BENIGNO M. VIGILLA, et al., petitioner, vs.

PHILIPPINE COLLEGE OF CRIMINOLOGY, et

al., respondents.
G.R. No. 200094, June 10, 2013.

TOPIC: Contracting Arrangement.

FACTS:

The Philippine College of Criminology, Inc. (PCCI) hired Benigno M. Vigilla, et al. as janitors and
janitresses but were told that they would be under the Metropolitan Building Services, Inc. (MBMSI), a
corporation engaged in providing janitorial services to clients. PCCI later discovered that MBMSI’s
Certificate of Incorporation had been revoked, prompting them to terminate the school’s relationship with
MBMSI. As a result, the employees under MBMSI were also terminated.

This prompted Vigilla et al to file before the Labor Arbiter a complaint for illegal dismissal,
reinstatement, back wages and other indemnities against MBMSI and PCCI, alleging among others that
PCCI is their real employer and not MBMSI. On the other hand, PCCI submitted releases, waivers and
quitclaims made by the employees in favor of MBMSI to prove that they were employees of MBMSI and
not PCCI.

The National Labor Relations Commission (NLRC) found Vigilla et al. to have been illegally dismissed
and that MBMSI is only a labor only contractor. The NLRC however excused PCCI and MBMSI from
liability on account of the releases, quitclaims and waivers executed by the janitors and janitresses.

a) Petitioner’s Arguments (VIGILLA, et al – Lost)

In their complaints, they alleged that it was the school, not MBMSI, which was their real employer
because (a) MBMSI's certification had been revoked; (b) PCCI had direct control over MBMSI's
operations; (c) there was no contract between MBMSI and PCCI; and (d) the selection and hiring of
employees were undertaken by PCCI.

b) Respondent’s Argument’s (PCCI, et al - Win)

On the other hand, PCCI and Bautista contended that (a) PCCI could not have illegally dismissed the
complainants because it was not their direct employer; (b) MBMSI was the one who had complete and
direct control over the complainants; and (c) PCCI had a contractual agreement with MBMSI, thus,
making the latter their direct employer.
PCCI submitted several documents before LA Ronaldo Hernandez, including releases, waivers and
quitclaims in favor of MBMSI executed by the complainants to prove that they were employees of
MBMSI and not PCCI. The said documents appeared to have been notarized by one Atty. Ramil Gabao.

ISSUE:

Are the PCCI and MBMSI excused from liability on account of the releases, waivers and quitclaims they
had executed in favor of MBMSI although this was done after MBMSI’s certificate of Incorporation has
been revoked?

RULING:

The petition failed.

Rule:

Yes. The releases, waivers and quitclaims that were executed were valid despite the revocation of MBSI’s
Certificate of Incorporation. The revocation does not result in the termination of its liabilities. Section 122
of the Corporation Code provides for a three-year winding up period for a corporation whose charter is
annulled by forfeiture or otherwise to continue as a body corporate for the purpose of settling and closing
affairs. Even if said documents were executed six (6) years after MBMSI’s dissolution, they are still valid
and binding upon the parties and the dissolution will not terminate the liabilities incurred by the dissolved
corporation pursuant to Section 122 and 145 of the Corporation code. In the case of Premiere
Development Bank v. Flores, the Court held that a corporation is allowed to settle and close its affairs
even after the winding up period of three years.

Considering that MBMSI, as a labor-only contractor, is solidarily liable with the corporation, as the
principal employer, then the NLRC and the Court of Appeals correctly held that the respondent’s solidary
liability was already expunged by virtue of the releases, waivers and quitclaims executed by each of the
petitioners in favor of MBMSI pursuant to Article 1217 of the Civil Code which provides that “payment
made by one of the solidary debtors extinguishes the obligation.”

Application:

The revocation of the corporation’s articles of incorporation does not result in the termination of its
liabilities. Hence even if the quitclaims, releases and waivers were executed six years after the
corporation’s dissolution, they are still valid and binding upon parties.