Photo from Pexels | Ann H

This article is provided for general informational purposes only and does not create, nor shall it be construed as creating, a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. For advice on specific legal concerns, you are encouraged to engage the services of a qualified lawyer. You may also directly consult Alburo Alburo and Associates Law Offices for proper guidance tailored to your situation.

The views and information presented herein are based on the laws, rules, and jurisprudence prevailing at the time of writing. They do not take into account subsequent legal developments and should not be relied upon as a substitute for professional legal advice.

AT A GLANCE:

The death of the sole proprietor dissolves the proprietorship. But what happens when a successor-business illegally dismisses an employee of the dissolved proprietorship? In the case of Galit v. Willy, the Court applied the doctrine of piercing the corporate veil on Treebox as a sole proprietorship, as it acted as a mere alter ego and successor-business to MWC Enterprises, the defunct proprietorship that had previously employed Galit. The Court ruled that Galit had been illegally dismissed.

Facts:

In 1998, Nilo Galit (Galit) was hired as a helper by MWC Enterprises (MWC), a sole proprietorship providing printing services, owned and operated by Willy Tantongco (Willy). 

On June 6, 216, Galit was hospitalized until June 16, 20216. Calumba, MWC’s secretary,  approved Galit’s leave of absence and told him to take his time and return to work when he was fully recovered.

In January 2017, Galit reported back to work, although he was not fully recovered. Calumba refused to let Galit work, telling him to go home and to rest so that he could fully recover.

On January 18, 2018, Willy, MWC’s sole proprietor, died. On April 13, 2018, Cristine, Willy’s daughter, filed an Establishment Employment Report (Report) with the Department of Labor and Employment (DOLE) of Galit’s permanent termination from MWC because he had been absent without official leave (AWOL) for one year and 10 months.

On May 9, 2018, Susan Tantongco, Willy’s Wife, and Critine put up Treebox, their own printing business, and on May 25, 2018, MWC’s business was retired.

On September 10, 2018, Galit fully recovered and reported for work. To his surprise, Calumba, who was already working for Treebox, informed him that he was no longer an MWC employee and that MWC had already closed. However, MWC et al. contended that it was actually on October 4, 2018, when Galit went to the former office of MWC, which was then already occupied by Treebox, and during which time he was informed that he had been reported as AWOL to the DOLE.

On October 24, 2018, Galit filed a Complaint for illegal dismissal, claiming that he was illegally dismissed from employment without due process.

MWC et al. countered that Galit was not dismissed but that he abandoned his job on account of his unauthorized leave of absence for a protracted period of time, and that he was already reported as AWOL before the DOLW. Willy or MWC cannot be held liable for illegal dismissal since Willy died on January 17, 2018, and MWC formally ceased its operation on May 25, 2018 after Galit was reported as AWOL to the DOLE. Cristine and Treebox were also not made liable for illegal dismissal, as Treebox only came into existence on May 8, 2018, and Galit was not its employee.

Labor Arbiter’s Ruling

In a Decision, the labor arbiter found Treebox as the business successor of MWC for the following reasons: (a) both Treebox and MWC were engaged in the business of providing printing services; (b) Treebox was a family business, owned by the members of the same family that owned MWC; (c) both businesses had the same business address; (d) Calumba was retained as a Treebox employee; and (e) Cristine reported Galit to DOLE as AWOL on behalf of MWC.

Thus, the labor arbiter rejected MWC et al.’s argument that Galit abandoned his work. There being no just or authorized cause of this dismissal, it was clear that Galit was illegally dismissed from his employment. As such, the labor arbiter ruled in Galit’s favor and awarded him backwages and separation pay. 

NLRC’s Decision

On appeal, the NLRC rendered its Decision reversing the ruling of the labor arbiter and dismissing Galit’s complaint. The NLRC found no basis to impute liability upon Treebox as the successor-in-interest of MWC.  Galit moved for reconsideration, but the NLRC denied it in its Resolution.

CA Decision

Aggrieved, Galit elevated the matter before the CA. In its Decision, the CA dismissed the petition and affirmed the ruling of the NLRC. Galit moved for reconsideration, but the CA denied it in its Resolution. Hence, Galit filed the present Petition. 

Court’s Ruling on Illegal Dismissal

The issue for the Court to resolve is whether the CA erred in affirming the NLRC’s ruling, which dismissed petitioner Nilo S. Galit’s illegal dismissal and money claims.

The Court found that Galit had been illegally dismissed.

Contrary to the view of the CA, the Court found it apt to pierce the corporate veil of Treebox and treat it as one and the same as MWC. 

For the piercing doctrine to apply, it is of no consequence if the company is a sole proprietorship. For as long as the separate and distinct personality of such juridical entity is used to perpetuate fraud, commit illegal acts, and evade one’s obligations, the equitable doctrine of piercing the veil of corporate fiction will apply, as these are the acts which the doctrine seeks to prevent and remedy.

A careful scrutiny of the circumstances obtaining in this case indubitably shows that Treebox is nothing more than a mere alter ego of MWC. It is not lost on this Court that Cristine was the one who reported petitioner to the DOLE as AWOL. Additionally, she signed the Report as MWC’s owner/company representative. If she is truly not privy to the affairs of MWC, it is highly unlikely that she would know that the petitioner had not been reporting for work for quite some time, which would necessitate her making the report. Even assuming that her only purpose in filing the report with DOLE was to help wind up the business of MC following the demise of its proprietor, her failing to indicate in the Report that the status of the establishment as “permanent closure” instead of “reduction of workforce” betrays Cristyine intent for Treebox to continue MWC’s venture and absorb its employees, except petitioner. This is shown by the fact that Calumba is now employed with Treebox, despite no evidence having been presented to show that a Report was submitted to DOLE stating her separation from MWC due to its permanent closure by reason of its proprietor’s demise. These circumstances, coupled with the fact that MWC and Treebox are both engaged in the same line of business and have the same office address, give ground to petitioner’s asseveration that Treebox is a continuation of MWC’s enterprise. Hence, Treebox’s separate personality must be disregarded. It must be treated as one and the same as MWC, thus making Treebox liable for illegal dismissal and monetary claims if the petitioner duly proves the same. These circumstances justify the application of the piercing doctrine, otherwise, this Court will run afoul of the mandate for the Constitution to secure the workingman’s employment and guarantee them full protection in labor.

In cases of illegal termination of employees or other unjust acts perpetuated by corporations, partnerships, or associations, their officers are generally not held liable along with the corporation, partnership or association. However, this rule admits of certain exceptions. In Lambert Pawnbrokers and Jewelry Corporation v. Binamira, this Court ruled:

As a general rule, only employer-corporation, partnership, or association or any other entity and not its officers, which may be held liable for illegal dismissal of employees or for other wrongful acts. This is as it should be because a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. A corporation as a juridical entity, may act only through its directors, officers, and employees. Obligations incurred as a result of the directors’ and officers’ acts as corporate agents, are not their personal liability but the direct responsibility of the corporation they represent. It is settled that in the absence of malice and bad faith, a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. They are only solidarily liable with the corporation for the illegal termination of services of employees if they acted with malice or bad faith. In Philippine American Life and General Insurance v. Gramaje, bad faith is defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purpose. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. 

Here, the unceremonious termination of petitioner without the observance of procedural and substantive due process to ease him out of his employment, even if Cristine intended Treebox to continue MWC’s business sufficiently demonstrates that Cristine acted in bad faith, as would make her solidarily liable with Treebox for the illegal dismissal of petitioner and the adjudged money claims in his favor. 

Court’s Ruling on Abandonment

The respondents contended that petitioner was not terminated from employment but instead abandoned his employment. The Court was not persuaded.

In this case, records show that petitioner’s absence from work was caused by his injuries. Respondent could not claim without knowing about his ailment, given that, despite his long absence from work, petitioner was never issued a return-to-work order. He was also not required to explain his long absence. These circumstances lend credence to petitioner’s argument that he was permitted to take a leave of absence from work until he gets better. His lack of intention to sever his employment relationship with MWC is clearly shown when he went back to the office in January 2017 and asked to be given a job, even as a gate opener, as he was not fully well, only to be given false assurances to take as much time as he needed to recover fully. It must be emphasized that respondents did not refute the petitioner’s claim. From this factual backdrop, it is clear that the elements of abandonment are lacking. Since respondents failed to substantiate their claim that petitioner abandoned his work, his dismissal from work is unquestionably illegal.

Case: Nilo S. Galit vs. Willy Tantongco, et al. (G.R. No. 273877 | November 18, 2025)

Read also: What Does It Mean to Pierce the Corporate Veil?

Click here to subscribe to our newsletter

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

All rights reserved.