SECOND DIVISION

[G.R. No. 127181. September 4, 2001]

LAND BANK OF THE PHILIPPINES, petitioner, vs. THE COURT OF APPEALS, ECO MANAGEMENT
CORPORATION and EMMANUEL C. OATE, respondents.

DECISION
QUISUMBING, J.:

This petition for review on certiorari seeks to reverse and set aside the decision promulgated on June 17, 1996 in CA-GR No.
[1]

CV-43239 of public respondent and its resolution dated November 29, 1996 denying petitioners motion for reconsideration.
[2] [3]

The facts of this case as found by the Court of Appeals and which we find supported by the records are as follows:

On various dates in September, October, and November, 1980, appellant Land Bank of the Philippines (LBP) extended a
series of credit accommodations to appellee ECO, using the trust funds of the Philippine Virginia Tobacco Administration
(PVTA) in the aggregate amount of P26,109,000.00. The proceeds of the credit accommodations were received on behalf
of ECO by appellee Oate.

On the respective maturity dates of the loans, ECO failed to pay the same. Oral and written demands were made, but ECO
was unable to pay. ECO claims that the company was in financial difficulty for it was unable to collect its investments
with companies which were affected by the financial crisis brought about by the Dewey Dee scandal.

xxx

On October 20, 1981, ECO proposed and submitted to LBP a Plan of Payment whereby the former would set up a
financing company which would absorb the loan obligations. It was proposed that LBP would participate in the scheme
through the conversion of P9,000,000.00 which was part of the total loan, into equity.

On March 4, 1982, LBP informed ECO of the action taken by the formers Trust Committee concerning the Plan of
Payment which reads in part, as follows:

xxx

Please be informed that the Banks Trust Committee has deliberated on the plan of payment during its meetings on
November 6, 1981 and February 23, 1982. The Committee arrived at a decision that you may proceed with your Plan of
Payment provided Land Bank shall not participate in the undertaking in any manner whatsoever.

In view thereof, may we advise you to make necessary revision in the proposed Plan of Payment and submit the same to
us as soon as possible. (Records, p. 428)

On May 5, 1982, ECO submitted to LBP a Revised Plan of Payment deleting the latters participation in the proposed
financing company. The Trust Committee deliberated on the Revised Plan of Payment and resolved to reject it. LBP then
sent a letter to the PVTA for the latters comments. The letter stated that if LBP did not hear from PVTA within five (5)
days from the latters receipt of the letter, such silence would be construed to be an approval of LBPs intention to file suit
against ECO and its corporate officers. PVTA did not respond to the letter.

On June 28, 1982, Landbank filed a complaint for Collection of Sum of Money against ECO and Emmanuel C. Oate
before the Regional Trial Court of Manila, Branch 50.
After trial on the merits, a judgment was rendered in favor of LBP; however, appellee Oate was absolved from personal
liability for insufficiency of evidence.

Dissatisfied, both parties filed their respective Motions for Reconsideration. LBP claimed that there was an error in
computation in the amounts to be paid.LBP also questioned the dismissal of the case with regard to Oate.

On the other hand, ECO questioned its being held liable for the amount of the loan. Upon order of the court, both parties
submitted Supplemental Motions for Reconsideration and their respective Oppositions to each others Motions.

On February 3, 1993, the trial court rendered an Amended Decision, the dispositive portion of which reads as follows:

ACCORDINGLY, the Decision, dated December 3, 1990, is hereby modified to read as follows:

WHEREFORE, judgment is rendered ordering defendant Eco Management Corporation to pay plaintiff Land Bank of the
Philippines:

A. The sum of P26,109,000.00 representing the total amount of the ten (10) loan accommodations plus 16% interest per
annum computed from the dates of their respective maturities until fully paid, broken down as follows:

1. the principal amount of P4,000,000.00 with interest at 16% computed from September 18, 1981;

2. the principal amount of P5,000,000.00 with interest at 16% computed from September 21, 1981;

3. the principal amount of P1,000,000.00 with interest rate at 16% computed from September 28, 1981;

4. the principal amount of P1,000,000.00 with interest at 15% computed from October 5, 1981;

5. the principal amount of P2,000,000.00 with interest rate at of 16% computed from October 8, 1981;

6. the principal amount of P2,000,000.00 with interest rate at of 16% from October 23, 1981;

7. the principal amount of P814,000.00 with interest rate at of 16% computed from November 1, 1981;

8. the principal amount of P2,295,000.00 with interest rate at of 16% computed from November 6, 1981;

9. the principal amount of P3,000,000.00 with interest rate at of 16% computed from November 7, 1981;

10. the principal amount of P5,000,000.00 with interest rate at 16% computed from November 9, 1981;

B. The sum of P260,000.00 as attorneys fees; and

C. The costs of the suit.

The case as against defendant Emmanuel Oate is dismissed for insufficiency of evidence.

SO ORDERED. (Records, p. 608) [4]

The Court of Appeals affirmed in toto the amended decision of the trial court. [5]

On June 9, 1996, petitioner filed a motion for reconsideration, which was denied in a resolution dated November 29,
1996. Hence, this present petition, assigning the following errors allegedly committed by the Court of Appeals:
A
THE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT BASED ON THE FACTS AS
ESTABLISHED BY EVIDENCE, THERE EXISTS A SUBSTANTIAL AND JUSTIFIABLE GROUND UPON WHICH
THE LEGAL NOTION OF THE CORPORATE FICTION OF RESPONDENT ECO MANAGEMENT CORPORATION
MAY BE PIERCED.

THE COURT OF APPEALS GRAVELY ERRED IN NOT A[T]TACHING LIABILITY TO RESPONDENT

EMMANUEL C. OATE JOINTLY AND SEVERALLY WITH RESPONDENT ECO MANAGEMENT CORPORATION
FOR THE PRINCIPAL SUM OF P26 M PLUS INTEREST THEREON.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE LOWER COURT THE
SAME NOT BEING SUPPORTED BY THE EVIDENCE AND APPLICABLE LAWS AND JURISPRUDENCE. [6]

The primary issues for resolution here are (1) whether or not the corporate veil of ECO Management Corporation should be
pierced; and (2) whether or not Emmanuel C. Oate should be held jointly and severally liable with ECO Management Corporation for
the loans incurred from Land Bank.
Petitioner contends that the personalities of Emmanuel Oate and of ECO Management Corporation should be treated as one, for
the particular purpose of holding respondent Oate liable for the loans incurred by corporate respondent ECO from Land
Bank. According to petitioner, the said corporation was formed ostensibly to allow Oate to acquire loans from Land Bank which he
used for his personal advantage.
Petitioner submits the following arguments to support its stand: (1) Respondent Oate owns the majority of the interest holdings in
respondent corporation, specifically during the crucial time when appellees applied for and obtained the loan from LANDBANK,
sometime in September to November, 1980. (2) The acronym ECO stands for the initials of Emmanuel C. Oate, which is the logical,
sensible and concrete explanation for the name ECO, in the absence of evidence to the contrary. (3) Respondent Oate has always
referred to himself as the debtor, not merely as an officer or a representative of respondent corporation. (4) Respondent Oate
personally paid P1 Million taken from trust accounts in his name. (5) Respondent Oate made a personal offering to pay his personal
obligation. (6) Respondent Oate controlled respondent corporation by simultaneously holding two (2) corporate positions, viz., as
Chairman and as treasurer, beginning from the time of respondent corporations incorporation and continuously thereafter without
benefit of election. (7) Respondent corporation had not held any meeting of the stockholders or of the Board of Directors, as shown by
the fact that no proceeding of such corporate activities was filed with or borne by the record of the Securities and Exchange
Commission (SEC). The only corporate records respondent corporation filed with the SEC were the following: Articles of
Incorporation, Treasurers Affidavit, Undertaking to Change Corporate Name, Statement of Assets and Liabilities. [7]

Private respondents, in turn, contend that Oates only participation in the transaction between petitioner and respondent ECO was
his execution of the loan agreements and promissory notes as Chairman of the corporations Board of Directors. There was nothing in
the loan agreement nor in the promissory notes which would indicate that Oate was binding himself jointly and severally with
ECO. Respondents likewise deny that ECO stands for Emmanuel C. Oate. Respondents also note that Oate is no longer a majority
stockholder of ECO and that the payment by a third person of the debt of another is allowed under the Civil Code. They also alleged
that there was no fraud and/or bad faith in the transactions between them and Land Bank. Hence, private respondents conclude, there
is no legal ground to pierce the veil of respondent corporations personality.
[8]

At the outset, we find the matters raised by petitioner in his argumentation are mainly questions of fact which are not proper in a
petition of this nature. Petitioner is basically questioning the evaluation made by the Court of Appeals of the evidence submitted at
[9]

the trial. The Court of Appeals had found that petitioners evidence was not sufficient to justify the piercing of ECOs corporate
personality. Petitioner contended otherwise. It is basic that where what is being questioned is the sufficiency of evidence, it is a
[10]

question of fact. Nevertheless, even if we regard these matters as tendering an issue of law, we still find no reason to reverse the
[11]

findings of the Court of Appeals.

A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those persons
composing it as well as from any other legal entity to which it may be related. By this attribute, a stockholder may not, generally, be
[12]

made to answer for acts or liabilities of the said corporation, and vice versa. This separate and distinct personality is, however,
[13]

merely a fiction created by law for convenience and to promote the ends of justice. For this reason, it may not be used or invoked for
[14]

ends subversive to the policy and purpose behind its creation or which could not have been intended by law to which it owes its
[15]

being. This is particularly true when the fiction is used to defeat public convenience, justify wrong, protect fraud, defend crime,
[16]

confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. This is likewise true where the
[17] [18] [19]

corporate entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another
corporate entity. In all these cases, the notion of corporate entity will be pierced or disregarded with reference to the particular
[20]

transaction involved. [21]

The burden is on petitioner to prove that the corporation and its stockholders are, in fact, using the personality of the corporation
as a means to perpetrate fraud and/or escape a liability and responsibility demanded by law. In order to disregard the separate juridical
personality of a corporation, the wrongdoing must be clearly and convincingly established. In the absence of any malice or bad faith,
[22]

a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. [23]

The mere fact that Oate owned the majority of the shares of ECO is not a ground to conclude that Oate and ECO is one and the
same. Mere ownership by a single stockholder of all or nearly all of the capital stock of a corporation is not by itself sufficient reason
for disregarding the fiction of separate corporate personalities. Neither is the fact that the name ECO represents the first three letters
[24]

of Oates name sufficient reason to pierce the veil. Even if it did, it does not mean that the said corporation is merely a dummy of
Oate. A corporation may assume any name provided it is lawful. There is nothing illegal in a corporation acquiring the name or as in
this case, the initials of one of its shareholders.
That respondent corporation in this case was being used as a mere alter ego of Oate to obtain the loans had not been shown. Bad
faith or fraud on the part of ECO and Oate was not also shown. As the Court of Appeals observed, if shareholders of ECO meant to
defraud petitioner, then they could have just easily absconded instead of going out of their way to propose Plans of Payment.
Likewise, Oate volunteered to pay a portion of the corporations debt. This offer demonstrated good faith on his part to ease the debt
[25] [26]

of the corporation of which he was a part. It is understandable that a shareholder would want to help his corporation and in the
process, assure that his stakes in the said corporation are secured. In this case, it was established that the P1 Million did not come
solely from Oate. It was taken from a trust account which was owned by Oate and other investors. It was likewise proved that the P1
[27]

Million was a loan granted by Oate and his co-depositors to alleviate the plight of ECO. This circumstance should not be construed
[28]

as an admission that he was really the debtor and not ECO.

In sum, we agree with the Court of Appeals conclusion that the evidence presented by the petitioner does not suffice to hold
respondent Oate personally liable for the debt of co-respondent ECO. No reversible error could be attributed to respondent courts
decision and resolution which petitioner assails.
WHEREFORE, the petition is DENIED for lack of merit. The decision and resolution of the Court of Appeals in CA-G.R. CV
No. 43239 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

FIRST DIVISION
 [G.R. No. 116781. September 5, 1997]

TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION, THOMAS and JAMES

DEVELOPERS (PHIL.), INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
MARIO O. LABENDIA, SR., ROBERTO LABENDIA, NARCISO ADAN, FLORENCIO GOMEZ,
ERNESTO BAGATSOLON, SALVADOR BABON, PATERNO BISNAR, CIPRIANO BERNALES,
ANGEL MABULAY, SR., LEO SURIGAO, and ROQUE MORILLO, respondents.

DECISION
BELLOSILLO, J.:

From October to December 1990 private respondents individually filed complaints for illegal dismissal against
petitioners with the National Labor Relations Commission Regional Arbitration Branch No. VIII (NLRC - RAB VIII),
Tacloban City. Alleging that they were hired for various periods as construction workers in different capacities they
described their contractual terms as follows: (a) Roberto Labendia, general construction foreman, from 1971 to 17 October
1990 at P3,700/month; (b) Narciso Adan, tireman, from October 1981 to November 1990 at P75.00/day; (c) Florencio
Gomez, welder, from July 1983 to July 1990 at P60.00/day; (d) Ernesto Bagatsolon leadman/checker, from June 1982 to
October 1990 at P2,800/month; (e) Salvador Babon, clerk/timekeeper/paymaster, from June 1982 to October 1990
at P3,200/month; (f) Paterno Bisnar, road grader operator, from January 1979 to October 1990 at P105/day; (g) Cipriano
Bernales, instrument man, from February 1980 to November 1990 at P3,200/month; (h) Angel Mabulay, Sr., dump truck
driver, from August 1974 to October 1990 at P90/day; (I) Leo Surigao, payloader operator, from March 1975 to January
1978 at P100/day; (J) Mario Labendia, Sr. surveyor/foreman, from August 1971 to July 1990 at P2,900/month; and, (k)
Roque Morillo, company watchman, from August 1983 to October 1990 at P3,200/month. [1]

Within the periods of their respective employments, they alternately worked for petitioners Tomas Lao Corporation
(TLC), Thomas and James Developers (T&J) and LVM Construction Corporation (LVM), altogether informally referred to
as the Lao Group of Companies, the three (3) entities comprising a business conglomerate exclusively controlled and
managed by members of the Lao family.
TLC, T&J and LVM are engaged in the construction of public roads and bridges. Under joint venture agreements they
entered into among each other, they would undertake their projects either simultaneously or successively so that,
whenever necessary, they would lease tools and equipment to one another. Each one would also allow the utilization of
their employees by the other two (2). With this arrangement, workers were transferred whenever necessary to on-going
projects of the same company or of the others, or were rehired after the completion of the project or project phase to
which they were assigned. Soon after, however, TLC ceased its operations while T&J and LVM stayed on.
[2]

Sometime in 1989 Andres Lao, Managing Director of LVM and President of T&J, issued a memorandum requiring
[3] [4]

all workers and company personnel to sign employment contract forms and clearances which were issued on 1 July 1989
but antedated 10 January 1989.These were to be used allegedly for audit purposes pursuant to a joint venture agreement
between LVM and T&J. To ensure compliance with the directive, the company ordered the withholding of the salary of any
employee who refused to sign. Quite notably, the contracts expressly described the construction workers as project
employees whose employments were for a definite period, i.e., upon the expiration of the contract period or the
completion of the project for which the workers was hired.
Except for Florencio Gomez all private respondents refused to sign contending that this scheme was designed by
[5]

their employer to downgrade their status from regular employees to mere project employees. Resultantly, their salaries
were withheld. They were also required to explain why their services should not be terminated for violating company rules
and warned that failure to satisfactorily explain would be construed as disinterest in continued employment with the
company. Since the workers stood firm in their refusal to comply with the directives their services were terminated.
NLRC RAB VIII dismissed the complaints lodged before it, finding that private respondents were project employees
whose employments could be terminated upon completion of the projects or project phase for which they were hired. It
upheld petitioners contention that the execution of their employment contracts was to forestall the eventuality of being
compelled to pay the workers their salaries even if there was no more work to be done due to the completion of the
projects or project phases. The labor court however granted each employee a separation pay of P6,435.00 computed at
one-half (1/2) month salary for every year of service, uniformly rounded at five (5) years. [6]

The decision of Labor Arbiter Gabino A. Velasquez, Jr., was reversed on appeal by the Fourth Division of the National
Labor Relations Commission (NLRC) of Cebu City which found that private respondents were regular employees who
were dismissed without just cause and denied due process. The NLRC also overruled the fixing by the Labor Arbiter of the
term of employment of complainants uniformly at five (5) years since the periods of employment of the construction
workers as alleged in their complaints were never refuted by petitioners. In granting monetary awards to complainants,
NLRC disregarded the veil of corporate fiction and treated the three (3) corporations as forming only one entity on the
basis of the admission of petitioners that the three (3) operated as one (1), intermingling and commingling all its
resources, including manpower facility. [7]

Petitioners now lay their cause before us and assign the following errors: (a) NLRC erred in classifying the
employees as regular instead of project employees; (b) assuming that the workers were regular employees, NLRC failed
to consider that they were terminated for cause; (c) assuming further that the employees were illegally dismissed, NLRC
erred in awarding back wages in excess of three (3) years; and, (d) assuming finally that the decision is correct, NLRC
erred when it pierced the veil of corporate personality of petitioner-corporations.
The main thrust of petitioners expostulation is that respondents have no valid cause to complain about their
employment contracts since these documents merely formalized their status as project employees. They cite Policy
Instruction No. 20 of the Department of Labor which defines project employees as those employed in connection with a
particular construction project, adding that the ruling in Sandoval Shipyards, Inc. v. NLRC applies squarely to the instant
[8]

case because there the Court declared that the employment of project employees is co-terminous with the completion of
the project regardless of the number of projects in which they have worked. And as their employment is one for a definite
period, they are not entitled to separation pay nor is their employer required to obtain clearance from the Secretary of
Labor in connection with their termination. Petitioners thus argue that their dismissal from the service of private
respondents was legal since the projects for which they were hired had already been completed. As additional ground,
they claim that Mario Labendia and Roberto Labendia had absented themselves without leave giving management no
choice but to sever their employment.
We are not convinced. The principal test in determining whether particular employees are project employees
distinguished from regular employees is whether the project employees are assigned to carry out specific project or
undertaking, the duration (and scope) of which are specified at the time the employees are engaged for the
project. Project in the realm of business and industry refers to a particular job or undertaking that is within the regular or
usual business of employer, but which is distinct and separate and identifiable as such from the undertakings of the
company. Such job or undertaking begins and ends at determined or determinable times. [9]

While it may be allowed that in the instant case the workers were initially hired for specific projects or undertakings of
the company and hence can be classified as project employees, the repeated re-hiring and the continuing need for their
services over a long span of time (the shortest, at seven [7] years) have undeniably made them regular employees. Thus,
we held that where the employment of project employees is extended long after the supposed project has been finished,
the employees are removed from the scope of project employees and considered regular employees. [10]

While length of time may not be a controlling test for project employment, it can be a strong factor in determining
whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary
and indispensable to the usual business or trade of the employer. In the case at bar, private respondents had already
gone through the status of project employees. But their employments became non-coterminous with specific projects
when they started to be continuously re-hired due to the demands of petitioners business and were re-engaged for many
more projects without interruption. We note petitioners own admission -

[t]hese construction projects have been prosecuted by either of the three petitioners, either individually or in a joint
venture with one another. Likewise, these construction projects have been prosecuted by either of the three petitioners,
either simultaneously, one construction project overlapping another and/or one project commencing immediately after
another project has been completed or terminated. Perhaps because of their capacity to prosecute government projects and
their good record and performance, at least one of the three petitioners had an on-going construction project and/or one of
the three petitioners construction project overlapped that of another. [11]

The denial by petitioners of the existence of a work pool in the company because their projects were not continuous
is amply belied by petitioners themselves who admit that -

All the employees of either of the three petitioners were actually assigned to a particular project to remain in said project
until the completion or termination of that project. However, after the completion of that particular project or when their
services are no longer needed in the project or particular phase of the project where they were assigned, they were
transferred and rehired in another on-going project. [12]

A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment
during temporary breaks in the business, provided that the worker shall be available when called to report for a
project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers
insofar as the effect of temporary cessation of work is concerned.This is beneficial to both the employer and employee for
it prevents the unjust situation of coddling labor at the expense of capital and at the same time enables the workers to
attain the status of regular employees. Clearly, the continuous rehiring of the same set of employees within the framework
of the Lao Group of Companies is strongly indicative that private respondents were an integral part of a work pool from
which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project employees, petitioners point out
that the workers were not regularly maintained in the payroll and were free to offer their services to other companies when
there were no on-going projects.This argument however cannot defeat the workers status of regularity. We apply by
analogy the case of Industrial-Commercial-Agricultural Workers Organization v. CIR which deals with regular seasonal
[13]

employees. There we held -

That during the temporary layoff the laborers are free to seek other employment is natural, since the laborers are not being
paid, yet must find means of support. A period during which the Central is forced to suspend or cease operation for a time
xxx should not mean starvation for employees and their families (emphasis supplied).

Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work. Of
course, no compensation can be demanded from the employer because the stoppage of operations at the end of a project
and before the start of a new one is regular and expected by both parties to the labor relations. Similar to the case of
regular seasonal employees, the employment relation is not severed by merely being suspended. The employees are,
[14]

strictly speaking, not separated from services but merely on leave of absence without pay until they are
reemployed. Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the payroll and the
[15]

opportunity to seek other employment denote project employment.

Contrary to petitioners assertion, our ruling in Sandoval Shipyards is inapplicable considering the special
circumstances attendant to the present case. In Sandoval, the hiring of construction workers, unlike in the instant case,
was intermittent and not continuous for the shipyard merely accepts contracts for shipbuilding or for repair of vessels from
third parties and, only on occasions when it has work contract of this nature that it hires workers to do the job which,
needless to say, lasts only for less than a year or longer. [16]

Moreover, if private respondents were indeed employed as project employees, petitioners should have submitted a
report of termination to the nearest public employment office every time their employment was terminated due to
completion of each construction project. The records show that they did not. Policy Instruction No. 20 is explicit that
[17]

employers of project employees are exempted from the clearance requirement but not from the submission of termination
report. We have consistently held that failure of the employer to file termination reports after every project completion
proves that the employees are not project employees. Nowhere in the New Labor Code is it provided that the reportorial
[18]

requirement is dispensed with. The fact is that Department Order No. 19 superseding Policy Instruction No. 20 expressly
provides that the report of termination is one of the indicators of project employment. [19]

We agree with the NLRC that the execution of the project employment contracts was farcical. Obviously, the
[20]

contracts were a scheme of petitioners to prevent respondents from being considered as regular employees. It imposed
time frames into an otherwise flexible employment period of private respondents some of whom were employed as far
back as 1969. Clearly, here was an attempt to circumvent labor laws on tenurial security. Settled is the rule that when
periods have been imposed to preclude the acquisition of tenurial security by the employee, they should be struck down
as contrary to public morals, good customs or public order. Worth noting is that petitioners had engaged in various joint
[21]

venture agreements in the past without having to draft project employment contracts. That they would require execution of
employment contracts and waivers at this point, ostensibly to be used for audit purposes, is a suspect excuse, considering
that petitioners enforced the directive by withholding the salary of any employee who spurned the order.
We likewise reject petitioners justification in re-hiring private respondents i.e., that it is much cheaper and economical
to re-hire or re-employ the same workers than to train a new set of employees. It is precisely because of this cost-saving
benefit to the employer that the law deems it fair that the employees be given a regular status. We need not belabor this
point.
The NLRC was correct in finding that the workers were illegally dismissed. The rule is that in effecting a valid
dismissal, the mandatory requirements of substantive and procedural due process must be strictly complied with. These
were wanting in the present case. Private respondents were dismissed allegedly because of insubordination or blatant
refusal to comply with a lawful directive of their employer. But willful disobedience of the employers lawful orders as a just
cause for the dismissal of the employees envisages the concurrence of at least two (2) requisites: (a) the employees
assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful and perverse
attitude; and, (b) the order violated must have been reasonable, lawful, made known to the employee and must pertain to
the duties which he has been engaged to discharge. The refusal of private respondents was willful but not in the sense
[22]

of plain and perverse insubordination. It was dictated by necessity and justifiable reasons - for what appeared to be an
innocent memorandum was actually a veiled attempt to deny them their rightful status as regular employees. The workers
therefore had no option but to disobey the directive which they deemed unreasonable and unlawful because it would
result in their being downsized to mere project workers. This act of self-preservation should not merit them the extreme
penalty of dismissal.
The allegation of petitioners that private respondents are guilty of abandonment of duty is without merit. The
elements of abandonment are: (a) failure to report for work or absence without valid or justifiable reason, and, (b) a clear
intention to sever the employer-employee relationship, with the second element as the more determinative factor
manifested by some overt acts. In this case, private respondents Roberto Labendia and Mario Labendia were forced to
[23]

leave their respective duties because their salaries were withheld. They could not simply sit idly and allow their families to
starve. They had to seek employment elsewhere, albeit temporarily, in order to survive. On the other hand, it would be the
height of injustice to validate abandonment in this particular case as a ground for dismissal of respondents thereby
making petitioners benefit from a gross and unjust situation which they themselves created. Private respondents did not
[24]

intend to sever ties with petitioner and permanently abandon their jobs; otherwise, they would not have filed this complaint
for illegal dismissal.
[25]

Petitioners submit that since private respondents were only project employees, they are not entitled to security of
tenure. This is incorrect. In Archbuild Masters and Construction, Inc. v. NLRC we held -
[26]

x x x a project employee hired for a specific task also enjoys security of tenure. A termination of his employment must be
for a lawful cause and must be done in a manner which affords him the proper notice and hearing x x x x To allow
employers to exercise their prerogative to terminate a project workers employment based on gratuitous assertions of
project completion would destroy the constitutionally protected right of labor to security of tenure (emphasis supplied).

The burden of proving that an employee has been lawfully dismissed therefore lies with the employer. In the case at
bar, the assertions of petitioners were self-serving and insufficient to substantiate their claim of proximate project
completion. The services of the employees were terminated not because of contract expiration but as sanction for their
refusal to sign the project employment forms and quitclaims.
Finding that the dismissal was without just cause, we find it unnecessary to dwell on the non-observance of
procedural due process.Suffice it to state that private respondents were not priorly notified of their impending dismissal
and that they were not provided ample opportunity to defend themselves.
Petitioners charge as erroneous the grant to private respondents by NLRC of back wages in excess of three (3)
years or, in the alternative, to an award of separation pay if reinstatement is no longer feasible.
We disagree. Since the illegal dismissal was made in 1990 or after the effectivity of the amendatory provision of RA
No. 6715 on 21 March 1989, private respondents back wages should be computed on the basis of Art. 279 of the Labor
Code which states that (a)n employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.
Conformably with our ruling in Bustamante v. NLRC the illegally dismissed employees are entitled to full back
[27]

wages, undiminished by earnings derived elsewhere during the period of their illegal dismissal. In the event that
reinstatement is no longer feasible, back wages shall be computed from the time of illegal termination until the time of the
finality of the decision. The award shall be based on the documents submitted by private respondents, i.e. affidavits,
[28]

SSS and Medicare documents, since petitioners failed to adduce competent evidence to the contrary. The separation pay
shall be equivalent to "at least one (1) month salary or to one (1) month salary for every year of service, whichever is
higher, a fraction of at least six (6) months being considered as one whole year." [29]

Finally, public respondent NLRC did not err in disregarding the veil of separate corporate personality and holding
petitioners jointly and severally liable for private respondents back wages and separation pay. The records disclose that
the three (3) corporations were in fact substantially owned and controlled by members of the Lao family composed of Lao
Hian Beng alias Tomas Lao, Chiu Siok Lian (wife of Tomas Lao), Andrew C. Lao, Lao Y. Heng, Vicente Lao Chua, Lao E.
Tin, Emmanuel Lao and Ismaelita Maluto. A majority of the outstanding shares of stock in LVM and T&J is owned by the
Lao family. T&J is 100% owned by the Laos as reflected in its Articles of Incorporation. The Lao Group of Companies
therefore is a closed corporation where the incorporators and directors belong to a single family. Lao Hian Beng is the
same Tomas Lao who owns Tomas Lao Corporation and is the majority stockholder of T&J. Andrew C. Lao is the
Managing Director of LVM Construction, and President and Managing Director of the Lao Group of
Companies. Petitioners are engaged in the same line of business under one management and use the same equipment
including manpower services. Where it appears that [three] business enterprises are owned, conducted and controlled by
the same parties, both law and equity will, when necessary to protect the rights of third persons, disregard the legal fiction
that the [three] corporations are distinct entities, and treat them as identical.
[30]
 Consonant with our earlier ruling, we hold that the liability of petitioners extends to the responsible officers acting in
[31]

the interest of the corporations. In view of the peculiar circumstances of this case, we disregard the separate personalities
of the three (3) corporations and at the same time declare the members of the corporations jointly and severally liable with
the corporations for the monetary awards due to private respondents. It should always be borne in mind that the fiction of
law that a corporation as a juridical entity has a distinct and separate personality was envisaged for convenience and to
serve justice; therefore it should not be used as a subterfuge to commit injustice and circumvent labor laws.
WHEREFORE, the petition is DENIED and the decision of the National Labor Relations Commission dated 05
August 1994 is AFFIRMED. Petitioners are ordered to reinstate private respondents to their former positions without loss
of seniority rights and other privileges with full back wages, inclusive of allowances, computed from the time
compensation was withheld up to the time of actual reinstatement. In the event that reinstatement is no longer feasible,
petitioners are directed to pay private respondents separation pay equivalent to one month salary for every year of
service, a fraction of at least six (6) months being considered one (1) year in the computation thereof, and full back wages
computed from the time compensation was withheld until the finality of this decision. All other claims of the parties are
DISMISSED for lack of merit. Costs against petitioners.
SO ORDERED.
Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.