ROLANDO DE ROCA, PETITIONER, VS. EDUARDO C. DABUYAN, JENNIFER A. BRANZUELA, JENNYLYN A. RICARTE, AND HERMINIGILDO F. SABANATE, RESPONDENTS.

Rolando De Roca versus Eduardo Dabuyan

The Case

This is a petition for review on certiorari brought by Rolando De Roca against Eduardo Dabuyan, Jennifer Branzuela, Jennylyn Ricarte, and Herminigildo Sabanate. The respondents were hotel workers who filed a complaint for illegal dismissal, and De Roca was later impleaded as a co-respondent on the theory that he was the new management of the hotel that employed them. De Roca insists he was never their employer, only the owner of the building that the true employer leased and operated as a hotel. The case matters because the Supreme Court uses it to settle two things at once: who is the real employer when the owner of the premises is dragged into a labor case, and whether a judgment that rests on pure technicality may stand when it would work a grave miscarriage of justice.

Procedural History

The labor case began before a labor arbiter of the National Labor Relations Commission. The labor arbiter denied De Roca's motion to dismiss as a prohibited pleading filed out of time, and then rendered a decision finding all the respondents liable for illegal dismissal and ordering them to pay backwages, other monetary claims, and attorney's fees. De Roca did not appeal. Instead, he filed a petition for annulment of judgment before the National Labor Relations Commission, which dismissed it as tardy for having been filed beyond the ten-day reglementary period under the 2011 NLRC Rules of Procedure. He moved for reconsideration, and that too was denied.

De Roca then went up to the Court of Appeals on a petition for certiorari. The Court of Appeals dismissed the petition, holding that the National Labor Relations Commission did not err in denying the annulment petition for tardiness, and that the labor arbiter committed no grave abuse of discretion in denying the motion to dismiss and in incorporating that denial in the decision itself. It also refused to pass on the merits of the employer-employee relationship, saying that question required presentation and evaluation of evidence, which is not proper in a petition for certiorari. De Roca's motion for reconsideration was denied, so he filed this petition for review on certiorari before the Supreme Court, with a prayer for injunctive relief against execution of the judgment. The Supreme Court granted temporary injunctive relief, later issued a temporary restraining order upon the posting of a bond, and eventually gave due course to the petition.

Facts

De Roca owned a building in Parañaque City known as the RAF Mansion Hotel. On September 25, 2007, he leased the entire hotel premises to Oceanic Travel and Tour Agency, represented by Victoriano Ewayan, for a term of five years, at a monthly rental of 450,000 pesos, with the lessee bearing all expenses, utilities, maintenance, and taxes except real property taxes. Oceanic continued to operate the hotel under the same name, RAF Mansion Hotel. The respondents worked there as cook, waitress, and housekeeper.

In 2012, the respondents filed a complaint for illegal dismissal against the RAF Mansion Hotel old management and new management and Victoriano Ewayan. They later amended the complaint to include De Roca as a co-respondent. Summons sent to him by registered mail was returned, but a later summons was personally served on him by the sheriff of the National Labor Relations Commission. He did not attend the conference or the subsequent hearings, so the labor arbiter directed the respondents to submit their position paper. On April 18, 2012, the respondents submitted their position paper, and on the same day De Roca filed a motion to dismiss on the ground of lack of jurisdiction, claiming that Ewayan was the true employer.

The labor arbiter denied the motion to dismiss as filed beyond the period allowed by the rules, and, because the respondents' allegations stood uncontradicted, rendered judgment finding all the respondents liable for illegal dismissal. De Roca received a copy on August 3, 2012. He did not appeal but filed a petition for annulment of judgment on September 4, 2012, which the National Labor Relations Commission dismissed as tardy. In this Court, De Roca attached the lease contract, a demand letter to Ewayan to pay and vacate, and a written waiver executed by the respondents, except Sabanate, acknowledging that De Roca should not be held liable as owner of the premises for the problems caused by Ewayan.

Issues

• Whether or not the Court of Appeals erred in affirming the labor tribunals, which held De Roca solidarily liable with Ewayan and Oceanic despite the absence of an employer-employee relationship between him and the respondents.
• Whether or not the labor arbiter and the National Labor Relations Commission acquired jurisdiction over De Roca when the element of employer-employee relationship was lacking.
• Whether or not the labor arbiter's decision, which rested on a purely technical ground, may stand despite a strong showing that a grave miscarriage of justice would result.

Applicable Provisions

Article 1311 of the Civil Code provides:

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 is the provision the Court uses to hold that the employment contract between the respondents and Oceanic binds only those parties and does not extend to De Roca, who is not a party to it.

Section 6, Rule V of the 2011 NLRC Rules of Procedure provides:

Section 6. Motion to Dismiss. Before the date set for the mandatory conciliation and mediation conference, the respondent may file a motion to dismiss on grounds provided under Section 5, paragraph (a) hereof. Such motion shall be immediately resolved by the Labor Arbiter through a written order. An order denying the motion to dismiss, or suspending its resolution until the final determination of the case, is not appealable.

This is the rule the labor arbiter applied in denying De Roca's motion to dismiss as a prohibited pleading, and which the Court examines in weighing technicality against substantial justice.

Section 7, Rule V of the same Rules provides:

Section 7. Effect of Failure to File. No motion to dismiss shall be allowed or entertained after the lapse of the period provided in Section 6 hereof.

This is the provision that made De Roca's motion to dismiss a prohibited pleading, the very technicality the Court declines to let defeat the merits.

Section 2, Rule V of the same Rules provides:

Section 2. Nature of Proceedings. The proceedings before the Labor Arbiter shall be non-litigious in nature. Subject to the requirements of due process, the technicalities of law and procedure and the rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may avail himself/herself of all reasonable means to ascertain the facts of the controversy speedily, including ocular inspection and examination of well-informed persons.

This is the provision the Court invokes to stress that labor proceedings are non-litigious and that the labor tribunals should have scrutinized the lease contract instead of deciding on pure technicality.

Ruling

On the first issue, the Court ruled in favor of De Roca. It found that he was never the employer of the respondents. He did not hire them, did not pay their salaries, did not supervise or control them, and had no power to terminate them. The lease contract showed that he was merely the owner-lessor of the building, while Oceanic, through Ewayan, operated the hotel. There was no connection between De Roca and Oceanic other than the lease, and they were not partners in the operation of the hotel. The Court noted that the respondents originally did not implead De Roca and did so only later, which showed an afterthought, and that treating him as the new management was an admission that he had no hand in the old management under Ewayan. Applying Article 1311, the Court held that the employment contract between the respondents and Oceanic binds only them and does not extend to De Roca. To allow recovery from him would result in unjust enrichment.

On the second issue, the Court held that the labor tribunals never acquired jurisdiction over De Roca, because the element of employer-employee relationship was lacking. His inclusion in the labor case was borne of the respondents' inability to trace Ewayan, who had absconded.

On the third issue, the Court held that the labor arbiter's decision, resting on pure technicality, must be set aside as grossly erroneous and unjust. It stressed that the rules of procedure are mere tools designed to facilitate the attainment of justice, and that technicalities take a backseat against substantive rights. The Court also held that since the issue of the existence of an employment relation was raised in the petition and squarely met in the respondents' comment, it was ripe for adjudication, and there was no need to remand the case to the labor arbiter. The decision being void, it created no rights and imposed no duties, and could not have acquired finality.

Doctrine

The owner of the premises leased to and operated by another is not the employer of the workers hired by the lessee. The employment contract binds only the parties to it, their assigns and heirs, under Article 1311 of the Civil Code, and does not extend to a stranger to that contract. The test of employment remains the four-fold test: the power to hire, the payment of wages, the power of control, and the power to dismiss. Where these are absent, no employer-employee relationship arises, and the labor tribunals acquire no jurisdiction over the supposed employer. Finally, rules of procedure are tools of justice, not its masters; where their strict application would work a grave miscarriage of justice, the Court may relax them in the interest of substantial justice, especially in labor proceedings which are non-litigious in nature.

Disposition

The petition was granted; the Court of Appeals decision and resolution were reversed and set aside, and the labor case was ordered dismissed, but only as against Rolando De Roca.

Remember This

The single line worth memorizing is that the owner-lessor of a building is not the employer of the workers of the lessee, because a contract of employment binds only the parties to it. Examiners like to use this case on the four-fold test of employment, on Article 1311 of the Civil Code as a limit on who may be held liable, and on the rule that technicalities of procedure must yield to substantial justice.