neither alleged nor proven that Mancy and Sons Enterprises, Inc. functioned only for the benefit of Manuel Villanueva, so one could not be the alter ego of the other. The case against Manuel and Jose Marie Villanueva was accordingly dismissed.

• Substantial compliance with procedural rules — Procedural rules are to be treated with utmost respect, but exceptions are recognized for the most compelling reasons where strict obedience would defeat rather than serve the ends of justice. When the Court of Appeals dismisses a petition outright and the petitioner files a motion for reconsideration appending the requisite pleadings, documents or order/resolution, this constitutes substantial compliance with the Revised Rules of Court. The Court applied the doctrine to excuse the petitioners' failure to attach the secretary's certificate and complete pleadings at the time of filing, and proceeded to resolve the case on the merits.

• Proof of employer-employee relationship — No particular form of evidence is required to prove the existence of an employer-employee relationship; any competent and relevant evidence may be admitted, and it may be entirely testimonial, for otherwise no scheming employer would be brought before the bar of justice. The Court applied this to uphold the finding of employment based on the Joint Affidavit of Denaga and Jugue rather than on SSS Form R-1A, which merely recorded the date of reporting for coverage.

• Classification of employees under Article 280 of the Labor Code — The provision identifies three types of employees: (1) regular employees, or those engaged to perform activities usually necessary or desirable in the usual business or trade of the employer; (2) project employees, or those whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of engagement, or those whose work or service is seasonal in nature and is performed for the duration of the season; and (3) casual employees, or those who are neither regular nor project employees. Any employee who has rendered at least one year of service, whether continuous or broken, is considered a regular employee with respect to the activity in which he is employed.

• Farm workers as regular seasonal employees — Farm workers generally fall under the definition of seasonal employees. Seasonal employees may be considered regular employees when they are called to work from time to time; they are in regular employment because of the nature of the job and not because of the length of time they have worked. Seasonal workers who have worked for only one season may not be considered regular employees. The nature of the services performed, and not the duration thereof, is determinative of coverage. To be exempted as a casual employee, the services must not merely be irregular, temporary or intermittent but must also be unconnected with the business or occupation of the employer. The Court applied this to hold respondent a regular seasonal worker despite having only sixteen months of posted contributions, but limited her coverage to six months per year because sugarcane cultivation lasts only that long.

• De Leon vs. NLRC test for regular employment — The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee and the usual business or trade of the employer; the test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection is determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. If the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability, of that activity to the business, and the employment is considered regular with respect to such activity while it exists.

• Mandatory nature of the 3% penalty — The imposition upon and payment by the delinquent employer of the 3% penalty for late remittance of premium contributions is mandatory and cannot be waived by the System. The law merely gives the Commission the power to prescribe the manner of paying the premiums; the power to remit or condone the penalty is not embraced therein.

• Damages for misrepresentation of the date of employment — Under Section 24(b) of the Social Security Law, an employer who misrepresents the true date of employment of an employee member shall pay the SSS damages equivalent to the difference between the amount of benefit to which the employee member or his beneficiary is entitled had the proper contributions been remitted and the amount payable on the basis of the contributions actually remitted. Where the employee member or beneficiary is entitled to pension benefits, the damages shall be equivalent to the accumulated pension due as of the date of settlement of the claim or to the five years' pension, whichever is higher, including the dependent's pension.

• Piercing the veil of corporate fiction — A corporation may be regarded as an association of persons, or two corporations merged into one, when its corporate legal entity is used as a cloak for fraud or illegality. The doctrine applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made a shield to confuse legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where it is so organized and controlled and its affairs so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. To disregard the corporation's separate juridical personality, the wrongdoing must be established clearly and convincingly; it cannot be presumed. The corporate veil may be pierced only if it becomes a shield for fraud, illegality or inequity committed against a third person. In alter ego cases, where the stock of a corporation is owned by one person whereby the corporation functions only for the benefit of that individual owner, the corporation and the individual should be deemed the same. The Court applied the doctrine to reject respondent's claim, absent any showing that the corporation was used as a shield for fraud or that it functioned solely for Manuel Villanueva's benefit.

• "When the CA dismisses a petition outright and the petitioner files a motion for the reconsideration of such dismissal, appending thereto the requisite pleadings, documents or order/resolution, this would constitute substantial compliance with the Revised Rules of Court." — This passage states the procedural ratio that allowed the Court to overlook the Court of Appeals' outright dismissal and reach the merits, and it is the formulation of the substantial-compliance rule applied to the petitioners' belated attachments.

• "It was settled that there is no particular form of evidence required to prove the existence of the employer-employee relationship. Any competent and relevant evidence to prove such relationship may be admitted. This may entirely be testimonial." — This defines the evidentiary standard for establishing employment, which the Court used to uphold the finding of a 1970 employment date based on affidavits rather than on SSS Form R-1A.

• "Farm workers generally fall under the definition of seasonal employees." — This is the canonical formulation of the labor-law doctrine applied to classify respondent as a regular seasonal employee rather than a casual worker.

• "To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and convincingly. It cannot be presumed." — This states the quantum of proof required for piercing the corporate veil, which respondent failed to satisfy, resulting in the dismissal of the case against the individual Villanuevas.

• Obut vs. Court of Appeals, 162 Phil. 731 (1976) — Cited as controlling authority for the principle that judicial orders are issued to be obeyed but non-compliance is dealt with as circumstances warrant, and that a party-litigant must be given the fullest opportunity to establish the merits of his complaint or defense rather than lose life, liberty, honor or property on technicalities.
• Garcia vs. Philippine Airlines, Inc., 498 Phil. 808 (2005) — Cited as the source of the rule that appending the requisite pleadings, documents or order/resolution to a motion for reconsideration of an outright dismissal constitutes substantial compliance with the Revised Rules of Court.
• Gapayao vs. Fulo, SSS and SSC, G.R. No. 193493, June 13, 2013 — Cited for the rule that the Court is not a trier of facts, for the classification of employees under Article 280 of the Labor Code, and for the doctrine that farm workers are seasonal employees who may be considered regular when called to work from time to time.
• Martinez vs. NLRC, 339 Phil. 176 (1997) — Cited for the rule that no particular form of evidence is required to prove the existence of an employer-employee relationship and that such proof may be entirely testimonial.
• Vinoya vs. NLRC, 381 Phil. 460 (2000) — Cited in support of the principle that documentary evidence is not indispensable to establish an employer-employee relationship, since requiring it would allow scheming employers to escape liability.
• De Leon vs. NLRC, 257 Phil. 626 (1989) — Cited as the leading exposition of the test for regular employment, particularly the primary standard of reasonable connection between the activity performed and the usual business or trade of the employer, and the one-year intermittent service rule.
• Hacienda Fatima vs. National Federation of Sugarcane Workers-Food & General Trade, 444 Phil. 587 (2003) — Cited for the qualification that seasonal workers who have worked for only one season may not be considered regular employees.
• Rivera vs. United Laboratories, Inc., 604 Phil. 184 (2009) — Cited as the controlling statement of the doctrine of piercing the veil of corporate fiction, including the rule that the wrongdoing must be established clearly and convincingly and cannot be presumed.
• R & E Transport, Inc. vs. Latag, 467 Phil. 355 (2004) — Cited for the caution that the corporate veil may be pierced only if it becomes a shield for fraud, illegality or inequity committed against a third person.
• Arnold vs. Willets and Patterson, Ltd., 44 Phil. 634 (1923) — Cited for the alter ego formulation that where the stock of a corporation is owned by one person whereby the corporation functions only for the benefit of that individual owner, the corporation and the individual should be deemed the same.
• Benares vs. Pancho, 497 Phil. 181 (2005) and Perpetual Help Credit Cooperative, Inc. vs. Faburada, 419 Phil. 147 (2001) — Cited, through Gapayao vs. Fulo, SSS and SSC, for the classification of farm workers as seasonal employees.
• AAG Trucking and/or Alex Ang Gaeid vs. Yuag, G.R. No. 195033, October 12, 2011 — Cited for the rule that seasonal employees may be considered regular employees when called to work from time to time.
• Airport Studio vs. SSC, CA-G.R. No. 34806-R, September 9, 1969 — Cited for the rule that the power to remit or condone the 3% penalty for late remittance of premium contributions is not embraced in the Commission's power to prescribe the manner of paying premiums.
• CMTC International Marketing Corporation vs. BHAGIS International Trading Corporation, G.R. No. 170488, December 10, 2012 and Osmeña vs. Commission on Audit, G.R. No. 188818, May 31, 2011 — Cited for the principle that procedural rules must be respected but may be relaxed for the most compelling reasons where strict obedience would defeat the ends of justice.

• Article 280, Labor Code (Regular and Casual Employment) — Classifies employment as regular where the employee has been engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, except where the employment is fixed for a specific project or the work is seasonal in nature and the employment is for the duration of the season; employment is casual if not covered by the preceding paragraph, provided that an employee who has rendered at least one year of service, continuous or broken, is considered regular with respect to the activity in which he is employed. The Court used this provision to classify respondent as a regular seasonal employee rather than a casual worker.
• Section 22, Social Security Law (Republic Act No. 1161) — The basis for the imposition of the 3% per month penalty on the delayed payment of contributions, which the Court held to be mandatory and not subject to waiver by the System.
• Section 24(b), Social Security Law (Republic Act No. 1161 as amended by Republic Act No. 8282) — Imposes on an employer who misrepresents the true date of employment of an employee member liability for damages equivalent to the difference between the benefit that would have been due had the proper contributions been remitted and the amount payable on the basis of the contributions actually remitted; where pension benefits are involved, the damages equal the accumulated pension as of the date of settlement or the five years' pension, whichever is higher, including the dependent's pension. This provision sustained the award of P32,356.21 in damages.
• Section 5, Rule 43, in relation to Section 7, Rule 45, Rules of Court — Requires that the signatory to a verification attach his authority to sign for and on behalf of the other petitioners; the Court of Appeals cited this as a ground for the outright dismissal, which the Supreme Court excused on substantial compliance.
• Section 6, Rule 43, in relation to Section 7, Rule 43, Rules of Court — Requires that certified true copies of pleadings and documents relevant and pertinent to the petition be complete; the Court of Appeals cited the omission of the Petition/Amended Petition, the Answer, the parties' position papers, and their memoranda of appeal as a further ground for dismissal.
• Section 13, Article VIII, 1987 Constitution — The basis for the certification that the conclusions of the Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

• Presbitero J. Velasco, Jr., Associate Justice (Chairperson)
• Martin S. Villarama, Jr., Associate Justice
• Bienvenido L. Reyes, Associate Justice
• Francis H. Jardeleza, Associate Justice