G.R. No. 182915 and G.R. No. 189658; December 12, 2011
Case Parties/Title:

G.R. No. 182915: MARIALY O. SY, ET AL., Petitioners, vs. FAIRLAND KNITCRAFT CO., INC., Respondent.
G.R. No. 189658: SUSAN T. DE LEON, Petitioner, vs. FAIRLAND KNITCRAFT CO., INC., ET AL., Respondents.

FACTS

1. Fairland Knitcraft Co., Inc. (Fairland) is a domestic corporation engaged in the garments business. Susan T. de Leon (Susan) is the owner/proprietress of Weesan Garments (Weesan).
2. The complaining workers (sewers, trimmers, helpers, a guard, and a secretary) were hired by Weesan at various dates from 1995 to 2002.
3. On December 23, 2002, some workers filed a complaint with the NLRC Arbitration Branch against Susan/Weesan for underpayment/non-payment of wages, overtime, holiday premium, 13th month pay, and other benefits. In January 2003, the rest of the workers filed similar complaints, which were later consolidated.
4. On February 5, 2003, Weesan reported a temporary closure to the DOLE-NCR. As the workers were no longer allowed to work, they filed an Amended Complaint on February 18, 2003, and another pleading on March 13, 2003, to include the charge of illegal dismissal and to implead Fairland and its manager, Debbie Manduabas, as additional respondents.
5. A Notice of Hearing was sent to Weesan for April 3, 2003. Atty. Antonio A. Geronimo appeared as counsel for Weesan and requested an extension to file a position paper. On the next hearing on April 28, 2003, Atty. Geronimo also entered his appearance for Fairland and again requested an extension.
6. On May 16, 2003, Atty. Geronimo filed two separate position papers—one for Fairland (verified by Debbie Manduabas) and one for Susan/Weesan (verified by Susan). The workers filed a Reply. Atty. Geronimo then filed a Consolidated Reply verified by both Susan and Debbie. The workers submitted a Rejoinder.
7. On November 26, 2003, Labor Arbiter Ramon Valentin C. Reyes rendered a Decision dismissing the complaint for lack of merit but ordering respondents to pay each complainant ₱5,000 as financial assistance.
8. The NLRC, on appeal, reversed the Labor Arbiter. In its November 30, 2004 Decision, it declared the dismissal illegal and ordered respondents (Susan/Weesan and Fairland) solidarily liable for reinstatement with full backwages, payment of wage differentials, unpaid benefits, separation pay if reinstatement is not possible, and attorney’s fees.
9. Atty. Geronimo filed a Motion for Reconsideration. Subsequently, Fairland, through a new counsel, Atty. Melina O. Tecson, filed a separate Motion for Reconsideration, assailing the jurisdiction of the labor tribunals over it, claiming it was never summoned and did not engage Atty. Geronimo’s services. The NLRC denied both motions.
10. Fairland and Susan filed separate Petitions for Certiorari before the Court of Appeals (CA). In CA-G.R. SP No. 93204 (Fairland’s petition), the CA First Division, on July 25, 2007, denied the petition, affirming the NLRC’s finding of illegal dismissal and solidary liability based on labor-only contracting.
11. Fairland filed a Motion for Reconsideration and a Motion for Voluntary Inhibition of two justices. The case was transferred to the CA Special Ninth Division, which, on May 9, 2008, reversed the First Division’s ruling. It held that the labor tribunals did not acquire jurisdiction over Fairland’s person, and even if they did, Weesan was a bona fide independent contractor, not a labor-only contractor. It annulled the NLRC Decision and Resolution insofar as Fairland was concerned.
12. In CA-G.R. SP No. 93860 (Susan’s petition), the CA Special Former Special Eighth Division, on July 20, 2009, affirmed the NLRC’s November 30, 2004 Decision and August 26, 2005 Resolution. It denied Susan’s Motion for Reconsideration on October 1, 2009.
13. The consolidated Petitions for Review on Certiorari were filed before the Supreme Court.

ISSUE

1. Whether the labor tribunals (Labor Arbiter and NLRC) acquired jurisdiction over the person of respondent Fairland.
2. Whether Weesan Garments is a labor-only contractor, making Fairland solidarily liable for the claims of the complaining workers.

RULING

1. On Jurisdiction over Fairland: The Supreme Court ruled that the labor tribunals did acquire jurisdiction over the person of Fairland. Jurisdiction over the person is acquired by voluntary appearance or submission to the authority of the tribunal. The records show that Atty. Antonio Geronimo entered his appearance as counsel for Fairland during the April 28, 2003 hearing before the Labor Arbiter and requested an extension to file a position paper. He subsequently filed a Position Paper for Fairland verified by its manager, Debbie Manduabas, and a Consolidated Reply also verified by Debbie Manduabas. These acts constitute voluntary appearance and submission to the Labor Arbiter’s jurisdiction. Fairland’s claim that it never engaged Atty. Geronimo’s services was belied by these pleadings filed on its behalf and verified by its agent. The Court emphasized that a lawyer appearing for a party is presumed to be properly authorized. Fairland’s subsequent filing of a Motion for Reconsideration through a different counsel (Atty. Tecson) after an adverse NLRC decision did not negate the earlier voluntary submission. Therefore, the labor tribunals validly acquired jurisdiction over Fairland.
2. On Labor-Only Contracting: The Supreme Court ruled that Weesan Garments was a labor-only contractor, making Fairland solidarily liable with Susan/Weesan for the workers’ claims. The Court found that the workers were engaged in activities directly related to Fairland’s main garments business (sewing, trimming). Weesan did not have substantial capital or investment. The workers performed their duties under Fairland’s control and supervision, using Fairland’s materials, sewing machines, and factory premises. Fairland’s own manager, Debbie Manduabas, admitted in her verification of the position paper that the workers were sewing Fairland’s products. These circumstances satisfy the criteria for labor-only contracting under Article 106 of the Labor Code and established jurisprudence. As a labor-only contractor, Weesan is considered merely an agent of Fairland. The principal, Fairland, is therefore responsible to the workers as if it directly employed them. Consequently, Fairland is solidarily liable with Susan/Weesan for the illegal dismissal and monetary claims of the workers.
DISPOSITIVE PORTION:
The Supreme Court GRANTED the petition in G.R. No. 182915 and DENIED the petition in G.R. No. 189658. The Court REINSTATED the July 25, 2007 Decision of the Court of Appeals First Division in CA-G.R. SP No. 93204, which affirmed the November 30, 2004 Decision and August 26, 2005 Resolution of the NLRC. The NLRC’s ruling, which declared the workers’ dismissal illegal and held respondents Susan T. de Leon/Weesan Garments and Fairland Knitcraft Co., Inc. solidarily liable for reinstatement with full backwages, payment of wage differentials, unpaid benefits, separation pay (if reinstatement is not possible), and attorney’s fees, was upheld.