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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 102199 January 28, 1997

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE, respondents.

PANGANIBAN, J.:

The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National Labor Relations Commission have no jurisdiction to entertain and rule on money claims where no employer-employee relations is involved. Thus, any such award rendered without jurisdiction is a nullity.

This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the National Labor Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the decision of the labor arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to private respondent.

The Antecedent Facts

The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided: 2

B. Duties and Obligations:

1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars, rules and regulations which it may from time to time, revise, modify or cancel to serve its business interests.

2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp, installation or residence of military personnel. He is free to solicit in the area for which he/she is licensed and as authoriied, provided however, that AFPMBAI may from time to time, assign him a specific area of responsibility and a production quota on a case to case basis.

xxx xxx xxxC. Commission

1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received by AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT at the rates set forth in the applicant's commission schedules hereto attached.

xxx xxx xxx

D. General Provisions

1. There shall be no employer-employee relationship between the parties, the SALES AGENT being hereby deemed an independent contractor.

As compensation, he received commissions based on the following percentages of the premiums paid: 3

"30% of premium paid within the first year;10% of premium paid with the second year;5% of the premium paid during the third year;3% of the premium paid during the fourth year; and1% of the premium paid during the fifth year up tothe tenth year.

On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for another life insurance company in violation of said agreement.

At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24) months per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company. Said summary showed that private respondent had a total commission receivable of P438,835.00, of which only P78,039.89 had been paid to him.

Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through Marketing Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence, believing Concepcion's computations, private respondent signed a quitclaim in favor of petitioner.

Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his check, he discovered from a document (account summary) attached to said check that his total commissions for the 24 months actually amounted to P354,796.09. Said document stated: 4

6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983 grosses P438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June 30, 1989, total expected commission would amount to P354,796.09. From that figure at a 15% compromise settlement this would mean P53,219.41 due him to settle his claim.

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Private respondent, however, was paid only the amount of P35,000.00.

On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner praying for the payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the Public Assistance and Information Division, Office of the Insurance Commissioner, advised private respondent that it was the Department of Labor and Employment that had jurisdiction over his complaint.

On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1) commission for 2 years from termination of employment equivalent to 30% of premiums remitted during employment; (2) P354,796.00 as commission earned from renewals and old business generated since 1983; (3) P100,000.00 as moral damages; and (4) P100,000.00 as exemplary damages.

After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990, the dispositive portion of which reads: 5

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the dismissal of the complainant as just and valid, and consequently, his claim for separation pay is denied. On his money claim, the respondent company is hereby ordered to pay complainant the sum of P319,796.00 plus attorney's fees in the amount of P31,976.60.

All other claims of the complainant are dismissed for want of merit.

The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area of responsibility and a production quota, and read it as signalling the existence of employer- employee relationship between petitioner and private respondent.

On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor Arbiter. In the assailed Resolution, respondent Commission found no reason to disturb said ruling of the labor arbiter and ruled: 7

WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby, denied and the decision appealed from affirmed

SO ORDERED.

Hence, this petition.

The Issue

Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an employer-employee relationship between petitioner and private respondent.

Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employer-employee relationship between private respondent and itself. Hence, respondent commission gravely abused its discretion when it held that the labor arbiter had jurisdiction over the case.

The Court's RulingThe petition is meritorious.

First Issue: Not All That Glitters Is Control

Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence. 8 The determinative factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind this Court.

Respondent Commission concurred with the labor arbiter's findings that: 9

x x x The complainant's job as sales insurance agent is usually necessary and desirable in the usual business of the respondent company. Under the Sales Agents Agreement, the complainant was required to solicit exclusively for the respondent company, and he was bound by the company policies, memo circulars, rules and regulations which were issued from time to time. By such requirement to follow strictly management policies, orders, circulars, rules and regulations, it only shows that the respondent had control or reserved the right to control the complainant's work as solicitor. Complainant was not an independent contractor as he did not carry on an independent business other than that of the company's . . .

To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may assign private respondent a specific area of responsibility and a production quota. From there, it concluded that apparently there is that exercise of control by the employer which is the most important element in determining employer- employee relationship. 10

We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has applied the "four-fold" test in determining the existence of employer-employee relationship. This test considers the following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most important element. 11

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The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business exclusively for petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance agents are barred from serving more than one insurance company, in order to protect the public and to enable insurance companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the Insurance Commission, and not from an intention by petitioner to establish control over the method and manner by which private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship between the parties, nor does it necessarily imbue such relationship with the quality of control envisioned by the law.

So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations issued from time to time is also not indicative of control. In its Reply to Complainant's Position Paper, 13 petitioner alleges that the policies, memo/circulars, and rules and regulations referred to in provision B(1) of the Sales Agent's Agreement are only those pertaining to payment of agents' accountabilities, availment by sales agents of cash advances for sorties, circulars on incentives and awards to be given based on production, and other matters concerning the selling of insurance, in accordance with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are never affected or covered by the rules and regulations concerning employee conduct and penalties for violations thereof, work standards, performance appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence, management-union matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the same are deemed admitted, or at least proven, thereby leaving nothing to support the respondent Commission's conclusion that the foregoing elements signified an employment relationship between the parties.

In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise of control over an employee. First of all, the place of work in the business of soliciting insurance does not figure prominently in the equation. And more significantly, private respondent failed to rebut petitioner's allegation that it had never issued him any territorial assignment at all. Obviously, this Court cannot draw the same inference from this feature as did the respondent Commission.

To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to control the method and the details of performance of the service being rendered, and the degree to which the principal may intervene to exercise such control. The presence of such power of control is indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do

the work according to his own methods and without being subject to the control of the employer except only as to the result of the work. 14 Such is exactly the nature of the relationship between petitioner and private respondent.

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurande company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. . . . None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company. 15

Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell insurance at any time as he was not subject to definite hours or conditions of work and in turn was compensated according to the result of his efforts. By the nature of the business of soliciting insurance, agents are normally left free to devise ways and means of persuading people to take out insurance. There is no prohibition, as contended by petitioner, for private respondent to work for as long as he does not violate the Insurance Code. As petitioner explains:

(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered time to pursue his business. He did not have to punch in and punch out the bundy clock as he was not required to report to the (petitioner's) office regularly. He was not covered by any employee policies or regulations and not subject to the disciplinary action of management on the basis of the Employee Code of Conduct. He could go out and sell

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insurance at his own chosen time. He was entirely left to his own choices of areas or territories, with no definite, much less supervised, time schedule.

(Private respondent) had complete control over his occupation and (petitioner) did not exercise any right of Control and Supervision over his performance except as to the payment of commission the amount of which entirely depends on the sole efforts of (private respondent). He was free to engage in other occupation or practice other profession for as long as he did not commit any violation of the ethical standards prescribed in the Sales Agent's Agreement. 16

Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be disapproved was only the result of the work, and not the means by which it was accomplished.

The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in this situation. Thus, the Court is constrained to rule that no employment relationship had ever existed between the parties.

Second Issue: Jurisdiction of RespondentCommission & Labor Arbiter

Under the contract invoked, private respondent had never been petitioner's employee, but only its commission agent. As an independent contractor, his claim for unpaid commission should have been litigated in an ordinary civil action. 17

The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code. 18 The unifying element running through paragraphs (1) — (6) of said provision is the consistent reference to cases or disputes arising out of or in connection with an employer-employee   relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the article included "all other cases arising from employer-employee relation unless expressly excluded by this Code." 19 Without this critical element of employment relationship, the labor arbiter and respondent Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on the part of the labor arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the respondent Commission's affirmance thereof.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action. 20 Moreover, in the proceedings below, petitioner consistently challenged the jurisdiction of the labor arbiter 21 and respondent Commission. 22

It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final. ". . . (I)t may be said to be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head." 24

The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid commission. Be that as it may, this ruling is without prejudice to private respondent's right to file a suit for collection of unpaid commissions against petitioner with the proper forum and within the proper period.

WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 111870 June 30, 1994

AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

Jerry D. Banares for petitioner.

Perdrelito Q. Aquino for private respondent.

CRUZ, J.:

Private respondent Luis S. Salas was appointed "notarial and legal counsel" for petitioner Air Material Wings Savings and Loan Association (AMWSLAI) in 1980. The appointment was renewed for three years in an implementing order dated January 23, 1987, reading as follows:

SUBJECT: Implementing Order on the Reappointment of the Legal Officer

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TO: ATTY. LUIS S. SALAS

Per approval of the Board en banc in a regular meeting held on January 21, 1987, you are hereby reappointed as Notarial and Legal Counsel of this association for a term of three (3) years effective March 1, 1987, unless sooner terminated from office for cause or as may be deemed necessary by the Board for the interest and protection of the association.

Aside from notarization of loan & other legal documents, your duties and responsibilities are hereby enumerated in the attached sheet, per Articles IX, Section 1-d of the by-laws and those approved by the Board en banc.

Your monthly compensation/retainer's fee remains the same.

This shall form part of your 201 file.

BY AUTHORITY OF THE BOARD:

LUVIN S. MANAYPresident & Chief of the Board

On January 9, 1990, the petitioner issued another order reminding Salas of the approaching termination of his legal services under their contract. This prompted Salas to lodge a complaint against AMWSLAI for separation pay, vacation and sick leave benefits, cost of living allowances, refund of SSS premiums, moral and exemplary damages, payment of notarial services rendered from February 1, 1980 to March 2, 1990, and attorney's fees.

Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It averred that there was no employer-employee relationship between it and Salas and that his monetary claims properly fell within the jurisdiction of the regular courts. Salas opposed the motion and presented documentary evidence to show that he was indeed an employee of AMWSLAI.

The motion was denied and both parties were required to submit their position papers. AMWSLAI filed a motion for reconsideration ad cautelam, which was also denied. The parties were again ordered to submit their position papers but AMWSLAI did not comply. Nevertheless, most of Salas' claims were dismissed by the labor arbiter in his decision dated November 21, 1991. 1

It was there held that Salas was not illegally dismissed and so not entitled to collect separation benefits. His claims for vacation leave, sick leave, medical and dental allowances and refund of SSS premiums were rejected on the ground that he was a managerial employee. He was also denied moral and exemplary damages for lack of evidence of bad faith on the part of AMWSLAI. Neither was he allowed to collect his notarial fees from 1980 up to 1986 because the claim therefor had already prescribed. However, the petitioner was ordered to pay Salas his notarial fees from 1987 up to March 2, 1990, and attorney's fee equivalent to 10% of the judgment award.

On appeal, the decision was affirmed in   toto by the respondent Commission, prompting the petitioner to seek relief in this Court. 2

The threshold issue in this case is whether or not Salas can be considered an employee of the petitioner company.

We have held in a long line of decisions that the elements of an employer-employee relationship are: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) employer's own power to control employee's conduct. 3

The existence of such a relationship is essentially a factual question. The findings of the NLRC on this matter are accorded great respect and even finality when the same are supported by substantial evidence. 4

The terms and conditions set out in the letter-contract entered into by the parties on January 23, 1987, clearly show that Salas was an employee of the petitioner. His selection as the company counsel was done by the board of directors in one of its regular meetings. The petitioner paid him a monthly compensation/retainer's fee for his services. Though his appointment was for a fixed term of three years, the petitioner reserved its power of dismissal for cause or as it might deem necessary for its interest and protection. No less importantly, AMWSLAI also exercised its power of control over Salas by defining his duties and functions as its legal counsel, to wit:

1. To act on all legal matters pertinent to his Office.

2. To seek remedies to effect collection of overdue accounts of members without prejudice to initiating court action to protect the interest of the association.

3. To defend by all means all suit against the interest of the Association. 5

In the earlier case of Hydro   Resources   Contractors   Corp.   v. Pagalilauan, 6 this Court observed that:

A lawyer, like any other professional, may very well be an employee of a private corporation or even of the government. It is not unusual for a big corporation to hire a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its table of organization, and otherwise treat them like its other officers and employees. At the same time, it may also contract with a law firm to act as outside counsel on a retainer basis. The two classes of lawyers often work closely together but one group is made up of employees while the other is not. A similar arrangement may exist as to doctors, nurses, dentists, public relations practitioners and other professionals.

We hold, therefore, that the public respondent committed no grave abuse of discretion in ruling that an employer-employee relationship existed between the petitioner and the private respondent.

We must disagree with the NLRC, however, on Salas' claims for notarial fees.

The petitioner contends that the public respondents are not empowered to adjudicate claims for notarial fees. On the other hand, the Solicitor General believes that the NLRC acted correctly when it took cognizance of the claim because it arose out of Salas'

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employment contract with the petitioner which assigned him the duty to notarize loan agreements and other legal documents. Moreover, Section 9 of Rule 141 of the Rules of Court does not restrict or prevent the labor arbiter and the NLRC from determining claims for notarial fees.

Labor arbiters have the original and exclusive jurisdiction over money claims of workers when such claims have some reasonable connection with the employer-employee relationship. The money claims of workers referred to in paragraph 3 of Article 217 of the Labor Code are those arising out of or in connection with the employer-employee relationship or some aspect or incident of such relationship.

Salas' claim for notarial fees is based on his employment as a notarial officer of the petitioner and thus comes under the jurisdiction of the labor arbiter.

The public respondents agreed that Salas was entitled to collect notarial fees from 1987 to 1990 by virtue of his having been assigned as notarial officer. We feel, however, that there is no substantial evidence to support this finding.

The letter-contract of January 23, 1987, does not contain any stipulation for the separate payment of notarial fees to Salas in addition to his basic salary. On the contrary, it would appear that his notarial services were part of his regular functions and were thus already covered by his monthly compensation. It is true that the notarial fees were paid by members-borrowers of the petitioner for its own account and not of Salas. However, this is not a sufficient basis for his claim to such fees in the absence of any agreement to that effect.

ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the modification that the award of notarial fees and attorney's fees is disallowed. It is so ordered.

Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 114733 January 2, 1997

AURORA LAND PROJECTS CORP. Doing business under the name "AURORA PLAZA" and TERESITA T. QUAZON, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION and HONORIO DAGUI, respondents.

HERMOSISIMA, JR., J.:

The question as to whether an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some businessmen try to avoid the bringing about of an employer-

employee relationship in their enterprises because that judicial relation spawns obligations connected with workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism. 1 In light of this observation, it behooves this Court to be ever vigilant in Checking the unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing their return on investments at the expense of the lowly workingman.

This petition for certiorari seeks the reversal of the Resolution 2 of public respondent National Labor Relations Commission dated March 16, 1994 affirming with modification the decision of the Labor Arbiter, dated May 25, 1992, finding petitioners liable to pay private respondent the total amount of P195,624.00 as separation pay and attorney's fees.

The relevant antecedents:

Private respondent Honorio Dagui was hired by Doña Aurora Suntay Tanjangco in 1953 to take charge of the maintenance and repair of the Tanjangco apartments and residential buildings. He was to perform carpentry, plumbing, electrical and masonry work. Upon the death of Doña Aurora Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco Quazon, took over the administration of all the Tanjangco properties. On June 8, 1991, private respondent Dagui received the shock of his life when Mrs. Quazon suddenly told him: "Wala ka nang trabaho mula ngayon," 3 on the alleged ground that his work was unsatisfactory. On August 29, 1991, private respondent, who was then already sixty-two (62) years old, filed a complaint for illegal dismissal with the Labor Arbiter.

On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, the decretal portion of which reads:

IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or Teresita Tanjangco Quazon are hereby ordered to pay the complainant the total amount of ONE HUNDRED NINETY FIVE THOUSAND SIX HUNDRED TWENTY FOUR PESOS (P195,624.00) representing complainant's separation pay and the ten (10%) percent attorney's fees within ten (10) days from receipt of this Decision.

All other issues are dismissed for lack of merit. 4

Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T. Quazon appealed to the National Labor Relations Commission. The Commission affirmed, with modification, the Labor Arbiter's decision in a Resolution promulgated on March 16, 1994, in the following manner:

WHEREFORE, in view of the above considerations, let the appealed decision be as it is hereby AFFIRMED with (the) MODIFICATION that complainant must be paid separation pay in the amount of P88,920.00 instead of P177,840.00. The award of attorney's fees is hereby deleted. 5

As a last recourse, petitioners filed the instant petition based on grounds not otherwise succinctly and distinctly ascribed, viz:

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RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING THE LABOR ARBITER'S DECISION SOLELY ON THE BASIS OF ITS STATEMENT THAT "WE FAIL TO FIND ANY REASON OR JUSTIFICATION TO DISAGREE WITH THE LABOR ARBITER IN HIS FINDING THAT HONORIO DAGUI WAS DISMISSED BY THE RESPONDENT" (p. 7, RESOLUTION), DESPITE — AND WITHOUT EVEN BOTHERING TO CONSIDER — THE GROUNDS STATED IN PETITIONERS' APPEAL MEMORANDUM WHICH ARE PLAINLY MERITORIOUS.

II

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT COMPLAINANT WAS EMPLOYED BY THE RESPONDENTS MORE SO "FROM 1953 TO 1991" (p. 3, RESOLUTION).

III

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT MORE SO FOR THE EQUIVALENT OF 38 YEARS OF ALLEGED SERVICE.

IV

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING BOTH PETITIONERS LIABLE FOR SEPARATION PAY. 6

It is our impression that the crux of this petition rests on two elemental issues: (1) Whether or not private respondent Honorio Dagui was an employee of petitioners; and (2) If he were, whether or not he was illegally dismissed.

Petitioners insist that private respondent had never been their employee. Since the establishment of Aurora Plaza, Dagui served therein only as a job contractor. Dagui had control and supervision of whoever he would take to perform a contracted job. On occasion, Dagui was hired only as a "tubero" or plumber as the need arises in order to unclog sewerage pipes. Every time his services were needed, he was paid accordingly. It was understood that his job was limited to the specific undertaking of unclogging the pipes. In effect, petitioners would like us to believe that private respondent Dagui was an independent contractor, particularly a job contractor, and not an employee of Aurora Plaza.

We are not persuaded.

Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code provides in part:

There is job contracting permissible under the Code if the following conditions are met:

xxx xxx xxx

(2) The contractor has substantial  capital  or   investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.

Honorio Dagui earns a measly sum of P180.00 a day (latest salary). 7 Ostensibly, and by no stretch of the imagination can Dagui qualify as a job contractor. No proof was adduced by the petitioners to show that Dagui was merely a job contractor, and it is absurd to expect that private respondent, with such humble resources, would have substantial capital or investment in the form of tools, equipment, and machineries, with which to conduct the business of supplying Aurora Plaza with manpower and services for the exclusive purpose of maintaining the apartment houses owned by the petitioners herein.

The bare allegation of petitioners, without more, that private respondent Dagui is a job contractor has been disbelieved by the Labor Arbiter and the public respondent NLRC. Dagui, by the findings of both tribunals, was an employee of the petitioners. We are not inclined to set aside these findings. The issue whether or not an employer-employee relationship exists in a given case is essentially a question of fact. 8 As a rule, repetitious though it has become to state, this Court does not review supposed errors in the decision of the NLRC which raise factual issues, because factual findings of agencies exercising quasi-judicial functions [like public respondent NLRC] are accorded not only respect but even finality, aside from the consideration that this Court is essentially not a trier of facts. 9

However, we deem it wise to discuss this issue full-length if only to bolster the conclusions reached by the labor tribunals, to which we fully concur.

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. 10 It is the so-called "control test," and that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished, 11 which constitute the most important index of the existence of the employer-employee relationship. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved but also the means to be used in reaching such end. 12

All these elements are present in the case at bar. Private respondent was hired in 1953 by Doña Aurora Suntay Tanjangco (mother of Teresita Tanjangco-Quazon), who was then the one in charge of the administration of the Tanjangco's various apartments and other properties. He was employed as a stay-in worker performing carpentry, plumbing, electrical and necessary work (sic) needed in the repairs of Tanjangco's properties. 13 Upon the demise of Doña Aurora in 1982, petitioner Teresita Tanjangco-Quazon took over the administration of these properties and continued to employ the private respondent, until his unceremonious dismissal on June 8, 1991. 14

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Dagui was not compensated in terms of profits for his labor or services like an independent contractor. Rather, he was paid on a daily wage basis at the rate of P180.00. 15 Employees are those who are compensated for their labor or services by wages rather than by profits. 16 Clearly, Dagui fits under this classification.

Doña Aurora and later her daughter petitioner Teresita Quazon evidently had the power of dismissal for cause over the private respondent. 17

Finally, the records unmistakably show that the most important requisite of control is likewise extant in this case. It should be borne in mind that the power of control refers merely to the existence of the power and not to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the former has a right to wield the power. 18 The establishment of petitioners is engaged in the leasing of residential and apartment buildings. Naturally, private respondent's work therein as a maintenance man had to be performed within the premises of herein petitioners. In fact, petitioners do not dispute the fact that Dagui reports for work from 7:00 o'clock in the morning until 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore, that Dagui had to observe the instructions and specifications given by then Doña Aurora and later by Mrs. Teresita Quazon as to how his work had to be performed. Parenthetically, since the job of a maintenance crew is necessarily done within company premises, it can be inferred that both Doña Aurora and Mrs. Quazon could easily exercise control on private respondent whenever they please.

The employment relationship established, the next question would have to be: What kind of an employee is the private respondent — regular, casual or probationary?

We find private respondent to be a regular employee, for Article 280 of the Labor Code provides:

Regular and Casual employment. — The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists.

As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade

of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. 19

Whichever standard is applied, private respondent qualifies as a regular employee. As aptly ruled by the Labor Arbiter:

. . . As owner of many residential and apartment buildings in Metro Manila, the necessity of maintaining and employing a permanent stay-in worker to perform carpentry, plumbing, electrical and necessary work needed in the repairs of Tanjangco's properties is readily apparent and is in fact needed. So much so that upon the demise of Doña Aurora Tanjangco, respondent's daughter Teresita Tanjangco-Quazon apparently took over the administration of the properties and continued to employ complainant until his outright dismissal on June 8, 1991. . . . 20

The jobs assigned to private respondent as maintenance man, carpenter, plumber, electrician and mason were directly related to the business of petitioners as lessors of residential and apartment buildings. Moreover, such a continuing need for his services by herein petitioners is sufficient evidence of the necessity and indispensability of his services to petitioners' business or trade.

Private respondent Dagui should likewise be considered a regular employee by the mere fact that he rendered service for the Tanjangcos for more than one year, that is, beginning 1953 until 1982, under Doña Aurora; and then from 1982 up to June 8, 1991 under the petitioners, for a total of twenty-nine (29) and nine (9) years respectively. Owing to private respondent's length of service, he became a regular employee, by operation of law, one year after he was employed in 1953 and subsequently in 1982. In Baguio Country Club Corp., v. NLRC, 21 we decided that it is more in consonance with the intent and spirit of the law to rule that the status of regular employment attaches to the casual employee on the day immediately after the end of his first year of service. To rule otherwise is to impose a burden on the employee which is not sanctioned by law. Thus, the law does not provide the qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he can acquire a regular status.

Petitioners argue, however, that even assuming arguendo that private respondent can be considered an employee, he cannot be classified as a regular employee. He was merely a project employee whose services were hired only with respect to a specific job and only while the same exists, 22 thus falling under the exception of Article 280, paragraph 1 of the Labor Code. Hence, it is claimed that he is not entitled to the benefits prayed for and subsequently awarded by the Labor Arbiter as modified by public respondent NLRC.

The circumstances of this case in light of settled case law do not, at all, support this averment. Consonant with a string of cases beginning with Ochoco  v. NLRC, 23 followed by Philippine  National  Construction Corporation   v.NLRC, 24 Magante   v. NLRC, 25 and Capitol   Industrial Construction Corporation v. NLRC, 26 if truly, private respondent was employed as a "project employee," petitioners should have submitted a report of termination to the nearest public employment office everytime his employment is terminated due to completion of each project, as required by Policy Instruction No. 20, which provides:

9

Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of project in which they have been employed by a particular construction company. Moreover, the company is not required to obtain a clearance from the Secretary of Labor in connection with such termination. What   is   required   of   the   company   is   a report to the nearest Public Employment Office for statistical purposes.

Throughout the duration of private respondent's employment as maintenance man, there should have been filed as many reports of termination as there were projects actually finished, if it were true that private respondent was only a project worker. Failure of the petitioners to comply with this simple, but nonetheless compulsory, requirement is proof that Dagui is not a project employee. 27

Coming now to the second issue as to whether or not private respondent Dagui was illegally dismissed, we rule in the affirmative.

Jurisprudence abound as to the rule that the twin requirements of due process, substantive and procedural, must be complied with, before a valid dismissal exists. 28 Without which the dismissal becomes void. 29

The twin requirements of notice and hearing constitute the essential elements of due process. This simply means that the employer shall afford the worker ample opportunity to be beard and to defend himself with the assistance of his representative, if he so desires. 30 As held in the case of Pepsi Cola Bottling Co. v. NLRC: 31

The law requires that the employer must furnish the worker sought to be dismissed with two   written   noticesbefore termination of employee can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss him (Section 13, BP 130; Sections, 2-6, Rule XIV, Book V Rules and Regulations Implementing the Labor Code as amended), Failure to comply with the requirements taints the dismissal with illegality. This procedure is mandatory; in the absence of which, any judgment reached by management is void and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National Service Corporation v. NLRC, 168 SCRA 122 [1988]; Ruffy v. NLRC, 182 SCRA 365 [1990].

These mandatory requirements were undeniably absent in the case at bar. Petitioner Quazon dismissed private respondent on June 8, 1991, without giving him any written notice informing the worker herein of the cause for his termination. Neither was there any hearing conducted in order to give Dagui the opportunity to be heard and defend himself. He was simply told: "Wala ka nang trabaho mula ngayon," allegedly because of poor workmanship on a previous job. 32 The undignified manner by which private respondent's services were terminated smacks of absolute denial of the employee's right to due process and betrays petitioner Quazon's utter lack of respect for labor. Such an attitude indeed deserves condemnation.

The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was made by both the Labor Arbiter and the NLRC. No backwages were awarded. It must be remembered that backwages and reinstatement are two reliefs that should be given to an illegally dismissed employee. They are separate and distinct from each other. In the event that reinstatement is no longer possible, as in this case, 33 separation pay is awarded to the employee. The award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2) backwages. 34 Payment of backwages is specifically designed to restore an employee's income that was lost because of his unjust dismissal. 35 On the other hand, payment of separation pay is intended to provide the employee money during the period in which he will be looking for another employment. 36

Considering, however, that the termination of private respondent Dagui was made on June 8, 1991 or after the effectivity of the amendatory provision of Republic Act No. 6715 on March 21, 1989, private respondent's backwages should be computed on the basis of said law.

It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation pay sansbackwages. While as a general rule, a party who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of the court below, 37 law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors. 38 In this case, the failure of the Labor Arbiter and the public respondent NLRC to award backwages to the private respondent, who is legally entitled thereto having been illegally dismissed, amounts to a "plain error" which we may rectify in this petition, although private respondent Dagui did not bring any appeal regarding the matter, in the interest of substantial justice. The Supreme Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. 39 Rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. 40 Thus, substantive rights like the award of backwages resulting from illegal dismissal must not be prejudiced by a rigid and technical application of the rules. 41

Petitioner Quazon argues that, granting the petitioner corporation should be held liable for the claims of private respondent, she cannot be made jointly and severally liable with the corporation, notwithstanding the fact that she is the highest ranking officer of the company, since Aurora Plaza has a separate juridical personality.

We disagree.

In the cases of Maglutac   v. National   Labor   Relations Commission, 42 Chua   v. National   Labor   Relations Commission, 43 and A.C. Ransom Labor Union-CCLU v. National Labor Relations   Commission 44 we were consistent in holding that the highest and most ranking officer of the corporation, which in this case is petitioner Teresita Quazon as manager of Aurora Land Projects Corporation, can be held jointly and severally liable with the corporation for the payment of the unpaid money claims of its employees who were illegally dismissed. In this case, not only was

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Teresita Quazon the most ranking officer of Aurora Plaza at the time of the termination of the private respondent, but worse, she had a direct hand in the private respondent's illegal dismissal. A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment. 45 Here, the failure of petitioner Quazon to observe the mandatory requirements of due process in terminating the services of Dagui evinced malice and bad faith on her part, thus making her liable.

Finally, we must address one last point. Petitioners aver that, assuming that private respondent can be considered an employee of Aurora Plaza, petitioners cannot be held liable for separation pay for the duration of his employment with Doña Aurora Tanjangco from 1953 up to 1982. If petitioners should be held liable as employers, their liability for separation pay should only be counted from the time Dagui was rehired by the petitioners in 1982 as a maintenance man.

We agree.

Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner Teresita Quazon, as manager of Aurora Plaza, continued to employ private respondent. From 1953 up to the death of Doña Aurora sometime in 1982, private respondent's claim for separation pay should have been filed in the testate or intestate proceedings of Doña Aurora. This is because the demand for separation pay covered by the years 1953-1982 is actually a money claim against the estate of Doña Aurora, which claim did not survive the death of the old woman. Thus, it must be filed against her estate in accordance with Section 5, Rule 86 of the Revised Rules of Court, to wit:

Sec. 5. Claims which must be filed under tire notice. If not filed, barred; exceptions. — All claims for money against the decedent,   arising   from   contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. . . .

WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public respondent National Labor Relations Commission dated March 16, 1994 is hereby MODIFIED in that the award of separation pay against the petitioners shall be reckoned from the date private respondent was re-employed by the petitioners in 1982, until June 8, 1991. In addition to separation pay, full backwages are likewise awarded to private respondent, inclusive of allowances, and other benefits or their monetary equivalent pursuant to Article 279 46 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, computed from the time he was dismissed on June 8, 1991 up to the finality of this decision, without deducting therefrom the earnings derived by private respondent elsewhere during the period of his illegal dismissal, pursuant to our ruling in Osmalik   Bustamante, et   al. v. National   Labor   Relations Commission. 47

No costs.

SO ORDERED.

Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 106108 February 23, 1995

CABALAN PASTULAN NEGRITO LABOR ASSOCIATION (CAPANELA) and JOSE ALVIZ, SR. petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION and FERNANDO SANCHEZ, respondents.

REGALADO, J.:

A man said to the Universe,Behold, I am born!However, replied the Universe,The fact does not create in meA sense of obligation.

To most, these familiar verses express the article of faith for self-reliance. To the racist in some countries, however, they mean that the world does not owe the Negroid or other colored people equal solicitude. The neo-colonial in the Philippines would hold the Negrito or a member of indigenous cultural communities to the same social bondage. But our Constitution and our laws were precisely formulated under a sense of obligation to the marginalized and the under privileged. Under such mandates, this Court has always accorded them scrupulous and compassionate attention. In now resolving their predicament in the case at bar, it call once again on the old Castilian tenet: A él que la vida ha dado menos, désele mas por la ley. 1

In this petition for certiorari, the resolution of the National Labor Relations Commission (hereafter, NLRC) dated February 28, 1992 2 which dismissed the appeal of herein petitioners from the decision of the labor arbiter 3 for failure to file a supersedeas bond, as well as its April 30, 1992 4 denying their motion for reconsideration, are assailed for having been rendered with grave abuse of discretion.

The antecedents of the present recourse, as culled from the records, are that herein private respondent, Fernando Sanchez, filed a complaint for illegal dismissal, non-payment of back wages and other benefits on January 3, 1991 with Regional Office No. III of the Department of Labor and Employment in Olongapo City originally docketed therein as NLRC Case No. RAB III 01-1931-91. The complaint, naming Cabalan Pastulan Negrito Labor Association (CAPANELA, for brevity) and its president, Jose Alviz, Sr., as

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respondents, alleged that the former was employed by CAPANELA as a foreman with a monthly salary of P3,245.70 from March, 1977 until he was illegally dismissed on January 1, 1990. 5

Said complaint was later amended on February 22, 1991 to introduce the correction that private respondent was illegally dismissed on March 27, 1990 (instead of January 1, 1990), and to further pray for reinstatement without loss of seniority rights and payment of full back wages and moral and exemplary damages. 6 As no amicable settlement was arrived at during the mandatory pre-conference despite efforts exerted by the labor arbiter, the parties were required to simultaneously submit their respective position papers and/or affidavits. 7 The case was submitted for resolution on March 11, 1991 on the bases of said position papers and other evidence, but the parties were further allowed to submit their respective memoranda, 8 after which the case was deemed submitted for decision on May 29, 1991. 9

A decision was rendered on June 24, 1991 in favor of herein private respondent, declaring his dismissal illegal, and ordering herein petitioners, jointly and severally —

1. To pay the backwages of complainant from March 24, 1990 until June 24, 1991 and for 15 months at P3,245.70 a month equals P48,685.50;

2. To immediately reinstate complainant to his former or equivalent position without loss of seniority rights and other privileges, and for this purpose, respondents are hereby ordered to submit proof of the physical or payroll reinstatement of the complainant within five (5) working days from receipt hereof, provided further that should reinstatement (be) not feasible due to any supervening event, respondents are further ordered to pay the separation pay of complainant equivalent to one month salary for every year of service, a fraction of at least six (6) months service considered as in addition to his respondents are further one (1) whole year, in addition to his backwages; . . . .

but dismissing the claim for moral and exemplary damages for want of substantial evidence. 10

The records further reveal that private respondent subsequently filed a motion for the issuance of a writ of 11 This was opposed by execution on July 15, 1991. 11 This was opposed by CAPANELA 12 through its new counsel, Atty. Isagani M. Jungco, who at the same time filed a memorandum of appeal 13 in its behalf, although admittedly without posting a supersedeas bond because of want of funds of either CAPANELA or its president and co-petitioner Alviz, Sr. Private respondent, in his answer to CAPANELA's memorandum of, appeal 14 and reply to opposition to motion for execution, 15 was unconvinced and adamantly insisted on the dismissal of the appeal due to non-perfection thereof for failure to comply with the legal requirement of posting a cash or surety bond as a requisite for the perfection of an appeal.

A partial writ of execution 16 was issued by Labor Arbiter Saludares on August 15, 1991 ordering the physical or payroll reinstatement of

private respondent. The sheriff's return of November 4, 1991, signed by Numeriano S. Reyes, Sheriff II of the NLRC Regional Arbitration Branch No. III, stated that the writ expired without any indication of private respondent having been reinstated. 17

As stated at the outset, the NLRC dismissed the appeal on February 28, 1992 for failure of petitioners to post the supersedeas bond required by law, stating that "(r)espondents' contention that it cannot post bond because it is insolvent deserve(s) scant consideration not being accompanied by proof there(of)," and denied petitioner's motion for reconsideration.

The present controversy raises as principal issues for resolution by the Court whether or not (1) the dismissal of private respondent was legal, and; (2) the appeal was perfected despite failure to file a supersedeas bond.

Anent the first issue, before we delve into the matter of the alleged illegal dismissal of private respondent Sanchez by petitioner CAPANELA, it is evidently necessary to ascertain the existence of an employer-employee relationship between them.

Petitioners asseverate that CAPANELA is an association composed of Negritos who worked inside the American naval base in Subic Bay (hereinafter referred to as the Base). They initially received a daily wage of P100.00 and thus earned, on the average, less than P3,000.00 per month. Said association organized the system of employment of members of this cultural community who were accorded special treatment concededly because of the occupancy of their ancestral lands as part of the operational area and military facility used by the Base authorities.

CAPANELA, through its officers, saw to it that its members reported for work, recorded their attendance, and distributed the workers' salaries paid by the Base at the end of a specific pay period, without gaining any amount from such undertakings petitioner Alviz, Sr., for his part and as president of CAPANELA, was himself only an employee at the Base. In other words, neither CAPANELA nor its president was the employer of private respondent Sanchez; rather, it was the United States Government acting through the military base authorities. 18

Contrarily, private respondent maintains that there existed an employer-employee relationship, as allegedly supported by the evidence on record, and that petitioners CAPANELA and Alviz, Sr. exercised control as employer over the means and methods by which the work was accomplished. He further argues that since the determination of the existence of an employer-employee relationship is a factual question, the findings of the labor officials thereon should be considered conclusive and binding upon and respected by the appellate courts. 19

It is hence clearly apparent that the judgment of the labor arbiter, as affirmed by respondent commission, declaring the dismissal of private respondent illegal and ordering the payment of back wages to him together with his payroll or physical reinstatement, was premised on the finding that there was an existing employer-employee relationship.

Indeed, findings of fact and conclusions of the labor arbiter, 20 as well as those of the NLRC, 21 or, for that matter, any other adjudicative

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body which can be considered as a trier of facts on specific matters within its field of expertise, 22 should be considered as binding and conclusive upon the appellate courts. This is in addition to the fact that they were in a better position to assess and evaluate the credibility of the contending parties and the validity of their respective evidence. 23However, these doctrinal strictures hold true only when such findings and conclusions are supported by substantial evidence. 24

In the case at bar, we are hard put to find sufficient evidential support for public respondent's conclusion on the putative existence of an employer-employee relationship between petitioners and private respondent. We are accordingly persuaded that there is ample justification to disturb the findings of respondent NLRC and to hold that a reconsideration of its challenged resolutions is in order.

A careful reevaluation of the documentary evidence of record belies the finding that CAPANELA, through its president and co-petitioner, Jose Alviz, Sr., wielded control as an employer over private respondent. It will be noted that in his affidavit dated March 4, 1991, 25 private respondent himself declared that through the intervention of CAPANELA, by way of its June 13, 1389 letter 26 to Lt. Mark S. Kistner, he was cleared of the charge of larceny of U.S. government property. Thereafter, in an indorsement dated July 11, 1989 from the Director of Security, U.S. Navy Public Works Center, the recommendation for his reinstatement and the release of his gate pass to the Base was addressed to the Director, Investigation Section, U.S. Facility Security Department via the Director of the Contracts Administration Division. 27

This only goes to show that CAPANELA had in fact no control over the continued employment of its members working in the U.S. naval base. For, after conducting its own investigation, CAPANELA could only intervene in behalf of its members facing charges through a recommendatory action request for favorable consideration. It could not, on its own authority, exonerate such members from the charges, much less effect their reinstatement without the approval of the Base authorities. Interestingly, in order to comply with the labor arbiter's decision of June 24, 1991, CAPANELA even had to write to the Resident Officer-in-Charge of the Facility Support Contracts at Subic Bay recommending the reinstatement of private respondent to his former position. 28

Under their arrangement, CAPANELA, through its officers, could only impose disciplinary sanctions upon its members for infractions of its own rules and regulations, to the extent of ousting a member from the association when called for under the circumstances. Nonetheless, such called termination of membership in the association, which could result in curtailment of the privilege of working at the Base inasmuch as employment therein was conditioned upon membership in CAPANELA, is not equivalent to the illegal dismissal from employment contemplated in our labor laws. Petitioners, not being the employer, obviously could not arrogate unto themselves an employer's prerogatives of hiring and firing workers.

As succinctly pointed out by the Solicitor General:

True, there was a stipulation to the effect that Fernando Sanchez was employed by petitioner CAPANELA, but the real employer was the United 

States government and petitioner was just a "labor-only contractor." Annexes "G" and "H" of CAPANELA's Memorandum on Appeal show that the award or contract of work was between CAPANELA and the United States government through the U.S. Navy. The same contract likewise clearly stipulated that CAPANELA was "to provide labor and material to perform trash sorting services in the Base period for all work specified in Section C." Annex "A" of complainant Fernando Sanchez' Answer to petitioner's Memorandum on Appeal itself proves that the negotiation was between CAPANELA and the U.S. Navy, with the former supplying the labor and the U.S. government paying the wages. Since CAPANELA merely provided the labor force, it cannot be deduced therefrom that CAPANELA should also compensate the laborers; it is a case of non sequitur. In other words, the actual mechanical act of making payments was done by CAPANELA, but the monies therefor were provided and disbursements made by the disbursing officer of the U.S. Naval Supply Depot, Subic Bay (see Annexes "G" and "H").

Moreover, ingress and egress in the work premises were controlled not by CAPANELA but by the U.S. Base authorities who could even reject entry of CAPANELA members then duly employed as part of the project, and impose disciplinary sanctions against them. Annex "1" of petitioners' Position Paper as respondent in the NLRC Case No. RAB-III-01-193 1-91, which was the letter of Lt. M.E. Kistner of the U.S. Navy, clearly proves this. 29 (Emphasis in the original text.)

Prevailing case law enumerates the essential elements of an employer-employee relationship as: (a) the selection and engagement of the employee;(b) the payment of wages; (c) the power of dismissal; and (d) the power of control with regard to the means and methods by which the work is to be accomplished, with the power of control being the most determinative factor. 30

The Solicitor General pertinently illustrates the glaring absence of these elements in the present case:

. . . , as aforeshown, CAPANELA had no control of the premises as it was the U.S. naval authorities who had the power to issue passes or deny their issuance. In fact, CAPANELA did not have absolute control on the disciplinary measures to be imposed on its members employed in the Base. Annex "1" of CAPANELA's Position Paper submitted before the NLRC Regional Arbitration Branch established the U.S. Navy's right to impose disciplinary measures for violations or infractions of its rules and regulations as well as the right to recommend suspensions or dismissals of the workers. Moreover, it was not shown that CAPANELA had control of the means and methods or manner by which the workers were to go about

13

their work. These are indeed strong indicia of the U.S. Navy's right of control over the workers as direct employer.

Third, there is evidence to prove that payment of wages was merely done through CAPANELA, but the source of payment was actually the U.S. government paying workers according to the volume of work accomplished on rates agreed upon between CAPANELA and the U.S. government. . . . 31

It would, therefore, be inutile to discuss the matter of the legality or illegality of the dismissal of private respondent. Considering that petitioners cannot legally be considered as the employer of herein private respondent, it follows that it cannot be made liable as such nor be required to bear the responsibility for the legal consequences of the charge of illegal dismissal. Granting arguendo that private respondent was illegally dismissed, the action should properly be directed against the U.S. government which, through the Base authorities, was the true employer in this case.

Neither can petitioners be deemed to have been engaged in permissible job contracting under the law, for failure to satisfy the following prescribed conditions:

1. The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with performance of the work except as to the results thereof; and

2. The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business. 32

In the present case, the setup was such that CAPANELA was merely tasked with organizing the Negritos to facilitate the orderly administration of work made available to them at the base facilities, that is, sorting scraps for recycling. CAPANELA recorded the attendance of its members and submitted the same to the Base authorities for the determination of wages due them and the preparation of the payroll. Payment of wages was coursed through CAPANELA but the funds therefor came from the coffers of the Base. Once inside the Base, control over the means and methods of work was exercised by the Base authorities. Accordingly, CAPANELA functioned as just an administrator of its Negrito members employed at the Base.

From the legal standpoint, CAPANELA's activities may at most be considered akin to that of labor-only contracting, albeit of a special or peculiar type, wherein CAPANELA, operating like a contractor, merely acted as an agent or intermediary of the employer. 33

The Solicitor General ramifies this aspect:

. . . , petitioner CAPANELA could not be classified as an "independent contractor" because it was not shown that it has substantial capital or investments to qualify as such under the law. On the other hand, it was apparent that the premises, tools, equipment, and other paraphernalia used by the workers were all supplied by the U.S. government through the U.S. Navy. What CAPANELA supplied was only the local labor force, complainant Fernando Sanchez among them. It is therefore clear that CAPANELA had no capital outlay involved in the business or in the maintenance thereof. 34

While it is not denied that an association or a labor organization or union can at times be an employer insofar as people hired by it to dispose of its business are concerned, 35 the situation in this case is altogether different. A proper and necessary distinction should be made between the employees of CAPANELA who actually attended to its myriad functions as an association and its members who were employed in the jobsite inside the Base vis-a-visCAPANELA's relative position as the employer of the former and a mere administrator with respect to the latter.

On the matter of the perfection of an appeal from the decision of the NLRC, petitioners plead for a more considerate and humane application of the law as would allow their appeal to prosper despite non-posting of a supersedeas bond on account of their insolvency. To dismiss the appeal for failure to post said bond, petitioners aver, is tantamount to denial of the constitutionally guaranteed right of access to courts by reason of poverty. 36Private respondent, on the other hand, argues that perfection of an appeal within the reglementary period and in compliance with all requirements of the law therefor is jurisdictional. That petitioners do not have the funds for the premiums for posting a supersedeas bond or for a cash deposit, disdainfully says private respondent, "is not in the least our problem." 37

We have no quarrel with the provision of Article 223 of the Labor Code which, in part and among others, requires that in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon posting of a cash or surety bond issued by a reputable bonding company duly accredited by the commission in the amount equivalent to the monetary award in the judgment appealed from. Perfection of an appeal within the period and in the manner prescribed by law is jurisdictional 38 and non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory. 39

However, in a number of recent cases, 40 the Court has eased the requirement of posting a bond, as a condition for perfection of appeals in labor cases, when to do so would bring about the immediate and appropriate resolution of controversies on the merits without over-indulgence in technicalities, 41 ever mindful of the underlying spirit and intention of the Labor Code to ascertain the facts of each case speedily and objectively without regard to technical rules of law and procedure, all in the interest of due process. 42 Punctilious adherence to stringent technical rules may be relaxed in the interest of the working man, 43 and should not defeat the complete and equitable resolution of the rights and obligations of the parties. 44 Moreover, it is the duty of labor officials to consider

14

their decisions and inquire into the correctness of execution, as supervening events may affect such execution. 45

The Solicitor General realistically assesses the situation, thus:

. . . As aforestated, above the technical consideration on whether failure to post a supersedeas bond was fatal to petitioners' appeal is the importance of first resolving whether there was indeed an employer-employee relationship in this case so as not to render the execution of the NLRC's resolution unenforceable or impossible to implement. . . . Besides, it is of public notice that the U.S. Navy had withdrawn from the Subic Base in view of the termination of the Bases Treaty. Even if CAPANELA were ordered to reinstate complainant Fernando Sanchez, this is obviously an impossible thing to perform as there is no longer any work to be done inside the Base. Nor is petitioner CAPANELA in a position to pay Sanchez's back wages considering that it was the U.S. Navy that paid his wages. . . . 46

In light of the circumstances in this case, the Solicitor General further suggests two ways of writing finis to this dispute, i.e., to reconsider public respondent's resolution of February 28, 1992 and April 30, 1992 and reinstate petitioner's appeal to give the latter a chance to prove CAPANELA's insolvency or poverty, or to reverse the decision of the labor arbiter on the ground that there was no employer-employee relationship between petitioner CAPANELA and private respondent Sanchez. Harmonizing our evaluation of the facts of this case with the greater interests of social justice, and considering that the parties involved are those upon whose socio-economic status we prefaced this opinion, we opt for the latter.

While this Court, when it finds that a lower court or quasi-judicial body is in error, may simply and conveniently nullify the challenged decision, resolution or order and remand the case thereto for further appropriate action, it is well within the conscientious exercise of its broad review powers to refrain from doing so and instead choose to render judgment on the merits when all material facts have been duly laid before it as would buttress its ultimate conclusion, in the public interest and for the expeditious administration of justice, such as where the ends of justice would not be subserved by the remand of the case. 47

IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February 28, 1992 and April 30, 1992 of respondent National Labor Relations Commission are accordingly ANNULLED, and the adjudgment of Labor Arbiter Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 is hereby REVERSED and SET ASIDE.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 154463 September 5, 2006

CEBU METAL CORPORATION, petitioner, vs.GREGORIO ROBERT SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO, respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision1 dated 18 February 2002, and the Resolution2 dated 27 June 2002, rendered by the Court of Appeals in CA-G.R. SP No. 66480, which annulled and set aside the decision3 dated 9 October 2000, and resolution4 dated 2 July 2001, of the National Labor Relations Commission (NLRC) in NLRC Case No.V-000840-99. In its decision, the NLRC reversed and set aside the decision5 dated 27 May 1999 of Labor Arbiter Jesus N. Rodriguez, Jr. in favor of complainant employees, herein respondents Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie Amparado, RAB Case No. 06-01-10019-97.

The Facts

Parties herein are somewhat at variance with respect to the basic facts of the case at bar.

The facts of the case as recounted6 by petitioner Cebu Metal Corporation are as follows:

Respondent (Cebu Metal Corporation) is a corporation engage (sic) in buying and selling of scrap iron x x x. In the Bacolod Branch, it has three regular (3) employees holding such positions as Officer-in-Charge, a scaler and a yardman, x x x whose salaries are paid directly by its main office in Cebu while others are undertaking pakiao work in the unloading of scrap iron for stockpiling.

Among those workers who presented for work in the unloading of scrap iron in the area are the unemployed persons or trisicad drivers standing by in the vicinity some of whom are the herein complainants x x x Gregorio Robert Saliling, Elias Bolido, Manuel Alquiza, Benjie Amparado and non-complainants Arnel Allera, Eliseo Torralba or any other persons who wanted to augment their income aside from their regular jobs. Robert Gregorio Saliling started working in 1996, Elias Bolido on (sic)

15

October 1995 while Manuel Alquiza and Benjie Amparado, on (sic) February 1996.

As compensation for their services, these workers including the herein complainants are paid at the rate of P15.00 per ton for which each person can unload at least two (2) to three (3) tons per hour or can earn at least P240.00 to P360.00 in eight (8) hours if work is only available which payment necessarily includes cost of living allowance (COLA) and 13th-month pay.

x x x x

Petitioner company further elaborated7 on the nature of its business and the circumstances surrounding the employment of respondent complainants, to wit:

The Bacolod buying station is mainly a stockyard where scrap metal delivered by its suppliers are stockpiled.

The supply of scrap metal is not steady as it depends upon many factors, such as availability of supplies, price, competition and demand among others. There are therefore (sic) instances when in a single week , one or two trucks of scrap metal are delivered while there are weeks when not a single truck of scrap metal are delivered although there may also be weeks when quite a number of trucks are delivered to the stockyard x x x. The arrivals of these trucks and the deliveries of scrap metal are not regular and the schedules of deliveries x x x to the stockyard x x x are not known before hand by the respondent (petitioner company).

x x x [t]he trucks used in the delivery of scrap metal are owned and/or rented by the different suppliers of scrap metal. These trucks have their own driver and truck boys employed by these different suppliers. Sometimes, these trucks do not have any truck boys, and in these instances, the respondent hires the services of people for the purpose of unloading the scrap metal from these trucks.

It is for this reason that the unloaders hired by the respondent to unload the scrap metal from these trucks are basically seasonal workers. They are hired only whenever there are trucks of suppliers of scrap metal that deliver scrap metal to the yard of the respondent and these trucks happen not to have any accompanying truck boys. Whoever are available and whoever are willing to help unload x x x on a particular occasion are hired to unload x x x.

Usually, there is a leader for a particular group who is tasked to unload the scrap metal from a particular truck. It is this leader who distributes the individual take of each member of the particular group

unloading the scrap metal from a particular truck.

In contrast, respondent complainants, Gregorio Saliling, Elias Bolido, Manuel Alquiza and Benjie Amparado, in their position paper8 submitted to the Labor Arbiter, narrate:

1. That complainants Gregorio Saliling was employed by defendant Corporation x x x in 1988, complainant Elias Bolido was hired in 1992 and complainant Benjie Amparado was hired by respondent in 1994; x x x.

2. The aforesaid complainants, from the time they were employed by respondent, they received their salary on (sic) the following rate:

GREGORIO ROBERT SALILING

ELIAS BOLIDO

BENJIE AMPARADO

3. That the aforesaid complainants never received any other benefits from the respondent, except the amount indicated above; (sic) They received the sum of P10.93 per hour in case of overtime work, but they never received additional benefits in case, (sic) they worked on Saturdays, Sundays, and Holidays;

Complainants likewise never received 13th month pay, holiday pay, incentive leave pay, bonuses and other labor benefits;

4. Complainants were required to work from 8:00 A.M. to 12:00 noon and from 1:00 P.M. to 5:00 P.M. or for eight hours a day; seven days a week and thirty days a month;

5. When these complainants demanded from respondent for the increase of their salary, respondent through Marlon got irritated and instructed complainants to stop working, thus, complainants, effective December 1996 were

16

precluded from entering respondent loading and unloading compound x x x.

On 10 January 1997, respondent complainants filed a Complaint9 before the Regional Arbitration Branch No VI, Bacolod City for underpayment of wages and non-payment of the following benefits: 1) 13th month pay; 2) holiday pay; and 3) service incentive leave pay.

On 6 March 1998, respondent complainants manifested10 that they were including in their complaint against petitioner company, the claim for illegal dismissal. Such belated filing was alleged to have been due to the fact that they were only dismissed after the filing of their complaint.

On 27 May 1999, the Labor Arbiter rendered a decision11 the dispositive of which reads:

CONFORMABLY TO THE FOREGOING, respondent Cebu Metal Corporation, through its manager, MARLON RADEN, is hereby ordered to REINSTATE complainants to their former positions with backwages limited to one (1) year and 13th month pay, ERA and COLA as follows:

NAME OF COMPLAINANTS:

1. Gregorio Robert Saliling

A) Backwages -----

B) 13th Month Pay -----

C) ERA -----

D) COLA -----

TOTAL -----

2. Elias Bolido

A) Backwages -----

B) 13th Month Pay -----

C) ERA -----

D) COLA -----

TOTAL -----

A) Backwages -----

B) 13th Month Pay -----

C) ERA -----

D) COLA -----

TOTAL -----

3. Manuel Alquiza

A) Backwages -----

B) 13th Month Pay -----

C) ERA -----

D) COLA -----

TOTAL -----

4. Benjie Amparado

A) Backwages -----

B) 13th Month Pay -----

C) ERA -----

D) COLA -----

TOTAL -----

GRAND TOTAL -----

In case reinstatement is no longer feasible, complainants are to be given separation pay equivalent to fifteen (15) days to be given for every year of service.

Attorney's fees of five percent (5%) of the total judgment award of the amount of Twelve Thousand Eight Hundred fifty Pesos and Forty-Eight Centavos (P12,850.48) is also awarded.

In ordering the reinstatement of respondent complainants, the Labor Arbiter found them to have been illegally dismissed from their employment with petitioner company. The decision explained that:

17

Regarding the second issue which is illegal dismissal, we find the same meritorious. Under Article 280 of the Labor Code, complainants are regular employees since they are "engaged to perform activities which are necessary and desirable in the usual business or trade of the employer", (sic) x x x. Complainants job of loading, unloading and stockpiling scrap iron is necessary and part of the business of respondent. Since complainants were dismissed without cause and due process of law, they are entitled to reinstatement with backwages limited to one (1) year.

Aggrieved, petitioner company appealed the foregoing decision to the NLRC.

In a Decision12 promulgated on 9 October 2000, the Fourth Division of the NLRC reversed and set aside the ruling of the Labor Arbiter. Instead, the Commission held that respondent complainants were not regular employees of petitioner company, thus, they could not have been illegally dismissed. The order of reversal was based on the Commission's finding that the petty cash vouchers13 submitted by petitioner company confirmed the fact that unloaders were paid on "pakiao" or task basis at P15.00 per metric ton. The Commission further rationalized that with the irregular nature of the work involved, the stoppage and resumption of which depended solely on the availability or supply of scrap metal, it necessarily follows that after the job of unloading was completed and "unloaders" were paid the contract price, the latter's working relationship with petitioner company legally ended. They were then free to offer their services to others.

As an aside, the Commission observed that it was erroneous for the Labor Arbiter to rule on the question of whether or not respondent complainants were illegally dismissed since the complaint filed on 10 January 1997 failed to include such matter. To be sure, the complaint merely imputed the following causes of action: 1) underpayment of wages; and 2) non-payment of a) 13th month pay; b) holiday pay; and c) service incentive leave pay. Nowhere was the matter of illegal dismissal written on the same. The issue was formally brought up only on 6 March 1998, via a Manifestation, long after the filing of the parties' respective position papers.

In view of the above, the Commission declared that respondent complainants invalidly raised the issue of illegal dismissal in the position paper they filed before the Labor Arbiter.

Dissatisfied by the above, it was the turn of respondent complainants to challenge the same but this time before the Court of Appeals.

In a Decision dated 18 February 2002, the Court of Appeals annulled and set aside the assailed decision of the NLRC. Said Decision was grounded exclusively on the argument that the Commission committed grave abuse of discretion in reversing and setting aside the Decision of the Labor Arbiter since petitioner company did not make an issue

out of the Labor Arbiter's action in ruling on a cause of action, i.e., illegal dismissal, not specifically stated in the complaint. Stated differently, the NLRC gravely abused its discretion in ruling on an issue that was allegedly not raised on appeal before it.

The Court of Appeals decision ended in this wise:

WHEREFORE, foregoing premises considered, the PETITION HAVING MERIT is hereby GIVEN DUE COURSE. RESULTANTLY, the challenged decision of Public Respondent National Labor Relations Commission is hereby ANNULLED AND SET ASIDE AND THE JUDGMENT OF THE LABOR ARBITER IN RAB-CASE No. 06-01-10019-97 REINSTATED. No costs.

SO ORDERED.

The Issues

Its Motion for Reconsideration having been denied14, petitioner company now comes to this Court imputing the following errors on the Court of Appeals:

I.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS COMMISSION FOURTH DIVISION, CEBU CITY HAD NO AUTHORITY TO DISMISS PRIVATE RESPONDENT'S CLAIMS FOR ILLEGAL DISMISSAL AND OTHER MONEY CLAIMS;

II.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR RELATIONS COMMISSION FOURTH DIVISION, CEBU CITY HAD NO AUTHORITY TO REVERSE THE LABOR ARBITER'S DECISION; and

III.

THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR CERTIORARI IN CA G.R. SP. NO. 66480 AND IN ANNULING (sic) THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION.

In essence, the issue for resolution in the case at bar is whether or not the Court of Appeals committed reversible error in ruling that the NLRC had no authority to adjudicate on an issue not properly raised in petitioner company's Memorandum on Appeal.

Petitioner company posits that contrary to the argument of the appellate court, the main or primary reason for the reversal of the Labor Arbiter's decision was the finding that respondent complainants could not be regarded, based on the facts of the case and the evidence presented, as regular

18

employees of petitioner company.

Conversely, respondent complainants allege that an appellate court has no power to resolve an unassigned error that does not affect the court's jurisdiction or is an error that is neither plain nor clerical. Likewise, they contend that "there is nothing to show that petitioner company made an issue of the Labor Arbiter's action in ruling on a cause of action not specifically stated in the complaint."

The Court's Ruling

We find merit in the petition.

It was plain error for the Court of Appeals to annul and set aside the decision of the NLRC on the lone reason that the latter "dismissed Petitioner's appeal on the basis of an issue not raised by Private Respondent in its appeal x x x."15 A painstaking review of the decision of the NLRC will readily reveal that the Commission's finding that respondent complainants were not regular employees was the raison d'être for the subsequent turnaround of the state of affairs.

What the NLRC made use of to reverse the Labor Arbiter's decision was precisely the conclusion of the latter that respondent complainants were regular employees of petitioner company. According to the Commission, such conclusion was predicated merely on the consideration that respondent complainants were performing activities necessary and desirable to the business or trade of their employer. Based on the facts of the case and the evidence presented by the parties to the case at bar, however, the NLRC arrived at a divergent conclusion, which we fully agree in. We quote with approval its disquisition:

It is interesting to note that the Labor Arbiter had given credence and probative value to the Petty Cash Vouchers submitted by the respondents. Thus he said:

"The petty cash vouchers (Annexes "1" to"1-A-62", respondents position paper) show that complainants are not paid on hourly or daily basis as they would like this office to believe but on "pakiao" or task basis at P15.00 per metric ton. There is no basis then for complainants to claim that they are underpaid since there is no minimum wage in this type of work. Complainants' earnings depend upon their own diligence and speed in unloading and stockpiling scrap iron. More importantly, it depends upon the availability of scrap iron to be unloaded and stockpiled."

The above findings validate respondent's position as to the nature of complainants' work. Their services are needed only when scrap metals are delivered which occurs only one or twice a week or sometimes no delivery at all in a given week. The irregular

nature of work, stoppage of work and then work again depending on the supply of scrap metal has not been denied by complainants. On the contrary they even admitted the same in their Reply to respondent's Appeal. x x x. Indeed, it would be unjust to require respondent to maintain complainants in the payroll even if there is no more work to be done. To do so would make complainants privileged retainers who collect payment from their employer for work not done. This is extremely unfair and amount to cuddling of labor at the expense of management.16

It should be remembered that The Philippine Constitution, while inexorably committed towards the protection of the working class from exploitation and unfair treatment, nevertheless mandates the policy of social justice so as to strike a balance between an avowed predilection for labor, on the one hand, and the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the deserving, to be dispensed with in the light of established facts, the applicable law, and existing jurisprudence.17

Under the circumstances abovestated:

x x x there can be no illegal dismissal to speak of. Besides, complainants cannot claim regularity in the hiring every time a truck comes loaded with scrap metal. This is confirmed in the Petty cash Vouchers which are in the names of different leaders who apportion the amount earned among his members.18

And, quite telling is the fact that not every truck delivery of scrap metal requires the services of respondent complainants when a particular truck is accompanied by its own "unloader." And whenever required, respondent complainants were not always the ones contracted to undertake the unloading of the trucks since the work was offered to whomever were available at a given time.

Finally, the judgment of the Commission that the Labor Arbiter acted incorrectly in ruling on a cause of action, i.e., illegal dismissal, not specifically stated in the complaint, did not constitute grave abuse of discretion on its part.

It is well settled that an act of a court or tribunal may only be considered to have been done in grave abuse of discretion when the same was performed in a capricious or whimsical exercise of judgment which is equivalent to lack of jurisdiction.19 The abuse of discretion must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined or to a ct at all in contemplation of law, as where the power is exercised in an arbitrary power and despotic manner by reason of passion or personal hostility.20

In the case at bar, from the preceding definition, it is quite apparent that no grave abuse of discretion can be attributed

19

to the NLRC. Its decision simply expressed an observation, to wit:

Moreover, We note that in the complaint filed last January 10, 1997, the issue of illegal dismissal was not raised as a cause of action although it was later discussed in their position paper filed on January 12, 1998. x x x. [Emphasis supplied.]

The use of the word "moreover" clearly expresses NLRC's position in treating the matter of the non-inclusion of the issue of illegal dismissal in the complaint merely as an add-on, adjunct or a supplement to its finding that respondent complainants' were not regular employees of petitioner company.

At any rate, the Court is clothed with authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.21

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated 18 February 2002, and the Resolution dated 27 June 2002, both rendered by the Court of Appeals in CA-G.R. SP No. 66480, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the NLRC dated 9 October 2000 is REINSTATED. Costs against respondent complainants.

SO ORDERED.

Panganiban, C.J. Chairman, Ynares-Santiago, Austria-Martinez, Callejo, Sr., J.J., concur.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-43825 May 9, 1988

CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and RODITO NASAYAO, respondents.

Benito P. Fabie for petitioners.

Narciso C. Parayno, Jr. for respondents.

PADILLA, J.:

In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners seek to annul and set aside the decision rendered by the respondent Arbitrator Jose T. Collado, dated 29 December 1975, in NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David, respondents," and the resolution issued by the respondent Commission, dated 7 May 1976, which dismissed herein petitioners' appeal from said decision.

In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that sometime in May 1974, he was appointed plant manager of the petitioner corporation, with an alleged compensation of P3,000.00, a month, or 25% of the monthly net income of the company, whichever is greater, and when the company failed to pay his salary for the months of May, June, and July 1974, Rodito Nasayao filed a complaint with the National Labor Relations Commission, Branch IV, for the recovery of said unpaid varies. The case was docketed therein as NLRC Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employed in the company as plant manager with a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed upon by the parties was a joint venture, a sort of partnership, wherein Rodito Nasayao was to keep the machinery in good working condition and, in return, he would get the contracts from end-users for the installation of marble products, in which the company would not interfere. In addition, private respondent Nasayao was to receive an amount equivalent to 25% of the net profits that the petitioner corporation would realize, should there be any. Petitioners alleged that since there had been no profits during said period, private respondent was not entitled to any amount.

The case was submitted for voluntary arbitration and the parties selected the herein respondent Jose T. Collado as voluntary arbitrator. In the course of the proceedings, however, the herein petitioners challenged the arbitrator's capacity to try and decide the case fairly and judiciously and asked him to desist from further hearing the case. But, the respondent arbitrator refused. In due time, or on 29 December 1975, he rendered judgment in favor of the complainant, ordering the herein petitioners to pay Rodito Nasayao the amount of P9,000.00, within 10 days from notice. 1

Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations Commission on grounds that the labor arbiter gravely abused his discretion in persisting to hear and decide the case notwithstanding petitioners' request for him to desist therefrom: and that the appealed decision is not supported by evidence. 2

On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that the decision of the voluntary arbitrator is final, unappealable, and immediately executory; 3 and, on 23 March 1976, he filed a motion for the issuance of a writ of execution. 4

Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976, dismissed the appeal on the ground that the decision appealed from is final, unappealable and immediately executory, and ordered the herein petitioners to comply with the decision of the voluntary arbitrator within 10 days from receipt of the resolution. 5

20

The petitioners are before the Court in the present recourse. As prayed for, the Court issued a temporary restraining order, restraining herein respondents from enforcing and/or carrying out the questioned decision and resolution. 6

The issue for resolution is whether or not the private respondent Rodito Nasayao was employed as plant manager of petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or 25% of its monthly income, whichever is greater, as claimed by said respondent, or entitled to receive only an amount equivalent to 25% of net profits, if any, that the company would realize, as contended by the petitioners.

The respondent arbitrator found that the agreement between the parties was for the petitioner company to pay the private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and, consequently, ordered the company to pay Rodito Nasayao the amount of P9,000.00 covering a period of three (3) months, that is, May, June and July 1974.

The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator is final, unappealable and immediately executory, and may not be reviewed by the Court. His contention is based upon the provisions of Art. 262 of the Labor Code, as amended.

The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse of discretion, the rule on unappealability of awards of a voluntary arbitrator becomes flexible and it is the inherent power of the Courts to maintain the people's faith in the administration of justice." The question of the finality and unappealability of a decision and/or award of a voluntary arbitrator had been laid to rest in Oceanic Bic Division (FFW) vs. Romero, 7 and reiterated in Mantrade FMMC Division Employees and Workers Union vs. Bacungan. 8The Court therein ruled that it can review the decisions of voluntary arbitrators, thus-

We agree with the petitioner that the decisions of voluntary arbitrators must be given the highest respect and as a general rule must be accorded a certain measure of finality. This is especially true where the arbitrator chosen by the parties enjoys the first rate credentials of Professor Flerida Ruth Pineda Romero, Director of the U.P. Law Center and an academician of unquestioned expertise in the field of Labor Law. It is not correct, however, that this respect precludes the exercise of judicial review over their decisions. Article 262 of the Labor Code making voluntary arbitration awards final, inappealable, and executory except where the money claims exceed P l 00,000.00 or 40% of paid-up capital of the employer or where there is abuse of discretion or gross incompetence refers to appeals to the National Labor Relations Commission and not to judicial review.

Inspite of statutory provisions making 'final' the decisions of certain administrative agencies, we have taken cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous

interpretation of the law were brought to our attention. There is no provision for appeal in the statute creating the Sandiganbayan but this has not precluded us from examining decisions of this special court brought to us in proper petitions. ...

The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial capacity. There is no reason why herdecisions involving interpretation of law should be beyond this Court's review. Administrative officials are presumed to act in accordance with law and yet we do hesitate to pass upon their work where a question of law is involved or where a showing of abuse of authority or discretion in their official acts is properly raised in petitions for certiorari.

The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise known as the Arbitration Law, which provides:

Sec. 29. Appeals — An appeal may be taken from an order made in a proceeding under this Act, or from a judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to questions of law. The proceedings upon such an appeal, including the judgment thereon shall be governed by the Rules of Court in so far as they are applicable.

The private respondent, Rodito Nasayao, in his Answer to the petition, 9 also claims that the case is premature for non-exhaustion of administrative remedies. He contends that the decision of the respondent Commission should have been first appealed by petitioners to the Secretary of Labor, and, if they are not satisfied with his decision, to appeal to the President of the Philippines, before resort is made to the Court.

The contention is without merit. The doctrine of exhaustion of administrative remedies cannot be invoked in this case, as contended. In the recent case of John Clement Consultants, Inc. versus National Labor Relations Commission, 10 the Court said:

As is well known, no law provides for an appeal from decisions of the National Labor Relations Commission; hence, there can be no review and reversal on appeal by higher authority of its factual or legal conclusions. When, however, it decides a case without or in excess of its jurisdiction, or with grave abuse of discretion, the party thereby adversely affected may obtain a review and nullification of that decision by this Court through the extraordinary writ of certiorari. Since, in this case, it appears that the Commission has indeed acted without jurisdiction and with grave abuse of discretion in taking cognizance of a belated appeal sought to be taken from a decision of Labor Arbiter and thereafter reversing it, the writ of certiorari will issue to undo those acts, and do justice to the aggrieved party.

21

We also find no merit in the contention of Rodito Nasayao that only questions of law, and not findings of fact of a voluntary arbitrator may be reviewed by the Court, since the findings of fact of the voluntary arbitrator are conclusive upon the Court.

While the Court has accorded great respect for, and finality to, findings of fact of a voluntary arbitrator 11 and administrative agencies which have acquired expertise in their respective fields, like the Labor Department and the National Labor Relations Commission, 12 their findings of fact and the conclusions drawn therefrom have to be supported by substantial evidence. ln that instant case, the finding of the voluntary arbitrator that Rodito Nasayao was an employee of the petitioner corporation is not supported by the evidence or by the law.

On the other hand, we find the version of the petitioners to be more plausible and in accord with human nature and the ordinary course of things. As pointed out by the petitioners, it was illogical for them to hire the private respondent Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an amount which they could ill-afford to pay, considering that the business was losing, at the time he was hired, and that they were about to close shop in a few months' time.

Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was an employee of the petitioner corporation. He was not included in the company payroll, nor in the list of company employees furnished the Social Security System.

Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the Philippines vs. Zamora,13 the Court enumerated the factors in determining whether or not an employer-employee relationship exists, to wit:

In determining the existence of an employer-employee relationship, the elements that are generally considered are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which the work is to be accomplished. It is the so-called "control test" that is the most important element (Investment Planning Corp. of the Phils. vs. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).<äre||anº•1àw>

In the instant case, it appears that the petitioners had no control over the conduct of Rodito Nasayao in the performance of his work. He decided for himself on what was to be done and worked at his own pleasure. He was not subject to definite hours or conditions of work and, in turn, was compensated according to the results of his own effort. He had a free hand in running the company and its business, so much so, that the petitioner Felipe David did not know, until very much later, that Rodito Nasayao had collected old accounts receivables, not covered by their agreement, which he converted to his own personal use. It was only after Rodito Nasayao had abandoned the plant following discovery of his wrong- doings, that Felipe David assumed management of the plant.

Absent the power to control the employee with respect to the means and methods by which his work was to be accomplished, there was no employer-employee relationship between the parties. Hence, there is no basis for an award of unpaid salaries or wages to Rodito Nasayao.

WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David, respondents," on 29 December 1975, and the resolution issued by the respondent National Labor Relations Commission in said case on 7 May 1976, are REVERSED and SET ASIDE and another one entered DISMISSING private respondent's complaints. The temporary restraning order heretofore isued by the Court is made permanent. Without costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 86693 July 2, 1990

COSMOPOLITAN FUNERAL HOMES, INC., petitioner, vs.NOLI MAALAT and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Castro, Enriquez, Carpio, Guillen & Associates for petitioner.

Castro B. Dorado for private respondent.

GUTIERREZ, JR., J.:

The nature of the work of a "funeraria" supervisor, whether employee or commission agent, is the issue raised in this petition.

Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the services of private respondent Noli Maalat as a "supervisor" to handle the solicitation of mortuary arrangements, sales and collections. The funeral services which he sold refer to the taking of the corpse, embalming, casketing, viewing and delivery. The private respondent was paid on a commission basis of 3.5% of the amounts actually collected and remitted.

On January 15, 1987, respondent Maalat was dismissed by the petitioner for commission of the following violations despite previous warnings:

(a) Understatement of the reported contract price against the actual contract price charged to and paid by the customers;

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(b) Misappropriation of funds or collections by non-remittance of collections and non-issuance of Official Receipt;

(c) Charging customers additional amount and pocketing the same for the cost of medicines, linen, and security services without issuing Official Receipt;

(d) Non-reporting of some embalming and re-embalming charges and pocketing the same and non-issuance of Official Receipt;

(e) Engaging in tomb making and inclusion of the price of the tomb in the package price without prior knowledge of the customers and the company. (At p. 16, Records)

Maalat filed a complaint for illegal dismissal and non-payment of commissions.

On the basis of the parties' position papers, Labor Arbiter Newton R. Sancho rendered a decision declaring Maalat's dismissal illegal and ordering the petitioner to pay separation pay, commission, interests and attorney's fee in the total amount of P205,571.52.

In an appeal from the decision, the National Labor Relations Commission (NLRC), on May 31, 1988, reversed the Arbiter's action and rendered a new decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the decision dated November 27, 1987, is hereby SET ASIDEand VACATED and a New One ENTERED, ordering as follows:

1. Judgment is hereby rendered declaring the dismissal of complainant Noli Maalat by respondent-appellant as justified and with lawful cause. By way of equitable relief and in the interest of social and compassionate justice, We hereby order and direct respondent Cosmopolitan Funeral Homes, Inc. to pay complainant Maalat his separation pay equivalent to one-half (1/2%) month average income for every year of service to appellant, computed on his last year of service immediately preceding his separation from respondent, subject to allowable set-offs and deductions of the counter-claims of respondent company, after due notice and hearing.

2. The claims for accrued commissions by complainant may be admitted, subject to proofs thereof, and allowable set-offs and deductions credited to the account of respondent-appellant by way of counterclaims, after due notice and hearing.

3. All the evidence adduced by the parties are hereby admitted, subject to rebuttal and/or

controvertion by either party during the hearing and the hearings hereafter.

4. The Attorney's fee in favor of complainant's counsel is hereby fixed at two (2%) percent, assessable over whatever final money award complainant may be entitled on the aggregate sums thereof, after proper hearing on the same.

All other claims and counter-claims are hereby dismissed for lack of merit, except those specified above.

Finally, this case is remanded to the Regional Arbitration Branch of origin for further proceedings in accordance with the above judgment. No findings as to costs. (At pp. 66-67, Rollo)

The petitioner's motion for reconsideration was denied, hence, this petition for review before this Court.

The issues raised in this petition are:

I. Whether or not the NLRC erred in ruling that an employment relationship existed between the parties; and

II. Whether or not there was equitable basis for the award of 1/2 month separation pay for every year of service.

I

In determining whether a person who performs work for another is the latter's employee or an independent contractor, the prevailing test is the "right of control" test. Under this test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.

The petitioner argues that Maalat was never its employee for he was only a commission agent whose work was not subject to its control. Citing Investment Planning Corporation of the Philippines v. Social Security System (21 SCRA 924 [1967]), the petitioner states that the work of its agents approximates that of an independent contractor since the agent is not under control by the latter with respect to the means and methods employed in the performance of the work, but only as to the results.

The NLRC, after its perusal of the facts and evidence on record, stated that there exists an employment relationship between the parties. The petitioner has failed to overcome this factual finding.

The fact that the petitioner imposed and applied its rule prohibiting superiors from engaging in other funeral business which it considered inimical to company interests proves that it had the right of control and actually exercised its control over the private respondent. In other words, Maalat worked exclusively for the petitioner.

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Moreover, the private respondent was prohibited from engaging in part-time embalming business outside of the company and a violation thereof was cause for dismissal. Incurring absences without leave was likewise subject to disciplinary action: a reprimand for the first offense, one week suspension for the second offense, and dismissal for the third offense.

The petitioner admits that these prohibitive rules bound the private respondent but states that these rules have no bearing on the means and methods ordinarily required of a supervisor. The overall picture is one of employment. The petitioner failed to prove that the contract with private respondent was but a mere agency, which indicates that a "supervisor" is free to accomplish his work on his own terms and may engage in other means of livelihood.

In Investment Planning Corporation, supra, cited by the petitioner, the majority of the "commission agents" are regularly employed elsewhere. Such a circumstance is absent in Maalat's case. Moreover, the private respondent's job description states that ". . . he attends to the needs of the clientele and arranges the kind of casket and funeral services the customers would like to avail themselves of" and indicates that he must always be on the job or at least most of time.

Likewise, the private respondent was not allowed to issue his own receipts, nor was he allowed to directly deduct his commission as truly independent salesmen practice.

Worthy of note too are two other company rules which provide that "negotiation and making of contract with customers shall be done inside the office" and "signing of contract should be made immediately before the cadaver or deceased is place in the casket." (Annex 10-B, Petitioner's Position Paper, Records) Said rules belie the petitioner's stand that it does not have control over the means and methods by which the work is accomplished. The control test has been satisfied. (Social Security System v. Court of Appeals, 156 SCRA 383 [1987])

The finding by the public respondent that the petitioner has reported private respondent to the Social Security System as a covered employee adds strength to the conclusion that Maalat is an employee.

There is no reversible error in the findings of facts by the NLRC which are supported by substantial evidence and which we, therefore, do not disturb on appeal.

The payment of compensation by way of commission does not militate against the conclusion that private respondent was an employee. Under Article 97 of the Labor Code, "wage" shall mean "the renumeration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, pace or commission basis . . .".

The non-observance of regular office hours does not sufficiently show that Maalat is a "supervisor on commission basis" nor does the same indicate that he is an independent salesman. As a supervisor, although compensated on commission basis, he is exempt from the observance of normal hours of work for his compensation is measured by the number of sales he makes. He may not have had the usual fixed time for starting and ending his work as in other types of

employment but he had to spend most of his working hours at his job. People die at all times of the day or night.

All considered, we rule that private respondent is an employee of petitioner corporation.

II

The petitioner impugns the award of separation pay equivalent to one-half (1/2) month average income for every year of service to private respondent. The NLRC ruled that:

However, mindful of the fact the complainant Noli Maalat has served respondent company for the last twenty four (24) years, more or less, it is but proper to afford him some equitable relief, consistent with the recent rulings of the Supreme Court, due to his past services with no known previous record, and the ends of social and compassionate justice will thus be served if he is paid a portion of his separation pay, equivalent to one-half (1/2) month every year of his service to said company. (See Soco v. Mercantile Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone, et al, v. Lariosa et al., G.R. No. 70479, February 27, 1987). We are not inclined to grant complainant his full month termination pay for every year of his service because, unlike in the former Soco case, the misconduct of the employee merely involves infraction of company rules while in the latter Firestone case it involves misconduct of a rank-and-file employee, although similarly involving acts of dishonesty. (At pp. 65-66, Rollo)

This Court will not disturb the finding by the NLRC that private respondent Maalat was dishonest in the discharge of his functions. The finding is sufficiently supported by the evidence on record.

Additionally, the private respondent did not appeal from the NLRC decision, thereby impliedly accepting the validity of his dismissal.

We take exception, therefore, to the grant of separation pay to private respondent.

In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA 671 [1988]), this Court re-examined, the doctrine in the aforecited Firestone and Soco cases and other previous cases that employees dismissed for cause are nevertheless entitled to separation pay on the ground of social and compassionate justice. In abandoning this doctrine, the Court held, and we quote:

. . . We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the

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employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than punishing the erring employee for his offense. . . .

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. . . .

Subsequent decisions have abided by this pronouncement. (See Philippine National Construction Corporation v. National Labor Relations Commission, 170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National Labor Relations Commission, 170 SCRA 597 [1989]; Osias Academy v. National Labor Relations Commission, G.R. No. 83234, April 18, 1989; and Nasipit Lumber Co., Inc. v. National Labor Relations Commission, G.R. No. 54424, August 31, 1989.)

Conformably with the above cited PLDT ruling, this Court pronounces that the grant of separation pay to private respondent Maalat, who was validly terminated for dishonesty, is not justified.

Parenthetically, it may be mentioned that the Labor Arbiter, apparently unaware of the petition for review pending before this Court, conducted further proceedings to compute private respondent's separation pay, unclaimed commission and 2% attorney's fees, in compliance with the NLRC decision of May 31, 1988. After hearing, the Labor Arbiter rendered a decision on May 10, 1989, the pertinent portion of which reads:

In sum, the sustainable claims of complainant are as follows:

(1) Separation Pay : P 76,064.40(2) Unpaid Commissions : 39,344.80——————Sub-total : P 115,409.20(3) 2% Attorney's Fees : 2,308.18——————P 117, 717.38

WHEREFORE, judgment is hereby rendered ordering respondent Cosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat his claims above set forth in the total amount of P117,717.38 only.

Neither party appealed from said decision.

For being in conflict with our holding that the private respondent is not entitled to separation pay, this Court sets aside the Labor Arbiter's computation of separation pay. However, we uphold his computation of unclaimed commissions amounting to P39,344.80. The amount of attorney's fee should consequently be recomputed at 2% of P39,344.80 or P786.89.

WHEREFORE, the judgment of the National Labor Relations Commission is AFFIRMED except for the grant of separation pay which is hereby disallowed. Private respondent Maalat is entitled to unclaimed commissions of P39,344.80 and 2% attorney's fees of P786.89, said amounts being considered final.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 118101 September 16, 1996

EDDIE DOMASIG, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS CORPORATION and/or OTTO ONG and CATALINA CO., respondents.

PADILLA, J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside the Resolution 1 of respondent National Labor Relations Commission (NLRC) rendered on 20 September 1994 remanding the records of the case to the arbitration branch of origin for further proceedings.

The antecedent facts as narrated by public respondent in the assailed resolution are as follows:

The complaint was instituted by Eddie Domasig against respondent Cata Garments Corporation, a company engaged in garments business and its owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid commission and other monetary claim[s]. Complainant alleged that he started working with the respondent on July 6, 1986 as Salesman when the company was still named Cato Garments Corporation; that three (3) years ago, because of a complaint against respondent by its workers, its changed its name to Cata Garments Corporation; and that on August 29, 1992, he was dismissed when respondent learned that he was being pirated by

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a rival corporation which offer he refused. Prior to his dismissal, complainant alleged that he was receiving a salary of P1,500.00 a month plus commission. On September 3, 1992 he filed the instant complaint.

Respondent denied complainant's claim that he is a regular employee contending that he is a mere commission agent who receives a commission of P5.00 per piece of article sold at regular price and P2.50 per piece sold in [sic] bargain price; that in addition to commission, complainant received a fixed allowance of P1,500.00 a month; that he had no regular time schedule; and that the company come [sic] into existence only on September 17, 1991. In support of its claim that complainant is a commission agent, respondent submitted as Annexes "B" and "B-1" the List of Sales Collections, Computation of Commission due, expenses incurred, cash advances received for the month of January and March 1992 (Rollo, p. 22-27). Respondent further contends that complainant failed to turn over to the respondent his collection from two (2) buyers as per affidavit executed by these buyers (Rollo p. 28-29) and for which, according to respondent it initiated criminal proceedings against the complainant.

The Labor Arbiter held that complainant was illegally dismissed and entitled to reinstatement and backwages as well as underpayment of salary; 13th month pay; service incentive leave and legal holiday. The Arbiter also awarded complainant his claim for unpaid commission in the amount of P143,955.00. 2

Private respondents appealed the decision of the labor arbiter to public respondent. As aforesaid, the NLRC resolved to remand the case to the labor arbiter for further proceeding. It declared as follows:

We find the decision of the Labor Arbiter not supported by evidence on record. The issue of whether or not complainant was a commission agent was not fully resolved in the assailed decision. It appears that the Labor Arbiter failed to appreciate the evidences submitted by respondent as Annexes "B" and "B-1" (Rollo p. 22-27) in support of its allegation as regard[s] the nature of complainant's employment. Neither is there a showing that the parties were required to adduce further to support their respective claim. The resolution of the nature of complainant's employment is vital to the case at bar considering that it would be determinative to his entitlement of monetary benefits. The same is similarly true as regard the claim [sic] for unpaid commission. The amount being claim [sic] for unpaid commission as big as it is requires substantial proof to establish the entitlement of

the complainant proof to establish the entitlement of the complainant to the same. We take not of the respondent's claim that "while they admit that complainant has an unpaid commission due him, the same is only for his additional sale of 4,027 pieces at regular price and 1,047 pieces at bargain price for a total sum of (P20,135.00 + 2,655.00) or P22,820.00 as appearing in the list of Sales and unpaid commission" (Annex "C" and "C-1" Appeal, Rollo p. 100-102). Said amount according to respondent is being withheld by them pending the accounting of money collected by complainant from his two (2) buyers which was not remitted to them. Considering the conflicting version of the parties regarding the issues on hand, it was incumbent on the Labor Arbiter to conduct further proceedings thereon. The ends of justice would better be served if both partied are given the opportunity to ventilate further their positions. 3

In their comment on the petition at bar, private respondents agree with the finding of the NLRC that the nature of petitioner's employment with private respondents is vital to the case as it will determine the monetary benefits to which he is entitled. They further aver that the evidence presented upon which the labor arbiter based her decision is insufficient, so that the NLRC did not commit grave abuse of discretion in remanding the case to the arbitration branch of origin for further proceedings.

The comment of the Solicitor General is substantially the same as that of private respondents, i.e., there is no sufficient evidence to prove employer-employee relationship between the parties. Furthermore, he avers that the order of the NLRC to the labor arbiter for further proceedings does not automatically translate to a protracted trial on the merits for such can be faithfully complied with through the submission of additional documents or pleadings only.

The only issue to be resolved in this petition is whether or not the NLRC gravely abused its discretion in vacating and setting aside the decision of the labor arbiter and remanding the case to the arbitration branch of origin for further proceedings.

In essence, respondent NLRC was not convinced that the evidence presented by the petitioner, consisting of the identification card issued to him by private respondent corporation and the cash vouchers reflecting his monthly salaries covering the months stated therein, settled the issue of employer-employee relationship between private respondents and petitioner.

It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the existence of employer-employee relationship. No particular form of evidence is required is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. 4

Substantial evidence has been defined to be such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, and its absence is not shown by stressing that there is

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contrary evidence on record, direct or circumstantial, for the appellate court cannot substitute its own judgment or criterion for that of the trial court in determining wherein lies the weight of evidence or what evidence is entitled to belief. 5

In a business establishment, an identification card is usually provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers covering petitioner's salaries for the months stated therein, we agree with the labor arbiter that these matters constitute substantial evidence adequate to support a conclusion that petitioner was indeed an employee of private respondent.

Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission provides thus:

Sec. 4. Determination of Necessity of Hearing. — Immediately after the submission of the parties of their position papers/memoranda, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any, from any party or witness.

It is clear from the law that it is the arbiters who are authorized to determine whether or not there is a necessity for conducting formal hearings in cases brought before them for adjudication. Such determination is entitled to great respect in the absence of arbitrariness. 6

In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the finding of the NLRC, her decision at least on the existence of an employer-employee relationship between private respondents and petitioner, is supported by substantial evidence on record.

The list of sales collection including computation of commissions due, expenses incurred and cash advances received (Exhibits "B" and "B-1") which, according to public respondent, the labor arbiter failed to appreciate in support of private respondents" allegation as regards the nature of petitioner's employment as a commission agent, cannot overcome the evidence of the ID card and salary vouchers presented petitioner which private respondents have not denied. The list presented by private respondents would even support petitioner's allegations that, aside from a monthly salary of P1,500.00, he also received commissions for his work as a salesman of private respondents.

Having been in the employ of private respondents continuously for more than one year, under the law, petitioner is considered a regular employee. Proof beyond reasonable doubt is not required as a basis for judgment on the legality of an employer's dismissal of an employee, nor even preponderance of evidence for that matter, substantial evidence being sufficient. 7 Petitioner's contention that private respondents terminated his employment due to their

suspicion that he was being enticed by another firm to work for it was not refuted by private respondents. The labor arbiter's conclusion that petitioner's dismissal is therefore illegal, is not necessarily arbitrary or erroneous. It is entitled to great weight and respect.

It was error and grave abuse of discretion for the NLRC to remand the case for further proceedings to determine whether or not petitioner was private respondents' employee. This would only prolong the final disposition of the complaint. It is stressed that, in labor cases, simplification of procedures, without regard to technicalities and without sacrificing the fundamental requisites of due process, is mandated to ensure the speedy administration of justice. 8

After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers, including issuance of subpoena, requiring the attendance and testimony of witnesses or the production of such documentary evidence as may be material to a just determination of the matter under investigation.

Additionally, the National Labor Relations Commission and the labor arbiter have authority under the Labor Code to decide a case based on the position papers and documents submitted without resorting to the technical rules of evidence. 9

However, in view of the need for further and correct computation of the petitioner's commissions in the light of the exhibits presented and the dismissal of the criminal cases filed against petitioner, the labor arbiter is required to undertake a new computation of the commissions to which petitioner may be entitled, within thirty (30) days from the submission by the partied of all necessary documents.

WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November 1994 are SET ASIDE. The decision of the labor arbiter dated 19 may 1993 us REINSTATED and AFFIRMED subject to the modification above-stated as regards a re-computation by the labor arbiter of the commissions to which petitioner maybe actually entitled.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-32245 May 25, 1979

DY KEH BENG, petitioner, vs.INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.

A. M Sikat for petitioner.

D. A. Hernandez for respondents.

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DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully reinstated without loss to their right of seniority and of such other rights already acquired by them and/or allowed by law. 1

Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial Relations:

I

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.

II

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.

III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.

IV

RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.

V

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows:

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that Solano was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido Onayan.

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial Relations. An employee-employer relationship was found to have existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece basis. 4 The issue therefore centered on whether there existed an employee employer relation between petitioner Dy Keh Beng and the respondents Solano and Tudla .

According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their work with the establishment was continuous although their services were compensated on piece basis. Evidence likewise showed that at times the establishment had eight (8) workers and never less than five (5); including the complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(4) When there were no orders needing his services there was nothing for him to do;

(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched him for these orders; and

(6) Solano's work with Dy's establishment was not continuous. , 7

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According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an employee 8 is referred to as

shall include any employee and shag not be limited to the employee of a particular employer unless the Act explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with any current labor dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment.

while an employer 9

includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization (otherwise than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is to render personal services to or for the benefit of the other and recognition by them of the right of one to order and control the other in the performance of the work and to direct the manner and method of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and employee, because there was no evidence to show that petitioner had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only when there was work.

While this Court upholds the control test 11 under which an employer-employee relationship exists "where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. 12 Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe, among others, Dy's requirements of size and quality of thekaing. Some control would necessarily be exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not define the essence of the relation. Units of time ... and units of work are in establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece where work is done in such an establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in our country, is, in fact, a labor contract -between employers and employees, between capitalists and laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion when it concluded that the findings of fact made by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put into effect in a long line of decisions where the Supreme Court did not reverse the findings of fact of the Court of Industrial Relations when they were supported by substantial evidence. 14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15 and that the decision being appealed ordered the payment of backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances. 17 Considering there are no such circumstances in this case, there is no reason why the Court should not apply the abovementioned formula in this instance.

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three years without qualification and deduction at the respective rates of compensation the employees concerned were receiving at the time of dismissal. The execution of this award is entrusted to the National Labor Relations Commission. Costs against petitioner.

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SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-21278 December 27, 1966

FEATI UNIVERSITY, petitioner, vs.HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.

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G.R. No. L-21462 December 27, 1966

FEATI UNIVERSITY, petitioner-appellant, vs.FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.

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G.R. No. L-21500 December 27, 1966

FEATI UNIVERSITY, petitioner-appellant, vs.FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.

Rafael Dinglasan for petitioner.Cipriano Cid and Associates for respondents.

ZALDIVAR, J.:

This Court, by resolution, ordered that these three cases be considered together, and the parties were allowed to file only one brief for the three cases.

On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU — hereinafter referred to as Faculty Club — wrote a letter to Mrs. Victoria L. Araneta, President of petitioner Feati University — hereinafter referred to as University — informing her of the organization of the Faculty Club into a registered labor union. The Faculty Club is composed of members who are professors and/or instructors of the University. On January 22, 1963, the President of the Faculty Club sent another letter containing twenty-six demands that have connection with the employment of the members of the Faculty Club by the University, and requesting an answer within ten days from receipt thereof. The President of the University answered the two letters, requesting that she be given at least thirty days to study thoroughly the different phases of the demands. Meanwhile counsel for the University, to whom the demands were referred, wrote a letter to the President of the Faculty Club demanding proof of its majority status and designation as a bargaining representative. On

February 1, 1963, the President of the Faculty Club again wrote the President of the University rejecting the latter's request for extension of time, and on the same day he filed a notice of strike with the Bureau of Labor alleging as reason therefor the refusal of the University to bargain collectively. The parties were called to conferences at the Conciliation Division of the Bureau of Labor but efforts to conciliate them failed. On February 18, 1963, the members of the Faculty Club declared a strike and established picket lines in the premises of the University, resulting in the disruption of classes in the University. Despite further efforts of the officials from the Department of Labor to effect a settlement of the differences between the management of the University and the striking faculty members no satisfactory agreement was arrived at. On March 21, 1963, the President of the Philippines certified to the Court of Industrial Relations the dispute between the management of the University and the Faculty Club pursuant to the provisions of Section 10 of Republic Act No. 875.

In connection with the dispute between the University and the Faculty Club and certain incidents related to said dispute, various cases were filed with the Court of Industrial Relations — hereinafter referred to as CIR. The three cases now before this Court stemmed from those cases that were filed with the CIR.

CASE NO. G.R. NO. L-21278

On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition with writ of preliminary injunction", docketed as G.R. No. L-21278, praying: (1) for the issuance of the writ of preliminary injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No. 1183-MC, and the order dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.

On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing a bond of P1,000.00, ordering respondent Judge Jose S. Bautista as Presiding Judge of the CIR, until further order from this Court, "to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations)."1 On December 4, 1963, this Court ordered the injunction bond increased to P100,000.00; but on January 23, 1964, upon a motion for reconsideration by the University, this Court reduced the bond to P50,000.00.

A brief statement of the three cases — CIR Cases 41-IPA, 1183-MC and V-30 — involved in the Case G.R. No. L-21278, is here necessary.

CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of the Faculty Club. As we have stated, the dispute between the University and the Faculty Club was certified on March 21, 1963 by the President of the Philippines to the CIR. On the strength of the presidential certification, respondent Judge Bautista set the case for hearing on March 23, 1963. During the hearing, the Judge endeavored to reconcile the part and it was agreed upon that the striking faculty members would return to work and the University would readmit them under a status quo arrangement. On that very same day, however, the University, thru counsel filed a motion to dismiss the case upon the ground that the CIR has no jurisdiction over

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the case, because (1) the Industrial Peace Act is not applicable to the University, it being an educational institution, nor to the members of the Faculty Club, they being independent contractors; and (2) the presidential certification is violative of Section 10 of the Industrial Peace Act, as the University is not an industrial establishment and there was no industrial dispute which could be certified to the CIR. On March 30, 1963 the respondent Judge issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the presidential certification. In the same order, the respondent Judge, believing that the dispute could not be decided promptly, ordered the strikers to return immediately to work and the University to take them back under the last terms and conditions existing before the dispute arose, as per agreement had during the hearing on March 23, 1963; and likewise enjoined the University, pending adjudication of the case, from dismissing any employee or laborer without previous authorization from the CIR. The University filed on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIRen banc, and at the same time asking that the motion for reconsideration be first heard by the CIR en banc. Without the motion for reconsideration having been acted upon by the CIR en banc, respondent Judge set the case for hearing on the merits for May 8, 1963. The University moved for the cancellation of said hearing upon the ground that the court en banc should first hear the motion for reconsideration and resolve the issues raised therein before the case is heard on the merits. This motion for cancellation of the hearing was denied. The respondent Judge, however, cancelled the scheduled hearing when counsel for the University manifested that he would take up before the Supreme Court, by a petition for certiorari, the matter regarding the actuations of the respondent Judge and the issues raised in the motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. The order of March 30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the case, G.R. No. L-21278.

Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the University had employed professors and/or instructors to take the places of those professors and/or instructors who had struck. On April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition to declare in contempt of court certain parties, alleging that the University refused to accept back to work the returning strikers, in violation of the return-to-work order of March 30, 1963. The University filed, on April 5,1963, its opposition to the petition for contempt, denying the allegations of the Faculty Club and alleging by way of special defense that there was still the motion for reconsideration of the order of March 30, 1963 which had not yet been acted upon by the CIR en banc. On April 6, 1963, the respondent Judge issued an order stating that "said replacements are hereby warned and cautioned, for the time being, not to disturb nor in any manner commit any act tending to disrupt the effectivity of the order of March 30,1963, pending the final resolution of the same."2 On April 8, 1963, there placing professors and/or instructors concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the order of respondent Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that are sought to be annulled in case G.R. No. L-21278.

CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on March 8, 1963 before the CIR, praying that it be certified as the sole and exclusive bargaining representative of all the employees of the University. The University filed an opposition to the petition for certification election and at the same

time a motion to dismiss said petition, raising the very same issues raised in Case No. 41-IPA, claiming that the petition did not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate labor union; that the members of the Faculty Club cannot unionize for collective bargaining purposes; that the terms of the individual contracts of the professors, instructors, and teachers, who are members of the Faculty Club, would expire on March 25 or 31, 1963; and that the CIR has no jurisdiction to take cognizance of the petition because the Industrial Peace Act is not applicable to the members of the Faculty Club nor to the University. This case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the motion to dismiss, however, the Faculty Club filed on April 3, 1963 a motion to withdraw the petition on the ground that the labor dispute (Case No. 41-IPA) had already been certified by the President to the CIR and the issues raised in Case No. 1183-MC were absorbed by Case No. 41-IPA. The University opposed the withdrawal, alleging that the issues raised in Case No. 1183-MC were separate and distinct from the issues raised in Case No. 41-IPA; that the questions of recognition and majority status in Case No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR could not exercise its power of compulsory arbitration unless the legal issue regarding the existence of employer-employee relationship was first resolved. The University prayed that the motion of the Faculty Club to withdraw the petition for certification election be denied, and that its motion to dismiss the petition be heard. Judge Baltazar Villanueva, finding that the reasons stated by the Faculty Club in the motion to withdraw were well taken, on April 6, 1963, issued an order granting the withdrawal. The University filed, on April 24, 1963, a motion for reconsideration of that order of April 6, 1963 by the CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in the case, G.R. No. L-21278, now before Us.

CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the administrative officials of the University. The Faculty Club, through the Acting Chief Prosecutor of the CIR, filed with the CIR a complaint docketed as Case No. V-30, charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive Vice-President Rodolfo Maslog, and Assistant to the President Jose Segovia, as officials of the University, with indirect contempt of court, reiterating the same charges filed in Case No. 41-IPA for alleged violation of the order dated March 30, 1963. Based on the complaint thus filed by the Acting Chief Prosecutor of the CIR, respondent Judge Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest the above named officials of the University so that they may be dealt with in accordance with law, and the same time fixed the bond for their release at P500.00 each. This order of April 29, 1963 is also one of the orders sought to be annulled in the case, G.R. No. L-2l278.

The principal allegation of the University in its petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278, now before Us, is that respondent Judge Jose S. Bautista acted without, or in excess of, jurisdiction, or with grave abuse of discretion, in taking cognizance of, and in issuing the questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and V-30. Let it be noted that when the petition for certiorari and prohibition with preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR Cases Nos. 41-IPA, 1183-MC and V-30 were still pending action by the CIR en banc upon motions for reconsideration filed by the University.

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On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition with preliminary injunction, admitting some allegations contained in the petition and denying others, and alleging special defenses which boil down to the contentions that (1) the CIR had acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential certification, so that it had jurisdiction to issue the questioned orders in said Case No. 41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is applicable to the University as an employer and to the members of the Faculty Club as employees who are affiliated with a duly registered labor union, so that the Court of Industrial Relations had jurisdiction to take cognizance of Cases Nos. 1183-MC and V-30 and to issue the questioned orders in those two cases; and (3) that the petition for certiorari and prohibition with preliminary injunction was prematurely filed because the orders of the CIR sought to be annulled were still the subjects of pending motions for reconsideration before the CIR en banc when said petition for certiorari and prohibition with preliminary injunction was filed before this Court.

CASE G.R. NO. L-21462

This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club as a labor union, praying that it be certified as the sole and exclusive bargaining representative of all employees of the University. This petition was opposed by the University, and at the same time it filed a motion to dismiss said petition. But before Judge Baltazar Villanueva could act on the petition for certification election and the motion to dismiss the same, Faculty Club filed a motion to withdraw said petition upon the ground that the issue raised in Case No. 1183-MC were absorbed by Case No. 41-IPA which was certified by the President of the Philippines. Judge Baltazar Villanueva, by order April 6, 1963, granted the motion to withdraw. The University filed a motion for reconsideration of that order of April 6, 1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition forcertiorari and prohibition with preliminary injunction in Case G.R. no. L-21278 was filed on May 10, 1963. As earlier stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963, ordering respondent Judge Bautista, until further order from this Court, to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).

On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R. No. L-21278, the CIR en banc issued a resolution denying the motion for reconsideration of the order of April 6, 1963 in Case No. 1183-MC.

On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution of the CIR en banc, dated June 5, 1963, denying the motion for reconsideration of the order of April 6, 1963 in Case No. 1183-MC. This petition was docketed as G.R. No. L-21462. In its petition for certiorari, the University alleges (1) that the resolution of the Court of Industrial Relations of June 5, 1963 was null and void because it was issued in violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the issues of employer-employee relationship, the alleged status as a labor union, majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA and

therefore the motion to withdraw the petition for certification election should not have been granted upon the ground that the issues in the first case have been absorbed in the second case; and (3) the lower court acted without or in excess of jurisdiction in taking cognizance of the petition for certification election and that the same should have been dismissed instead of having been ordered withdrawn. The University prayed that the proceedings in Case No. 1183-MC and the order of April 6, 1963 and the resolution of June 5, 1963 issued therein be annulled, and that the CIR be ordered to dismiss Case No. 1183-MC on the ground of lack of jurisdiction.

The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition for certiorari; and specially alleging that the lower court's order granting the withdrawal of the petition for certification election was in accordance with law, and that the resolution of the court en banc on June 5, 1963 was not a violation of the writ of preliminary injunction issued in Case G.R. No. L-21278 because said writ of injunction was issued against Judge Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge Baltazar Villanueva who was the trial judge of Case No. 1183-MC.

CASE G.R. NO. L-21500

This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41-IPA relates to the strike staged by the members of the Faculty Club and the dispute was certified by the President of the Philippines to the CIR. The University filed a motion to dismiss that case upon the ground that the CIR has no jurisdiction over the case, and on March 30, 1963 Judge Jose S. Bautista issued an order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the presidential certification; and in that same order Judge Bautista ordered the strikers to return to work and the University to take them back under the last terms and conditions existing before the dispute arose; and enjoined the University from dismissing any employee or laborer without previous authority from the court. On April 1, 1963, the University filed a motion for reconsideration of the order of March 30, 1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en banc when the petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As we have already stated, this Court in said case G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963 ordering respondent Judge Jose S. Bautista, until further order from this Court, to desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).

On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May 7, 1963 but actually received and stamped at the Office of the Clerk of the CIR on June 28, 1963, denying the motion for reconsideration of the order dated March 30, 1963 in Case No. 41-IPA.

On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an appeal from the resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but actually received by said petitioner on July 2, 1963) denying the motion for reconsideration of the order of March 30, 1963 in Case No. 41-IPA. This petition was docketed as G.R. No. L-21500. In its petition for certiorari the University alleges (1) that the resolution of the

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CIR en banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is null and void because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take cognizance of Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May 7, 1963 issued therein are null and void; (3) that the certification made by the President of the Philippines is not authorized by Section 10 of Republic Act 875, but is violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union for collective bargaining purposes and to be certified as a collective bargaining agent within the purview of the Industrial Peace Act, and consequently it has no right to strike and picket on the ground of petitioner's alleged refusal to bargain collectively where such duty does not exist in law and is not enforceable against an educational institution; and (5) that the return-to-work order of March 30, 1963 is improper and illegal. The petition prayed that the proceedings in Case No. 41-IPA be annulled, that the order dated March 30, 1963 and the resolution dated May 7, 1963 be revoked, and that the lower court be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.

On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition for certiorari on the ground that the petition being filed by way of an appeal from the orders of the Court of Industrial Relations denying the motion to dismiss in Case No. 41-IPA, the petition for certiorari is not proper because the orders appealed from are interlocutory in nature.

This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered together and the motion to dismiss in Case G.R. No. L-21500 be taken up when the cases are decided on the merits after the hearing.

Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these three cases on the merits of the issues raised.

The University has raised several issues in the present cases, the pivotal one being its claim that the Court of Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and V-30, brought before it, upon the ground that Republic Act No. 875 is not applicable to the University because it is an educational institution and not an industrial establishment and hence not an "employer" in contemplation of said Act; and neither is Republic Act No. 875 applicable to the members of the Faculty Club because the latter are independent contractors and, therefore, not employees within the purview of the said Act.

In support of the contention that being an educational institution it is beyond the scope of Republic Act No. 875, the University cites cases decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We have reviewed these cases, and also related cases subsequent thereto, and We find that they do not sustain the contention of the University. It is true that this Court has ruled that certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion College, and other juridical entities, like the Boy Scouts of the

Philippines and Manila Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that the Court of Industrial Relations has no jurisdiction to take cognizance of charges of unfair labor practice filed against them, but it is nonetheless true that the principal reason of this Court in ruling in those cases that those institutions are excluded from the operation of Republic Act 875 is that those entities are not organized, maintained and operated for profit and do not declare dividends to stockholders. The decision in the case of University of San Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We quote a portion of the decision:

It appears that the University of San Agustin, petitioner herein, is an educational institution conducted and managed by a "religious non-stock corporation duly organized and existing under the laws of the Philippines." It was organized not for profit or gain or division of the dividends among its stockholders, but solely for religious and educational purposes. It likewise appears that the Philippine Association of College and University Professors, respondent herein, is a non-stock association composed of professors and teachers in different colleges and universities and that since its organization two years ago, the university has adopted a hostile attitude to its formation and has tried to discriminate, harass and intimidate its members for which reason the association and the members affected filed the unfair labor practice complaint which initiated this proceeding. To the complaint of unfair labor practice, petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial Relations over the controversy on the following grounds:

"(a) That complainants therein being college and/or university professors were not "industrial" laborers or employees, and the Philippine Association of College and University Professors being composed of persons engaged in the teaching profession, is not and cannot be a legitimate labor organization within the meaning of the laws creating the Court of Industrial Relations and defining its powers and functions;

"(b) That the University of San Agustin, respondent therein, is not an institution established for the purpose of gain or division of profits, and consequently, it is not an "industrial" enterprise and the members of its teaching staff are not engaged in "industrial" employment (U.S.T. Hospital Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988, 24 May 1954; and San Beda College vs. Court of Industrial Relations and National Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 5636-5640);

"(c) That, as a necessary consequence, alleged controversy between therein complainants and respondent is not an "industrial" dispute, and the Court of Industrial Relations has no jurisdiction, notonly on the parties but also over the subject matter of the complaint."

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The issue now before us is: Since the University of San Agustin is not an institution established for profit or gain, nor an industrial enterprise, but one established exclusively for educational purposes, can it be said that its relation with its professors is one of employer and employee that comes under the jurisdiction of the Court of Industrial Relations? In other words, do the provisions of the Magna Carta on unfair labor practice apply to the relation between petitioner and members of respondent association?

The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice Montemayor, answered the query in the negative in the following wise:

"The main issue involved in the present case is whether or not a charitable institution or one organized not for profit but for more elevated purposes, charitable, humanitarian, etc., like the Boy Scouts of the Philippines, is included in the definition of "employer" contained in Republic Act 875, and whether the employees of said institution fall under the definition of "employee" also contained in the same Republic Act. If they are included, then any act which may be considered unfair labor practice, within the meaning of said Republic Act, would come under the jurisdiction of the Court of Industrial Relations; but if they do not fall within the scope of said Republic Act, particularly, its definitions of employer and employee, then the Industrial Court would have no jurisdiction at all.

xxx xxx xxx

"On the basis of the foregoing considerations, there is every reason to believe that our labor legislation from Commonwealth Act No. 103, creating the Court of Industrial Relations, down through the Eight-Hour Labor Law, to the Industrial Peace Act, was intended by the Legislature to apply only to industrial employment and to govern the relations between employers engaged in industry and occupations for purposes of profit and gain, and their industrial employees, but not to organizations and entities which are organized, operated and maintained not for profit or gain, but for elevated and lofty purposes, such as, charity, social service, education and instruction, hospital and medical service, the encouragement and promotion of character, patriotism and kindred virtues in youth of the nation, etc.

"In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof regarding labor disputes and unfair labor practice, does not apply to the Boy Scouts of the Philippines, and consequently, the Court of Industrial Relations had no jurisdiction to entertain and decide the action or petition filed

by respondent Araos. Wherefore, the appealed decision and resolution of the CIR are hereby set aside, with costs against respondent."

There being a close analogy between the relation and facts involved in the two cases, we cannot but conclude that the Court of Industrial Relations has no jurisdiction to entertain the complaint for unfair labor practice lodged by respondent association against petitioner and, therefore, we hereby set aside the order and resolution subject to the present petition, with costs against respondent association.

The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar Villanueva, et al., G.R. No. L-13748, October 30, 1959, where this Court ruled that:

In the present case, the record reveals that the petitioner University of Santo Tomas is not an industry organized for profit but an institution of learning devoted exclusively to the education of the youth. The Court of First Instance of Manila in its decision in Civil Case No. 28870, which has long become final and consequently the settled law in the case, found as established by the evidence adduced by the parties therein (herein petitioner and respondent labor union) that while the University collects fees from its students, all its income is used for the improvement and enlargement of the institution. The University declares no dividend, and the members of the corporation who founded it, as ordained in its articles of incorporation, receive no material compensation for the time and sacrifice they render to the University and its students. The respondent union itself in a case before the Industrial Court (Case No. 314-MC) has averred that "the University of Santo Tomas, like the San Beda College, is an educational institution operated not for profit but for the sole purpose of educating young men." (See Annex "B" to petitioner's motion to dismiss.). It is apparent, therefore, that on the face of the record the University of Santo Tomas is not a corporation created for profit but an educational institution and therefore not an industrial or business organization.

In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960, this Court repeated the same ruling when it said:

The main issue in this appeal by petitioner is that the industry trial court committed an error in holding that it has jurisdiction to act in this case even if it involves unfair labor practice considering that the La Consolacion College is not a business enterprise but an educational institution not organized for profit.

If the claim that petitioner is an educational institution not operated for profit is true, which apparently is the case, because the very court a quo found that it has no stockholder, nor capital . . . then we are of the opinion that the same does not come under the jurisdiction of the Court of Industrial Relations in view of the ruling in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January 29, 1958.

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It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas, and La Consolacion College, cited above, all involve charges of unfair labor practice under Republic Act No. 875, and the uniform rulings of this Court are that the Court of Industrial Relations has no jurisdiction over the charges because said Act does not apply to educational institutions that are not operated or maintained for profit and do not declare dividends. On the other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620, August 31, 1962, this Court upheld the decision of the Court of Industrial Relations finding the Far Eastern University, also an educational institution, guilty of unfair labor practice. Among the findings of fact in said case was that the Far Eastern University made profits from the school year 1952-1953 to 1958-1959. In affirming the decision of the lower court, this Court had thereby ratified the ruling of the Court of Industrial Relations which applied the Industrial Peace Act to educational institutions that are organized, operated and maintained for profit.

It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the University of San Agustin, the University of Sto. Tomas, and La Consolacion College, this Court was not unanimous in the view that the Industrial Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or non-profit organizations — which include educational institutions not operated for profit. There are members of this Court who hold the view that the Industrial Peace Act would apply also to non-profit organizations or entities — the only exception being the Government, including any political subdivision or instrumentality thereof, in so far as governmental functions are concerned. However, in the Far Eastern University case this Court is unanimous in supporting the view that an educational institution that is operated for profit comes within the scope of the Industrial Peace Act. We consider it a settled doctrine of this Court, therefore, that the Industrial Peace Act is applicable to any organization or entity — whatever may be its purpose when it was created — that is operated for profit or gain.

Does the University operate as an educational institution for profit? Does it declare dividends for its stockholders? If it does not, it must be declared beyond the purview of Republic Act No. 875; but if it does, Republic Act No. 875 must apply to it. The University itself admits that it has declared dividends.3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-IPA — which order was issued after evidence was heard — also found that the University is not for strictly educational purposes and that "It realizes profits and parts of such earning is distributed as dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)"4 Under this circumstance, and in consonance with the rulings in the decisions of this Court, above cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner Feati University.

But the University claims that it is not an employer within the contemplation of Republic Act No. 875, because it is not an industrial establishment. At most, it says, it is only a lessee of the services of its professors and/or instructors pursuant to a contract of services entered into between them. We find no merit in this claim. Let us clarify who is an "employer" under the Act. Section 2(c) of said Act provides:

Sec. 2. Definitions.—As used in this Act —

(c) The term employer include any person acting in the interest of an employer, directly or indirectly, but shall not

include any labor organization (otherwise than when acting as an employer) or any one acting in the capacity or agent of such labor organization.

It will be noted that in defining the term "employer" the Act uses the word "includes", which it also used in defining "employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the word "means" which the Act uses in defining the terms "court" [Sec. 2(a)], "labor organization" [Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is manifest. This variation and distinction in terminology and phraseology cannot be presumed to have been the inconsequential product of an oversight; rather, it must have been the result of a deliberate and purposeful act, more so when we consider that as legislative records show, Republic Act No. 875 had been meticulously and painstakingly drafted and deliberated upon. In using the word "includes" and not "means", Congress did not intend to give a complete definition of "employer", but rather that such definition should be complementary to what is commonly understood as employer. Congress intended the term to be understood in a broad meaning because, firstly, the statutory definition includes not only "a principal employer but also a person acting in the interest of the employer"; and, secondly, the Act itself specifically enumerated those who are not included in the term "employer", namely: (1) a labor organization (otherwise than when acting as an employer), (2) anyone acting in the capacity of officer or agent of such labor organization [Sec. 2(c)], and (3) the Government and any political subdivision or instrumentality thereof insofar as the right to strike for the purpose of securing changes or modifications in the terms and conditions of employment is concerned (Section 11). Among these statutory exemptions, educational institutions are not included; hence, they can be included in the term "employer". This Court, however, has ruled that those educational institutions that are not operated for profit are not within the purview of Republic Act No. 875.5

As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary definition of the term "employer". The term encompasses those that are in ordinary parlance "employers." What is commonly meant by "employer"? The term "employer" has been given several acceptations. The lexical definition is "one who employs; one who uses; one who engages or keeps in service;" and "to employ" is "to provide work and pay for; to engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The Workmen's Compensation Act defines employer as including "every person or association of persons, incorporated or not, public or private, and the legal representative of the deceased employer" and "includes the owner or lessee of a factory or establishment or place of work or any other person who is virtually the owner or manager of the business carried on in the establishment or place of work but who, for reason that there is an independent contractor in the same, or for any other reason, is not the direct employer of laborers employed there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage Law states that "employer includes any person acting directly or indirectly in the interest of the employer in relation to an employee and shall include the Government and the government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines employer as "any person, natural or juridical, domestic or foreign, who carries in the Philippines any trade, business, industry, undertaking, or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the Government and any of its political

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subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]).

This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which cases involve unfair labor practices and hence within the purview of Republic Act No. 875, defined the term employer as follows:

An employer is one who employs the services of others; one for whom employees work and who pays their wages or salaries (Black Law Dictionary, 4th ed., p. 618).

An employer includes any person acting in the interest of an employer, directly or indirectly (Sec. 2-c, Rep. Act 875).

Under none of the above definitions may the University be excluded, especially so if it is considered that every professor, instructor or teacher in the teaching staff of the University, as per allegation of the University itself, has a contract with the latter for teaching services, albeit for one semester only. The University engaged the services of the professors, provided them work, and paid them compensation or salary for their services. Even if the University may be considered as a lessee of services under a contract between it and the members of its Faculty, still it is included in the term "employer". "Running through the word `employ' is the thought that there has been an agreement on the part of one person to perform a certain service in return for compensation to be paid by an employer. When you ask how a man is employed, or what is his employment, the thought that he is under agreement to perform some service or services for another is predominant and paramount." (Ballentine Law Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R. 557, 560, 122 S.E. Rep. 202).

To bolster its claim of exception from the application of Republic Act No. 875, the University contends that it is not state that the employers included in the definition of 2 (c) of the Act. This contention can not be sustained. In the first place, Sec. 2 (c) of Republic Act No. 875 does not state that the employers included in the definition of the term "employer" are only and exclusively "industrial establishments"; on the contrary, as stated above, the term "employer" encompasses all employers except those specifically excluded by the Act. In the second place, even the Act itself does not refer exclusively to industrial establishments and does not confine its application thereto. This is patent inasmuch as several provisions of the Act are applicable to non-industrial workers, such as Sec. 3, which deals with "employees' right to self-organization"; Sections 4 and 5 which enumerate unfair labor practices; Section 8 which nullifies private contracts contravening employee's rights; Section 9 which relates to injunctions in any case involving a labor dispute; Section 11 which prohibits strikes in the government; Section 12 which provides for the exclusive collective bargaining representation for labor organizations; Section 14 which deals with the procedure for collective bargaining; Section 17 which treats of the rights and conditions of membership in labor organizations; Sections 18, 19, 20 and 21 which provide respectively for the establishment of conciliation service, compilation of collective bargaining contracts, advisory labor-management relations; Section 22 which empowers the Secretary of Labor to make a study of labor relations; and Section 24 which enumerates the rights of labor organizations. (See

Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091, January 29, 1958.)

This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that the Industrial Peace Act "refers only to organizations and entities created and operated for profits, engaged in a profitable trade, occupation or industry". It cannot be denied that running a university engages time and attention; that it is an occupation or a business from which the one engaged in it may derive profit or gain. The University is not an industrial establishment in the sense that an industrial establishment is one that is engaged in manufacture or trade where raw materials are changed or fashioned into finished products for use. But for the purposes of the Industrial Peace Act the University is an industrial establishment because it is operated for profit and it employs persons who work to earn a living. The term "industry", for the purposes of the application of our labor laws should be given a broad meaning so as to cover all enterprises which are operated for profit and which engage the services of persons who work to earn a living.

The word "industry" within State Labor Relations Act controlling labor relations in industry, cover labor conditions in any field of employment where the objective is earning a livelihood on the one side and gaining of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases, Permanent Edition, Vol. 21, 1960 edition p. 510).

The University urges that even if it were an employer, still there would be no employer-employee relationship between it and the striking members of the Faculty Club because the latter are not employees within the purview of Sec. 2(d) of Republic Act No. 875 but are independent contractors. This claim is untenable.

Section 2 (d) of Republic Act No. 875 provides:

(d) The term "employee" shall include any employee and shall not be limited to the employee of a particular employer unless the act explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment.

This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term "include", complementary. It embraces not only those who are usually and ordinarily considered employees, but also those who have ceased as employees as a consequence of a labor dispute. The term "employee", furthermore, is not limited to those of a particular employer. As already stated, this Court in the cases of The Angat River Irrigation System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term "employer" as "one who employs the services of others; one for whom employees work and who pays their wages or salaries. "Correlatively, an employee must be one who is engaged in the service of another; who performs services for another; who works for salary or wages. It is admitted by the University that the striking professors and/or instructors are under contract to teach particular courses and that they are paid for their services. They are, therefore, employees of the University.

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In support of its claim that the members of the Faculty Club are not employees of the University, the latter cites as authority Francisco's Labor Laws, 2nd ed., p. 3, which states:

While the term "workers" as used in a particular statute, has been regarded as limited to those performing physical labor, it has been held to embrace stenographers and bookkeepers. Teachers are not included, however.

It is evident from the above-quoted authority that "teachers" are not to be included among those who perform "physical labor", but it does not mean that they are not employees. We have checked the source of the authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A reading of the last case confirms Our view.

That teachers are "employees' has been held in a number of cases (Aebli v. Board of Education of City and County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v. Tangipahoa Parish School Board, La. App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University case, supra, considered university instructors as employees and declared Republic Act No. 875 applicable to them in their employment relations with their school. The professors and/or instructors of the University neither ceased to be employees when they struck, for Section 2 of Rep. Act 875 includes among employees any individual whose work has ceased as consequence of, or in connection with a current labor dispute. Striking employees maintain their status as employees of the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855, 858).

The contention of the University that the professors and/or instructors are independent contractors, because the University does not exercise control over their work, is likewise untenable. This Court takes judicial notice that a university controls the work of the members of its faculty; that a university prescribes the courses or subjects that professors teach, and when and where to teach; that the professors' work is characterized by regularity and continuity for a fixed duration; that professors are compensated for their services by wages and salaries, rather than by profits; that the professors and/or instructors cannot substitute others to do their work without the consent of the university; and that the professors can be laid off if their work is found not satisfactory. All these indicate that the university has control over their work; and professors are, therefore, employees and not independent contractors. There are authorities in support of this view.

The principal consideration in determining whether a workman is an employee or an independent contractor is the right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the work, but the right to control, which constitutes the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259, 261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed., Vol. 14, p. 576).

Where, under Employers' Liability Act, A was instructed when and where to work . . . he is an employee, and not a contractor, though paid specified sum per square. (Heine v.

Hill, Harris & Co., 2 La. App. 384, 390, in Words and Phrases, loc, cit.) .

Employees are those who are compensated for their labor or services by wages rather than by profits. (People vs. Distributors Division, Smoked Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words and Phrases, loc, cit.)

Services of employee or servant, as distinguished from those of a contractor, are usually characterized by regularity and continuity of work for a fixed period or one of indefinite duration, as contrasted with employment to do a single act or a series of isolated acts; by compensation on a fixed salary rather than one regulated by value or amount of work; . . . (Underwood v. Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)

Independent contractors can employ others to work and accomplish contemplated result without consent of contractee, while "employee" cannot substitute another in his place without consent of his employer. (Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Words and Phrases, Vol. 14, p. 576).

Moreover, even if university professors are considered independent contractors, still they would be covered by Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court observed that Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the United States, and this Act did not exclude "independent contractors" from the orbit of "employees". It was in the subsequent legislation — the Labor Management Relation Act (Taft-Harley Act) — that "independent contractors" together with agricultural laborers, individuals in domestic service of the home, supervisors, and others were excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).

It having been shown that the members of the Faculty Club are employees, it follows that they have a right to unionize in accordance with the provisions of Section 3 of the Magna Carta of Labor (Republic Act No. 875) which provides as follows:

Sec. 3. Employees' right to self-organization.—Employees shall have the right to self-organization and to form, join or assist labor organizations of their own choosing for the purpose of collective bargaining through representatives of their own choosing and to engage in concerted activities for the purpose of collective bargaining and other mutual aid or protection. . . .

We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to be set aside in the instant case, that the right of employees to self-organization is guaranteed by the Constitution, that said right would exist even if Republic Act No. 875 is repealed, and that regardless of whether their employers are engaged in commerce or not. Indeed, it is Our considered view that the members of the faculty or teaching staff of private universities, colleges, and schools in the Philippines, regardless of whether the university, college or school is run for profit or not, are included in the

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term "employees" as contemplated in Republic Act No. 875 and as such they may organize themselves pursuant to the above-quoted provision of Section 3 of said Act. Certainly, professors, instructors or teachers of private educational institutions who teach to earn a living are entitled to the protection of our labor laws — and one such law is Republic Act No. 875.

The contention of the University in the instant case that the members of the Faculty Club can not unionize and the Faculty Club can not exist as a valid labor organization is, therefore, without merit. The record shows that the Faculty Club is a duly registered labor organization and this fact is admitted by counsel for the University.5a

The other issue raised by the University is the validity of the Presidential certification. The University contends that under Section 10 of Republic Act No. 875 the power of the President of the Philippines to certify is subject to the following conditions, namely: (1) that here is a labor dispute, and (2) that said labor dispute exists in an industry that is vital to the national interest. The University maintains that those conditions do not obtain in the instant case. This contention has also no merit.

We have previously stated that the University is an establishment or enterprise that is included in the term "industry" and is covered by the provisions of Republic Act No. 875. Now, was there a labor dispute between the University and the Faculty Club?

Republic Act No. 875 defines a labor dispute as follows:

The term "labor dispute" includes any controversy concerning terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment regardless of whether the disputants stand in proximate relation of employer and employees.

The test of whether a controversy comes within the definition of "labor dispute" depends on whether the controversy involves or concerns "terms, tenure or condition of employment" or "representation." It is admitted by the University, in the instant case, that on January 14, 1963 the President of the Faculty Club wrote to the President of the University a letter informing the latter of the organization of the Faculty Club as a labor union, duly registered with the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to which was attached a list of demands consisting of 26 items, and asking the President of the University to answer within ten days from date of receipt thereof; that the University questioned the right of the Faculty Club to be the exclusive representative of the majority of the employees and asked proof that the Faculty Club had been designated or selected as exclusive representative by the vote of the majority of said employees; that on February 1, 1963 the Faculty Club filed with the Bureau of Labor Relations a notice of strike alleging as reason therefor the refusal of the University to bargain collectively with the representative of the faculty members; that on February 18, 1963 the members of the Faculty Club went on strike and established picket lines in the premises of the University, thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for unfair labor practice against the University, but which was later dismissed (on April 2, 1963 after Case 41-IPA was certified to the CIR); and that on March 7, 1963 a petition for certification election, Case No. 1183-MC, was filed by the Faculty

Club in the CIR.6 All these admitted facts show that the controversy between the University and the Faculty Club involved terms and conditions of employment, and the question of representation. Hence, there was a labor dispute between the University and the Faculty Club, as contemplated by Republic Act No. 875. It having been shown that the University is an institution operated for profit, that is an employer, and that there is an employer-employee relationship, between the University and the members of the Faculty Club, and it having been shown that a labor dispute existed between the University and the Faculty Club, the contention of the University, that the certification made by the President is not only not authorized by Section 10 of Republic Act 875 but is violative thereof, is groundless.

Section 10 of Republic Act No. 875 provides:

When in the opinion of the President of the Philippines there exists a labor dispute in an industry indispensable to the national interest and when such labor dispute is certified by the President to the Court of Industrial Relations, said Court may cause to be issued a restraining order forbidding the employees to strike or the employer to lockout the employees, and if no other solution to the dispute is found, the Court may issue an order fixing the terms and conditions of employment.

This Court had occasion to rule on the application of the above-quoted provision of Section 10 of Republic Act No. 875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, it was held:

It thus appears that when in the opinion of the President a labor dispute exists in an industry indispensable to national interest and he certifies it to the Court of Industrial Relations the latter acquires jurisdiction to act thereon in the manner provided by law. Thus the court may take either of the following courses: it may issue an order forbidding the employees to strike or the employer to lockout its employees, or, failing in this, it may issue an order fixing the terms and conditions of employment. It has no other alternative. It can not throw the case out in the assumption that the certification was erroneous.

xxx xxx xxx

. . . The fact, however, is that because of the strike declared by the members of the minority union which threatens a major industry the President deemed it wise to certify the controversy to the Court of Industrial Relations for adjudication. This is the power that the law gives to the President the propriety of its exercise being a matter that only devolves upon him. The same is not the concern of the industrial court. What matters is that by virtue of the certification made by the President the case was placed under the jurisdiction of said court. (Emphasis supplied)

To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case is exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to the presidential certification,

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the CIR may exercise its broad powers as provided in Commonwealth Act 103. All phases of the labor dispute and the employer-employee relationship may be threshed out before the CIR, and the CIR may issue such order or orders as may be necessary to make effective the exercise of its jurisdiction. The parties involved in the case may appeal to the Supreme Court from the order or orders thus issued by the CIR.

And so, in the instant case, when the President took into consideration that the University "has some 18,000 students and employed approximately 500 faculty members", that `the continued disruption in the operation of the University will necessarily prejudice the thousand of students", and that "the dispute affects the national interest",7and certified the dispute to the CIR, it is not for the CIR nor this Court to pass upon the correctness of the reasons of the President in certifying the labor dispute to the CIR.

The third issue raised by the University refers to the question of the legality of the return-to-work order (of March 30, 1963 in Case 41-IPA) and the order implementing the same (of April 6, 1963). It alleges that the orders are illegal upon the grounds: (1) that Republic Act No. 875, supplementing Commonwealth Act No. 103, has withdrawn from the CIR the power to issue a return-to-work order; (2) that the only power granted by Section 10 of Republic Act No. 875 to the CIR is to issue an order forbidding the employees to strike or forbidding the employer to lockout the employees, as the case may be, before either contingency had become a fait accompli; (3) that the taking in by the University of replacement professors was valid, and the return-to-work order of March 30, 1963 constituted impairment of the obligation of contracts; and (4) the CIR could not issue said order without having previously determined the legality or illegality of the strike.

The contention of the University that Republic Act No. 875 has withdrawn the power of the Court of Industrial Relations to issue a return-to-work order exercised by it under Commonwealth Act No. 103 can not be sustained. When a case is certified by the President to the Court of Industrial Relations, the case thereby comes under the operation of Commonwealth Act No. 103, and the Court may exercise the broad powers and jurisdiction granted to it by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing the terms of employment." This clause is broad enough to authorize the Court to order the strikers to return to work and the employer to readmit them. This Court, in the cases of the Philippine Marine Officers Association vs. The Court of Industrial Relations, Compania Maritima, et al.; and Compañia Martima, et al. vs. Philippine Marine Radio Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:

We cannot subscribe to the above contention. We agree with counsel for the Philippine Radio Officers' Association that upon certification by the President under Section 10 of Republic Act 875, the case comes under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor disputes in industries indispensable to the national interest when the President certifies the case to the Court of Industrial Relations. The evident intention of the law is to empower the Court of Industrial Relations to act in such cases, not only in the manner prescribed under Commonwealth Act 103, but with the same broad powers and jurisdiction granted by that act. If the Court of Industrial Relations is granted authority to find a solution to an industrial dispute and such solution

consists in the ordering of employees to return back to work, it cannot be contended that the Court of Industrial Relations does not have the power or jurisdiction to carry that solution into effect. And of what use is its power of conciliation and arbitration if it does not have the power and jurisdiction to carry into effect the solution it has adopted? Lastly, if the said court has the power to fix the terms and conditions of employment, it certainly can order the return of the workers with or without backpay as a term or condition of employment.

The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960.

When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of Republic Act No. 875, the CIR is granted authority to find a solution to the industrial dispute; and the solution which the CIR has found under the authority of the presidential certification and conformable thereto cannot be questioned (Radio Operators Association of the Philippines vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957, 54 O.G. 3218).

Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after strike has been declared, it being contended that under Section 10 of Republic Act No. 875 the CIR can only prevent a strike or a lockout — when either of this situation had not yet occurred. But in the case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:

There is no reason or ground for the contention that Presidential certification of labor dispute to the CIR is limited to the prevention of strikes and lockouts. Even after a strike has been declared where the President believes that public interest demands arbitration and conciliation, the President may certify the ease for that purpose. The practice has been for the Court of Industrial Relations to order the strikers to work, pending the determination of the union demands that impelled the strike. There is nothing in the law to indicate that this practice is abolished." (Emphasis supplied)

Likewise untenable is the contention of the University that the taking in by it of replacements was valid and the return-to-work order would be an impairment of its contract with the replacements. As stated by the CIR in its order of March 30, 1963, it was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers would return to work under the status quo arrangement and the University would readmit them, and the return-to-work order was a confirmation of that agreement. This is a declaration of fact by the CIR which we cannot disregard. The faculty members, by striking, have not abandoned their employment but, rather, they have only ceased from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty members have not lost their right to go back to their positions, because the declaration of a strike is not a renunciation of their employment and their employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The employment of replacements was not authorized by the CIR. At most, that was a temporary expedient resorted to by the University, which was subject to the power of the CIR to allow to continue or not. The employment of replacements by the University prior to the issuance of the order of March 30, 1963 did not vest in

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the replacements a permanent right to the positions they held. Neither could such temporary employment bind the University to retain permanently the replacements.

Striking employees maintained their status as employees of the employer (Western Castridge Co. v. National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that employees who took the place of strikers do not displace them as `employees." ' (National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)

It is clear from what has been said that the return-to-work order cannot be considered as an impairment of the contract entered into by petitioner with the replacements. Besides, labor contracts must yield to the common good and such contracts are subject to the special laws on labor unions, collective bargaining, strikes and similar subjects (Article 1700, Civil Code).

Likewise unsustainable is the contention of the University that the Court of Industrial Relations could not issue the return-to-work order without having resolved previously the issue of the legality or illegality of the strike, citing as authority therefor the case of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-3021, July 13, 1950. The ruling in said case is not applicable to the case at bar, the facts and circumstances being very different. The Philippine Can Company case, unlike the instant case, did not involve the national interest and it was not certified by the President. In that case the company no longer needed the services of the strikers, nor did it need substitutes for the strikers, because the company was losing, and it was imperative that it lay off such laborers as were not necessary for its operation in order to save the company from bankruptcy. This was the reason of this Court in ruling, in that case, that the legality or illegality of the strike should have been decided first before the issuance of the return-to-work order. The University, in the case before Us, does not claim that it no longer needs the services of professors and/or instructors; neither does it claim that it was imperative for it to lay off the striking professors and instructors because of impending bankruptcy. On the contrary, it was imperative for the University to hire replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality of the strike should be decided first before the issuance of the return-to-work order does not apply to the case at bar. Besides, as We have adverted to, the return-to-work order of March 30, 1963, now in question, was a confirmation of an agreement between the University and the Faculty Club during a prehearing conference on March 23, 1963.

The University also maintains that there was no more basis for the claim of the members of the Faculty Club to return to their work, as their individual contracts for teaching had expired on March 25 or 31, 1963, as the case may be, and consequently, there was also no basis for the return-to-work order of the CIR because the contractual relationships having ceased there were no positions to which the members of the Faculty Club could return to. This contention is not well taken. This argument loses sight of the fact that when the professors and instructors struck on February 18, 1963, they continued to be employees of the University for the purposes of the labor controversy notwithstanding the subsequent termination of their teaching contracts, for Section 2(d) of the Industrial Peace Act includes among employees "any individual whose work has ceased a consequence of, or in connection with, any current labor dispute or of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment."

The question raised by the University was resolved in a similar case in the United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read:

On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return to their employment. The company believing it had not committed any unfair labor practice, refused the employees' offer and claimed the right to employ others to take the place of the strikers, as it might see fit. This constituted discrimination in the hiring and tenure of the striking employees. When the employees went out on a strike because of the unfair labor practice of the company, their status as employees for the purpose of any controversy growing out of that unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R. 1217.

For the purpose of such controversy they remained employees of the company. The company contended that they could not be their employees in any event since the "contract of their employment expired by its own terms on April 23, 1939."

In this we think the company is mistaken for the reason we have just pointed out, that the status of the employees on strike became fixed under Sec. 2 (3) of the Act because of the unfair labor practice of the company which caused the strike.

The University, furthermore, claims that the information for indirect contempt filed against the officers of the University (Case No. V-30) as well as the order of April 29, 1963 for their arrest were improper, irregular and illegal because (1) the officers of the University had complied in good faith with the return-to-work order and in those cases that they did not, it was due to circumstance beyond their control; (2) the return-to-work order and the order implementing the same were illegal; and (3) even assuming that the order was legal, the same was not Yet final because there was a motion to reconsider it.

Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work provision of that order is valid and legal. Necessarily the order of April 6, 1963 implementing that order of March 30, 1963 was also valid and legal.

Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any Judge thereof to punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of the Rules of Court, under the same procedure and penalties provided therein. Section 3 of Rule 71 enumerates the acts which would constitute indirect contempt, among which is "disobedience or resistance to lawful writ, process, order, judgment, or command of a court," and the person guilty thereof can be punished after a written charge has been filed and the accused has been given an opportunity to be heard. The last paragraph of said section provides:

But nothing in this section shall be so construed as to prevent the court from issuing process to bring the accused party into court, or from holding him in custody pending such proceedings.

40

The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon which respondent Judge Bautista relied when he issued the questioned order of arrest.

The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work order allegedly violated was within the court's jurisdiction to issue.

Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of Industrial Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to the Supreme Court from any award, order or decision shall not stay the execution of said award, order or decision sought to be reviewed unless for special reason the court shall order that execution be stayed. Any award, order or decision that is appealed is necessarily not final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not yet final, is executory, and the stay of execution is discretionary with the Court of Industrial Relations. In other words, the Court of Industrial Relations, in cases involving strikes and lockouts, may compel compliance or obedience of its award, order or decision even if the award, order or decision is not yet final because it is appealed, and it follows that any disobedience or non-compliance of the award, order or decision would constitute contempt against the Court of Industrial Relations which the court may punish as provided in the Rules of Court. This power of the Court of Industrial Relations to punish for contempt an act of non-compliance or disobedience of an award, order or decision, even if not yet final, is a special one and is exercised only in cases involving strikes and lockouts. And there is reason for this special power of the industrial court because in the exercise of its jurisdiction over cases involving strikes and lockouts the court has to issue orders or make decisions that are necessary to effect a prompt solution of the labor dispute that caused the strike or the lockout, or to effect the prompt creation of a situation that would be most beneficial to the management and the employees, and also to the public — even if the solution may be temporary, pending the final determination of the case. Otherwise, if the effectiveness of any order, award, or decision of the industrial court in cases involving strikes and lockouts would be suspended pending appeal then it can happen that the coercive powers of the industrial court in the settlement of the labor disputes in those cases would be rendered useless and nugatory.

The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any violation of any order, award, or decision of the Court of Industrial Relations shall after such order, award or decision has become final, conclusive and executory constitute contempt of court," and contends that only the disobedience of orders that are final (meaning one that is not appealed) may be the subject of contempt proceedings. We believe that there is no inconsistency between the above-quoted provision of Section 6 and the provision of Section 14 of Commonwealth Act No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By the provision of Section 14 an order, award or decision of the Court of Industrial Relations in cases involving strikes and lockouts are immediately executory, so that a violation of that order would constitute an indirect contempt of court.

We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also authorized under Section 19 of Commonwealth Act No. 103 which provides as follows:

SEC. 19. Implied condition in every contract of employment.—In every contract of employment whether verbal or written, it is an implied condition that when any dispute between the employer and the employee or laborer has been submitted to the Court of Industrial Relations for settlement or arbitration pursuant to the provisions of this Act . . . and pending award, or decision by the Court of such dispute . . . the employee or laborer shall not strike or walk out of his employment when so enjoined by the Court after hearing and when public interest so requires, and if he has already done so, that he shall forthwith return to it, upon order of the Court, which shall be issued only after hearing when public interest so requires or when the dispute cannot, in its opinion, be promptly decided or settled; and if the employees or laborers fail to return to work, the Court may authorize the employer to accept other employees or laborers. A condition shall further be implied that while such dispute . . . is pending, the employer shall refrain from accepting other employees or laborers, unless with the express authority of the Court, and shall permit the continuation in the service of his employees or laborers under the last terms and conditions existing before the dispute arose. . . . A violation by the employer or by the employee or laborer of such an order or the implied contractual condition set forth in this section shall constitute contempt of the Court of Industrial Relations and shall be punished by the Court itself in the same manner with the same penalties as in the case of contempt of a Court of First Instance. . . .

We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the University upon a complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V-30, and that order was valid. Besides those ordered arrested were not yet being punished for contempt; but, having been charged, they were simply ordered arrested to be brought before the Judge to be dealt with according to law. Whether they are guilty of the charge or not is yet to be determined in a proper hearing.

Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned in Case G.R. No. L-21278 before this Court in a special civil action for certiorari. The University did not appeal from that order. In other words, the only question to be resolved in connection with that order in CIR Case V-30 is whether the CIR had jurisdiction, or had abused its discretion, in issuing that order. We hold that the CIR had jurisdiction to issue that order, and neither did it abuse its discretion when it issued that order.

In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its petition for certification election, and from the resolution of the CIR en banc, dated June 5, 1963, denying the motion to reconsider said order of April 6, 1963. The ground of the Faculty Club in asking for the withdrawal of that petition for certification election was because the issues involved in that petition were absorbed by the issues in Case 41-IPA. The University opposed the petition for withdrawal, but at the same time it moved for the dismissal of the petition for certification election.

It is contended by the University before this Court, in G.R. L-21462, that the issues of employer-employee relationship between the

41

University and the Faculty Club, the alleged status of the Faculty Club as a labor union, its majority representation and designation as bargaining representative in an appropriate unit of the Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-IPA, and, therefore, the motion to withdraw the petition for certification election should not have been granted upon the ground that the issues in the first case were absorbed in the second case.

We believe that these contentions of the University in Case G.R. No. L-21462 have been sufficiently covered by the discussion in this decision of the main issues raised in the principal case, which is Case G.R. No. L-21278. After all, the University wanted CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification election had in a way produced the situation desired by the University. After considering the arguments adduced by the University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278, We hold that the CIR did not commit any error when it granted the withdrawal of the petition for certification election in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all the questions relating to the labor disputes between the University and the Faculty Club may be threshed out, and decided, in that case.

In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963, issued by Judge Bautista, and from the resolution of the CIR en banc promulgated on June 28, 1963, denying the motion for the reconsideration of that order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR has jurisdiction to issue that order of March 30, 1963, and that order is valid, and We, therefore, hold that the CIR did not err in issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28, 1963 (although dated May 7, 1963) denying the motion to reconsider that order of March 30, 1963.

IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs prayed for therein are denied. The writ of preliminary injunction issued in Case G.R. No. L-21278 is dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with costs in these three cases against the petitioner-appellant Feati University. It is so ordered.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 109704 January 17, 1995

ALFREDO B. FELIX, petitioner, vs.DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, JR., in his capacity as Administrator, both of the National Center for Mental Health, and the CIVIL SERVICE COMMISSION,respondents.

KAPUNAN, J.:

Taking advantage of this Court's decisions involving the removal of various civil servants pursuant to the general reorganization of the government after the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I of the National Center for Mental Health (formerly the National Mental Hospital) as illegal and violative of the constitutional provision on security of tenure allegedly because his removal was made pursuant to an invalid reorganization.

In Mendoza vs. Quisumbing 1 and the consolidated cases involving the reorganization of various government departments and agencies we held:

We are constrained to set aside the reorganizations embodied in these consolidated petitions because the heads of departments and agencies concerned have chosen to rely on their own concepts of unlimited discretion and "progressive" ideas on reorganization instead of showing that they have faithfully complied with the clear letter and spirit of the two Constitutions and the statutes affecting reorganization. 2

In De Guzman vs. CSC 3, we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs. Primicias 4 that a valid abolition of an office neither results in a separation or removal, likewise upholding the corollary principle that "if the abolition is void, the incumbent is deemed never to have ceased to hold office," in sustaining therein petitioner's right to the position she held prior to the reorganization.

The instant petition on its face turns on similar facts and issues, which is, that petitioner's removal from a permanent position in the National Center for Mental Health as a result of the reorganization of the Department of Health was void.

However, a closer look at the facts surrounding the instant petition leads us to a different conclusion.

After passing the Physician's Licensure Examinations given by the Professional Regulation Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental Health (then the National Mental Hospital) on May 26, 1980 as a Resident Physician with an annual salary of P15,264.00. 5 In August of 1983, he was promoted to the position of Senior Resident Physician 6 a position he held until the Ministry of Health reorganized the National Center for Mental Health (NCMH) in January of 1988, pursuant to Executive Order No. 119.

Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary capacity immediately after he and other employees of the NCMH allegedly tendered their courtesy resignations to the Secretary of Health. 7 In August of 1988, petitioner was promoted to the position of Medical Specialist I (Temporary Status), which position was renewed the following year. 8

In 1988, the Department of Health issued Department Order No. 347 which required board certification as a prerequisite for renewal of

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specialist positions in various medical centers, hospitals and agencies of the said department. Specifically, Department Order No. 347 provided that specialists working in various hospitals and branches of the Department of Health be recognized as "Fellows" of their respective specialty societies and/or "Diplomates" of their specialty boards or both. The Order was issued for the purpose of upgrading the quality of specialties in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside) examinations given by recognized specialty boards, in keeping up with international standards of medical practice.

Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers, (then) Secretary of Health Alfredo Bengzon issued Department Order No. 347 providing for an extension of appointments of Medical Specialist positions in cases where the termination of medical specialist who failed to meet the requirement for board certification might result in the disruption of hospital services. Department Order No. 478 issued the following guidelines:

1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply unless the Chief of Hospital requests for exemption, certifies that its application will result in the disruption of the delivery service together with the steps taken to implement Section 4, and submit a plan of action, lasting no more than 3-years, for the eventual phase out of non-Board certified medical specialties.

2. Medical specialist recommended for extension of appointment shall meet the following minimum criteria:

a. DOH medical specialist certified

b. Has been in the service of the Department at least three (3) years prior to December 1988.

c. Has applied or taken the specialty board examination.

3. Each recommendation for extension of appointment must be individually justified to show not only the qualification of the recommendee, but also what steps he has taken to be board certified.

4. Recommendation for extension of appointment shall be evaluated on a case to case basis.

5. As amended, the other provisions of Department Order No. 34/s. 1988 stands.

Petitioner was one of the hundreds of government medical specialist who would have been adversely affected by Department Order No. 347 since he was no yet accredited by the Psychiatry Specialty Board. Under Department Order No. 478, extension of his appointment

remained subject to the guidelines set by the said department order. On August 20, 1991, after reviewing petitioner's service record and performance, the Medical Credentials Committee of the National Center for Mental Health recommended non-renewal of his appointment as Medical Specialist I, informing him of its decision on August 22, 1991. He was, however, allowed to continue in the service, and receive his salary, allowances and other benefits even after being informed of the termination of his appointment.

On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among other matters, the petitioner's case. In the said meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed out petitioner's poor performance, frequent tardiness and inflexibility as among the factors responsible for the recommendation not to renew his appointment. 9 With one exception, other department heads present in the meeting expressed the same opinion, 10 and the overwhelming concensus was for non-renewal. The matter was thereafter referred to the Civil Service Commission, which on February 28, 1992 ruled that "the temporary appointment (of petitioner) as Medical Specialist I can be terminated at any time . . ." and that "[a]ny renewal of such appointment is within the discretion of the appointing authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner was advised by hospital authorities to vacate his cottage since he was no longer with said memorandum petitioner filed a petition with the Merit System Protection Board (MSPB) complaining about the alleged harassment by respondents and questioning the non-renewal of his appointment. In a Decision rendered on July 29, 1992, the (MSPB) dismissed petitioner's complaint for lack of merit, finding that:

As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or after its expiration is a matter largely addressed to the sound discretion of the appointing authority. In this case, there is no dispute that Complainant was a temporary employee and his appointment expired on August 22, 1991. This being the case, his re-appointment to his former position or the renewal of his temporary appointment would be determined solely by the proper appointing authority who is the Secretary, Department of Health upon the favorable recommendation of the Chief of Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service Commission G.R. Nos. 80455-56 dated April 10, 1989, held as follows:

The power of appointment is essentially a political question involving considerations of wisdom which only the appointing authority can decide.

In this light, Complainant therefore, has no basis in law to assail the non-renewal of his expired temporary appointment much less invoke the aid of this Board cannot substitute its judgment to that of the appointing authority nor direct the latter to issue an appointment in the complainant's favor.

Regarding the alleged Department Order secured by the complainant from the Department of Health (DOH), the Board finds the same

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inconsequential. Said Department Order merely allowed the extension of tenure of Medical Specialist I for a certain period but does not mandate the renewal of the expired appointment.

The Board likewise finds as baseless complainant's allegation of harassment. It should be noted that the subsistence, quarters and laundry benefits provided to the Complainant were in connection with his employment with the NCMH. Now that his employment ties with the said agency are severed, he eventually loses his right to the said benefits. Hence, the Hospital Management has the right to take steps to prevent him from the continuous enjoyment thereof, including the occupancy of the said cottage, after his cessation form office.

In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with any legal infirmity, thus rendering as baseless, this instant complaint.

Said decision was appealed to the Civil Service Commission which dismissed the same in its Resolution dated December 1, 1992. Motion for Reconsideration was denied in CSC Resolution No. 93-677 dated February 3, 1993, hence this appeal, in which petitioner interposes the following assignments of errors:

I

THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS TEMPORARY APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND ACCEPTANCE OF APPOINTMENT.

II

THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF THE PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH IN THE GUISE OF REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE PETITIONER'S RIGHT OF SECURITY OF TENURE.

Responding to the instant petition, 12 the Solicitor General contends that 1) the petitioner's temporary appointment after the reorganization pursuant to E.O. No. 119 were valid and did not violate his constitutional right of security of tenure; 13 2) petitioner is guilty of estoppel or laches, having acquiesced to such temporary appointments from 1988 to 1991; 14 and 3) the respondent Commission did not act with grave abuse of discretion in affirming the petitioner's non-renewal of his appointment at the National Center for Mental Hospital. 15

We agree.

The patent absurdity of petitioner's posture is readily obvious. A residency or resident physician position in a medical specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a physician right after post-graduate internship (and after hurdling the Medical Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given field.

A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal Medicine (four years in DOH hospitals) and moves on to a two or three-year fellowship or residency in Cardiology before he is allowed to take the specialty examinations given by the appropriate accrediting college. In a similar manner, the accredited Psychiatrist goes through the same stepladder process which culminates in his recognition as a fellow or diplomate (or both) of the Psychiatry Specialty Board. 16 This upward movement from residency to specialist rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his specialty. Because acceptance and promotion requirements are stringent, competitive, and based on merit. acceptance to a first year residency program is no guaranty that the physician will complete the program. Attribution rates are high. Some programs are pyramidal. Promotion to the next post-graduate year is based on merit and performance determined by periodic evaluations and examinations of knowledge, skills and bedside manner. 17 Under this system, residents, specialty those in university teaching hospitals 18 enjoy their right to security of tenure only to the extent that they periodically make the grade, making the situation quite unique as far as physicians undergoing post-graduate residencies and fellowships are concerned. While physicians (or consultants) of specialist rank are not subject to the same stringent evaluation procedures, 19 specialty societies require continuing education as a requirement for accreditation for good standing, in addition to peer review processes based on performance, mortality and morbidity audits, feedback from residents, interns and medical students and research output. The nature of the contracts of resident physicians meet traditional tests for determining employer-employee relationships, but because the focus of residency is training, they are neither here nor there. Moreover, stringent standards and requirements for renewal of specialist-rank positions or for promotion to the next post-graduate residency year are necessary because lives are ultimately at stake.

Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made pursuant to Executive Order No. 119 would therefore be akin to a college student asking to be sent back to high school and staying there. From the position of senior resident physician, which he held at the time of the government reorganization, the next logical step in the stepladder process was obviously his promotion to the rank of Medical Specialist I, a position which he apparently accepted not only because of the increase in salary and rank but because of the prestige and status which the promotion conferred upon him in the medical community. Such status, however, clearly carried with it certain professional responsibilities including the responsibility of keeping up with the minimum requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his specialty rank, the responsibility of completing board certification requirements within a reasonable period of time. The evaluation made by the petitioner's peers and superiors clearly showed that he was deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not even board-certified.

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It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist I (temporary) in August of 1988, no objection was raised by him about the change of position or the temporary nature of designation. The pretense of objecting to the promotion to specialist rank apparently came only as an afterthought, three years later, following the non-renewal of his position by the Department of Health.

We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his acquiescence to — if not his unqualified acceptance of the promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier change from the status of permanent senior resident physician to temporary senior physician were neither pursued nor mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the promotion. His negligence to assert his claim within a reasonable time, coupled with his failure to repudiate his promotion to a temporary position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, 20 that he "either abandoned (his claim) or declined to assert it."

There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil service, permanent, temporary of otherwise, or any claim to a violation of the constitutional provision on security of tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right to any position are strongly discouraged. 21 In the same token, the failure to assert a claim or the voluntary acceptance of another position in government, obviously without reservation, leads to a presumption that the civil servant has either given up his claim of has already settled into the new position. This is the essence of laches which is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 22

In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of petitioner's position from permanent resident physician status to that of a temporary resident physician pursuant to the government reorganization after the EDSA Revolution. What is unique to petitioner's averments is the fact that he hardly attempts to question the validity of his removal from his position of Medical Specialist I (Temporary) of the National Center for Mental Health, which is plainly the pertinent issue in the case at bench. The reason for this is at once apparent, for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by falsely claiming that petitioner was forced to submit his courtesy resignation in 1987 when he actually did not; and second, by insisting on a right of claim clearly abandoned by his acceptance of the position of Medical Specialist I (Temporary), which is hence barred by laches.

The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue in the case at bench, we decline to make any further pronouncements relating to

petitioner's contentions relating to the effect on him of the reorganization except to say that in the specific case of the change in designation from permanent resident physician to temporary resident physician, a change was necessary, overall, to rectify a ludicrous situation whereby some government resident physicians were erroneously being classified as permanent resident physicians in spite of the inherently temporary nature of the designation. The attempts by the Department of Health not only to streamline these positions but to make them conform to current standards of specialty practice is a step in a positive direction. The patient who consults with a physician of specialist rank should at least be safe in the assumption that the government physician of specialist rank: 1.) has completed all necessary requirements at least assure the public at large that those in government centers who claim to be specialists in specific areas of Medicine possess the minimum knowledge and skills required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that they do their patients no harm. Primium non nocere.

Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment (Medical Specialist I). As respondent Civil Service Commission has correctly pointed out 23, the appointment was for a definite and renewable period which, when it was not renewed, did not involve a dismissal but an expiration of the petitioner's term.

ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner, vs.HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN, SR., respondents.

Bedona & Bedona Law Office for petitioner.

Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of Appeals, 190 SCRA 477) reviewing the appellate court's conclusion that there exists an employer-employee relationship between the petitioner and its co-defendant Funtecha. The Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the grounds that the latter was

45

not an authorized driver for whose acts the petitioner shall be directly and primarily answerable, and that Funtecha was merely a working scholar who, under Section 14, Rule X, Book III of the Rules and Regulations Implementing the Labor Code is not considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the petitioner. The private respondents maintain that under Article 2180 an injured party shall have recourse against the servant as well as the petitioner for whom, at the time of the incident, the servant was performing an act in furtherance of the interest and for the benefit of the petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of the school authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the appellate court, the Court reconsiders its decision. We reinstate the Court of Appeals' decision penned by the late Justice Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and Serafin E. Camilon. Applying Civil Code provisions, the appellate court affirmed the trial court decision which ordered the payment of the P20,000.00 liability in the Zenith Insurance Corporation policy, P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and P3,000.00 attorney's fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner Filamer. He was, in relation to the school, an employee even if he was assigned to clean the school premises for only two (2) hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to take over the vehicle while the latter was on his way home one late afternoon. It is significant to note that the place where Allan lives is also the house of his father, the school president, Agustin Masa. Moreover, it is also the house where Funtecha was allowed free board while he was a student of Filamer Christian Institute.

Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that they had to swerve to the right to avoid a collision. Upon swerving, they heard a sound as if something had bumped against the vehicle, but they did not stop to check. Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction against vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise to swerve to the right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-school. He further said that there was no specific time for him to be off-duty and that after driving the students home at 5:00 in the afternoon, he still had to go back to school and then drive home using the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and Funtecha reside is an act in furtherance of the interest of the petitioner-school. Allan's job demands that he drive

home the school jeep so he can use it to fetch students in the morning of the next school day.

It is indubitable under the circumstances that the school president had knowledge that the jeep was routinely driven home for the said purpose. Moreover, it is not improbable that the school president also had knowledge of Funtecha's possession of a student driver's license and his desire to undergo driving lessons during the time that he was not in his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha definitely was not having a joy ride. Funtecha was not driving for the purpose of his enjoyment or for a "frolic of his own" but ultimately, for the service for which the jeep was intended by the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722 [1932]; See also Association of Baptists for World Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is constrained to conclude that the act of Funtecha in taking over the steering wheel was one done for and in behalf of his employer for which act the petitioner-school cannot deny any responsibility by arguing that it was done beyond the scope of his janitorial duties. The clause "within the scope of their assigned tasks" for purposes of raising the presumption of liability of an employer, includes any act done by an employee, in furtherance of the interests of the employer or for the account of the employer at the time of the infliction of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the employee driving the vehicle derived some benefit from the act, the existence of a presumptive liability of the employer is determined by answering the question of whether or not the servant was at the time of the accident performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner anchors its defense, was promulgated by the Secretary of Labor and Employment only for the purpose of administering and enforcing the provisions of the Labor Code on conditions of employment. Particularly, Rule X of Book III provides guidelines on the manner by which the powers of the Labor Secretary shall be exercised; on what records should be kept; maintained and preserved; on payroll; and on the exclusion of working scholars from, and inclusion of resident physicians in the employment coverage as far as compliance with the substantive labor provisions on working conditions, rest periods, and wages, is concerned.

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the Rules is not the decisive law in a civil suit for damages instituted by an injured person during a vehicular accident against a working student of a school and against the school itself.

The present case does not deal with a labor dispute on conditions of employment between an alleged employee and an alleged employer. It invokes a claim brought by one for damages for injury caused by the patently negligent acts of a person, against both doer-employee and his employer. Hence, the reliance on the implementing rule on labor to disregard the primary liability of an employer under Article 2180 of the Civil Code is misplaced. An implementing rule on labor cannot be used by an employer as a shield to avoid liability under the substantive provisions of the Civil Code.

46

There is evidence to show that there exists in the present case an extra-contractual obligation arising from the negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or limited control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a driver's position in order that the petitioner may be held responsible for his grossly negligent act, it being sufficient that the act of driving at the time of the incident was for the benefit of the petitioner. Hence, the fact that Funtecha was not the school driver or was not acting within the scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the presumption juris tantum that there was negligence on its part either in the selection of a servant or employee, or in the supervision over him. The petitioner has failed to show proof of its having exercised the required diligence of a good father of a family over its employees Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the guidance of its employees and the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his employees. (Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the performance of any act indispensable to the business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as would prohibit any one of its employees from taking control over its vehicles if one is not the official driver or prohibiting the driver and son of the Filamer president from authorizing another employee to drive the school vehicle. Furthermore, the petitioner has failed to prove that it had imposed sanctions or warned its employees against the use of its vehicles by persons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the absence of evidence that the petitioner had exercised the diligence of a good father of a family in the supervision of its employees, the law imposes upon it the vicarious liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability of the employer is, under Article 2180, primary and solidary. However, the employer shall have recourse against the negligent employee for whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party defendant in the civil case for damages. This is quite understandable considering that as far as the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was the one driving the vehicle and presumably was one authorized by the school to drive. The plaintiff and his heirs should not now be left to suffer without simultaneous recourse

against the petitioner for the consequent injury caused by a janitor doing a driving chore for the petitioner even for a short while. For the purpose of recovering damages under the prevailing circumstances, it is enough that the plaintiff and the private respondent heirs were able to establish the existence of employer-employee relationship between Funtecha and petitioner Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of his own but in furtherance of the business of his employer. A position of responsibility on the part of the petitioner has thus been satisfactorily demonstrated.

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby GRANTED. The decision of the respondent appellate court affirming the trial court decision is REINSTATED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO, Petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any

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board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected with the company. 11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the company’s employees. 12

Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioner’s latest employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 – 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 – 09/2001) 22,500.00

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney’s fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to actual payment of separation pay.

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads:

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PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorney’s fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.

SO ORDERED. 15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.

SO ORDERED. 16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending parties is supported by substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished, economic

realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the worker over the period of the latter’s employment.

The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting

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Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers covering petitioner’s salaries for the months stated therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were the former’s employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioner’s job was as Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations

other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year.

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SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 73887 December 21, 1989

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner, vs.HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.

G.A. Fortun and Associates for petitioner.

Corsino B. Soco for private respondent.

PARAS J.:

Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC, for brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private respondent Honorato Judico, as its regular employee as defined under Art. 281 of the Labor Code and 2) remanding the case to its origin for the determination of private respondent Judico's money claims.

The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond, moral and exemplary damages and attorney's fees.

Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the ground that the employer-employee relations did not exist between the parties but ordered Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian Charity.

On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art. 281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas bond of said company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal or factual basis to support its payment.

Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal issues to wit:

I. Whether the relationship between insurance agents and their principal, the insurance company, is that of agent and principal to be governed by the Insurance Code and the Civil Code provisions on agency, or one of employer-employee, to be governed by the Labor Code.

II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code.

III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between insurance agent and the insurance company, arising from their agency relations.

IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J. Minoria and in ordering the case remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)

The crux of these issues boil down to the question of whether or not employer-employee relationship existed between petitioner and private respondent.

Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner defines a debit agent as "an insurance agent selling/servicing industrial life plans and policy holders. Industrial life plans are those whose premiums are payable either daily, weekly or monthly and which are collectible by the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of public respondent that as such debit agent, private respondent Judico had definite work assignments including but not limited to collection of premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out that complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain percentage denominated as sales reserve of his total collections but not lesser than P 200.00. Sometime in September 1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance fixed at P110.00 per week. During the third week of November 1981, he was reverted to his former position as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of at least P 200.00. Finally on June 28, 1982, complainant was dismissed by way of termination of his agency contract.

Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that Judico's compensation was not based on any fixed number of hours he was required to devote to the service of petitioner company but rather it was the production or result of his efforts or his work that was being compensated and that the so-called allowance for the first thirteen weeks that Judico worked as debit agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initial period of his training which was fixed for thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses, was based on actual production, (insurance plans sold and premium collections).

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Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a definite amount as his Wage known as "sales reserve" the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to canvassing and making regular reports, he was burdened with the job of collection and to make regular weekly report thereto for which an anemic performance would mean dismissal. He earned out of his faithful and productive service, a promotion to Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic performance and not because of the termination of the contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an insurance agent in the ordinary meaning of the term.

That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company; and (2) registered representatives who work on commission basis. The agents who belong to the second category are not required to report for work at anytime, they do not have to devote their time exclusively to or work solely for the company since the time and the effort they spend in their work depend entirely upon their own will and initiative; they are not required to account for their time nor submit a report of their activities; they shoulder their own selling expenses as well as transportation; and they are paid their commission based on a certain percentage of their sales. One salient point in the determination of employer-employee relationship which cannot be easily ignored is the fact that the compensation that these agents on commission received is not paid by the insurance company but by the investor (or the person insured). After determining the commission earned by an agent on his sales the agent directly deducts it from the amount he received from the investor or the person insured and turns over to the insurance company the amount invested after such deduction is made. The test therefore is whether the "employer" controls or has reserved the right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.

Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a definite minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 for thirteen weeks regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the job of collection. In both cases he was required to make regular report to the company regarding these duties, and for which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him a promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite period.

On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure without fear of dismissal from the company and short of committing acts detrimental to the business interest of the company or against the latter, whether he produces or not is of no moment as his salary is based on his production, his anemic performance or even dead result does not become a ground for dismissal. Whereas, in private respondent's case, the undisputed facts show that he was controlled by petitioner insurance company not only as to the kind of work; the amount of results, the kind of performance but also the power of dismissal. Undoubtedly, private respondent, by nature of his position and work, had been a regular employee of petitioner and is therefore entitled to the protection of the law and could not just be terminated without valid and justifiable cause.

Premises considered, the appealed decision is hereby AFFIRMED in toto.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-16600 December 27, 1961

ILOILO CHINESE COMMERCIAL SCHOOL, petitioner, vs.LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION, respondents.

Luis G. Hofileña for petitioner.J. T. de Leon for respondents.

PAREDES, J.:

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora Fabrigar (common-law wife) and their children, filed a claim for compensation with the Workmen's Compensation Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al., Claimants, vs. Iloilo Chinese Commercial School, Respondent." In this claim, it was alleged that the cause of death was " pulmonary tuberculosis contractedduring and as a result of his employment as janitor." The Hearing Officer of the WCC denied the claim and dismissed the case, finding that the claimant failed to prove the casual effect of employment and death; nothing was shown that the disease was contracted in line of duty; that whatever evidence claimant presented about the cause of death was only a mere suggestion that progressively developed from tuberculosis with heart trouble to a sudden fatal turn, ending up for the cause of "beriberi adult" at the time of death, as per certification of Sanitary Inspector Dr. P. E. Labitoria, of Dao, Capiz (Exhibits C & 4).

The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation Commission which, on November 12,

52

1959, rendered judgment reversing the decision of its Hearing Officer, making the following findings of facts:

That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-messenger of the respondent Iloilo Chinese Commercial School, his work consisting of sweeping and scrubbing the floors, cleaning the classrooms and the school premises, and other janitorial chores; on March 11, 1956, preparatory to graduation day, he carried desks and chairs from the classrooms to the auditorium, set the curtains and worked harder and faster than usual; that although he felt shortness of breath and did not feel very well that day, he continued working at the request of the overseer of respondent, that on the following day he reported for work, but on March 13, he spat blood and stopped working; that from April 29, 1956 to May 15, 1956, he was under treatment by Dr. Quirico Villareal "for far advanced pulmonary tuberculosis and for heart disease"; and that previous to said treatment, he was attended by Dr. Jaranilla for pulmonary tuberculosis. The Commission concluded that the short period of intervention between his last day of work (March 13, 1956) when he spat blood and his death on June 28, 1956, due to pulmonary tuberculosis, indicated that he had been suffering from such disease even during the time he was employed by the respondent and considering the strenuous work he performed, his employment as janitor aggravated his pre-existing illness; that although here is a discrepancy between the cause of death "beriberi adult," as appearing in the death Certificate and the testimony of Dr. Villareal, the latter deserves more credence, because the information (cause of death) was given by the sanitary inspector who did not, in any way, examine the deceased before or after his death. The Commission, therefore, ordered the respondent Chinese Commercial School, Inc., in said case —

1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely, Carlito, Gloria, Rosita and Ernesto, all surnamed Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as Death benefits; and

2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act 3428, as amended.

The above decision is now before Us for Review on a Writ of Certiorari, after the motion for reconsideration had been denied, petitioner alleging that the Commission erred:

1. In disregarding completely the evidentiary value of the death certificate of the attending physician which was presented as evidence by both claimants and respondent (Exhibits C & 4) to prove the cause of death;

2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was contracted during and as a result of the nature of his employment;

3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar; and

4. In not holding that the herein petitioner is exempt from the scope of the Workmen's Compensation Law.lawphil.net

Petitioner contends that the preponderance of evidence on the matters involved in this case, militates in its favor. Considering the doctrine that the Commission, like the Court of Industrial Relations, is bound not by the rule of preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence (Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No. 772, W.C. Act), petitioner's pretension is without merit. Substantial evidence supports the decision of the Commission. While seemingly there exists an inconsistency in the cause of death, as appearing in the death certificate by Dr. Labitoria and in Dr. Villareal's diagnosis, it is a fact found by the Commission, that the Sanitary Inspector did not examine the deceased before and after his death. "Undoubtedly," says the Commission, "the information that he died of beriberi adult, as appearing in the death certificate was given because it appears that the deceased had also edema of the extremities (swollen legs)." The evidence of record sustains the following findings of the Commission, is Fabrigar's cause of death to wit —

The short period of time intervening between his last day of work (March 13, 1956) when he spat blood and his death June 28, 1956 due to pulmonary tuberculosis indicates that he had been suffering from the disease even during the time that he was employed by the respondent. Considering the strenuous work that he performed while in the service of the respondents and the unusually long hours of work he rendered (6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal and legal working hours, we find that his employment aggravated his pre-existing illness and brought about his death. Moreover, our conclusion finds support in the fact that immediately preceding his last day of work with the respondent, he had an unusually hard day lifting desks and other furnitures and assisting in the preparations for the graduation exercises of the school. Considering also his complaints during that day (March 11), among which was "shortness of breath", we may also say that his work affected an already existing heart ailment.

We find no plausible reason for altering or disturbing the above factual findings of the Commission, in the present appeal by certiorari.

It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo Chinese Chamber of Commerce which was the one that furnished the janitor service in the premises of its buildings, including the part thereof occupied by the petitioner; that the Chamber of Commerce paid the salaries of janitors, including the deceased; that the petitioner could not afford to pay rentals of its premises and janitor due to limited finances depended largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and Chinese nationals who helped the school. In other words, it is pretended that the deceased was not an employee of the school but of the Chinese Chamber of Commerce which should be the one responsible for the compensation of the deceased. On one hand, according to the Commission, there is substantial proof to the effect that Fabrigar was employed by and rendered service for the petitioner and was an employee within the purview of the Workmen's Compensation Law. On the other hand, the most important test of employer-employee relation is the power to control the employee's conduct. The records disclose that the person in charge (encargado)

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of the respondent school supervised the deceased in his work and had control over the manner he performed the same.

It is finally contended that petitioner is an institution devoted solely for learning and is not an industry within the meaning of the Workmen's Compensation Law. Consequently, it is argued, it is exempt from the scope of the same law. Considering that this factual question has not been properly put in issue before the Commission, it may not now be entertained in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et al., L-16992, Dec. 23, 1961, citing International Oil Factory Union v. Hon. Martinez, et al., L-15560, Dec. 31, 1960). The decision of the Commission does not show that the matter was taken up. We are at a loss to state whether the issue was raised in the motion for reconsideration filed with the Commission, because the said motion is not found in the record before us. And the resolution to the motion for reconsideration does not touch this question.

IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed from is affirmed, with costs against the herein petitioner.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by which:

1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company;

2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ...

Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to implement his end of it Basiao organized an agency or office to which he gave the

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name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.

Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party

who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10

... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct — although the latter is the most important element (35 Am. Jur. 445). ...

has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot

55

justifiably be said to establish an employer-employee relationship between him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods — or the methods themselves — of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action.

The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits.

WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-37790 March 25, 1976

MAFINCO TRADING CORPORATION, petitioner, vs.THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR RELATIONS COMMISSION RODRIGO REPOMANTA and REY MORALDE, respondents.

Tanada, Sanchez, Tanada & Tanada for petitioner.

Jose T. Maghari for private respondents.

Solicitor General Estelito P. Mendoza for all other respondents.

AQUINO, J.:

Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of certiorari and prohibition in order to annul the decision of the Secretary of Labor dated April 16, 1973. In that decision the Secretary reversed an order of the old National Labor Relations Commission (NLRC) and held that the NLRC had jurisdiction over the complaint lodged by the Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas (FOITAF) against Mafinco for having dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case No. LR-086). The voluminous record reveals the following facts:

Peddling contracts and their termination. — On April 30, 1968 Cosmos Aerated Water Factory, Inc., hereinafter called Cosmos, a firm based at Malabon, Rizal, appointed Mafinco as its sole distributor of Cosmos soft drinks in Manila. On May 31, 1972 Rodrigo Repomanta and Mafinco executed a peddling contract whereby Repomanta agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a similar contract. The contracts were to remain in force for one year unless sooner terminated by either party upon five days notice to the other. 1 The contract with Repomanta reads as follows:

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PEDDLING CONTRACT

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT, entered into by and between:

The MAFINCO TRADING CORPORATION, a domestic corporation duly organized and existing under the laws of the Philippines, doing business at Rm. 715 Equitable Bank Bldg., Juan Luna St., Manila, under the style MAFINCO represented in this act by its General Manager, SALVADOR C. PICA, duly authorized for the purpose and hereinafter referred to as MAFINCO, and RODRIGO REPOMANTA, married/single, of legal age, and a resident of 70-D Bo. Potrero, MacArthur Highway, Malabon, Rizal hereinafter referred to as PEDDLER, WITNESSETH:

WHEREAS, MAFINCO has been appointed as the exclusive distributor of 'COSMOS' Soft Drink Products for and within the City of Manila;

WHEREAS, the PEDDLER is desirous of buying and selling in Manila the 'COSMOS' Soft Drink Products handled by MAFINCO;

NOW THEREFORE, for and in consideration of the foregoing premises and the covenants and conditions hereinafter set forth, the parties hereto has agreed as follows:

1. That in consideration of the competence of the PEDDLER and his ability to promote mutual benefits for the parties hereto, MAFINCO shall provide the PEDDLER with a delivery truck with which the latter shall exclusively peddle the soft drinks of the former, under the terms set forth herein;

2. The PEDDLER himself shall, carefully and in strict observance to traffic regulations, drive the truck furnished him by MAFINCO or should he employ a driver or helpers such driver or helpers shall be his employees under his direction and responsibility and not that of MAFINCO, and their compensation including salaries, wages, overtime pay, separation pay, bonus or other remuneration and privileges shall be for the PEDDLER'S own account; The PEDDLER shall likewise bind himself to comply with the provisions of the Social Security Act and all the applicable labor laws in relation to his employees;

3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or damage to the truck used by him caused by his own acts or omission or that of his driver and helpers;

4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips, bear the cost of maintenance and repairs of the said truck arising from ordinary wear and tear;

5. The PEDDLER shall secure at his own expense all necessary licenses and permits required by law or ordinance and shall bear any and all

expenses which may be incurred by him in the sales of the soft drink products covered by the contract;

6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per case of 24 bottles, ex-warehouse; PROVIDED, However, that if the PEDDLER purchases a total of not less than 250 cases a day, he shall be entitled further to a Peddler's Discount of P11.00;

7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the amount of P1,500.00 against which MAFINCO shall charge the PEDDLER with any unpaid account at the end of each day or with any damage to the truck of other account which is properly chargeable to the PEDDLER; within 30 days after the termination of this contract, the cash bond, after deducting proper charges, shall be returned to the PEDDLER;

8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized representative at the end of each day, and his failure to do so shall subject his cash bond at once to answer for any unliquidated accounts;

9. This contract shall be effective up to May 31, 1973 and supersedes any or all other previous contracts, if any, that may have been entered into between the parties; However, either of the parties may terminate the same upon five (5) days prior notice to the other;

10. Upon the. termination of this contract, unless the same is renewed, the delivery truck and such other equipment furnished by MAFINCO to the PEDDLER shall be returned by the latter in good order and workable condition, ordinary wear and tear excepted, und shall promptly settle his outstanding account if any, with MAFINCO;

11. To assure performance by the PEDDLER of his obligation to his employees under the Social Security Act, the applicable labor laws and for damages suffered by third persons, PEDDLER shall furnish a performance bond of P1,000.00 in favor of MAFINCO from a SURETY COMPANY acceptable to MAFINCO.

IN WITNESS WHEREOF, the parties hereto have signed this instrument at the City of Manila, Philippines, this May 31, 1972.

MAFINCO TRADING CORPORATION

By:

(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA

Peddler General Manager

(Witnesses and notarial acknowledgment are omitted)

On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the same. The notice to Repomanta reads as follows:

Dear Mr. Repomanta:

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This has reference to the Peddling Contract you executed with the Mafinco Trading Corporation on May 31, 1972. Please be informed that in accordance with the provisions of paragraph 9 of the said peddling contract, we are hereby serving notice of termination thereof effective on December 12, 1972.

Yours truly,

(Sgd.) SALVADOR C. PICA

General Manager

Complaints of Repomanta and Moralde and NLRCs dismissal thereof. — Four days later or on December 11, 1972 Repomanta and Moralde, through their union, the FOITAF, filed a complaint with the NLRC, charging the general manager of Mafinco with having violated Presidential Decree No. 21, issued on October 14, 1972, which created the NLRC and which was intended "to promote industrial peace, maximize productivity and secure social justice for all". The brief complaint reads as follows:

Hon. Amado Gat Inciong, Chairman

National Labor Relations Commission

Phoenix Bldg., Intramuros,

Manila

Sir:

Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the FOITAF files a complaint against SALVADOR C. PICA, General Manager of MAFINCO TRADING CORP. located at Room 715, Equitable Bank Bldg., Juan Luna, Manila, for terminating union officials (sic), Mr. Rodrigo Refumanta and Mr. Rey Moralde, which is a violation of the above mentioned decree.

Notice of termination is herewith attach (sic).

We anticipate your due attention and assistance.

Respectfully yours,

(Signed by National Secretary of FOITAF)

Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no jurisdiction because Repomanta and Moralde were not its employees but were independent contractors. It stressed that there was termination of the contract, not a dismissal of an employee. In Repomanta's case, it pointed out that he was registered with the Social Security System as an employer who, as a peddler, paid premiums for his employees; that he secured the mayor's permit to do business and the corresponding peddler's license and paid the privilege tax and that he obtained workmen's compensation

insurance for his own employees or helpers. It alleged that Moralde was in the same situation as Repomanta.

Mafinco further alleged that the Bureau of Labor Relations denied the application of peedlers for registration as a labor union because they were not employees but employers in their own right of delivery helpers (Decision dated January 4, 1966 by the Registrar of Labor Organizations in Registration Proceeding No. 4, In the Matter of Cosmos Supervisors Association-PTGWO); that the Court of Industrial Relations in Case No. 4399-ULP, Cosmos Supervisors' Association — PTGWO vs. Manila Cosmos Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that the peddlers were not employees of Cosmos, and that the Court of Appeals held in Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R, March 18, 1958 that the delivery helpers of the peddlers were not employees of Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs. Fung Kui, Resolution dated July 16, 1958).

The complaint was referred to a factfinder who in a lengthy report dated January 22, 1973 found, after "exhaustively and impartially" considering the contentions of the parties, that the peddlers were employers or "independent businessmen', as held by the Court of Industrial Relations and the Court of Appeals, and that that holding has the force of res judicata. The factfinder recommended the dismissal of the complaint.

The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O. Castro, adopted that recommendation in its order dated February 2, 1973. That order, which analyzes the peddling contract and reviews the court rulings on the matter, is quoted below:

The question of whether peddling contracts of the kind entered into between the parties give rise to an employer-employee relationship is not new. Nor are the contracts themselves of recent vintage.

For at least twenty years respondent MAFINCO and its predecessor and/or principal, the Manila-Cosmos Aerated Water Factory, have entered into contracts with peddlers, under the terms of which the latter buy from the former at a special price, and sell in Manila, the former's soft drink products. The distributor provides the peddler with a delivery truck with the distributor answering for the cost of fuel and maintenance. If a peddler buys a certain number of cases or more a day, he is entitled to a fixed amount of peddler's discount.

The peddler himself drives the truck but if he engages a driver or helpers, the latter are his employees and he assumes all the responsibilities of an employer in relation to them. He also obtains at his own expense all licenses and permits required by law of salesmen.

The peddler clears his accounts with the distributor at the end of each day, and unpaid accounts are charged against the cash deposit or bond which he gives the distributor upon the

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execution of the peddling contract. He answers for damages caused by him or his employees to third persons.

Ruling upon this type of contracts, and the practices and relationships that attended its implementation, the Court of Appeals, in CA-G.R. No. 19477-R, said that it did not create a relationship of employer and employee; that the peddlers under such contract were not employees of the manufacturer or distributor, and accordingly dismissed the complaints in the said case. (The peddler-complainants in that case were claiming overtime pay and damages, among others.) Elevated to the Supreme Court on review (G.R. Nos. L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals was in effect affirmed, for the petition for review was dismissed by the Supreme Court 'for being factual and for lack of merit!

The Court of Industrial Relations is of the same persuasion. After inquiring extensively into substantially the same terms and conditions of peddling contracts and the practices and relationships that went into their implementation, the Court said in Case No. 4399ULP that the peddlers of the Manila-Cosmos Aerated Water Factory were not employees of the latter.

These precedents apply squarely to the case at hand. The complainants here have not shown that their peddling contracts with the respondent differ in any substantial degree from those that were at issue in the Court of Industrial Relations, the Court of Appeals and the Supreme Court in the cases cited above. Indeed, a comparison between the contracts involved in those cases and those in the instant litigation do not show any difference that would warrant a different conclusion than that reached by those courts. If at all, the additional stipulations in the present contracts strengthen the position that the complainant peddlers are independent contractors or businessman, not employees of the respondent.

Nor has there been shown any substantial change in the old practices of peddlers vis-a-vis the distributor or manufacturer. The points raised by the complainants in their pleadings regarding these practices were extensively discussed by the CIR in the ULP case above referred to.

We are not prepared to depart from this rule of long standing. It is the law of the case.

We therefore hold that the complainants in this case were not employees of MAFINCO and Presidential Decree No. 21 does not I apply to them.

Complainants' appeal and the Labor Secretary's decision that they were employees of Mafinco. — Complainants Repomanta and Moralde appealed to the Secretary of Labor. They argued that the NLRC erred (1) in holding that they were independent contractors and not employees; (2) in relying on the peddler's contract to determine the existence of employer-employee relationship; (3) in anchoring its decisions on precedents which have only persuasive force and which did not rule squarely on the issue of employer-employee relationship, and (4) in dismissing their complaint.

As stated at the outset, the Secretary in his decision reversed al the NLRC order. He ruled that Repomanta and Moralde were employees of Mafinco and that, consequently, the NLRC had jurisdiction over their complaint. The Secretary directed the NLRC to hear the case on the merits.

The Secretary found that the complainants "were driver-salesmen of the company, driving the trucks and distributing the products of the company" and that they were not independent contractors because they had no capital of their own. That finding was based on the following considerations:

(1) That the contracts are Identical; (2) that the complainants were originally plant drivers' of the company; (3) that the complainants had no capital of their own; (4) that their delivery trucks were provided by the company; (5) that the use of the trucks were 'exclusively' for peddling the products of the company; (6) that they were required to observe regulations; (7) that they were required to drive the trucks; (8) that the company furnished the gasoline and oil to run the said trucks in business trips; (9) that the company shouldered the cost of maintenance and repair of the said trucks arising from an ordinary wear and tear; (10) that the company required them to secure the necessary licenses and permits; (11) that the company prohibited them from selling the company's products higher than the fixed price of the company; and (12) that they and their helpers were paid on commission basis.

The Secretary relied on this Court's ruling that a person who possesses no capital or money of his own to pay his obligations to his workers but relies-entirely upon the contract price to be paid by the company, falls short of the requisites or conditions necessary for an independent contractor (Mansal vs. Gocheco Lumber Co., 96 Phil. 941).

He observed that "behind the peddling cloak there was in fact employee-employer relationship". He said:

While, generally, written employment contracts are held sufficient in determining the nature of employment, such contracts, however, cannot be always held conclusive where the actual circumstances of employment indicate otherwise. For example, some employers, in order to avoid or evade coverage of the Workmen's Compensation Act, enter into pseudo contracts with their employees who are named as 'employers' or 'independent contractors'. Such

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'written contracts as distinguished from oral Agreements, purporting to make persons independent contractors, no matter how 'adroitly framed', can be carefully scanned and the real relationship ascertained' (Glielmi vs. Netherlands Dairy Co., 254 N.Y. 60 (1930), Morabe & Inton, Workmen's Compensation Act. p. 69).

If the Peddling Contract were carefully scanned, the conclusion may be drawn that the contract is but a device and subterfuge to evade coverage under the labor laws. There is more than meets the eye in item 2 of the Peddling Contract which required the peddlers to do that which the law intends the employer to have done.

In fact, such contracts, as the one in question, exempting or tending to exempt the employers from their legal obligations to their workers are null and void under Sec. 7 of the Workmen's Compensation Act, as amended, which states:

Any contract, regulation or device of any sort intended to exempt the employer from all or part of the liability created by this Act shall be null and void.

To rule otherwise would be to open the floodgate to employers in this territory to evade liabilities to their workers by simply letting contracts for the doing of their business. 'Such construction could not only narrow the provisions of the Act, but would defeat its intent and purposes in their entirety. (Andoyo vs. Manila Railroad Co., supra).

The motion for the reconsideration of the decision was denied by the Secretary in his order of July 16,1973.

The Committee's report that the peddlers are independent contractors. — On July 25, 1973 Mafinco moved for the clarification of the decision by inquiring whether the question of employee-employer relationship would be included in the hearing on the merits.

Action on the said motion was deferred until the receipt of the report of the committee created to study the status of peddlers of Cosmos products. On September 3, 1973- the Secretary directed the committee composed of Ernesto Valencia, Vicente R. Guzman and Eleo Cayapas to conduct an in-depth study of the actual relationship existing between the Cosmos Bottling Co. and its peddlers.

The committee in its report dated September 17, 1973 arrived at the conclusion that the relationship actually existing between Cosmos and Mafinco, on one hand, and the peddlers of Cosmos products, on the other, is not one of employer and employee and "that the peddlers are independent contractors".

The committee after a perusal of the record of NLRC Case No. LR-086 interviewed twenty peddlers, an officer of Cosmos and an officer of Mafinco. In the conduct of the interviews it 44 observed judicious adherence to impartiality and openmindedness but with a modicum

of friendliness and much of informality". The report reads in part as follows:

(1) Implications of the 'Agreement To Peddler Soft Drinks'. — Of vital importance to the mind of your committee is the fact that this Agreement entered into between Cosmos and the Peddlers has, as its prefatory statement but before the enumeration of its terms and conditions, the following:

That the Peddler has agreed to buy and sell the products of the MANUFACTURER under the following conditions:

Similarly, the 'Peddling Contract' entered into between Mafinco and the Peddlers. contains peculiarly Identical wordings. viz:

WHEREAS, the PEDDLER is desirious of buying and selling in Manila the 'COSMOS' Soft Drink Products handled by

MAFINCO:

It is immediately clear from the beginning that the relationship that the parties would want to establish between them is one of buyer and seller of the Cosmos Products. Moreover, this type of Agreement or Contract has its roots since some twenty (20) years earlier, with modifications only with respect to the factory price, the amount of over prices or what the peddlers refer to as commission, and the amount pertaining to the dealer's discount. which appear to vary depending upon the market demands.

We are, however, tempted to argue, as did the Peddlers, that this Agreement or Contract might have been contrived as a device to evade responsibilities imposed upon Cosmos or Mafinco under our labor laws as well as under other national or municipal laws. Nevertheless, a close reading thereof will show a flaw in this line of insistence, when we consider that this type of Agreement or Contract has been substantially the same since the beginning of this relationship. More than this, it has withstood the test of time by pronouncements of the CIR in ULP Case No. 4399, Cosmos Supervisors Association vs. Manila Cosmos Aerated Water Factory, Inc.' July 17, 1967; by judicial review of the Court of Appeals in CA-G.R. Nos. 19477-R, 19478-R and 21397-R, 'Eustaquio Repajon, et al. vs. Manila Cosmos Aerated Water Factory, Inc.', promulgated on March 18, 1958; and impliedly by resolution of the Supreme Court in G.R. Nos. L-14072 to L-14074 when the Court of Appeals cases were appealed to that Tribunal.

But the more basic and indeed forceful ratiocination in favor of the validity of the Agreement or Contract which covenants that the

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relationship between the Peddlers and Cosmos or Mafinco is one of buyer and seller of the Cosmos Products on the part of the Peddlers, and, therefore, one of an independent contractorship, finds substantive support in our Civil Code which provides: (here arts. 1370 and 1374 of the Civil Code regarding interpretation of contracts are quoted).

For its adjective interpretation, our Rules of Court specifically provides: (Here parol evidence rule in see. 7, Rule 130, Rules of Court is quoted)

It must b restated at this point for purposes of emphasis that the validity of the aforesaid Agreement or Contract has not been seriously assailed by the parties. In fact, their rallying cause was the Agreement or Contract itself. To strengthen these provisions of the Civil Code and the Rules of Court, stabilized jurisprudence have held that it is elementary rule of contract that the laws in force at the time the contract was made must govern its interpretation and application; that the terms of the contract, where unambiguous, are conclusive, in the absence of averment and proof of mistake, the question being, not what intention existed in the minds of the parties, but what intention is expressed by the language used; that interpretation of an agreement does not include its modifications or the creation of a new or different one; that Courts cannot make for the parties better agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties; and that there is no right to interpret an agreement as meaning something different from what the parties intended as expressed by the language they saw fit to employ.

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(1) The selection and engagement of the employees.-Nothing in the Agreement to Peddler Soft Drinks in the case of Cosmos and in the Peddling Contract in the case of Mafinco, will reveal and we cannot logically infer therefrom, that the Peddlers were engaged as employees of Cosmos or Mafinco. The selection of the Peddlers who will buy and sell Cosmos products is left entirely between the parties; it is not the sole prerogative of either one of the parties. There must be meeting of the minds in order to consummate the Agreement or Contract and no evidence of coercion or imposition of the will of one over the other is evident or apparent from the Peddlers' or Managements' interviews had by the members of your Committee. This test, therefore, cannot be invoked by the Peddlers in their attempt at presenting arguments to the effect that they are employees of Cosmos or Mafinco. Upon the other hand, the Agreement or Contract itself provides that the Peddlers can hire helpers and drivers under their direction and responsibility, and to whom they shall be liable for payment of 'salaries, wages, overtime pay, separation pay, bonus and other remuneration and privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz and M. Fong Kui, who are peddlers in their own right. This evidently

shows the discretion granted the peddlers to hire employees of their own.

(2) The payment of wages. — On the basis of the clear terms of the Agreement or Contract, no mention is made of the wages of the Peddlers; neither can an inference be made that any salary or wage is given to Peddlers. In the interviews, however, with the Peddlers, they vehemently take the position that the 'dealer's discount' which was given to them at the rate of Pll.50 in excess of 200 cases of Cosmos products they sell a day, constitutes their 'wages'. The term 'wages' as defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602, as amended) is as follows:

(g) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece, commission basis, or other method of calculating the same, which is payable by an employer to an under a written or unwritten contract of employement for work done or to be done or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. ...

Section 10 (k) of the same law provides as follows:

(k) Notification of wage conditions. — It shall be the duty of every employer to notify his employees at the time of hiring of the wage conditions under which they are employed, which shall include the following particulars:

(1) The rate of wages payable;

(2) The method of calculation of wages;

(3) The periodicity of wage payment; the day, the hour and pIace of payment; and

(4) Any change with respect to any of the foregoing items.

To the Committee's mind, all these requirements have not been shown to exist in the relationship between the Peddlers and the Cosmos or Mafinco. If it were true that the Pedders' 'dealer's discount' is in the nature of wages, then they must be notifed fully of the wage conditions. Moreover, such 'wages' must be paid to them periodically at least once every two weeks or twice a month. (See Par. (h) of See. 10 of Act No. 602, as amended). The absence of such notification to the Peddlers and the lack of periodicity of such payment in the manner and procedure contemplated in the Minimum Wage Law destroy, quiet evidently, their allegation that the 'dealer's discount' was their 'wage'. Take note that the 'dealer's discount' was given only about a week after the end of the month, and from the evidence submitted by Cosmos, it appears clearly that the 'dealer's discount' varies from month to month. Thus, the earnings of Mr. Salvador Abonales, who is a Peddler, from January to August, 1973, amounted to P12,520.70, while that

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of Mr. Alberto S. Garcia, for the same period, amounted to P13,633.42, and 4 their earnings every month vary decisively. This factor defeats factually the insistence of the Peddlers that they are employees of Cosmos or Mafinco.

Upon the other hand, the Peddlers' declarations reveal that the wages of their helpers are taken from the overprice or what is ordinarily termed as 'commission' of ten centavos (P0.10) per case that they get-a factor which indicates that they are themselves employers of their helpers. In addition, the Peddlers are reported as Employers of these helpers with the Social Security System, and that they also purchase workmen's compensation policies in their names as Employers of their own helpers for purposes of workmen's compensation insurance of their liabilities, which are all in accordance with the terms and conditions of the Agreement or Contract and indicative of an attribute of one who is an independent merchant.

(3) The power of dismissal. — In the case of 'Rodrigo Repomanta and Rey Moralde vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, which served as one of our bases for this study, the complainants therein appear to have complained before the National Labor Relations Commission for being allegedly illegally dismissed or that their services were terminated without cause. A search of the alleged dismissal however shows that the Identical letters both dated December 7, 1972 addressed to the said complainants were not actually what complainants pictured them to be, but the termination of the peddling in accordance with paragraph 9 of said Contract.

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Thus, complainants' services were not terminated, only their Peddling Contracts with Mafinco were. The power of dismissal is not lodged with either Mafinco or Cosmos, for based on the Agreement or Contract none whatsoever exists. Certainly, to attribute a power of dismissal to Cosmos or Mafinco where none exists is careless imprudence and a height of inaccuracy. This power of dismissal by Cosmos or Mafinco is not countenanced in the Agreement or Contract.

There is, however, an allegation by the Peddlers that the hiring and firing of the helpers ultimately rest on Cosmos or Mafinco. This allegation nevertheless, is controverted by Cosmos and Mafinco. Nonetheless, we checked the basic document — the Agreement or Contract — and we find that the hiring and, impliedly firing, we is a prerogative of the Peddlers and not of Cosmos or Mafinco.

(4) The power to control the employee's conduct. — From the interviews had by your Committee with both the Peddlers and the representatives of Cosmos and Mafinco, we gather that the following findings on the power of control are substantially correct:

(a) That the delivery trucks assigned to the Peddlers are available to them early in the morning and are free to get them, which they usually do between 5:30 A.M. to 6:30 A.M. There was no compulsion on the part of the Peddlers to report for work at that time, as in fact, they did not sign any time record. The practice of getting the delivery trucks early in the morning is more beneficial to the Peddlers than to Cosmos or Mafinco since they can finish the peddling of Cosmos products much earlier and spend the rest of the day at their own pleasure. The signing of the 'logbooks' is both pertinent and necessary since the trucks used in the delivery of Cosmos products are owned by Cosmos or Mafinco and are simply utilized by Peddlers as a measure of convenience and for advertising purposes. But peddlers are not precluded from getting trucks of their own should they so desire.

(b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco in definite areas routes or zones, not so much of supervision over Peddlers, since their areas, routes or zones were already agreed upon or pre-arranged among them through the Cosmos Peddlers Association, Inc. of which all Peddlers are members, as principally for market analysis since soft drinks selling is a highly competitive business, and also to inquire or check on sales, and the result of which, report is made direct to the Office of Cosmos or Mafinco.

(c) That the use of the uniform does not seem to be an imposition by management of Cosmos or Mafinco upon the Peddlers, but a voluntary arrangement among the Peddlers themselves. For, from the documents submitted to this Committee, it appears that the Cosmos Peddlers Association, in a meeting held on August 5, 1967, adopted a resolution to 'always wear their uniform while in the performance of their sales work,' and in their meeting on January 25, 1969, it adopted another resolution penalizing Peddlers who failed to wear their uniform in the amount of P2.00 per violation. Certainly, the resolutions of the Cosmos Peddlers Association, an independent association of Peddlers and duly registered with the Securities and Exchange Commission, and possessing an entirely distinct existence, cannot be taken as impositions from Cosmos or Mafinco.

(d) That the matter of turning in of sales of collection which, if found short, is charged against the Peddler's cash bond, is to the mind of the Committee, giving effect to the valid terms and conditions of the Agreement or Contract, and also an ordinary business practice which necessarily requires liquidation of the day's accounts. We do not see any evidence of control on the part of Cosmos or Mafinco over the activities, including the sales, of the Cosmos products by the Peddlers themselves who are, apparently, left to their own

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choices of routes, areas or zones as pre-arranged, with no definite, much less supervised, time schedule.

(e) That in the matter of reprimand or discipline which the peddlers attempt to project when they failed to report for work, your Committee found no substantial evidence on this point. The evidence shows that the peddlers are free to choose their time. Obviously, any absence that they may incur means so much reduction from their earnings. Thus, if their attention is incidentally called on this matter it is for the observance of their agreements which is present in any contractual relations.

As to the aspect of employer-employee relation, therefore, between Cosmos or Mafinco and the Peddlers, your Committee does not have sufficient basis to reasonably sustain the stand of the Peddlers that there is such relationship.

(c) Attributes of an independent contractor. — As a countercheck, as it were, to the issue of employer-employee relationship your committee has taken the task of testing such relationship against the attributes of an independent contractor which, from the interviews and documents submitted by the parties, appear to exists on the part of the Peddlers. The earlier case of Andoyo vs. Manila Railroad Co., G.R. No. 34722, promulgated on March 28, 1932, furnishes us the definition of an 'independent contractor.' Our Supreme Court of pre-war composition, ruled:

An independent contractor is one who exercises independent employment and contracts to do a piece of work according to his own methods and without being subject to control of his employer except as to the resuIt of thework. A person who has no capital or money of his own to pay his laborers or to comply with his obligations to them, who files no bond to answer for the fulfillment of his contract with his employer, falls short of the requisites or conditions necessary to classify him as independent contractor.

These requisites and conditions were reiterated in the postwar cases of Philippine Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968, promulgated on November 29, 1954, and Koppel (Phil.), Inc. vs. Darlucio et, al., G.R. No. L-14903, promulgated on August. 29, 1960. Analyzing the definition of 'independent contractor', the following may be gathered from the relationship between the Peddlers, on the one hand, and Cosmos or Mafinco, on the other:

(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the latter furnishing the delivery truck, but the former sell Cosmos products according to their own methods, subject to the pre-arranged routes, areas and zones, and go back to the Company

compound to return the delivery truck and to make accounting of the day's sales collection at any time in the morning or in the afternoon. Essentially, control, if at all, extends only as to observance of traffic regulations which is inherent in ownership of the delivery truck by Cosmos or Mafinco and the end result which is the liquidation of the sales collection. Control over the details of the Peddlers' sales activities seems to be farfetched in this case.

(2) Capital or money of the Peddlers to pay their own helpers is evidently within their prerogative, although it appears that the wages of helpers are uniform at P6.00 per trip. But can we safely say that the cash bond of Pl,500.00 by the Peddlers constitute their capital? For big-time businessmen, this small amount may not be considered capital, but when it is taken as a 'deposit on consignment' since the same answers for any deficiencies that the Peddlers may incur during the day's sales collection, then it can be taken to mean 'capital' within its signification that it allocates to every day business dealing. The amount of capital, to us, is immaterial; it is the purpose for which the same is deposited that is most significant.

(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and Peddling Contract to put up not only the cash bond of P1,500.00, but also a performance bond of P1,000.00 as embodied in said Agreement to Peddler Soft Drinks as follows:

(4) To assure performance by the PEDDLER of his obligation to his employees under the Social Security Act, the applicable labor laws, and for damages suffered by third persons PEDDLER shall furnish a performance bond of P1,000.00 in favor of the MANUFACTURER from a surety Company acceptable to the MANUFACTURER. And, in case Performance Bond within 30 days from the date of signing of this Contract, such failure shall be sufficient ground for the MANUFACTURER to suspend the business relationship with the Peddler until the Peddler complies with this provision.

Again, to the mind of your Committee, the amount of the Performance Bond is not so relevant and material as to the purpose for which the same is executed- which is to assure performance of the Peddlers' obligations as employer of his helpers. This is an attribute of an independent contractor to which the Peddlers are bound under the Agreement or Contract.

(4) Peddlers are doing business for themselves since they took out licenses in the City of Manila, and have paid their corresponding professional or occupation tax to the Bureau of Internal Avenue. This fact strengthens the Committee findings that the peddlers are carrying on a business as independent merchants.

The Secretary in his resolution of October 18, 1973 ignored the committee's conclusion. He clarified that the NLRC should determine whether the two complainants were illegally dismissed and that the jurisdictional issue should not be taken up anymore.

The instant petition; the issue and the ruling thereon. — Mafinco filed the instant actions on November 14, 1973. It prayed for a declaration that the Secretary of Labor and the NLRC had no jurisdiction to entertain the complaints of Repomanta and Moralde; that the

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Secretary's decision should be set aside, and that the NLRC and the Secretary be enjoined from further proceeding in NLRC Case No. LR-086.

Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21 the Secretary's decision "is appealable" to the President of the Philippines (Nation Multi Service Labor Union vs. Agcaoili, L-39741, May 30, 1975, 64 SCRA 274). However, under section 22 of the old NLRC regulations, an appeal to the President should be made only "in national interest cases".

On the other hand, judicial review of the decision of an administrative agency or official exercising quasi-judicial functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case the administrative action or resolution is "corrupt, arbitrary or capricious (San Miguel Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56; Commissioner of Customs vs. Valencia, 100 Phil. 165; Villegas vs. Auditor General, L-21352, November 29, 1966, 18 SCRA 877, 891).

After the parties had submitted their illuminating memoranda, Mafinco filed a motion in this Court for the dismissal of the complaint in the defunct NLRC on three grounds, to wit: (1) that the NLRC had no jurisdiction over the case because Repomanta and Moralde had not sought reinstatement or backwages; (2) that the employer's failure to secure written clearance from the Secretary of Labor before dismissing an employee might constitute a crime punishable under article 327 of the Labor Code and not mere contempt, as contemplated in section 10 of Presidential Decree No. 21, and (3) that the contempt provisions of that decree were abrogated by the Labor Code.

Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771, where it was held that the regular court, not the NLRC, has jurisdiction over an employee's action for damages against his employer's act of demoting him.

Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed out that, inasmuch as their complaint is pending in the new NLRC, this Court cannot dismiss it. They also observed that article 327 was eliminated from the Labor Code which, as amended by Presidential Decrees Nos. 570-A, 626 and 643, contains only 292 articles. Article 327 was superseded by article 278 of the amended Code.

The truth is that Mafinco's motion merely adduced additional grounds to support its stand that the Secretary of Labor had no jurisdiction over the complaint of Repomanta and Moralde.

This case was not rendered moot by the Labor Code. Although the Code abolished the old NLRC (Art. 289), it created a new NLRC (Art. 213) and provided that cases pending before the old NLRC should be transferred to, and processed by, the corresponding labor relations division or the new NLRC and should be decided in accordance with Presidential Decree No. 21 and the rules and regulations adopted thereunder (Art. 290. See Sec. 5, P.D. No. 626).

The issue is whether the dismissal of Repomanta and Moralde was within the jurisdiction of the old NLRC. If, as held by the old NLRC, it had no jurisdiction over their complaint because they were not

employees of Mafinco but independent contractors, then the Secretary of Labor had no jurisdiction to remand the case to the NLRC for a hearing on the merits of the complaint.

Hence, the crucial issue is whether Repomanta and Moralde were employees of Mafinco under the peddling contract already quoted. Is the contract an employment contract or a contract to sell or distribute Cosmos products?

The question of whether an employer-employee relationship exists in a certain situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried to avoid the bringing about of an employer-employee relationship in some of their enterprises because that juridical relation spawns obligations connected with workmen's compensation, social security, medicare, minimum wage, termination pay and unionism.

Presidential Decree No. 21 provides:

SEC. 2. The Commission shall have original and exclusive jurisdiction over the following:

1) All matters involving employee-employer relations including all disputes and grievances which may otherwise lead to strikes and lockouts under Republic Act No. 875;

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SEC. 10. The President of the Philippines, on recommendation of the Commission and the Secretary of Labor, may order the arrest and detention of any person held in contempt by the Commission for non-compliance and defiance of any subpoena, order or decision duly issued by the Commission in accordance with this Decree and its implementing rules and regulations and for any violation of the provisions of this Decree.

SEC. 11. No employer may shut down his establishment or dismiss or terminate the services of regular employees with at least one year of service without the written clearance of the Secretary of , Labor.

The Solicitor General, as counsel for the old NLRC and the Secretary of Labor, argues that the question of whether Repomanta and Morale are independent contractors or employees is factual in character and cannot be resolved by merely construing the peddling contracts; that other relevant facts aliunde or dehors the said contracts should be taken into account, and that the contracts were a part of an "intricate network of devices (of Mafinco and Cosmos) developed. and perfected through the years to conceal the true nature of their relationship to their sales agents".

Repomanta and Moralde contend that their peddling contracts were terminated because of their activities in organizing a union among the peddlers. Annexed to their memorandum is a joint affidavit of sixty-three sales agents of Cosmos products who described therein the nature of their work, the organization of their union and the dismissal of Repomanta and Moralde. Annexed to their answer is Resolution

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No. 921 of the Social Security Commission dated November 16, 1972 in SSS Case No. 602 wherein it was held that peddlers and their helpers were employees of Cosmos.

Like the Solicitor General, Repomanta and Moralde harp on the argument that the peddling contracts were a scheme to camouflage an employer-employee relationship and thus evade the coverage of labor laws.

The parties in their pleadings and memoranda injected conflicting factual allegations to support their diametrically opposite contentions. From the factual angle, the case has become highly controversial.

In a certiorari and prohibition case, like the instant case, only legal issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis of undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules of Court require that in the verified petition for certiorari, mandamus and prohibition the petitioner should allege "facts with certainty".

In this case the facts have become uncertain. Controversial evidentiary facts have been alleged. What is certain and indubitable is that a notarized peddling contract was executed.

This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis of the parties' contradictory factual submissions. The record has become voluminous because of their efforts to persuade this Court to accept their discordant factual statements.

Pro hac vice the issue of whether Repomanta and Moralde were employees of Mafinco or were independent contractors should be resolved mainly in the light of their peddling contracts. A different approach would lead this Court astray into the field of factual controversy where its legal pronouncements would not rest on solid grounds.

A restatement of the provisions of the peddling contract is necessary in order to find out whether under that instrument Repomanta and Moralde were independent contractors or mere employees of Mafinco.

Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler employ a driver and helpers, he would be responsible for their compensation and social security contributions and he should comply with applicable labor laws "in relation to his employees" (Par. 2).

The peddler would be responsible for any damage to persons or property or to the truck caused by his own acts or omissions or those of his driver and helpers (Par. 3). Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The peddler would secure at his own expense the necessary licenses and permits and bear the expenses to be incurred in the sale of Cosmos products (Par. 5).

The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-warehouse. Should he purchase at least 250 cases a

day, he would be entitled to a peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer for his obligations to his employees (Par. 11). He should liquidate his accounts at the end of each day (Par. 8). The contract would be effective up to May 31, 1973. Either party might terminate it upon five days' prior notice to the other (Par. 9).

We hold that under their peddling contracts Repomanta and Moralde were not employees of Mafinco but were independent contractors as found by the NLRC and its fact-finder and by the committee appointed by the Secretary of Labor to look into the status of Cosmos and Mafinco peddlers. They were distributors of Cosmos soft drinks with their own capital and employees. Ordinarily, an employee or a mere peddler does not execute a formal contract of employment. He is simply hired and he works under the direction and control of the employer.

Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which indicate the manner in which they would sell Cosmos soft drinks. That Circumstance signifies that they were acting as independent businessmen. They were to sign or not to sign that contract. If they did not want to sell Cosmos products under the conditions defined in that contract; they were free to reject it.

But having signed it, they were bound by its stipulations and the consequences thereof under existing labor laws. One such stipulation is the right of the parties to terminate the contract upon five days' prior notice (Par. 9). Whether the termination in this case was an unwarranted dismissal of an employee, as contended by Repomanta and Moralde, is a point that cannot be resolved without submission of evidence. Using the contract itself as the sole criterion, the termination should perforce be characterized as simply the exercise of a right freely stipulated upon by the parties.

"In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct-although the latter is the most important element" (Viana vs. Al-Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445).

On the other hand, an independent contractor is "one who exercises independent employment and contracts to do a piece of work according to his own methods and without being subject to control of his employer except as to the result of the work" (Mansal vs. P.P. Gocheco Lumber Co., supra).

Among the factors to be considered are whether the contractor is carrying on an independent business; whether the work is part of the employer's general business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of the work to another; the power to terminate the relationship; the existence of a contract for the performance of a specified piece of work; the control and supervision of the work; the employer's powers and duties with respect to the hiring, firing, and payment of the contractor's servants; the control of the premises; the duty to supply the premises,

65

tools, appliances, material and labor; and the mode, manner, and terms of payment. (56 C.J.S. 46).

Those tests to determine the existence of an employer-employee relationship or whether the person doing a particular work for another is an independent contractor cannot be satisfactorily applied in the instant case. It should be obvious by now that the instant case is a penumbral, sui generis case lying on the shadowy borderline that separates an employee from an independent contractor.

In determining whether the relationship is that of employer and employee or whether one is an independent contractor, "each case must be determined on its own facts and all the features of the relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of the peddling contract, no employer-employee relationship was created. Hence, the old NLRC had no jurisdiction over the termination of the peddling contract.

However, this ruling is without prejudice to the right of Repomanta and Moralde and the other peddlers to sue in the proper Court of First Instance and to ask for a reformation of the instrument evidencing the contract or for its annulment or to secure a declaration that, disregarding the peddling contract, the actual juridical relationship between them and Mafinco or Cosmos is that of employer and employee. In that action a fulldress trial may be held and the parties may introduce the evidence necessary to sustain their respective contentions.

Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had acted oppressively towards their peddlers, as contemplated in article 1701 of the Civil Code, then they should file the proper action for damages in the regular courts. Where there is a right, there is a remedy (Ubi jus, ubi remedium).

WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC Case No. LR-086 dated April 16, July 16 and October 18, 1973, respectively, are set aside and the order of the NLRC dated February 2, 1973, dismissing the case for lack of jurisdiction, is affirmed. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department of Labor and Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members, JACINTO GARCIANO, ALFREDO

C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.

Ledesma, Saludo & Associates for petitioners.

Pablo S. Bernardo for private respondents.

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein petitioners assails the decision of respondent National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a) petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the existence of employer-employee relationship and granting respondent workers by reason thereof their various monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid on a monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P 3.00) pesos provided they report for work before 9:30 a.m. everyday.

Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to Saturday and during peak periods even on Sundays and holidays.

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied that the same was ordered by respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he copied the design of petitioner Haberdashery. But in the afternoon, when again questioned about said barong, Pelobello and Zapata denied ownership of the same. Consequently a memorandum was issued to each of them to explain on or before February 4, 1985 why no action

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should be taken against them for accepting a job order which is prejudicial and in direct competition with the business of the company. 2 Both respondents allegedly did not submit their explanation and did not report for work. 3 Hence, they were dismissed by petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar positions without loss of seniority rights, with full backwages from July 4, 1985 up to actual reinstatement. The charge of unfair labor practice is dismissed for lack of merit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the minimum wage law is hereby ordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive leave pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission is directed to compute the monetary awards due each complainant based on the available records of the respondents retroactive as of three years prior to the filing of the instant case.

SO ORDERED. 5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6

After their motion for reconsideration was denied, petitioners filed the instant petition raising the following issues:

I

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.

II

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.

III

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7

The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have repeatedly held in countless decisions that the test of employer-employee relationship is four-fold: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. It is the so called "control test" that is the most important element. 8 This simply means the determination of whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and method by which the same is to be accomplished. 9

The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from the operations of petitioner, when a customer enters into a contract with the haberdashery or its proprietor, the latter directs an employee who may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's measurements, and to sew the pants, coat or shirt as specified by the customer. Supervision is actively manifested in all these aspects — the manner and quality of cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati Tailors which reads in part:

4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this person (sic) must ask permission to the above mentioned before giving orders or instructions to the tailors.

B. Before accepting the job orders tailors must check the materials, job orders, due dates and other things to maximize the efficiency of our production. The materials should be checked (sic) if it is matched (sic) with the sample, together with the number of the job order.

C. Effective immediately all job orders must be finished one day before the due date. This can be done by proper scheduling of job order and if you will cooperate with your supervisors. If you have many due dates for certain day, advise Ruben or Ofel at once so that they can make necessary adjustment on due dates.

D. Alteration-Before accepting alteration person attending on customs (sic) must ask first or must advise the tailors regarding the due dates so that we can eliminate what we call 'Bitin'.

E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle the problem. Fighting inside the shop is

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strictly prohibited. Any tailor violating this memorandum will be subject to disciplinary action.

For strict compliance. 10

From this memorandum alone, it is evident that petitioner has reserved the right to control its employees not only as to the result but also the means and methods by which the same are to be accomplished. That private respondents are regular employees is further proven by the fact that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11

Since private respondents are regular employees, necessarily the argument that they are independent contractors must fail. As established in the preceding paragraphs, private respondents did not exercise independence in their own methods, but on the contrary were subject to the control of petitioners from the beginning of their tasks to their completion. Unlike independent contractors who generally rely on their own resources, the equipment, tools, accessories, and paraphernalia used by private respondents are supplied and owned by petitioners. Private respondents are totally dependent on petitioners in all these aspects.

Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which explicitly states that, "All employees paid by the result shall receive not less than the applicable new minimum wage rates for eight (8) hours work a day, except where a payment by result rate has been established by the Secretary of Labor. ..." 12 No such rate has been established in this case.

But all these notwithstanding, the question as to whether or not there is in fact an underpayment of minimum wages to private respondents has already been resolved in the decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient evidence to support the claims of the complainants for alleged violation of the minimum wage, their claims for underpayment re violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13

The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC; neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case is concerned, that issue has been laid to rest. As to private respondents, the judgment may be said to have attained finality. For it is a well-settled rule in this jurisdiction that "an appellee who has not himself appealed cannot obtain from the appellate court-, any affirmative relief other than the ones granted in the decision of the court below. " 14

As a consequence of their status as regular employees of the petitioners, they can claim cost of living allowance. This is apparent from the provision defining the employees entitled to said allowance, thus: "... All workers in the private sector, regardless of their position,

designation or status, and irrespective of the method by which their wages are paid. " 15

Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 which provides:

Section 3. Employers covered. — The Decree shall apply to all employers except to:

xxx xxx xxx

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned. (Emphasis supplied.)

On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are not entitled to service incentive leave pay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time consumed in the performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does show that a violation of the employer's rules has been committed and the evidence of such transgression, the copied barong tagalog, was in the possession of Pelobello who pointed to Zapata as the owner. When required by their employer to explain in a memorandum issued to each of them, they not only failed to do so but instead went on AWOL (absence without official leave), waited for the period to explain to expire and for petitioner to dismiss them. They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed because of union activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private respondents, their blatant disregard of their employer's memorandum is undoubtedly an open defiance to the lawful orders of the latter, a justifiable ground for termination of employment by the employer expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of guilt for the commission of acts inimical to the interests of the employer, another justifiable ground for dismissal under the same Article of the Labor Code, paragraph (c). Well established in our jurisprudence is the right of an employer to dismiss an employee whose continuance in the service is inimical to the employer's interest. 16

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no credence to their version and found their excuses that said barong tagalog was the one they got from the embroiderer for the Assistant Manager who was investigating them, unbelievable.

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Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have ruled that:

No employer may rationally be expected to continue in employment a person whose lack of morals, respect and loyalty to his employer, regard for his employer's rules, and appreciation of the dignity and responsibility of his office, has so plainly and completely been bared.

That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is meet and proper. That in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writings should be resolved in the former's favor, is not an unreasonable or unfair rule. But that disregard of the employer's own rights and interests can be justified by that concern and solicitude is unjust and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.17 More importantly, while the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will automatically be decided in favor of labor. 18

Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an employee for just and valid cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause in accordance with the norms of due process. 19

There is no evidence that the employer violated said norms. On the contrary, private respondents who vigorously insist on the existence of employer-employee relationship, because of the supervision and control of their employer over them, were the very ones who exhibited their lack of respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the services of private respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of service incentive leave pay to private respondents is deleted.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 114787 June 2, 1995

MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO, petitioners, 

vs.

NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO respondents.

 

VITUG, J.:

A prime focus in the instant petition is the question of when to hold a director or officer of a corporation solidarily obligated with the latter for a corporate liability.

The case originated from a complaint filed with the Labor Arbiter by private   respondent   Celso   B.   Balbastro   against   herein   petitioners, MAM   Realty   Development   Corporation   ("MAM")   and   its   Vice President   Manuel   P.   Centeno,   for   wage   differentials,   "ECOLA," overtime pay, incentive leave pay, 13th month pay (for the years 1988 and 1989), holiday pay and rest day pay. Balbastro alleged that he was employed by MAM as a pump operator in 1982 and had since performed such work at its Rancho Estate, Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00 for seven days of work a week that started from 6:00 a.m. to up until 6:00 p.m. daily.

MAM  countered   that   Balbastro   had   previously   been   employed   by Francisco   Cacho   and   Co.,   Inc.,   the   developer   of   Rancho   Estates. Sometime in May 1982, his services were contracted by MAM for the operation   of   the   Rancho   Estates'   water   pump.   He  was   engaged, however,   not   as   an   employee,   but   as   a   service   contractor,   at   an agreed fee of P1,590.00 a month. Similar arrangements were likewise entered into by MAM with one Rodolfo Mercado and with a security guard   of   Rancho   Estates   III   Homeowners'   Association.   Under   the agreement, Balbastro was merely made to open and close on a daily basis   the   water   supply   system   of   the   different   phases   of   the subdivision in accordance with its water rationing scheme. He worked for only a maximum period of three hours a day, and he made use of his   free  time by  offering  plumbing services   to   the   residents  of   the subdivision. He was not at all subject to the control or supervision of MAM for, in fact, his work could so also be done either by Mercado or by   the  security  guard.  On  23  May  1990,  prior   to   the  filing  of   the complaint, MAM executed a Deed of Transfer, 1effective 01 July 1990, in favor of the Rancho Estates Phase III Homeowners Association, Inc., conveying   to   the   latter   all   its   rights   and   interests   over   the  water system in the subdivision.

In a decision, dated 23 December 1991, the Labor Arbiter dismissed the complaint for lack of merit.

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On  appeal   to   it,   respondent  National   Labor   Relations   Commission ("NLRC") rendered judgment (a) setting aside the questioned decision of   the Labor Arbiter  and (b)   referring the case,  pursuant to  Article 218(c) of the Labor Code, to Arbiter Cristeta D. Tamayo for further hearing and submission of a report within 20 days from receipt of the Order.   2   On   21   March   1994,   respondent   Commissioner,   after considering the report of Labor Arbiter Tamayo, ordered:

WHEREFORE, the respondents are hereby directed to pay jointly and severally complainant the sum of P86,641.05 as above-computed. 3

The instant petition asseverates that respondent NLRC gravely abused its discretion, amounting to lack or excess of jurisdiction, (1) in finding that an employer-employee relationship existed between petitioners and   private   respondent   and   (2)   in   holding   petitioners   jointly   and severally liable for the money claims awarded to private respondent.

Once again, the matter of ascertaining the existence of an employer-employee relationship  is  raised.  Repeatedly,  we have said that this factual issue is determined by:

(a) the selection and engagement of the employee;

(b) the payment of wages;

(c) the power of dismissal; and

(d) the employer's power to control the employee with respect to the result of the work to be done and to the means and methods by which the work is to be accomplished.

We see no grave abuse of discretion on the part of NLRC in finding a full satisfaction, in the case at bench, of the criteria to establish that employer-employee   relationship.   The   power   of   control,   the   most important   feature   of   that   relationship   and,   here,   a   point   of controversy, refers merely to the existence of the power and not to the  actual  exercise   thereof.   It   is  not  essential   for   the  employer   to actually  supervise the performance of  duties of   the employee;   it   is enough that the former has a right to wield the power. 4 It is hard to accede to the contention of petitioners that private respondent should be considered totally free from such control merely because the work could   equally   and   easily   be   done   either   by  Mercado   or   by   the subdivision's   security   guard.   Not   without   any   significance   is   that private respondent's employment with MAM has been registered by petitioners with the Social Security System. 5

It would seem that the money claims awarded to private respondent were computed from 06 March 1988 to 06 March 1991, 6 the latter being the date of the filing of the complaint. The NLRC might have missed the transfer by MAM of the water system to the Homeowners Association on 01 July 1990, a matter that would appear not to be in dispute.  Accordingly,   the  period  for   the computation of   the  money claims should only be for the period from 06 March 1988 to 01 July 1990 (when petitioner corporation could be deemed to have ceased from the activity for which private respondent was employed),  and petitioner   corporation   should,   instead,   be   made   liable   for   the 

employee's separation pay equivalent to one-half (1/2) month pay for every year of

service.  7 While the transfer was allegedly due to MAM's financial constraints,   unfortunately   for   petitioner   corporation,   however,   it failed   to   sufficiently   establish   that   its   business   losses   or   financial reverses were serious enough that possibly can warrant an exemption under the law. 8

We agree with petitioners, however, that the NLRC erred in holding Centeno jointly and severally liable with MAM. A corporation, being a juridical   entity,   may   act   only   through   its   directors,   officers   and employees.  Obligations   incurred by  them,  acting as  such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally,   in the following cases: 9

1. When directors and trustees or, in appropriate cases, the officers of a corporation —

(a) vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons. 10

2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto. 11

3.  When  a  director,   trustee  or   officer  has   contractually  agreed  or stipulated   to  hold  himself   personally   and   solidarily   liable  with   the Corporation. 12

4 When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action. 13

In labor cases, for instance, the Court has held corporate directors and officers  solidarily   liable  with the corporation for  the termination of employment of employees done with malice or in bad faith. 14

In the case at Bench, there is nothing substantial on record that can justify, prescinding from the foregoing, petitioner Centeno's solidary liability with the corporation.

An extra note. Private respondent avers that the questioned decision, having   already   become   final   and   executory,   could   no   longer   be reviewed by this Court. The petition before us has been filed under Rule 65 of the Rules of Court,  there being no appeal,  or any other plain, speedy and adequate remedy in the ordinary course of law from decisions of the National Labor Relations Commission; it is a relief that is open so long as it is availed of within a reasonable time.

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WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is REMANDED to the NLRC for a re-computation of private respondent's monetary awards, which, conformably with this opinion, shall be paid solely by petitioner MAM Realty Development Corporation. No special pronouncement on costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner, 

vs.

INTERMEDIATE   APPELLATE   COURT   and   FERMIN   LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

 

NARVASA, C.J.:

The   question   before   the   Court   here   is   whether   or   not   persons rendering caddying services for members of golf clubs and their guests in said clubs' courses or premises are the employees of such clubs and therefore   within   the   compulsory   coverage   of   the   Social   Security System (SSS).

That   question   appears   to   have   been   involved,   either   directly   or peripherally,   in   three   separate   proceedings,   all   initiated   by   or   on behalf of herein private respondent and his fellow caddies. That which gave rise to the present petition for review was originally filed with the  Social  Security  Commission (SSC)  via  petition of  seventeen  (17) persons who styled themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of benefits under the Social Security Act as amended, "PTCCEA" being 

the   acronym   of   a   labor   organization,   the   "Philippine   Technical, Clerical,   Commercial   Employees   Association,"   with   which   the petitioners claimed to be affiliated. The petition, docketed as SSC Case 

No.   5443,   alleged   in   essence   that   although   the   petitioners   were employees   of   the   Manila   Golf   and   Country   Club,   a   domestic corporation, the latter had not registered them as such with the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were pending; these were:

(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case being titled "Philippine Technical,   Clerical,   Commercial   Association   vs.   Manila   Golf   and Country  Club"  and  docketed  as  Case  No.  R4-LRDX-M-10-504-78;   it appears to have been resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director Carmelo S. Noriel, denying the Club's motion for reconsideration; 1

(2)   a   compulsory   arbitration   case   initiated   before   the   Arbitration Branch of the Ministry of Labor by the same labor organization, titled "Philippine   Technical,   Clerical,   Commercial   Employees   Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by the National Labor Relations Commission  on   the  ground   that   there  was  no   employer-employee relationship between the petitioning caddies and the respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for   the   dismissal   of   the   petition,   alleging   in   substance   that   the petitioners,   caddies   by   occupation,   were   allowed   into   the   Club premises to render services as such to the  individual  members and guests  playing the Club's  golf  course and who themselves  paid  for such services; that as such caddies, the petitioners were not subject to the direction and control of the Club as regards the manner in which they   performed   their  work;   and   hence,   they  were   not   the   Club's employees.

Subsequently,  all  but two of the seventeen petitioners of their  own accord withdrew their  claim for   social   security  coverage,  avowedly coming to realize that indeed there was no employment relationship between them and the Club. The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the   two   holdouts,   Fermin   Llamar   and   Raymundo   Jomok.   The Commission dismissed the petition for lack of merit, 3 ruling:

. . . that the caddy's fees were paid by the golf players themselves and not   by   respondent   club.   For   instance,   petitioner  Raymundo   Jomok averred that for their services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by a player who will in turn hand over to management the other portion of the stub known as Caddy Ticket (Exh. "1") so that by this arrangement management will know how much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his own in accordance with the rules and regulations (TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any policy of respondent that directs the manner of caddying   (TSN,   pp.   76-77,   July   23,   1980).  While   respondent   club promulgates   rules  and   regulations  on   the  assignment,  deportment 

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and conduct of caddies (Exh. "C") the same are designed to impose personal  discipline among the caddies but not to direct or conduct their actual work. In fact, a golf player is at liberty to choose a caddy of his preference regardless of the respondent club's group rotation system and has the discretion on whether or not to pay a caddy. As testified to  by  petitioner  Llamar  that   their   income depends on the number of players engaging their services and liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that the caddies are never their employees in the absence of two   elements,   namely,   (1)   payment   of   wages   and   (2)   control   or supervision over them. In this  connection, our Supreme Court  ruled that in the determination of the existence of an employer-employee relationship, the "control test" shall be considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96 Phil. 941; Viana vs. 

Al-lagadan,  et  al.,  99 Phil.  408; Vda, de Ang, et  al.  vs.  The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al., 

L-12582, January 28, 1961, 1 SCRA 132. . .  .  (reference being made also to Investment Planning Corporation Phil. vs. SSS 21 SCRA 925).

Records   show   the   respondent   club   had   reported   for   SS   coverage Graciano   Awit   and   Daniel   Quijano,   as   bat   unloader   and   helper, respectively,   including   their  ground  men,  house  and  administrative personnel, a situation indicative of the latter's concern with the rights and  welfare  of   its  employees  under   the  SS   law,  as  amended.  The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued   to   the   caddies  merely   intended   to   identify   the   holders   as accredited caddies of the club and privilege(d) to ply their trade or occupation within its premises which could be withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense   posture   of   respondent   that   petitioners   were   never   its employees is well taken. 4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and Jomok. After the appeal was   docketed   5   and   some  months   before   decision   thereon   was reached and promulgated, Raymundo Jomok's appeal was dismissed at his instance, leaving Fermin Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1)   refusing   to  suspend  the  proceedings   to  await   judgment  by   the Labor  Relations  Division  of  National  Capital  Regional  Office   in   the certification   election   case   (R-4-LRD-M-10-504-78)   supra,   on   the precise   issue   of   the   existence   of   employer-employee   relationship between the respondent club and the appellants, it being contended that said issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor Relations, which "has not only become final but (has been) executed or (become) res adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance. Nor, it would appear, 

did it find any greater merit in the second alleged error. Although said Court reserved the appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold and Country Club, ordering that he be reported   as   such   for   social   security   coverage   and   paid   any corresponding  benefits,   8   it   conspicuously   ignored   the   issue  of   res adjudicata raised in said second assignment. Instead, it drew basis for the   reversal   from   this   Court's   ruling   in   Investment   Planning Corporation of the Philippines vs. Social Security System,supra 9 and declared that upon the evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-called "control   test,"   establishment   in   the   case   —   i.e.,   "whether   the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished," — the Club's control over the caddies encompassing:

(a)   the   promulgation   of   no   less   than   twenty-four   (24)   rules   and regulations   just  about  every  aspect  of   the   conduct   that   the  caddy must observe, or avoid, when serving as such, any violation of any which   could   subject   him   to   disciplinary   action,  which  may   include suspending or cutting off his access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the Club, that they observed no definite working hours and earned no fixed income.  It quoted with approval from an American decision 10 to the effect that: "whether the club paid the caddies and afterward collected in the first instance, the caddies were still employees of the club." This, no matter that   the   case  which   produced   this   ruling   had   a   slightly   different factual   cast,   apparently   having   involved   a   claim   for   workmen's compensation made by a caddy who, about to leave the premises of the club where he worked, was hit and injured by an automobile then negotiating the club's private driveway.

That same issue of res adjudicata,  ignored by the IAC beyond bare mention thereof, as already pointed out, is now among the mainways of   the   private   respondent's   defenses   to   the   petition   for   review. Considered   in   the   perspective   of   the   incidents   just   recounted,   it illustrates   as   well   as   anything   can,   why   the   practice   of   forum-shopping   justly  merits   censure   and  punitive   sanction.   Because   the same question of employer-employee relationship has been dragged into   three  different   fora,  willy-nilly  and   in  quick   succession,   it   has birthed controversy as to which of the resulting adjudications must now   be   recognized   as   decisive.   On   the   one   hand,   there   is   the certification case [R4-LRDX-M-10-504-78),  where the decision of the Med-Arbiter   found   for   the   existence   of   employer-employee relationship between the parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never thereafter   appealed   according   to   the   private   respondent;   on   the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by  or   for   the same respondent  at  about   the  same time, 

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which was dismissed for lack of merit by the Labor Arbiter, which was afterwards   affirmed   by   the  NLRC   itself   on   the   ground   that   there existed   no   such   relationship   between   the   Club   and   the   private respondent. And, as if matters were not already complicated enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for compulsory   social   security   coverage   with   the   Social   Security Commission (SSC Case No. 5443), with the result already mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had never become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as of a later motion for early resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record before the Court. And, for his part, the private respondent contends, not only that said decision had been appealed to and been affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in the PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country   Club   with   respect   to   wages,   hours   of   work,   terms   of employment,   etc.   12   Whatever   the   truth   about   these   opposing contentions, which the record before the Court does not adequately disclose, the more controlling consideration would seem to be that, however, final it may become, the decision in a certification case, by the 

very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the merits; (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4) there must be   between   the   two   cases   identity   of   parties,   identity   of   subject matter and identity of cause of action.13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial,   or   contentious,   "one   having   opposing   parties;   (is) contested,   as   distinguished   from   an   ex   parte   hearing   or proceeding. . . . of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it" 14 and a  certification case  is  not  such a  proceeding,  as   this  Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but mere investigation of a non-adversary,   fact-finding character,   in which the  investigating agency plays   the   part   of   a   disinterested   investigator   seeking   merely   to ascertain   the   desires   of   the   employees   as   to   the  matter   of   their representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by the employees. 15

Indeed,   if   any   ruling   or   judgment   can   be   said   to   operate   as   res adjudicata on the contested issue of employer-employee relationship between   present   petitioner   and   the   private   respondent,   it   would logically  be  that   rendered  in   the  compulsory  arbitration case  (NCR Case  No.   AB-4-771-79,   supra),   petitioner   having   asserted,  without dispute   from   the   private   respondent,   that   said   issue   was   there squarely raised and litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and which ruling was thereafter affirmed by the National Labor Relations Commission in an appeal taken by said respondent. 16

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting ruling just adverted to should be accorded primacy,  given the  fact   that   it  was he who actively sought them simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for forum-shopping may not be applied to him retroactively.

Accordingly,   the   IAC   is   not   to   be   faulted   for   ignoring   private respondent's   invocation   of   res   adjudicata;   on   contrary,   it   acted correctly in doing so.

Said Court’s  holding that upon the facts,  there exists (or existed) a relationship   of   employer   and   employee   between   petitioner   and private respondent is, however, another matter. The Court does not agree   that   said   facts   necessarily   or   logically   point   to   such   a relationship, and to the exclusion of any form of arrangements, other than   of   employment,   that   would  make   the   respondent's   services available to the members and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the various  matters   of   conduct,   dress,   language,   etc.   covered   by   the petitioner's   regulations,   does   not,   in   the   mind   of   the   Court,   so circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies must submit   to   some   supervision   of   their   conduct   while   enjoying   the privilege   of   pursuing   their   occupation   within   the   premises   and grounds of whatever club they do their work in. For all that is made to appear, they work for the club to which they attach themselves on sufference but, on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long   they   like.   It   is   not   pretended   that   if   found   remiss   in   the observance of said rules, any discipline may be meted them beyond barring them from the premises which, it may be supposed, the Club may do in any case even absent any breach of the rules, and without violating any right to work on their part. All these considerations clash frontally with the concept of employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still another indication of the latter's status as employees. It seems to the Court, however, that the intendment of such fact is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies' work and compensation that an employer would possess.

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The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than an assurance that the work  is fairly distributed,  a caddy who is absent when his turn number is called simply losing his turn to serve and being assigned instead the last number for the day. 17

By   and   large,   there   appears   nothing   in   the   record   to   refute   the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy  is  not required to exercise his  occupation  in the premises of petitioner.  He  may work  with  any  other  golf   club  or  he  may  seek employment   a   caddy   or   otherwise   with   any   entity   or   individual without restriction by petitioner. . . .

.   .   .   In   the  final  analysis,  petitioner  has  no  was  of   compelling   the presence of the caddies as they are not required to render a definite number of hours of work on a single day. Even the group rotation of caddies is not absolute because a player is at liberty to choose a caddy of his preference regardless of the caddy's order in the rotation.

It can happen that a caddy who has rendered services to a player on one day may still find sufficient time to work elsewhere. Under such circumstances, he may then leave the premises of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on call for a particular day may deliberately absent himself if he has more profitable   caddying,  or  another,   engagement   in   some  other  place. These are things beyond petitioner's control and for which it imposes no direct sanctions on the caddies. . . . 18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set aside, it being hereby declared that  the private respondent,  Fermin Llamar,   is  not  an employee of petitioner Manila Golf and Country Club and that petitioner is under no  obligation  to   report  him for  compulsory  coverage   to   the  Social Security System. No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 112546 March 13, 1996

NORTH  DAVAO  MINING  CORPORATION  and  ASSET  PRIVATIZATION TRUST, petitioners, 

vs.

NATIONAL   LABOR   RELATIONS   COMMISSION,   LABOR   ARBITER ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA, respondents.

 

PANGANIBAN, J.:p

Is  a   company  which   is   forced  by  huge  business   losses   to   close   its business, legally required to pay separation benefits to its employees at the time of its closure in an amount equivalent to the separation pay paid to those who were separated when the company was still a going concern? This is the main question brought before this Court in this petition for certiorari under Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside the Resolutions dated July 29, 1993 1  and September  27,  1993 2 of   the National  Labor  Relations Commission 3(NLRC) in NLRC CA No. M-00139593.

The Resolution dated July 29, 1993 affirmed in toto the decision of the Labor   Arbiter   in   RAB-11-08-00672-92   and   RAB-11-08-00713-92 ordering petitioners to pay the complainants therein certain monetary claims.

The   Resolution   dated   September   27,   1993   denied   the  motion   for reconsideration of the said July 29, 1993 Resolution.

The Facts

Petitioner   North   Davao   Mining   Corporation   (North   Davao)   was incorporated in 1974 as a 100% privately-owned company. Later, the Philippine National Bank (PNB) became part owner thereof as a result of a conversion into equity of a portion of  loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to  and equity   in  North Davao  in   favor of   the national  government which, by virtue of Proclamation No. 50 dated December 8, 1986, later turned them over to petitioner Asset Privatization Trust (APT). As of December   31,   1990   the   national   government   hold   81.8%   of   the common stock and 100% of the preferred stock of said company.4

Respondent  Wilfredo  Guillema  is  one  among several  employees  of North Davao who were separated by reason of the company's closure on May 31, 1992, and who were the complainants in the cases before the respondent labor arbiter.

On   May   31,   1992,   petitioner   North   Davao   completely   ceased operations   due   to   serious   business   reverses.   From   1988   until   its closure   in   1992,  North  Davao   suffered   net   losses   averaging   three billion pesos (P3,000,000,000.00) per year, for each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior   to   its   closure,   its   total   liabilities   had   exceeded   its   assets   by 20,392 billion pesos, as shown by its financial statements audited by the Commission on Audit.  When it  ceased operations,  its remaining employees were separated and given the equivalent of 12.5 days' pay for  every year of  service,  computed on their  basic  monthly  pay,   in addition to the commutation to cash of their unused vacation and sick 

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leaves.  However,   it   appears   that,   during   the   life   of   the   petitioner corporation,   from  the  beginning  of   its  operations   in  1981  until   its closure in 1992, it had been giving separation pay equivalent to thirty (30) days' pay for every year of service. Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and other peace and order problems, the employees had to collect their salaries at  a bank  in Tagum, Davao del  Norte,  some 58 kilometers from their  workplace and about 2 1/2 hours'   travel  time by public transportation; this arrangement lasted from 1981 up to 1990.

Subsequently, a complaint was filed with respondent Labor Arbiter by respondent  Wilfredo  Guillema and 271  other   separated  employees for:   (1)   additional   separation   pay   of   17.5   days   for   every   year   of service;   (2)   back   wages   equivalent   to   two   days   a   month;   (3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food   allowance;   (7)   post-employment   medical   clearance;   and   (8) future medical allowance, all of which amounted to P58,022,878.31 as computed by private respondent. 5

On   May   6,   1993,   respondent   Labor   Arbiter   rendered   a   decision ordering   petitioner   North   Davao   to   pay   the   complainants   the following:

(a) Additional separation pay of 17.5 days for every year of service;

(b) Backwages equivalent to two (2) days a month times the number of years of service but not to exceed three (3) years;

(c)  Transportation allowance at  P80 a month times the number of years of service but not to exceed three (3) years.

The   benefits   awarded   by   respondent   Labor   Arbiter   amounted   to P10,240,517.75.   Attorney's   fees   equivalent   to   ten   percent   (10%) thereof were also granted. 6

On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao's motion for reconsideration was likewise denied. Hence, this petition.

The Parties' Submissions and the Issues

In affirming the Labor Arbiter's decision, respondent NLRC ruled that "since (North Davao) has been paying its employees separation pay equivalent to thirty (30) days pay for every year of service," knowing fully well that the law provides for a lesser separation pay, then such company   policy   "has   ripened   into   an   obligation,"   and   therefore, depriving   now   the   herein   private   respondent   and   others   similarly situated of the same benefits would be discriminatory. 7 Quoting from Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, 8 it said that petitioners "may not pay separation benefits unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than others." It also cited Abella vs. NLRC,   9   as   authority   for   saying   that   Art.   283   of   the   Labor   Code protects workers in case of closure of the establishment.

To justify the award of two days a month in backwages and P80 per month of transportation allowance, respondent Commission ruled:

As to the appellants' claim that complainants-appellees' time spent in collecting their wages at Tagum, Davao is not compensable allegedly because it was on official time can not be given credence. No iota of evidence has been presented to back up said contention. The same is true   with   appellants'   assertion   that   the   claim   for   transportation expenses   is   without   basis   since   they   were   incurred   by   the complainants. Appellants should have submitted the payrolls to prove that   complainants   appellees   were   not   the   ones   who   personally collected their wages and/or the bus/jeep trip tickets or vouchers to show   that   the   complainants-appellees   were   provided   with   free transportation as claimed.

Petitioner,   through   the  Government   Corporate   Counsel,   raised   the following grounds for the allowance of the petition:

1. The NLRC acted with grave abuse of discretion in affirming without legal   basis   the   award   of   additional   separation   pay   to   private respondents who were separated due to serious business losses on the part of petitioner.

2. The NLRC acted with grave abuse of discretion in affirming without sufficient factual  basis  the award of  backwages and transportation expenses to private respondents.

3. There is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of the law.

and the following issues:

1. Whether or not an employer whose business operations ceased due to   serious   business   losses   or   financial   reverses   is   obliged   to   pay separation pay to its employees separated by reason of such closure.

2. Whether or not time spent in collecting wages in a place other than the  place of  employment   is  compensable  notwithstanding that   the same is done during official time.

3. Whether or not private respondents are entitled to transportation expenses   in   the   absence   of   evidence   that   these   expenses   were incurred.

The First Issue: Separation Pay

To resolve   this   issue,   it   is  necessary   to  revisit   the  provision  of   law adverted to by the parties in their submissions, namely, Art. 283 of the Labor Code, which reads as follows:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent   losses   or   the   closing   or   cessation   of   operation   of   the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice 

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on the workers and the Ministry of Labor and Employment at least one   (1)   month   before   the   intended   date   thereof.   In   case   of termination   due   to   the   installation   of   labor   saving   devices   or redundancy,   the   worker   affected   thereby   shall   be   entitled   to   a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six   (6)  months   shall   be   considered  one   (1)  whole   year.   (emphasis supplied)

The underscored portion of Art. 283 governs the grant of separation benefits  "in  case of  closures  or  cessation of  operation" of  business establishments   "NOT   due   to   serious   business   losses   or   financial reverses . . . ". Where, however, the closure was due to business losses — as in the instant case, in which the aggregate losses amounted to over P20 billion — the Labor Code does not  impose any obligation upon the employer to pay separation benefits, for obvious reasons. There is no need to belabor this point. Even the public respondents, in their Comment 10 filed by the Solicitor General, impliedly concede this point.

However, respondents tenaciously insist on the award of separation pay, anchoring their  claim solely on petitioner North Davao's  long-standing policy  of  giving  separation pay benefits  equivalent   to  30-days'  pay,  which  policy  had been  in   force   in   the  years  prior   to   its closure. Respondents contend that, by denying the same separation benefits   to   private   respondent   and   the   others   similarly   situated, petitioners discriminated against them. They rely on this Court's ruling in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra).   In   said   case,   petitioner   BISSI,   after   experiencing   financial reverses,   decided   "as   a   retrenchment   measure"   to   lay-off   some employees on May 16, 1988 and gave them separation pay equivalent to one-half (1/2) month pay for every year of service. BISSI retained some employees in an attempt to rehabilitate its business as a trading company.   However,   barely   two   and   a   half   months   later,   these remaining employees were likewise discharged because the company decided  to  cease  business  operations  altogether.  Unlike   the  earlier terminated   employees,   the   second   batch   received   separation   pay equivalent to a full  month's salary for every year of service,  plus a mid-year   bonus.   This   Court   ruled   that   "there   was   impermissible discrimination against the private respondents in the payment of their separation benefits.  The  law requires  an employer  to  extend equal treatment   to   its  employees.   It  may  not,   in   the  guise  of   exercising management prerogatives, grant greater benefits to some and less to others. . . ."

In resolving the present case, it bears keeping in mind at the outset that the factual circumstances of BISSI are quite different from the current  case.  The Court  noted that  BISSI  continued to suffer  losses even after the retrenchment of the first batch of employees: clearly, business   did   not   improve   despite   such   drastic   measure.   That notwithstanding, when BISSI finally shut down, it could well afford to (and   actually   did)   pay   off   its   remaining   employees   with   MORE 

separation benefits as compared with those earlier laid off; obviously, then, there was no reason for BISSI to skimp on separation pay for the first  batch  of  discharged  employees.  That   it  was  able   to  pay  one-month separation benefit for employees at the time of closure of its business meant that it must have been also in a position to pay the same amount to those who were separated prior to closure. That it did not do so was a wrongful exercise of management prerogatives. That   is   why   the   Court   correctly   faulted   it   with   "impermissible discrimination."   Clearly,   it   exercised   its  management   prerogatives contrary to "general principles of fair play and justice."

In   the   instant  case  however,   the  company's  practice  of  giving  one month's pay for every year of service could no longer be continued precisely because the company could not afford it  anymore.  It  was forced to close down on account of accumulated losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it gave  30-days'   separation  pay   to   its  employees  when  it  was  still  a going   concern   even   if   it   was   already   losing   heavily.   As   a   going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely ceases operations, i.e., upon its death as a going business concern, its vital lifeblood — its cashflow — literally dries up. Therefore, the fact that less separation benefits ware granted when the company finally met its  business  death  cannot  be  characterized  as  discrimination.   Such action was dictated not by a discriminatory management option but by   its   complete   inability   to   continue   its   business   life   due   to accumulated losses.  Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land.

As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In   the   case   before   us,   the   basis   for   the   claim   of   the   additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment   of   employees,   which   is   proscribed   as   an   unfair   labor practice   by   Art.   248   (e)   of   said   Code.   Under   the   facts   and circumstances of the present case, the grant of a lesser amount of separation  pay   to  private   respondent  was  done,  not  by   reason  of discrimination, but rather, out of sheer financial bankruptcy — a fact that is not controlled by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling losses was a supervening   fact   that   prevented   the   company   from   continuing   to grant  the  more generous amount of  separation pay.  The  fact   that North Davao at the point of   its  forced closure voluntarily  paid any separation benefits at all — although not required by law — and 12.5-days   worth   at   that,   should   have   elicited   admiration   instead   of condemnation. But to require it to continue being generous when it is no longer in a position to do so would certainly be unduly oppressive, unfair  and  most   revolting   to   the  conscience.  As   this  Court  held   in Manila   Trading  &   Supply  Co.   vs.   Zulueta,   11  and   reiterated   inSan Miguel   Corporation   vs.   NLRC   12   and   later,   in   Allied   Banking Corporation vs. Castro, 13 "(t)he law, in protecting the rights of the laborer,   authorizes   neither   oppression   nor   self-destruction   of   the employer."

At this  juncture, we note that the Solicitor General  in his Comment challenges the petitioners' assertion that North Davao, having closed down, no longer has the means to pay for the benefits. The Solicitor 

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General stresses that North Davao was among the assets transferred by   PNB   to   the   national   government,   and   that   by   virtue   of Proclamation   No.   50   dated   December   8,   1986,   the   APT   was constituted trustee of this government asset. He then concludes that "(i)t  would,   therefore,  be   incongruous to  declare  that  the  National Government, which should always be presumed to be solvent, could not pay now private respondents' money claims." Such argumentation is completely misplaced. Even if the national government owned or controlled  81.8% of   the   common stock  and  100% of   the  preferred stock of North Davao, it remains only a stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule is not directly, individually and/or personally liable for the indebtedness of   the   corporation.   The   obligation   of   North   Davao   cannot   be considered the obligation of the national government, hence, whether the latter be solvent or not is not material to the instant case. The respondents  have  not   shown that   this   case   constitutes  one  of   the instances where the corporate veil may be pierced. 14 From another angle,   the   national   government   is   not   the   employer   of   private respondent and his co-complainants, so there is no reason to expect any kind of bailout by the national government under existing law and jurisprudence.

The Second and Third Issues:

Back Wages and Transportation Allowance

Anent the award of  back wages and transportation allowance,   the issues raised in connection therewith are factual, the determination of which is best left to the respondent NLRC. It is well settled that this Court  is bound by the findings of fact of the NLRC, so  long as said findings are supported by substantial evidence 15.

As the Solicitor General pointed out in his comment:

It is undisputed that because of security reasons, from the time of its operations,   petitioner   NDMC   maintained   its   policy   of   paying   its workers at a bank in Tagum, Davao del Norte, which usually took the workers about two and a half (2 1/2) hours of travel from the place of work and such travel time is not official.

Records also show that on February 12, 1992, when an inspection was conducted   by   the   Department   of   Labor   and   Employment   at   the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out that petitioners had violated labor standards law, one of which is the place of payment of wages (p. 109, Vol. 1, Record)

Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:

Sec.   4.   Place   of   payment.  —   (a)   As   a   general   rule,   the   place   of payment shall be at or near the place of undertaking. Payment in a place other than the workplace shall  be permissible only under the following circumstances:

(1) When payment cannot be effected at or near the place of work by reason   of   the   deterioration   of   peace   and   order   conditions,   or   by reason   of   actual   or   impending   emergencies   caused   by   fire,   flood, epidemic or other calamity rendering payment thereat impossible;

(2) When the employer provides free transportation to the employees back and forth; and

(3) Under any analogous circumstances; provided that the time spent by   the  employees   in   collecting   their  wages   shall  be   considered  as compensable hours worked.

(b) xxx xxx xxx

(Emphasis supplied)

Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional  Director,  Regional  Office No.  XI,  Department  of  Labor and   Employment,   Davao   City,   ordered   petitioner   NDMC,   among others, as follows:

WHEREFORE, . . . . Respondent is further ordered to pay its workers salaries   at   the  plantsite  at  Amacan,  New Leyte,  Maco,  Davao  del Norte or whenever not possible, through the bank in Tagum, Davao del Norte as already been practiced subject, however to the provisions of Section 4 of Rule VIII, Book III of the rules implementing the Labor Code as amended.

Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held that:

From   the   evidence   on   record,   we   find   that   the   hours   spent   by complainants   in  collecting salaries  at  a  bank  in  Tagum, Davao del Norte   shall   be   considered   compensable  hours  worked.  Considering further the distance between Amacan, Maco to Tagum which is 2 1/2 hours by travel and the risks in commuting all the time in collecting complainants'   salaries,   would   justify   the   granting   of   backwages equivalent to two (2) days in a month as prayed for.

Corollary to the above findings, and for equitable reasons, we likewise hold respondents  liable for the transportation expenses  incurred by complainants at P40.00 round trip fare during pay days.

(p. 10, Decision; p. 207, Vol. 1, Record)

On   the   contrary,   it  will   be   petitioners'   burden   or   duty   to   present evidence of compliance of the law on labor standards, rather than for private   respondents   to  prove   that   they  were  not  paid/provided  by petitioners of their backwages and transportation expenses.

Other than the bare denials of petitioners, the above findings stand uncontradicted. Indeed we are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or complete lack of basis. In Maya Farms Employees Organizations vs. NLRC, 16 , we held:

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This Court has consistently ruled that findings of fact of administrative agencies   ad   quasi-judicial   bodies   which   have   acquired   expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality and are binding upon this Court unless there is a showing of grave abuse of discretion, or where it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record.

WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by SETTING ASIDE and deleting the award for "additional separation pay of 17.5 days for every year of service", and AFFIRMING it in all other aspects. No costs.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco and Hermosisima, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT

Manila

G.R. No. L-31341 March 31, 1976

PHILIPPINE   AIR   LINES   EMPLOYEES   ASSOCIATION   (PALEA)   and PHILIPPINE   AIR   LINES   SUPERVISORS'   ASSOCIATION   (PALSA), petitioners, 

vs.

PHILIPPINE AIR INES, INC., respondent.

G.R. No. L-31341-43 March 31, 1976

PHILIPPINE AIR LINES, INC., petitioner, 

vs.

PHILIPPINE   AIR   LINES   EMPLOYEES'   ASSOCIATION,   PHILIPPINE   AIR LINES SUPERVISORS'  ASSOCIATION,  and the COURT OF  INDUSTRIAL RELATIONS, respondents.

Siguion Reyna, Montecillo, Belo & Ongsiako for Philippines Air lines, Inc.

Laquihon & Legayada for Philippine Air Lines Supervisors' Association (PALEA).

 MAKASIAR, J.:

Before US are consolidated petitions to review the Court of industrial Relations en banc resolution dated October 9, 1969 in CIR Case No. 43-IPA.

In G.R. No. L-31341 (PALEA vs. PAL), petitioners question the date of effectivity  of   the  adjudicated pay differentials  due   to   the  monthly-salaried employees of Philippine Air Lines, Inc.

In G.R. No. L-31343 (PAL vs. PALEA), petitioner assails the reversal by the Court of Industrial Relations of its earlier resolution on the method employed by the Philippine Air Lines in computing the basic daily and hourly rate of its monthly salaried employees.

On February 14, 1963, the Philippine Air Lines Employees' Association (PALEA) and the Philippine Air Lines Supervisors' Association (PALSA) — petitioners in G.R. No. L-31341 and respondents in G.R. No. 31343 — commenced an action against the Philippine Air Lines (PAL) in the Court of Industrial Relations, praying that PAL be ordered to revise its method of computing the basic daily and hourly rate of its monthly salaried employees, and necessarily, to pay them their accrued sala differentials.

Sought   to   be   revised   is   PAL's   formula   in   computing  wages   of   its employees:

Monthly salary x 12 365 (No. of calendar = x (Basic dailr rate) days in a year)

x 8 = Basic hourly rate

The unions would like PAL to modify the above formula in this wise:

Monthly salary x 12 No. of actual working = x (Basic daily rate) days

x 8 = Basic hourly rate

On May 23, 1964, the Court of Industrial Relations, through Presiding Judge Jose S. Bautista, issued an order denying the unions' prayer for a modified wage formula. Pertinent portion of the order reads:

On the issue of rate of pay, PALSA and PALEA seek to change the long standing method in PAL of computing the basic daily and hourly rate of   monthly   salaried   employees   for   the   purpose   of   determining overtime   pay,   Sunday   and   legal   holiday   premium   pay,   night differential   pay,   vacation   and   sick   leave   pay,   to  wit,   the  monthly salary multiplied by 12 and dividing the product thereof by 365 and then the quotient by 8. PALEA and PALSA claim that the method of computing   the   basic   daily   and   hourly   rate   of   monthly   salaried employees of PAL prior to the implementation of the 40-hour week schedule   in   PAL   should   be   by   dividing   the  monthly   salary   by   26 working days, and after the 40-hour week schedule, by dividing the monthly salary by 20 working days, and then dividing the quotient thereof in each case by 8. From the records, however, it appears that for   may   years   since   1952,   and   even   previously,   PAL   has   been consistently and regularly determining the basic and hourly rates of monthly salaried employees by multiplying the monthly salary by 12 

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momths and dividing the product by 365 days to arive at the basic daily rate, and dividing the quotient by 8 to compute the basic hourly rate.   There   has   been   no   attempt   to   revise   this   formula notwithstanding   the  various  negotiations  PAL  and  with   the  unions ever   since   its  operations,  and   it  was  only  on   July  18,  1962,  when PALSA, for the first time, proposed that it be changed in accordance with what is now alleged in the petition. This, however, was a mere proposal by PALSA for the adoption of a new formula; it was not a demand for the application of a formula claimed to be correct under the   law.  Under   this   circumstance,  PALSA  and  PALEA  are  estopped from questioning the correctness and propriety of  PAL's  method of determining   the  basic  hourly  and  daily   rate  of  pay  of   its  monthly salaried   personnel,   and   considering   the   long   period   of   time   that elapsed before they brought their petition, are barred from insisting or demanding a different rate of pay formula.

xxx xxx xxx

Upon the foregoing, the Court,  therefore,  declares PAL's method of computing   the  basic   daily   and  hourly   rate  of   its  monthly   salaried employees as legal and proper, and denies the petition of PALSA and PALEA.

xxx xxx xxx

(pp. 47-48, 49, rec. G.R. No. L-31343).

On   May   30,   1964,   complaining   unions   promptly   moved   for   the reconsideration of the above-sais order (p. 51, rec. G.R. No. L-31343).

On June 9, 1964, the unions filed their  memorandum in support of their motion for reconsideration alleging that the questioned order is (a) contrary to law, and (b) contrary to evidence adduced during the trial (p. 53, ree G.R. No. L-31343).

The unions attributed error to PAL's wage formula, particularly in the use of 365 days as divisor. The unions contended that the use of 365 days as divisor  would necessarily   include off-days which,  under the terms of the collective bargaining agreements entered into between the parties, were not paid days. This is so since for work done on an off-day, an employee was paid 100% plus 25%, or 100% plus 37-½ of his regular working hour rate.

On the issue of prescription, the unions pointed out:

With respect to the period of prescription,  it   is  clear that since the claim   arises   from   the   written   contracts   or   collective   bargaining agreements  between the petitioner unions and the PAL,   the action thereon  prescribes   in   ten   years   from   the  time   the   right   of   action accrues, in accordance with Article 1144 of the New Civil Code. .... (p. 68, rec., G.R. No. L-31343).

On June 26, 1964, the Philippine Air Lines answered point by point the unions' memorandum, in a prompt reply.

On   October   9,   1969,   the   Court   of   Industrial   Relations,   through Presiding   Judge   Arsenio   I.   Martinez,   ordered   the   reversal   of   its decision dated May 34, 1964 and sustained the unions' method of age computation.

The   industrial   court,   however,   ordered   the   computation   of   pay differentials in accordance with the sustained method of computation effective only July 1, 1957.

Said the Court of Industrial Relations in this regard:

... In this connection, however, it will be noted as previously stated, that this case was considered as an incident of Case No. 39-IPA, in which the issues involved were related to the respondent PAL of the 40-Hour Week Law (Rep. Act 1880) from the date of its effectivity July 1, 1957. ...

This Cout therefore belives that in justice and equity and substantial merits   of   the   case,   the   aforesaid   pay   differentials   due   to   the employees involved herein by the application of the correct methods of computation of the rate of pay should be paid by the respondent also beginning July 1, 1957 (p. 117, rec., G.R. No. L-31343).

From the above resolution, both parties appealed to this COURT. The Philippine Air  Lines filed  its  appeal  petition on December 13,  1969, while PALEA filed its  petition for review on certiorari  on January 3, 1970.

I

For easy comprehension, WE start with the Philippine Air Lines, Inc. versus Philippine Air Lines Employees Association, Philippine Air Lines Supervisors Association, and the Court of Industrial Relations, G.R. No. L-31343.

In this appeal PAL emphasizes three assignments of error, to wit:

1.   RESPONDENT   CIR   ERRED   AND   COMMITTED   GRAVE   ABUSE   OF DISCRETION   IN   HOLDING   THAT   THE  METHOD   OF   COMPUTATION USED BY PAL IN DETERMINING TIIE BASIC DAILY OR HOURLY RATE OF ITS MONTLY SALARIED EMPLOYEES WHICH IS:

MONTHLY SALARY x  1 365  (NO. OF CALENDAR DAYS  IN YEAR) =  x (BASIC DAILY RATE)

x 8 = BASIC HOURLY RATE 8

IS NOT CORRECT, CONSIDERING THAT PAL, A PUBLIC UTILITY WHERE THERE  IS  WORK EVERYDAY OF THE WEEK FOR MANY YEARS EVEN BEFORE REPUBLIC ACT 602 AND WITH THE CONSENT AND APPROVAL OF THE EMPLOYEES, CONSISTENT WITH SECTION 19 OF REPUBLIC ACT 602 PROHIBITING REDUCTION OF WAGES FOR OFF DAYS-WHICH WAS SUSTAINED BY THIS HONORABLE COURT IN AUTOMOTIVE PARTS & EQUIPMENT   CO.,   INC.   VS.   JOSE   B.   LINGAD,G.R.   NO.   L-   26406, OCTOBER  31,   1969  — HAS  BEEN  TREATING  OFFSITE  DAYS,   11  AS 

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SATURDAYS,   SUNDAYS,   COMPANY   OBSERVED   HOLIDAYS   OR   ANY OTHER DESIGNATED HOLIDAYS AS PAID DAYS.

2.   RESPONDENT   CIR   ERRED   AND   COMMITTED   GRAVE   ABUSE   OF DISCRETION IN NOT FINDING. THAT RESPONDENT UNIONS, BY THEIR LONG   PERIOD   OF   CONSENT,   ACQUIESCENCE,   INACTION   AND ACCEPTANCE   OF   BENEFITS   THEREUNDER,   ARE   ESTOPPED   AND BARRED FROM CLAIMING THAT PAL'S FORMULA FOR DETERMINING THE BASIC DAILY AND HOURLY RATE OF PAY IS INCORRECT.

3. RESPONDENT CIR ERED AND ACTED IN EXCESS OF ITS JURISDICTION IN SENTENCING PAL TO PAY DIFFERENTIALS FOR OVERTIME WORK, NIGHTWORK,   HOLIDAY   AND   SUNDAY   PAY   FROM   JULY   1,   1957 CONSIDERING THAT UNDER THE THREE-YEAR PRESCRIPTIVE PERIOD PROVIDED  IN SECTION 7-a OF COMMONWEALTH ACT NO.  444,  AS AMENDED,   THE   EIGHT-HOUR   LABOR   LAW,   RESPONDENT  UNIONS, ASSUMING THEY HAD ANY CAUSE OF ACTION, COULD RECOVER ONLY FROM FEBRUARY 14, 1960 UP TO THE PRESENT, SINCE RESPONDENT UNIONS FILED THEIR ACTION ONLY ON FEBRUARY 14, 1963.

A

PAL's maiden argument has a strong tendency to mislead. In an effort to emphasize that off-days are paid and therefore should be reckoned with in determing the divisor for computing daily and hourly rate, PAL leans heavily on what it considers as additional payment of 125% or 137 ½%, as the case may be, of an employee's basic hourly rate, given to a worker who worked on his off-days. PAL would like us to believe that   the  word   "Additional"   all   but   accentuates   the   existence  of   a regular basic rate; otherwise, the 125% or 137½% shall be in addition to what?

The industrial court, however, had this to say:

Moreover, it will be noted that before September 4, 1961, a monthly salaried employee of PAL had to work 304 days only in a year,a nd after said date, he had to work only 258 days in ayear, to be entitled to his equivalent yearly salary. When he worked on his off-day, he was paid accordingly (125% or 137%), indicating that his off-days were not with pay. It seems illogical for said employe to be paid 125% or 137 ½% of  his  basic  daily   rate,   if   such off-days are already wtih pay,  as indicated by the company (p. 107, rec., G.R. No. L-31343, emphasis supplied).

WE agree.

There should hardly  be any doubt  that  off-days are not  paid days, Precisely, off-days are rest days for the worker. He is not required to work on such days. This finds support not only in the basic principle in labor that the basis of remuneration or compensation is actual service rendered, but in the ever pervading labor spirit aimed at humanizing the conditions of hie working man.

Since during his off-days an employee  is not compelled to work he cannot, conversely, demand for his corresponding pay. If, however, a worker works on his off-day, our welfare laws duly reward him with a 

premium higher than what he would receive when he works on his regular working day.

Such being the  case,   the  divisor   in  computing an employee's  basic daily rate should be the actual working days in a yar The number of off-days are not to be counted precisely because on such off-days, an employee is not required to work.

Simple common sense dictates that should an employee opt not to work — which he can legally do — on an off-day, and for such he gets no pay, he would be unduly robbed of a portion of his legitimate pay if and when in computing his basic daily and hourly rate, such off-day is deemed   subsumed   by   the   divisor.   For   it   is   elementary   in   the fundamental  process of  division  that  with a constant dividend,   the bigger your divisor is, the smaller our quotient will be.

It   bears   emphasis   that  OUR   view  above   constitutes   the   rationale behind the landmark ruling, surprisingly, by the same trial Judge Jose S.   Bautista   of   the   Court   of   Industrial   Relations,   in   National Waterworks and Sewerage Authority vs. NWSA Consolidated Unions, et al., (G.R. No. L-18938, August 31, 1964, 11 SCRA 766, 793-794), to which decision WE gave OUR affirmance.

PAL maintains that the NAWASA doctrine should not apply to a public utility  like PAL which,  from the nature of  its  operations,   requires a whole-year-round,   uninterrupted   work   by   personnel.   What   PAL apparently forgets is that just like it, NAWASA is also a public utility which  likewise   requires   its  workers   to  work  the  whole  year   round. Moreover,   the  NAWASA  is  a  government-owned   corporation  — to which PAL is akin, it being a government-controlled corporation.

As will later be stated herein, PAL inked with the representative unions of the employees collective bargaining agreements wherein it bound itself   to  duly   compensate  employer  working  on   their  off-days.  The same situation obtained in the NAWASA case, wherein WE held:

And in the collective bargaining agreement entered into between the NAWASA   and   respondent   unions   it   was   agreed   that   all   existing benefits enjoyed by the employees and laborers prior to its effectivity shall  remain in force and shall form part of the agreement, among which   certainly   is   the   25%   additional   compensation   for   work   on Sundays and legal holidays theretofore enjoyed by said laborers and employees.   It   may,   therefore,   be   said   that   while   under Commonwealth  Act  No.  444  a  public  utility   is  not   required   to  pay additional compensation to its employees and workers for work done on Sundays and legal holidays, there is, however, no prohibition ofr it to pay such additional compensation if it voluntarily agrees to do so. The NAWASA committed itself to pay this additional compensation. It must pay not because of compulsion of law but because of contractual obligation (11 SCRA 766, 776).

The settled NAWASA doctrine should not be disturbed.

B

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PAL also vigorously argues that the unions' longstanding silence with respect,   and   acquiescence,   to   PAL's   method   of   computation   has placed them in estoppel to impugn the correctness of the questioned wage formula. PAL furthermore contends that laches has likewise set in precisely because of stich long-standing inaction.

Our jurisprudence on estoppel is, however, to the effect that:

...   (I)t   is  meet   to   recall   that   "mere   innocent   silence  will   not  work estoppel. There must also be some element of turpitude or neglignece connected with the silence by which another is misled to his injury" (Civil Code of the philippines by Tolentino, Vol. IV, p. 600) ... [Beronilla vs.  GSISK,   G.R.   No.   L-21723,  Nov.   26,   1970,   36   SCRA   44,   46,   55, emphasis supplied].

In the case befor US, it is not denied that PAL's formula of determining daily  and  hourly   rate  of  pay  has  been  decided  and  adopted  by   it unilaterally   without   the   knowedge   and   express   consent   of   the employees. It was only later on that the employees came to know of the   formula's   irregularity   and   its   being   violative   of   the   collective bargaining agreements previously executed by PAL and the unions. Precisely,   PALSA   immediately   proposed   that   PAL   and   the   unions. Precisely,   PALSA   immediately   proposed   that   PAL   use   the   correct method of computation, which proposa PAL chose to ignore.

Clearly,   therefore,   the   alleged   long-standing   silence   by   the   PAL employees is in truth and in fact innocent silence,which cannot place a party in estoppel.

The rationale for this is not difficult to see. The doctrine of estoppel had its origin in equity. As such, its applicability depends, to a large extent,  on the circumstances surrounding a particular  case.  Where, therefore,  the neglect or omission alleged to haveplaced a party in estoppel cannot be invoked. This was the essence of OUR ruling in the case of Mirasol vs. Municipality of Tabaco (43 Phil.  610,  614).  And this, in quintessence, was the compelling reason why in Lodovica vs. Court of Appeals (L-29678, July 18, 1975, 65 SCRA 154, 158), WE held that  a   party  who  had  no   knowledge  of   or   gave  no   consent   to  a transaction may not be estopped by it.

Furthermore, jurisprudence likewise fortifies the position that in the interest of public policy, estoppel and laches cannot arrest recover of evertime compensation. The case of Manila Terminal Co. vs. CIR (G.R. NO. L-9265, April 29, 1957, 91 Phil. 625), is squarely in point. In this case We intoned.

The principle of estoppel and laches cannot well be invoked agains the Association. In the first place, it would be contrary to the spirit of the Eight-Hour   Labor   Law,  under  which,   as   already   seen,   the   laborers cannot waive their right to extra compensation. In the second place, the law principally obligates the employer to observe it, as much so that  it  punishes the employer  for  its  employer  for  its  violation and leaves the employee or laborer is in such a disadvantageous position as   to  be naturally   reluctant  or  even apprehensive   in  asserting any claim which may cause the employher to devise a way for exercising his right to terminate the employment.

If the principle of estoppel and laches is to be applied, it may bring about   a   situation,   whereby   theemployee   or   laborer,   who   cannot expressly renounce their right to extra compensation under the Eight-Hour Labor Law, may be compelled to accomplish the same thing by mere silence or lapse of time, thereby frustrating the purpose of the law by indirection (91 Phil. 625, 633, emphasis supplied).

In another count, the unilateral adoption by PAL of an irregular wage formula being an act against public policy, the doctrine of estoppel cannot   give   validity   to   the   same   (Auyong   Hian   vs.   Court   of   Tax Appeals, 59 SCRA 110, 112).

II

G.R.   No.   L-31341   is   an   appeal   from   that   portion   of   the   en   banc resolution of the Court of Industrial Relations dated October 9, 1969 in case 43-IPA making the payment of the adjudicated pay differentials effective only from July 1, 1957.

In their lone assignment of error, February 14, 1953, or ten (10) years from the date of the filing of their  original  complaint;  because the claim for pay differentials  is based on written contracts — i.e.,   the collective  bargaining  agreements  between  PAL and  the  employees' representative uniuons — and under Article 1144(1) of the Civil Code, actions based on written contracts prescribe in ten (10) years.

PAL, on the other hand, maintains that the employees' claim for pay differential is"an action to enforce a cause of action under the Eight-Hour Labor Law (CA No. 444, as amended): (p. 592, rec., G.R. No. L-31341). As such, the applicable provision is Section 7-a of CA No. 4444, which reads:

Sec. 7-a. Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of action accrued, otherwise such action shall be forever barred; provided, however, that actions already commenced before the effecitve date of this Act shall not be affected by the period herein prescribed (As amended by Rep. Act No. 1993, approved June 22, 1957, emphasis supplied).

Moreover, PAL argues that even assuming that the issue calls for the application of Article 1144(1) of the New Civil Code, a general law, still in case of conflict, Commonwealth ACt No. 444, as amended, should prevail because the latter is a special law.

WE believe that the present case calls for the application of the Civil Code provisions on the prescriptive period in the filing of actions based on written contracts. The rason should be fairly obvious. Petitioners' claim   fundamentally   involves   the   strict   compliance   by   PAL   of   the pvosions on wage computation embodied in the collective bargaining agreements   inked   between   it   and   the   employees   representative unions. These collective bargaining agreements were: the PAS-PALEA collective bargaining agreement of 1952-53; the PAL-PALEA collective bargaining   agreement   of   1956-59;   the   PAL-PALEA   collective bargaining agreement of 1959-61 (with Article VI as supplement); the PAL-PALEA agreement of September 4, 1961; the PAL-ACAP collective bargaining agreement of 1952-54; the PAL-ACAP collective bargaining agreement of September 6, 1955; the PAL-ACAP collective bargaining 

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agreement   of   1959-61;   the   PAL-PALSA   collective   bargaining agreement of 1959-62; and the supplementary PAL-PALSA collective bargaining agreement (pp. 54-55, rec., G.R. No. L-31343).

The three-year prescribed period fixed  in the Eight-Hour Labor Law (CA No. 444, as amended) will apply, if the claim for differentials for overtime work  is  solely  based on said  law, and not  on a collective bargaining agreement or any other contract. In the instant cases, the claim   for   overtime   compensation   is   not   so   much   because   of Commonwealth Act No. 444, as amended, but because the claim is a demandable   right   of   the   employees,   by   reason   of   the   above-mentioned  collective  bargaining  agreements.   That   is  precisely  why petitioners  did  not  make  any   reference  as   to   the   computation   for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 444),   and   instead   inissited   that  work   computation  provided   in   the collective bargaining agreements  between the parties be observed. Since   the  claim  for  pay  differentials   is  principally  anchored  on   the written   contracts   between   the   litigants,   the   ten-year   prescriptive period between the litigants, the ten-year prescriptive period provided by   Art.   1144(1)   of   the   New   Civil   Code   should   govern.   (General Insurance and Surety Corp. vs. Republic, L-13873, January 31, 1963, 7 SCRA 4; Heirs of the Deceased Juan Sindiong vs. Committee on Burnt Areas and Improvements of Cebu, L-15975, April 30, 1964, 10 SCRA 715; Conde vs. Cuenca and Malaga, L-9405, July 31, 1956; Veluz vs. Veluz, L-23261, July 31, 1968, 24 SCRA 559).

Finally,   granting   arguendo   that   there   is   doubt   as   to   what   labor legislation to apply to the grievances of the employees in the cases at bar,   it   is  OUR view that   that   legislation which would  enhance   the plight of the workers should be followed, consonant with the express pronouncement of the New Civil Code that:

In case of doubt, all  labor legislation and labor contracts should be construed   in   favor   of   the   safety   and   decent   living   of   the   laborer (Article 1702).

WHEREFORE,   THE   APPEALED   RESOLUTION   IS   HEREBY   AFFIRMED, WITH   THE   MODIFICATION   THAT   PAY   DIFFERENTIALS   BE   PAID EFFECTIVE FEBRUARY 14, 1953. WITH COSTS AGAINST PHILIPPINE AIR LINES, INC. IN BOTH CASES.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 76452 July 26, 1994

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS REYES, petitioners, 

vs.

HON.   ARMANDO   ANSALDO,   in   his   capacity   as   Insurance Commissioner, and RAMON MONTILLA PATERNO, JR., respondents.

Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners.

Oscar Z. Benares for private respondent.

 

QUIASON, J.:

This is a petition for certiorari and prohibition under Rule 65 of the Revised   Rules   of   Court,   with   preliminary   injunction   or   temporary restraining order, to annul and set aside the Order dated November 6, 1986 of the Insurance Commissioner and the entire proceedings taken in I.C. Special Case No. 1-86.

We grant the petition.

The instant case arose from a letter-complaint of private respondent Ramon   M.   Paterno,   Jr.   dated   April   17,   1986,   to   respondent Commissioner,   alleging   certain   problems   encountered   by   agents, supervisors,   managers   and   public   consumers   of   the   Philippine American Life Insurance Company (Philamlife) as a result of certain practices by said company.

In a letter dated April 23, 1986, respondent Commissioner requested petitioner   Rodrigo   de   los   Reyes,   in   his   capacity   as   Philamlife's president, to comment on respondent Paterno's letter.

In   a   letter   dated   April   29,   1986   to   respondent   Commissioner, petitioner  De   los  Reyes   suggested   that  private   respondent  "submit some sort of a 'bill of particulars' listing and citing actual cases, facts, dates, figures, provisions of law, rules and regulations, and all other pertinent   data  which   are   necessary   to   enable   him   to   prepare   an intelligent reply" (Rollo, p. 37). A copy of this letter was sent by the Insurance   Commissioner   to   private   respondent   for   his   comments thereon.

On May 16,  1986,   respondent Commissioner received a  letter  from private respondent maintaining that his letter-complaint of April 17, 1986  was   sufficient   in   form  and   substance,   and   requested   that   a hearing thereon be conducted.

Petitioner  De   los   Reyes,   in   his   letter   to   respondent   Commissioner dated   June  6,   1986,   reiterated  his   claim  that  private   respondent's letter of May 16, 1986 did not supply the information he needed to enable him to answer the letter-complaint.

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On July 14, a hearing on the letter-complaint was held by respondent Commissioner on the validity of the Contract of Agency complained of by private respondent.

In   said   hearing,   private   respondent   was   required   by   respondent Commissioner to specify the provisions of the agency contract which he claimed to be illegal.

On August 4, private respondent submitted a letter of specification to respondent Commissioner dated July 31, 1986, reiterating his letter of April  17, 1986 and praying that the provisions on charges and fees stated in the Contract of Agency executed between Philamlife and its agents,  as  well  as  the  implementing provisions as  published  in  the agents' handbook, agency bulletins and circulars, be declared as null and void. He also asked that the amounts of such charges and fees already deducted and collected by Philamlife in connection therewith be   reimbursed   to   the   agents,  with   interest   at   the   prevailing   rate reckoned from the date when they were deducted.

Respondent Commissioner   furnished petitioner De  los  Reyes with a copy of private respondent's letter of July 31, 1986, and requested his answer thereto.

Petitioner  De   los   Reyes   submitted  an  Answer   dated   September   8, 1986, stating inter alia that:

(1) Private respondent's  letter of August 11, 1986 does not contain any of the particular information which Philamlife was seeking from him and which he promised to submit.

(2)   That   since   the   Commission's   quasi-judicial   power   was   being invoked with regard to the complaint, private respondent must file a verified formal complaint before any further proceedings.

In his letter dated September 9, 1986, private respondent asked for the resumption of the hearings on his complaint.

On October 1, private respondent executed an affidavit, verifying his letters of April 17, 1986, and July 31, 1986.

In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior Assistant   Vice-President   and   Executive   Assistant   to   the   President, asked that respondent Commission first rule on the questions of the jurisdiction of the Insurance Commissioner over the subject matter of the letters-complaint and the legal standing of private respondent.

On October 27, respondent Commissioner notified both parties of the hearing of the case on November 5, 1986.

On   November   3,   Manuel   Ortega   filed   a   Motion   to   Quash Subpoena/Notice on the following grounds;

1. The Subpoena/Notice has no legal basis and is premature because:

(1) No complaint sufficient in form and contents has been filed;

(2) No summons has been issued nor received by the respondent De los   Reyes,   and   hence,   no   jurisdiction   has   been   acquired   over   his person;

(3) No answer has been filed, and hence, the hearing scheduled on November   5,   1986   in   the   Subpoena/Notice,   and   wherein   the respondent is required to appear, is premature and lacks legal basis.

II. The Insurance Commission has no jurisdiction over;

(1) the subject matter or nature of the action; and

(2) over the parties involved (Rollo, p. 102).

In   the   Order   dated   November   6,   1986,   respondent   Commissioner denied  the Motion  to  Quash.  The dispositive  portion of   said  Order reads:

NOW, THEREFORE, finding the position of complainant thru counsel tenable and considering the fact that the instant case is an informal administrative litigation falling outside the operation of the aforecited memorandum circular but cognizable by this Commission, the hearing officer, in open session ruled as it is hereby ruled to deny the Motion to Quash Subpoena/Notice for lack of merit (Rollo, p. 109).

Hence, this petition.

II

The main issue to be resolved is whether or not the resolution of the legality of the Contract of Agency falls within the jurisdiction of the Insurance Commissioner.

Private   respondent   contends   that   the   Insurance  Commissioner  has jurisdiction to take cognizance of the complaint in the exercise of its quasi-judicial powers. The Solicitor General, upholding the jurisdiction of the Insurance Commissioner, claims that under Sections 414 and 415 of the Insurance Code, the Commissioner has authority to nullify the alleged illegal provisions of the Contract of Agency.

III

The  general   regulatory  authority  of   the   Insurance  Commissioner   is described in Section 414 of the Insurance Code, to wit:

The Insurance Commissioner shall have the duty to see that all laws relating   to   insurance,   insurance   companies   and   other   insurance matters, mutual benefit associations and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, . . .

On the other hand, Section 415 provides:

In addition to the administrative sanctions provided elsewhere in this Code,   the   Insurance   Commissioner   is   hereby   authorized,   at   his 

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discretion,   to   impose   upon   insurance   companies,   their   directors and/or   officers   and/or   agents,   for   any  willful   failure  or   refusal   to comply with, or violation of any provision of this Code, or any order, instruction, regulation or ruling of the Insurance Commissioner, or any commission of irregularities, and/or conducting business in an unsafe and  unsound manner  as  may be  determined  by   the   the   Insurance Commissioner, the following:

(a) fines not in excess of five hundred pesos a day; and

(b)   suspension,   or   after   due   hearing,   removal   of   directors   and/or officers and/or agents.

A   plain   reading   of   the   above-quoted   provisions   show   that   the Insurance Commissioner has the authority to regulate the business of insurance, which is defined as follows:

(2)   The   term   "doing   an   insurance   business"   or   "transacting   an insurance business," within the meaning of this Code, shall include

(a) making or proposing to make, as insurer, any insurance contract;

(b)   making,   or   proposing   to   make,   as   surety,   any   contract   of suretyship as a vocation and not as merely  incidental to any other legitimate  business  or  activity  of   the   surety;   (c)  doing  any  kind  of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this  Code;   (d)  doing  or  proposing   to  do  any  business   in   substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. (Insurance Code, Sec. 2[2]; Emphasis supplied).

Since the contract of agency entered into between Philamlife and its agents is not included within the meaning of an insurance business, Section 2 of the Insurance Code cannot be invoked to give jurisdiction over   the  same  to   the   Insurance  Commissioner.  Expressio  unius  est exclusio alterius.

With regard to private respondent's contention that the quasi-judicial power   of   the   Insurance   Commissioner   under   Section   416   of   the Insurance Code applies in his case, we likewise rule in the negative. Section 416 of the Code in pertinent part, provides:

The   Commissioner   shall   have   the   power   to   adjudicate   claims   and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a contract of suretyship, or   for   which   a   reinsurer   may   be   used   under   any   contract   or reinsurance it may have entered into, or for which a mutual benefit association may be held  liable under the membership certificates  it has   issued   to   its  members,   where   the   amount   of   any   such   loss, damage or liability, excluding interest, costs and attorney's fees, being claimed   or   sued   upon   any   kind   of   insurance,   bond,   reinsurance contract,   or  membership   certificate   does  not   exceed   in   any   single claim one hundred thousand pesos.

A reading of the said section shows that the quasi-judicial power of the   Insurance   Commissioner   is   limited   by   law   "to   claims   and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance, . .   ."  Hence, this power does not cover the relationship affecting the insurance company and its agents but is limited to adjudicating claims and complaints filed by the insured against the insurance company.

While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of the Insurance Code, the provisions of said Chapter speak only of the licensing requirements and limitations imposed on insurance agents and brokers.

The Insurance Code does not have provisions governing the relations between  insurance companies  and their  agents.   It   follows that  the Insurance Commissioner  cannot,   in   the exercise  of   its  quasi-judicial powers, assume jurisdiction over controversies between the insurance companies and their agents.

We have held in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989), andInvestment Planning Corporation of the Philippines v. Social Security Commission, 21 SCRA 904 (1962), that an insurance company may have two classes of agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company; and (2) registered representatives, who work on commission basis.

Under   the   first   category,   the   relationship   between   the   insurance company and its agents is governed by the Contract of Employment and   the   provisions   of   the   Labor   Code,   while   under   the   second category,  the same is  governed by the Contract of Agency and the provisions  of   the  Civil  Code  on   the  Agency.  Disputes   involving   the latter are cognizable by the regular courts.

WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986 of the Insurance Commission is SET ASIDE.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,

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vs.

NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.

J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.

 

FERNAN, C.J.:

The  issue to  be resolved  in   the   instant  case  is  whether  or  not   the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and   if   so,  whether  or  not   they  were   illegally  dismissed   from  their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned and operated by   private   respondent   De   Guzman   Fishing   Enterprises   which   is primarily   engaged   in   the   fishing   business  with   port   and   office   at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel  in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business   of   "trawl"   fishing,   petitioners   were   paid   on   percentage commission basis   in  cash by  one Mrs.  Pilar  de  Guzman,  cashier  of private respondent.  As agreed upon,  they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded   the   cost   of   crude   oil   consumed   during   the   fishing   trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per week while the assistant engineer, second   fisherman,   and   fisherman-winchman   received   a   minimum income of P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private respondent,  to proceed   to   the   police   station   at   Camaligan,   Camarines   Sur,   for investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that  the same was a countermove to their  having formed   a   labor   union   and   becoming   members   of   Defender   of Industrial   Agricultural   Labor   Organizations   and   General   Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge  against   petitioners,  and  no   criminal   charges  were   formally filed against   them.  Notwithstanding,  private   respondent   refused to allow petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month pay, emergency cost   of   living   allowance   and   service   incentive   pay,  with   the   then Ministry   (now   Department)   of   Labor   and   Employment,   Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83   to   1456-83.   2   They   uniformly   contended   that   they  were arbitrarily dismissed without being given ample time to look for a new job.

On   October   24,   1983,   private   respondent,   thru   its   operations manager,   Conrado   S.   de   Guzman,   submitted   its   position   paper denying   the   employer-employee   relationship   between   private respondent and petitioners on the theory that private respondent and petitioners were engaged in a joint venture. 3

After the parties failed to reach an amicable settlement,  the Labor Arbiter scheduled the case for joint hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled   joint   hearings   were   postponed   due   to   the   absence   of private   respondent,  one  of   the  petitioners  herein,  Alipio  Ruga,   the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the fishing operations were conducted, mode of payment of compensation for services rendered by the fishermen-crew members, and the circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and   not   one   of   employer-employee   relationship   existed   between private respondent and petitioners.

From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.

On   May   30,   1985,   the   National   Labor   Relations   Commission promulgated its resolution 6 affirming the decision of the labor arbiter that  a   "joint   fishing   venture"   relationship   existed  between  private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and petitioners is a joint venture arrangement and not  an employer-employee relationship.  To stress that there is an employer-employee relationship between them and private respondent, petitioners invite attention to the following: that they  were  directly  hired  by  private   respondent   through  its  general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from 8 to 15 years in various capacities; that private respondent, through its operations manager, supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-catch the time to return to the fishing port, which were communicated to the patron/pilot by radio (single side band);  that they were not allowed to  join other outfits even   the   other   vessels   owned   by   private   respondent  without   the 

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permission of the operations manager; that they were compensated on percentage commission basis of the gross sales of the fish-catch which were delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and regulations imposed on them by private respondent.

Disputing   the   finding   of   public   respondent   that   a   "joint   fishing venture"   exists   between   private   respondent   and   petitioners, petitioners   claim   that   public   respondent   exceeded   its   jurisdiction and/or abused its discretion when it added facts not contained in the records when  it  stated that the pilot-crew members do not receive compensation from the boat-owners except their share in the catch produced  by   their  own efforts;   that  public   respondent   ignored   the evidence of petitioners that private respondent controlled the fishing operations;   that   public   respondent   did   not   take   into   account established   jurisprudence  that   the  relationship  between   the  fishing boat operators and their crew is one of direct employer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent that a "joint   fishing   venture"   exists   between   private   respondent   and petitioners rests on the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein, from compulsory coverage of the SSS on the ground that there is no employer-employee   relations   between   the   boat-owner   and   the fishermen-crew members following the doctrine laid down in Pajarillo vs.   SSS,   17  SCRA  1014   (1966).   In  applying   to   the   case  at  bar   the doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee relationship between the boat-owner and the pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and crew members contribute the corresponding labor and the parties get specific shares in the catch for their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the case at bar, did not control the conduct of the fishing  operations  and   the  pilot   and   crew members   shared   in   the catch.

We rule in favor of petitioners.

Fundamental   considerations   of   substantial   justice   persuade   Us   to decide the instant case on the merits rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim of a procedural   misstep,   the   idea   being   that   its   power   be   exercised according   to   justice   and   equity   and   substantial   merits   of   the controversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl fishing, as in the case of 

petitioners herein, who spend one (1) whole week or more 7 in the open sea performing their job to earn a living to support their families, convince Us to adopt a more liberal attitude in applying to petitioners the 10-calendar day rule in the filing of appeals with the NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision eight (8) days earlier, or on June 25, 1984. As adverted   to   earlier,   the   circumstances   peculiar   to   petitioners' occupation as fishermen-crew members, who during the pendency of the case understandably have to earn a living by seeking employment elsewhere, impress upon Us that in the ordinary course of events, the information as to the adverse decision against them would not reach them within such time frame as would allow them to faithfully abide by the 10-calendar day appeal period. This peculiar circumstance and the fact that their  representative  is a non-lawyer provide equitable justification to conclude that there is substantial compliance with the ten-calendar   day   rule   of   filing   of   appeals   with   the   NLRC   when petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal with the NLRC through registered mail.

We have consistently ruled that  in determining the existence of an employer-employee   relationship,   the   elements   that   are   generally considered are the following (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which the work is to be accomplished. 8 The employment relation arises from contract of hire, express or implied. 9 In the absence of hiring, no actual employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. The test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as   authority   for   the   ruling   that   a   "joint   fishing   venture"   existed between private respondent and petitioners is not applicable in the instant case. There is  neither light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners as regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in any way control the crew-members with whom the former have no relationship whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and that they only share in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the fishing operations was 

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undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port were shown to be the prerogative of private respondent.  12 While performing the fishing operations, petitioners received instructions via a   single-side   band   radio   from   private   respondent's   operations manager who called the patron/pilot in the morning. They are told to report their activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations was  monitored  by  private   respondent   thru   the  patron/pilot  of  7/B Sandyman II who is responsible for disseminating the instructions to the crew members.

The conclusion of public respondent that there had been no change in the   situation   of   the   parties   since   1968  when  De  Guzman   Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708 exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous for public respondent to apply the factual situation of the parties in the 1968 case to the instant case in the light of the changes in the conditions of employment agreed upon by the private respondent and petitioners as discussed earlier.

Records   show   that   in   the   instant   case,   as   distinguished   from   the Pajarillo  case where the crew members are under no obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for one day and be the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were   directly   hired   by   private   respondent,   through   its   general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman and have been under the employ of private respondent for a period of 8-15 years in various capacities, except for Laurente Bautu who was hired on August  3,  1983 as assistant  engineer.  Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968 until  he was promoted as chief  engineer of the fishing vessel;  Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime   Barbin   started   as   a   pilot   of   the  motor   boat   until   he   was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of petitioners to perform work which   is   necessary   or   desirable   in   the   usual   business   or   trade   of private respondent for a period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor Code   as   they   were   indeed   engaged   to   perform   activities   usually necessary or desirable in the usual fishing business or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the business   of   private   respondent,   it  must   be   noted   that   petitioners received   compensation  on  a  percentage   commission  based  on   the gross sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during the 

fishing   trip,  otherwise  only  10% of   the  proceeds  of   the   sale.   Such compensation falls within the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:

(f)   "Wage"  paid   to  any  employee   shall  mean  the   remuneration  or earnings, however designated, capable of being expressed in terms of money,   whether   fixed   or   ascertained   on   a   time,   task,   piece   or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered  or   to  be   rendered,  and   included   the   fair  and   reasonable value, as determined by the Secretary of Labor, of board, lodging, or other   facilities   customarily   furnished   by   the   employer   to   the employee. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in accordance with their own understanding 15 is not supported by recorded evidence. Except that such claim appears as an allegation in private respondent's position paper, there is nothing in the records showing such a sharing scheme as preferred by private respondent.

Furthermore,  the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at midsea without the knowledge   and   consent   of   private   respondent,   petitioners   were unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their side on the accusation against them unmistakably reveals the disciplinary power exercised by private respondent over them and the corresponding sanction imposed in case of violation of any of its rules and   regulations.   The   virtual   dismissal   of   petitioners   from   their employment  was  characterized  by  undue haste  when  less  extreme measures   consistent  with   the   requirements   of   due   process   should have been first exhausted. In that sense, the dismissal of petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea   the   act   of   private   respondent   virtually   resulting   in   their dismissal  evidently  contradicts  private  respondent's   theory of  "joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes generally a parity of standing between the joint   co-venturers   or   partners,   in  which   each   party   has   an   equal proprietary   interest   in   the   capital   or   property   contributed   16   and where each party exercises equal lights in the conduct of the business. 17  It  would be  inconsistent with the principle of parity  of  standing between the joint co-venturers as regards the conduct of business, if private   respondent   would   outrightly   exclude   petitioners   from   the conduct   of   the   business  without   first   resorting   to   other  measures consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent should have discussed with an open mind the advantages and disadvantages of petitioners' action with   its   joint   co-venturers   if   indeed   there   is  a   "joint  fishing venture" between the parties.  But this was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal   complaints  were   filed   against   them.   The   lame   excuse   of 

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private   respondent   that   the   non-filing   of   the   criminal   complaints against  petitioners  was   for  humanitarian   reasons  will   not  help   its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. InNegre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one   master   fisherman   locally   known   as   "maestro"   in   charge   of recruiting   others   to   complete   the   crew   members   are   considered employees, not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew members because of an alleged partnership   agreement   between   him,   as   financier,   and   Simplicio Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the WCC that there existed an employer-employee relationship between the boat-owner and the fishermen crew members not only because they worked for and in the interest of the business of the boat-owner but also because they were subject to the control, supervision and dismissal of the boat-owner, thru   its   agent,   Simplicio   Panganiban,   the   alleged   "partner"   of  Dr. Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not alter the character of their relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we held that the employer-employee relationship between the crew members and the owners of the fishing vessels engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The said ruling is premised on the principle that all these activities i.e., drydock,   repairs,   loading  of  necessary  provisions,   form part  of   the regular operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned   resolution   of   the  National   Labor   Relations   Commission dated  May   30,1985   is   hereby   REVERSED   and   SET   ASIDE.   Private respondent is ordered to reinstate petitioners to their former positions or   any   equivalent   positions   with   3-year   backwages   and   other monetary benefits under the law. No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant, vs.

PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.

x---------------------------------------------------------x

G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant, vs.PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.

Nicanor S. Sison for petitioner-appellant.Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.

CONCEPCION, J.:

Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be disposed of.

In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recordings of said companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review forcertiorari.

Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of employer-employee relationship between the parties is contested. However, this claim is

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neither borne out by any legal provision nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification.

It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence was presented that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority of the other numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of Republic Act No. 875."

The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a non-adversary, fact finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the matter of their representation. In connection therewith, the court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of the film companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film companies really contested. Besides, the substantial difference between the work performed by said musicians and that of other persons who participate in the production of a film, and the peculiar circumstances under which the services of that former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the aforesaid film companies. It does not intend to represent the other employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all the employees of said film companies, including those who are not musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In this connection the lower court had the following to say:

As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably chooses, from the musical directors, one who will furnish the musical background for a film. A price is agreed upon verbally between the producer and musical director for the cost of furnishing such musical background. Thus, the musical director may compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding compensation of the musicians under him.

When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time and place where he will be picked up by the truck of the film company. The film company provides the studio for the use of the musicians for that particular recording. The musicians are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals at dinner time.

During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the musicians and tells what to do in every detail. He solely directs the performance of the musicians before the camera as director, he supervises the performance of all the action, including the musicians who appear in the scenes so that in the actual performance to be shown on the screen, the musical director's intervention has stopped.

And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other employees of the company assist in the operation. Hence, the work of the musicians is an integral part of the entire motion picture since they not only furnish the music but are also called upon to appear in the finished picture.

The question to be determined next is what legal relationship exits between the musicians and the company in the light of the foregoing facts.

We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is called for.

Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which results from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of employers' to bargain collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of association and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment.'

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The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional legal distinctions, separating them from 'independent contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are within this Act, others beyond its coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in controversies of their wages, hours and working conditions may characterize the status of one group as of the other. The former, when acting alone may be as helpless in dealing with the employer as dependent on his daily wage and as unable to resist arbitrary and unfair treatment as the latter.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in certain types of economic relationship. Congress recognized those economic relationships cannot be fitted neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in proximate relationship may be drawn into common controversies by economic forces and that the very dispute sought to be avoided might involve 'employees' who are at times brought into an economic relationship with 'employers', who are not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlying economic facts rather than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts involved in the economic relationship. Where all the conditions of relation require protection, protection ought to be given .

By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an agreement which will settle disputes regarding conditions of employment, through the process of collective bargaining.

The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all employees in the conventional as well in the legal sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).

It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable industrial peace and the advancement of the general welfare, and the best interests of employers and employees by the settlement of issues respecting terms and conditions of employment through the process of collective bargaining between employers and representatives of their employees.

The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a contract which purports to establish the status of the worker, not as an employee.

The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio substantially under the direction and control of the company.

In other words, to determine whether a person who performs work for another is the latter's employee or an independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employer-employee relationship exist where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.

'We find that the independent contractors and persons working under them are employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have sufficient authority over the persons working under their immediate supervision to warrant their exclusion from the unit. We shall include in the unit the employees working under the supervision of the independent contractors, but exclude the contractors.'

'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees under the Act where the extent of the employer's control over them indicates that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).

The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture director, the performance of the musicians before the camera, in order to suit the music they are playing to the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild are employees of the three film companies

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and, therefore, entitled to right of collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the film companies."

We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of the film companies in these cases. The third parties with whom the management and the workers contracted in the Maligaya cases were agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage in said business issued by theCity Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim to have dealt with had nothing comparable to the business standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved the enforcement of the liability of an employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in the Caro case.

Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, butemployees of said company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or controls the means or details by which said workers are to accomplish their services" — as in the cases before us.

The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's Compensation Commission for further evidence.

The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection between its business and the painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that Geronimo was not an employee of the company; and that the latter was not bound,

therefore, to pay the compensation provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitioners-appellants and the work of the musicians is not casual. As held in the order appealed from which, in this respect, is not contested by herein petitioners-appellants — "the work of the musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third party who had directly contracted with said owner. In other words, the repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just as music is in the production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the interpretation of Republic Act No. 660, which amends the law creating and establishing the Government Service Insurance System. No labor law was sought to be construed in that case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals and other details — such are left to the leader'sdiscretion."

This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in the present case. Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the musical directors, fix the date, the time and the place of work. The film companies, not the musical directors, provide the transportation to and from the studio. The film companies furnish meal at dinner time.

What is more — in the language of the order appealed from — "during the recording sessions, the motion picture director who is an employee of the company" — not the musical director — "supervises the recording of the musicians and tells them what to do in every detail". The motion picture director — not the musical director — "solely directs and performance of the musicians before the camera". The motion picture director "supervises the performance of all the actors, including the musicians who appear in the scenes, so that in the actual performance to be shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want more drums or move violin or piano, as the case may be". The movie director "directly controls the activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.".

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It is well settled that "an employer-employee relationship exists . . .where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was held to exist between the management and the workers, notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to hire and fire said workers. The aforementioned control over the means to be used" in reading the desired end is possessed and exercised by the film companies over the musicians in the cases before us.

WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 73199 October 26, 1988

DR. RENATO SARA and/or ROMEO ARANA petitioners,

vs.

CERILA AGARRADO and the NATIONAL LABOR RELATIONS COMMISSION, respondents.

Amparo & Barcelona Law Offices for petitioners.

The Solicitor General for public respondent. Nicanor A. Magno for private respondent.

 

FERNAN, C.J.:

Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal   over   Case   No.   LRD-ROXII-006-82,   a   claim   for   unpaid commissions and reimbursement of certain sums of money filed by herein private respondent Cerila Agarrado against herein petitioners Dr. Renato Sara and Romeo Arabia.

Private respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato Sara She quit her job in 1973. Four years later, petitioners Dr. Sara and Romeo Arabia, being owners of a rice mill and having begun to engage in the buy and sell of palay and rice, entered 

into a verbal agreement with private respondent Agarrado whereby it was agreed that the latter would be paid P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palay purchased. It was further agreed that private respondent would spend her own money for the undertaking, but to enable her to carry out the agreement  more  effectively,   she  was  authorized   to  borrow money from other persons, as in fact she did, subject to reimbursement by petitioners. 1

In 1982, private respondent filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. XI, Cotabato City, a complaint against petitioners for unpaid commission of P4,598.00 on   milled   rice   sold,   P2,982.80   on   palay   sold,   reimbursement   of P17,500.00   which   she   had   borrowed   from   various   persons   and Pl,749.00   of   her   own  money  which   petitioners   allegedly   had   not reimbursed (LRD-ROXII-006- 82).

By way of defense, petitioners raised the issue of lack of jurisdiction on the part of  the Labor Arbiter to take cognizance of the case, there being no employer-employee relationship between the parties. They averred   that   the   claim  for  alleged  unpaid   commission  and  certain sums of money is governed by the law on agency under the Civil Code and hence a purely civil obligation cognizable by the regular courts.

On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in   favor   of   private   respondent   ordering   petitioners   to   pay   all   the claims amounting to P26,397.80. 2

Petitioner appealed the decision to the NLRC, which in a resolution dated   June   25,   1986   affirmed   the   Labor   Arbiter's   decision   and dismissed the appeal. 3

Their motion for reconsideration having been denied, petitioners took the present recourse, maintaining lack of jurisdiction on the part of the Labor Tribunal as well as grave abuse of discretion on its part in finding them liable to private respondent.

In  his   comment,   the  Solicitor  General  agreed  with  petitioners   that there  was  no   employer-employee   relationship  between   the  parties and that by reason thereof the Labor Arbiter had no jurisdiction over the   case.   The   Solicitor  General's   comment  was  accompanied  by  a manifestation and motion stating that he was filing the comment on his   own   behalf   and   that   the   public   respondent   NLRC   had   been informed about his contrary stand. 4

The primordial   issue  in this  case  is  whether  an employer-employee relationship exists between petitioners and private respondent as to warrant cognizance by the Labor Arbiter of LRD-ROXII-006-82.

To determine the existence of an employer-employee relationship, this Court in a long line of decisions 5 has invariably applied the following four-fold test: [1] the selection and engagement of the employee; [2] the payment of wages; [3] the power of dismissal; and [4] the power to control the employee's conduct.

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In the case at bar, we find that although there was a selection and engagement  of   private   respondent   in   1977,   the   verbal   agreement between the parties negated the existence of the other requisites.

As to the payment of wages, the verbal agreement entered into by the parties   stipulated   that   private   respondent   would   be   paid   a commission of  P2.00 per  sack of  milled rice  sold  as  well  as  a 10% commission on palay purchase. The arrangement thus was explicitly on a commission basis dependent on the volume of sale or purchase. Private respondent was not guaranteed any minimum compensation nor  was she allowed any drawing account or  advance of  any kind against unearned commissions. Her right to compensation depended upon and was  measured by   the   tangible   results   she  produced  the quantity of rice sold and the quantity of palay purchased.

The power to terminate the relationship was mutually vested upon the parties. Either may terminate the business arrangement at will, with or without cause.

Finally, noticeably absent from the agreement between the parties is the   element   of   control.   Among   the   four   (4)   requisites,   control   is deemed the most  important that the other requisites  may even be disregarded.   6   Under   the   control   test,   an   employer-employee relationship exists if the "employer" has reserved the right to control the "employee" not only as to the result of the work done but also as to the means and methods by which the same is to be accomplished. 7 Otherwise, no such relationship exists.

We observe that the means and methods of purchasing and selling rice   or   palay   by   private   respondent   were   totally   independent   of petitioners' control. As established by the NLRC:

...   Sometime   in   June   1977,   respondent   re-engaged   the   services  of herein complainant to sell milled rice to the customers of the former, as well as to buy palay for and in behalf of Dr. Renato Sara, with the verbal   agreement   that   to   carry   out   effectively   the   said   task, complainant was duly authorized by respondent, Dr. Sara to spend her own  money,   if   necessary  but   subject   to   reimbursment  and   if   that would not  be sufficient,   to  borrow money  from other  sources  with further   understanding   that   Dr.   Sala   will   repay   the   ill   thru   the complainant; ... ([Emphasis supplied], p. 21, Rollo)

Note that private respondent was never given capital by his supposed employer   but   relied   on   her   own   resources   and   if   insufficient,   she borrowed  money   from   others.   Petitioners   did   not   supply   private respondent with tools and appliances needed to enable her to carry her   undertaking,   except   to   authorize   her   to   borrow  money   from others, subject to reimbursement.

The absence of control is made more evident by the fact that private respondent was not even obliged to sell the palay she purchased to petitioners. She was at liberty to sell the palay to any trader offering higher buying rates. She was thus free to sell it to anybody whom she pleased.

Moreover,   private   respondent   worked   for   petitioners   at   her   own pleasure and was not subject to definite hours or conditions of work. 

She could even delegate the task of buying and selling to others, if she so desired, or simultaneously engaged  in other means of  livelihood while selling and purchasing rice or palay.

Under the conditions set forth in their agreement, private respondent was   an   independent   contractor,   who   exercising   independent employment, contracted to do a piece of work according to her own method  and without  being   subject   to   the   control  of  her   employer except as to the result of her work. She was paid for the result of her labor, unlike an employee who is paid for the labor he performs. 8

The verbal agreement devoid as it was of any stipulations indicative of control leaves no doubt that private respondent was not an employee of petitioners but was rather an independent contractor.

The Labor Tribunal's jurisdiction being primarily predicated upon the existence of an employer-employee relationship between the parties, the  absence  of   such   element,   as   in   the   case  at   bar,   removes   the controversy from the scope of its limited jurisdiction.

WHEREFORE, the  instant petition for certiorari   is  granted. Case No. LRD-ROXII-006-82   of   the   National   Labor   Relations   Commission   is hereby ordered DISMISSED for lack of jurisdiction.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISION G.R. No. 88498 June 9, 1992GENEROSO R. SEVILLA, petitioner, vs.THE HON. COURT OF APPEALS and NERITO L. SANTOS, respondents.

GRIÑO-AQUINO, J.:

May an officer who was appointed to an office in an "acting" capacity, bring a quo warranto action against the permanent appointee to the position?

The petitioner has been in the government service since 1949. His last appointment was last Assistant City Engineer of Palayan City which he discharged   until   he   was   designated   Acting   City   Engineer   of Cabanatuan City by President Ferdinand E. Marcos on May 2, 1981. He   unhesitatingly   assumed   the   latter   position   and   discharged   its functions   and   responsibilities   until   "People   Power"   and   the   EDSA Revolution   intervened.   The   subsequent   twists   and   turns   in   his professional career are recited in the decision dated May 31, 1989 of the Coourt of Appeals in CA- G.R. SP No. 14489 as follows:

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The advent of the 1986 Revolution and the 1987 Freedom Constitution spelled   changes   and  upheavals   particularly  within   the   Career  Civil Service. On August 18, 1986, the then Officer-in charge (OIC Mayor) of Cabanatuan   City,   Cesar   Vergara,   appointed   defendant-appellant Santos as city engineer of Cabanatuan City, and on August 28, 1986, defendant-appellant Santos assumed the position of city engineer. On that   very   same  day,   a  memorandum  informing  petitioner-appellee Sevilla of the appointment of defendant-appellant Santos was sent by then OIC Mayor.  As petitioner-appellee Sevilla  was on  leave at  the time,   the  memorandum  was   received   on   his   behalf   by   Anita   de Guzman, the administrative officer of the Department of Public Works and Highways (DPWH) Office of Cabanatuan City, where petitioner-appellee Sevilla also holds office.

A  few months   later,  or  on November  14,  1986,  petitioner-appellee Sevilla was designated by then Minister Rogociano Mercado of the MPWH as acting district  engineer of Pasay City.  Petitioner-appellee Sevilla served in that capacity until he was removed from that office of the new Secretary of the DPWH on February 3, 1987. This was what precipitated the present controversy.

Petitioner-appellee then returned to Cabanatuan City. On March 27, 1987,   he   filed   a   petition   for   quo   warranto   against   defendant-appellant Santos, which was docketed as Civil Case No. 879-134 (AF) before the Regional  Trial  Court  of  Cabanatuan City,  Branch 27.  On January   29,   1988,   the   lower   rendered   the   impugned   decision reinstating petitioner-appellee  Sevilla  and entitling  him payment  of vacation   and   sick   leaves   for   the   duration   of   his   absence.   The dispositive part of that decision reads:

WHEREFORE, judgement is hereby rendered for petitioner and against the respondent, to wit:

a. Ousting and excluding respondent Nerito Santos from the position of City Engineer;

b. Declaring petitioner Generoso Sevilla as the person lawfully entitled to hold aforesaid position; and

c.  Declaring   petitioner  Generoso   Sevilla   as   entitled   to  payment   of vacation  and   sick   leave  during   the  period  he  was  prevented   from rendering service by reason of this case. (pp. 53-54, Rollo.)

On   August   18,   1986,   the   OIC  Mayor   of   Cabanatuan   City,   Cesar Vergara,   appointed  Nerito   L.   Santos   as   the   new   city   engineer   of Cabanatuan City. Santos assumed the position on August 28 1986. On the same day, a memorandum was addressed to Sevilla informing him of Santos' appointment as city engineer of Cabanatuan City. Anita de Guzman, administrative officer of the Department of Public Works and Highways   (DPWH)  unit   in  Cabanatuan  City   received   the  notice   for Sevilla who was on leave on that time.

On November 14, 1986, the Minister of Public Works and Highways, Rogaciano Mercado, designated Sevilla asActing District Engineer of Pasay City. He served in that capacity for a little over two months or until   he   was   removed   on   February   3,   1987   by   the   new   DPWH Secretary, Jesus Jayme, forcing him to return to the Cabanatuan City 

Engineer's  Office  which,   however,  was  already   occupied   by  Nerito Santos.

On March 27, 1987, Sevilla filed a petition for quo warranto against Santos. It was docketed as Civil case No. 8795-134 (AF) in the Regional Trial  Court of Cabanatuan City — Branch 27. On June 8, 1987, the complaint was amended to include a petition for mandamus against the new OIC Mayor Evangelina Vergara, but the mandamuspetition was dismissed by the trial  court,  which proceeded to hear the quo warranto petition only.

In   his   quo   warranto   petition,   Sevilla   argued   that,   being   the presidential appointee, he could not be removed from office by an OIC mayor. And, even supposing that the OIC mayor had such authority, his (Sevilla's) separation from office was illegal because none of the grounds   for   the   separation/replacement   of   public   officials   and employees set forth in Section 3 of Executive Order No. 17 dated May 28, 1986, was cited to justify the termination of his service. Section 3 of E.O. No. 17 provides:

Section   3.   The   following   shall   be   the   grounds   for separation/replacement of personnel:

1. Existence of the case for summary dismissal pursuant to Section 40 of the Civil Service Law;

2. Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act as determined by the Ministry Head concerned;

3. Gross incompetence or inefficiency in the discharge of functions:

4. Misuse of public office for partisan political purposes:

5. Any other analogous ground showing that the incumbent is unfit to remain in the service or his separation/replacement is in the interest of the service.

Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISION G.R. No. 88498 June 9, 1992GENEROSO R. SEVILLA, petitioner, vs.THE HON. COURT OF APPEALS and NERITO L. SANTOS, respondents.

GRIÑO-AQUINO, J.:

May an officer who was appointed to an office in an "acting" capacity, bring a quo warranto action against the permanent appointee to the position?

The petitioner has been in the government service since 1949. His last appointment was last Assistant City Engineer of Palayan City which he 

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discharged   until   he   was   designated   Acting   City   Engineer   of Cabanatuan City by President Ferdinand E. Marcos on May 2, 1981. He   unhesitatingly   assumed   the   latter   position   and   discharged   its functions   and   responsibilities   until   "People   Power"   and   the   EDSA Revolution   intervened.   The   subsequent   twists   and   turns   in   his professional career are recited in the decision dated May 31, 1989 of the Coourt of Appeals in CA- G.R. SP No. 14489 as follows:

The advent of the 1986 Revolution and the 1987 Freedom Constitution spelled   changes   and  upheavals   particularly  within   the   Career  Civil Service. On August 18, 1986, the then Officer-in charge (OIC Mayor) of Cabanatuan   City,   Cesar   Vergara,   appointed   defendant-appellant Santos as city engineer of Cabanatuan City, and on August 28, 1986, defendant-appellant Santos assumed the position of city engineer. On that   very   same  day,   a  memorandum  informing  petitioner-appellee Sevilla of the appointment of defendant-appellant Santos was sent by then OIC Mayor.  As petitioner-appellee Sevilla  was on  leave at  the time,   the  memorandum  was   received   on   his   behalf   by   Anita   de Guzman, the administrative officer of the Department of Public Works and Highways (DPWH) Office of Cabanatuan City, where petitioner-appellee Sevilla also holds office.

A  few months   later,  or  on November  14,  1986,  petitioner-appellee Sevilla was designated by then Minister Rogociano Mercado of the MPWH as acting district  engineer of Pasay City.  Petitioner-appellee Sevilla served in that capacity until he was removed from that office of the new Secretary of the DPWH on February 3, 1987. This was what precipitated the present controversy.

Petitioner-appellee then returned to Cabanatuan City. On March 27, 1987,   he   filed   a   petition   for   quo   warranto   against   defendant-appellant Santos, which was docketed as Civil Case No. 879-134 (AF) before the Regional  Trial  Court  of  Cabanatuan City,  Branch 27.  On January   29,   1988,   the   lower   rendered   the   impugned   decision reinstating petitioner-appellee  Sevilla  and entitling  him payment  of vacation   and   sick   leaves   for   the   duration   of   his   absence.   The dispositive part of that decision reads:

WHEREFORE, judgement is hereby rendered for petitioner and against the respondent, to wit:

a. Ousting and excluding respondent Nerito Santos from the position of City Engineer;

b. Declaring petitioner Generoso Sevilla as the person lawfully entitled to hold aforesaid position; and

c.  Declaring   petitioner  Generoso   Sevilla   as   entitled   to  payment   of vacation  and   sick   leave  during   the  period  he  was  prevented   from rendering service by reason of this case. (pp. 53-54, Rollo.)

On   August   18,   1986,   the   OIC  Mayor   of   Cabanatuan   City,   Cesar Vergara,   appointed  Nerito   L.   Santos   as   the   new   city   engineer   of Cabanatuan City. Santos assumed the position on August 28 1986. On the same day, a memorandum was addressed to Sevilla informing him of Santos' appointment as city engineer of Cabanatuan City. Anita de Guzman, administrative officer of the Department of Public Works and 

Highways   (DPWH)  unit   in  Cabanatuan  City   received   the  notice   for Sevilla who was on leave on that time.

On November 14, 1986, the Minister of Public Works and Highways, Rogaciano Mercado, designated Sevilla asActing District Engineer of Pasay City. He served in that capacity for a little over two months or until   he   was   removed   on   February   3,   1987   by   the   new   DPWH Secretary, Jesus Jayme, forcing him to return to the Cabanatuan City Engineer's  Office  which,   however,  was  already   occupied   by  Nerito Santos.

On March 27, 1987, Sevilla filed a petition for quo warranto against Santos. It was docketed as Civil case No. 8795-134 (AF) in the Regional Trial  Court of Cabanatuan City — Branch 27. On June 8, 1987, the complaint was amended to include a petition for mandamus against the new OIC Mayor Evangelina Vergara, but the mandamuspetition was dismissed by the trial  court,  which proceeded to hear the quo warranto petition only.

In   his   quo   warranto   petition,   Sevilla   argued   that,   being   the presidential appointee, he could not be removed from office by an OIC mayor. And, even supposing that the OIC mayor had such authority, his (Sevilla's) separation from office was illegal because none of the grounds   for   the   separation/replacement   of   public   officials   and employees set forth in Section 3 of Executive Order No. 17 dated May 28, 1986, was cited to justify the termination of his service. Section 3 of E.O. No. 17 provides:

Section   3.   The   following   shall   be   the   grounds   for separation/replacement of personnel:

1. Existence of the case for summary dismissal pursuant to Section 40 of the Civil Service Law;

2. Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act as determined by the Ministry Head concerned;

3. Gross incompetence or inefficiency in the discharge of functions:

4. Misuse of public office for partisan political purposes:

5. Any other analogous ground showing that the incumbent is unfit to remain in the service or his separation/replacement is in the interest of the service.

On January 29, 1988, the lower court rendered a decision reinstating Sevilla   as   acting   City   Engineer   of   Cabanatuan   City   with   right   to payment of vacation and sick leaves for the duration of his absence (pp. 26-34,Rollo).

Santos appealed the decision to the Court of Appeals (CA-G.R. SP No. 14489) alleging that:

1. Sevilla has no legal standing to bring an action for quo warranto, because  his  designation  to   the  disputed  position  was   in  an  acting capacity only:

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2. his acceptance of another position in Pasay City precludes him from filing a quo warranto action; and

3.   the   OIC  mayor   had   legal   authority   to   appoint   Santos   as   city engineer.

In  a  decision  dated  May 31,  1989   (pp.  53-57,  Rollo),   the  Court  of Appeals set aside the lower court's decision and entered a new one, dismissing the petition for quo warranto. The Court of Appeals held that   by   accepting   another   office.   Sevilla   in   effect   voluntarily surrendered   his   former   office,   and   was   thereby   precluded   from maintaining a quo warranto action against Santos. When he accepted the   position   in   Pasay   City,   he   lost   his   right   to   the   position   in Cabanatuan City. The Court ruled that Santos' appointment was valid because   it   as   confirmed   by  Minister   Rogaciano  Mercado   of   the Ministry of Public Works and Highways.

Sevilla filed this petition for review alleging that the Court of Appeals erred:

1. in not applying the provisions of Executive Order No. 17;

2.   in not considering his  appointment as acting city engineering of Cabanatuan City as a specie of permanent appointment covered by civil service security of tenure and outside the doctrine enunciated in Austria vs.  Amante (79 Phil.  790) cited by the respondent court  as basis of its decision; and

3. in declaring that he "voluntarily surrendered his former office," (p. 1,   Rollo)   instead   of   finding   that   he   merely   complied   with   the memorandum of the Minister of Public Works and Highways assigning him in Pasay City.

The petition is devoid of merit.

An "acting" appointment is merely temporary, one which is good only until   another   appointment   is  made   to   take   its   place   (Austria   vs. Amante.   79   Phil.   784).   Hence,   petitioner's   right   to   hold   office   as "Acting City Engineer of Cabanatuan City" was merely temporary. It lapsed upon the appointment of Nerito Santos as the permanent city engineer of Cabanatuan City on August 18, 1986.

Petitioner was the incumbent city engineer of Palayan City when he was designated as Acting City Engineering of Cabanatuan City. There is   a   difference   between   an   appointment   an   appointment   and   a designation. Appointment is the selection by the proper authority of an individual who is to exercise the functions of an office. Designation, on   the   other   hand,   connotes  merely   the   imposition   of   additional duties,  upon a person already  in  the public  service by virtue of  an earlier  appointment or election (Santiago vs.  Commission on Audit, 199 SCRA 125; Political Law Review by Gonzales, pp. 184-185). A mere "designation" does not confer upon the designee security of tenure in the position or office which he occupies in an "acting" capacity only. Thus did this Court made such a distinction:

Appointment may be defined as the selection, by the authority vested with the power, of an individual who is to exercise the functions of a given   office.  When   completed,   usually   with   its   confirmation,   the appointment results in security of tenure for the person chosen unless he   is   replaceable   at   pleasure   because   of   the  nature  of   his   office. Designation, on the other hand, connotes merely the  imposition by law of additional duties on an incumbent official .  .  .   It  is said that appointment is essentially executive while designation is legislative in nature.

Designation may also be loosely defined as an appointment because it likewise   involves   the  naming  of   a  particular  person   to  a   specified public office. That is the common understanding of the term.However, where   the   person   is   merely   designated   and   not   appointed,   the implication is that he shall hold the office only in a temporary capacity and may be replaced at will by the appointing authority. In this sense, the   designation   is   considered   only   an   acting   or   temporary appointment, which does not confer security of tenure on the person named.

Even if so understood, that is, as an appointment, the designation of the   petitioner   cannot   sustain   his   claim   that   he   has   been   illegally removed.   .   .  Appointment  involves the exercise of discretion, which because of its nature cannot be delegated." (Binamira vs. Garrucho, 188 SCRA 158.)

Consequently, the designation of petitioner as Acting City Engineering of Cabanatuan City merely imposed upon him the additional function of the City Engineer of Cabanatuan City on top of his regular duties as City Engineer of Palayan City. He may claim security of tenure as City Engineer  of  Palayan  City  but  he  may  not   lay   such  a   claim  to   the position   of   City   Engineering   of   Cabanatuan   City   for   he   holds   no appointment to the latter office.

The power of appointment is essentially discretionary. Its exercise may not  be   controlled  by   the   courts.   The   choice  of  an  appointee   from among   qualified   candidates   or   applicants   is   a   political   and administrative   decision   calling   for   considerations   of   wisdom, convenience, utility and the interests of the service which can best be made  by   the  head  of  office   concerned   for   he   is   familiar  with   the organizational   structure   and   environmental   circumstances   within which   the   appointee   must   function.   (Lusterio   vs.   Intermediate Appellate   Court,   199   SCRA   255.)   The   appointing   authority   in   this particular case is the Mayor of Cabanatuan City (B.P. Blg. 337 or the Local Government Code which provides that "the city engineer shall be appointed by the city mayor, subject to civil service law, rules and regulations"). The appointment of Santos by OIC City Mayor Vergara was valid and binding for it was confirmed by the Minister of Public Works and Highways, and approved by the Civil Service Commission.

An action for quo warranto may be commenced by "a person claiming to be entitled to a public office or position usurpred or unlawfully held or exercised by another" (Sec. 6, Rule 66, Rules of Court). Inasmuch as the petitioner does not aver that he  is entitled to the office of City Engineer   of   Cabanatuan  City   and   that  Nerito   L.   Santos   is   a  mere usurper of said office, the Court of Appeals committed no reversible error   in  dismissing  petitioner's  action   forquo  warranto.  Petitioner's 

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ouster upon, and by virtue of, Santos' appointment as City Engineer of Cabanatuan City, was not illegal for the petitioner's right to discharge the   functions   of   Acting   City   Engineer   of   Cabanatuan   City   was extinguished when a permanent appointment to the same office was made in favor of the private respondent, Engineer Nerito L. Santos.

WHEREFORE, the petition for review is DENIED. The decision of the Court  of  Appeals  dismissing petitioner's  action  for  quo warranto  is AFFIRMED. Costs against the petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-80680 January 26, 1989DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners,

vs.

CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C. TUMANON, respondents.

V.E. Del Rosario & Associates for respondent CMC.

The Solicitor General for public respondent.

Banzuela,   Flores,  Miralles,   Raneses,   Sy,   Taquio   and  Associates   for petitioners.

Mildred A. Ramos for respondent Lily Victoria A. Azarcon.

 SARMIENTO, J.:

On July  21,  1986,  July  23,  1986,  and July  28,  1986,  the petitioners petitioned the National Labor Relations Commission for reinstatement and payment of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay,  and emergency cost of  living allowance pay, against the respondent, the California Manufacturing Company. 1

On   October   7,   1986,   after   the   cases   had   been   consolidated,   the California   Manufacturing   Company   (California)   filed   a   motion   to dismiss   as  well   as   a   position   paper   denying   the   existence   of   an employer-employee   relation   between   the   petitioners   and   the company   and,   consequently,   any   liability   for   payment   of   money 

claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.

It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned   them   to  work  as   "promotional  merchandisers"   3   for   the former firm pursuant to a manpower supply agreement. Among other things,   the  agreement  provided   that  California   "has  no   control  or supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform [Californias] obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be construed   as   creating   between   [California]   and   [Livi]   .   .   .   the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to comply with all existing as well as future laws, rules and regulations pertinent to employment of  labor" 6 and that "[California]  is  free and harmless from any liability  arising from such laws or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for [California]. 7

It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll  for the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8

The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which they signed new agreements with the same period, and so on. Unlike regular California employees, who received not less than P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received P38.56 plus P15.00 in allowance daily.

The petitioners now allege that they had become regular California employees and demand, as a consequence whereof, similar benefits. They   likewise   claim   that   pending   further   proceedings   below,   they were notified by California that they would not be rehired. As a result, they   filed   an   amended   complaint   charging   California   with   illegal dismissal.

California  admits  having   refused   to  accept   the  petitioners  back   to work but deny liability therefor for the reason that it is not, to begin with, the petitioners' employer and that the "retrenchment" had been forced   by   business   losses   as  well   as   expiration   of   contracts.   9   It appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or standby" status. 10

Amid   these   factual   antecedents,   the   Court   finds   the   single  most important issue to be: Whether the petitioners are California's or Livi's employees.

The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employer-employee relation between the petitioners  and  California  ostensibly   in   the   light   of   the  manpower supply contract,supra, and consequently, against the latter's liability as and for the money claims demanded. In the same breath, however, the   labor   arbiter   absolved   Livi   from   any   obligation   because   the 

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"retrenchment" in question was allegedly "beyond its control ." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees.

We reverse.

The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the   fact   that   the  manpower   supply   agreement   between   Livi   and California had specifically  designated the former as the petitioners' employer   and   had   absolved   the   latter   from   any   liability   as   an employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it, and the petitioners cannot be made to suffer from its adverse consequences.

This Court has consistently ruled that the determination of whether or not   there   is   an   employer-employee   relation   depends   upon   four standards:   (1)   the   manner   of   selection   and   engagement   of   the putative   employee;   (2)   the  mode   of   payment   of   wages;   (3)   the presence or absence of a power of dismissal; and (4) the presence or absence of a power to control the putative employee's conduct. 14 Of the  four,   the  right-of-control   test  has been held  to be the decisive factor. 15

On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced:

ART.  106.  Contractor  or  sub-contractor.  — Whenever  an employee enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code, the employer shall be jointly  and severally   liable  with  his  contractor  or  sub-contractor   to such   employees   to   the   extent   of   the  work   performed   under   the contract,   in   the   same   manner   and   extent   that   he   is   liable   to employees directly employed by him.

The Secretary  of  Labor  may,  by appropriate   regulations,   restrict  or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting   as   well   as   differentiations   within   these   types   of contracting and determine who among the parties involved shall be considered the employer  for  purposes of   this  Code,  to  prevent  any violation or circumvention of any provisions of this Code.

There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer.   In   such   cases,   the   person   or   intermediary   shall   be 

considered   merely   as   an   agent   of   the   employer   who   shall   be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

that   notwithstanding   the   absence   of   a   direct   employer-employee relationship  between   the  employer   in  whose   favor  work  had  been contracted out by a "labor-only" contractor, and the employees, the former   has   the   responsibility,   together   with   the   "labor-only" contractor,   for  any valid   labor  claims,  16 by operation of   law.  The reason, so we held, is that the "labor-only" contractor is considered "merely   an   agent   of   the   employer,"   17   and   liability   must   be shouldered by either one or shared by both. 18

There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in favor of clients. We hold that   it   is  one notwithstanding  its  vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor." 20 The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. 21 The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latter's  own business.   In this  connection, we do not agree that the petitioners had been made to perform activities 'which are not directly related   to   the   general   business   of  manufacturing,"   22   California's purported "principal operation activity. " 23 The petitioner's had been charged with "merchandizing [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task   and   occational   [sic]   price   tagging,"   24   an   activity   that   is doubtless, an integral part of the manufacturing business. It   is not, then, as if Livi had served as its (California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself done; Livi, as a placement agency, had simply supplied it   with   the   manpower   necessary   to   carry   out   its   (California's) merchandising   activities,   using   its   (California's)   premises   and equipment. 25

Neither   Livi   nor   California   can   therefore   escape   liability,   that   is, assuming one exists.

The   fact   that   the   petitioners   have   allegedly   admitted   being   Livi's "direct employees" 26 in their complaints  is nothing conclusive. For one thing, the fact that the petitioners were (are),  will  not absolve California   since   liability   has  been   imposed  by   legal   operation.   For another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by declarations of parties.

The   fact   that   the  petitioners  have  been  hired  on  a   "temporary  or seasonal" basis merely is no argument either. As we held in Philippine Bank of Communications v. NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say that  merchandising  is  a specific project   for   the obvious reason that  it   is  an activity related to the day-to-day operations of California.

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It  would have been different, we believe, had Livi  been discretely a promotions   firm,   and   that   California   had   hired   it   to   perform   the latter's merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would have been a mere patron, and not an employer. The employees would not in that event be unlike waiters, who, although at the service of customers, are not the  latter's employees, but of the restaurant.   As   we   pointed   out   in   the   Philippine   Bank   of Communications case:

xxx xxx xxx

...  The undertaking given by CESI  in favor of the bank was not the performance of a specific job for instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service, companies with their own personnel who pick up documents and packages from the offices of a client or customer,  and who deliver  such materials utilizing their own delivery vans or motorcycles to the addressees. In the present case, the undertaking of CESI was to provide its client the bank with a certain number of persons able to carry out the work of messengers.  Such undertaking of CESI was complied with when the requisite   number   of   persons   were   assigned   or   seconded   to   the petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of  CESI.  Messengerial  work the delivery of documents to designated persons whether within or without the bank premises-is of course directly related to the day-to-day operations of the   bank.   Section   9(2)   quoted   above   does   not   require   for   its applicability that the petitioner must be engaged  in the delivery of items as a distinct and separate line of business.

Succinctly  put,  CESI   is  not  a  parcel  delivery   company:  as   its  name indicates,   it   is   a   recruitment   and   placement   corporation   placing bodies, as it were, in different client companies for longer or shorter periods of time, ... 28

In   the   case   at   bar,   Livi   is   admittedly   an   "independent   contractor providing temporary services of manpower to its client. " 29 When it thus provided California with manpower,   it  supplied California with personnel, as if such personnel had been directly hired by California. Hence, Article 106 of the Code applies.

The Court need not therefore consider whether it is Livi or California which   exercises   control   over   the   petitioner   vis-a-vis   the   four barometers referred to earlier, since by fiction of law, either or both shoulder responsibility.

It is not that by dismissing the terms and conditions of the manpower supply agreement,  we have,  hence,  considered  it   illegal.  Under the Labor Code, genuine job contracts are permissible, provided they are genuine   job   contracts.   But,   as   we   held   in   Philippine   Bank   of Communications, supra, when such arrangements are resorted to "in anticipation  of,   and   for   the   very   purpose   of  making  possible,   the secondment" 30 of the employees from the true employer, the Court will   be   justified   in   expressing   its   concern.   For   then   that   would compromise the rights of the workers, especially their right to security of tenure.

This brings us to the question: What is the liability of either Livi or California?

The records show that the petitioners bad been given an initial six-month contract, renewed for another six months. Accordingly, under Article   281   of   the   Code,   they   had   become   regular   employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated without due process of law.

California resists reinstatement on the ground, first, and as we Id, that the   petitioners   are   not   its   employees,   and   second,   by   reason   of financial   distress   brought   about   by   "unfavorable   political   and economic atmosphere" 31"coupled by the February Revolution." 32 As to   the   first   objection,   we   reiterate   that   the   petitioners   are   its employees  and  who,   by   virtue  of   the   required  one-year   length-of-service, have acquired a regular status. As to the second, we are not convinced that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business reverses as a result   alone   of   the   prevailing   political   and   economic   climate.  We further find the attribution to the February Revolution as a cause for its alleged losses to be gratuitous and without basis in fact.

California   should  be  warned   that   retrenchment  of  workers,   unless clearly warranted, has serious consequences not only on the State's initiatives to maintain a stable employment record for the country, but more so, on the workingman himself, amid an environment that is desperately   scarce   in   jobs.   And,   the   National   Labor   Relations Commission   should   have   known   better   than   to   fall   for   such unwarranted excuses and nebulous claims.

WHEREFORE,   the   petition   is   GRANTED.   Judgment   is   hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20, 1987, and   the   resolution,   dated   August   19,   1987;   (2)   ORDERING   the respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status and rights of regular employees; and (3) ORDERING the  respondent,   the California  Manufacturing  Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon,   to   PAY,   jointly   and   severally,   unto   the   petitioners:   (a) backwages and differential pays effective as and from the time they had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3) years, and (b) all such   other   and   further   benefits   as   may   be   provided   by   existing collective   bargaining   agreement(s)   or   other   relations,   or   by   law, beginning such time; and (4) ORDERING the private respondents to PAY   unto   the   petitioners   attorney's   fees   equivalent   to   ten   (10%) percent  of  all  money   claims  hereby  awarded,   in  addition   to   those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.

IT IS SO ORDERED.

Melencio-Herrera,   (Chairperson),   Paras,   Padilla   and   Regalado,   JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

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SECOND DIVISION

G.R. No. 95845 February 21, 1996

WILLIAM L. TIU, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and HERMES DELA CRUZ, respondents.

D E C I S I O N

MENDOZA, J.:

On February 18, 1986, private respondent filed a complaint, for illegal dismissal, violation of the Minimum Wage Law and non-payment of the cost of living allowances, legal holiday pay, service incentive pay and separation pay, against petitioner. Petitioner denied that private respondent was his employee. But after consideration of the parties' evidence, the Labor Arbiter found that private respondent was an employee of petitioner and that he had been illegally dismissed. The Labor Arbiter ordered petitioner to pay private respondent the sum of P25,076.96, corresponding to the latter's differentials, 13th month pay and separation pay. On appeal, the Labor Arbiter's decision was affirmed in   toto by the NLRC. Hence this petition for certiorari. Petitioner alleges that the NLRC's decision was made in "reckless disregard" of the applicable facts and law and that it amounts to a grave abuse of discretion of the NLRC.1

Petitioner, as operator of the D'Rough Riders Transportation, is engaged in the transportation of passengers from Cebu City to the northern towns of Cebu. Private respondent worked in petitioner's bus terminals as a "dispatcher," assisting and guiding passengers and carrying their bags. The Labor Arbiter and the NLRC found, and petitioner had admitted in his position paper below, that private respondent was paid a regular daily wage of P20.00.

Petitioner denies that private respondent was his employee. He alleges that he did not have the power of selection and dismissal nor the power of control over private respondent. According to petitioner, private respondent, together with so-called "standbys," hung around his bus terminals, assisting passengers with their baggages as "dispatchers." Petitioner claims that, in league with "bad elements" in the locality who threatened to cause damage to his passenger buses and scare passengers away if petitioner and other bus operators did not let them, private respondent and other "standbys" forced passengers to hire them as baggage boys. Petitioner alleges that he had no choice but to allow private respondent and other "standbys" to carry on their activities within the premises of his bus terminals.2 He also claims he allowed them to do so even if their services as so-called "dispatchers" were not needed in his business. Petitioner insists that as "dispatcher," private respondent worked in his own way, without supervision by him.

The Labor Arbiter and the NLRC found private respondent to be an employee of petitioner, applying the Four-fold test, namely (a) who has the power of selection and engagement of the employees; (b) who pays the wages; (c) who has the power of dismissal, and (d) and who has the power to control the employees' conduct. The Labor Arbiter stated in his decision:

Respondents would want this office to believe that the sum of P20.00 that they pay complainant is ex gratia; hence, not compensation for services rendered. This is however belied by respondents' own allegation in their position paper that, "for purposes of preservation of his transportation business, agreed to give each 'standby' a fixed daily rate; and in exchange, they would canvass, assist and help passengers of respondents' passenger trucks. This privilege or arrangement was made possible due to the efforts and representation of complainant's father, Mr. Regino dela Cruz, who is close and known to the standbys and/or dispatchers." The impression that this office gets from said allegation is that the P20.00 received by complainant represents the value that respondents attach to complainant's services; hence, it is remuneration for services rendered. Respondent's admission of regular payment of such an amount, already establishes the existence of one of the factors that indicate employment relationship.

The right to hire and fire, on the other hand, has been indubitably established by complainant's Exhibit A (rebuttal) which remains untraversed and unrefuted, a translation of its contents of which are hereunder quoted for quick and easy reference:

Since there was an agreement for your return that when you are caught that you are inside the terminal you are to be dismissed outright and you agreed to this condition so that last Tuesday you were caught taking a bath inside the terminal so that from now on you are no longer with the company "you are dismissed" because you broke the agreement.

Evident therefrom is management's unequivocal language as regards its exercise of the prerogative to dismiss.

Complainant's Exhibit "D" rebuttal, respondent's official document, reflecting the designation of respondent's witness, (Regino) dela Cruz as Chief Dispatcher, likewise buttresses complainant's claim of employment, for the reason that the office of Chief (Dispatcher) presupposes the existence of subordinates over whom said chief exercises supervisory control. If a chief dispatcher works with the company, uses and signs official documents as is reflected in Exhibit "D," it follows that his employment as such was in consideration of a chief dispatcher's exercise of his duties to supervise and control subordinate dispatchers. Along this line, Regino dela Cruz's testimony that D'Rough Riders does not exercise control over the complainant cannot preponderate over Exhibit "D."

In fine, this Office finds that complainant was an employee of respondent.

Affirming the Labor Arbiter decision, the NLRC held:

We perused at length the record of the instant case, analyzing in the process, the grounds and supporting

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arguments advanced in the appeal and the reply thereto and we found no merit in the appeal.

. . . A reading of the affidavit of Regino dela Cruz, a witness for the respondent who is the Chief Dispatcher and father of the complainant would reveal that it was he who included the complainant as one of the dispatchers of the respondents. Considering that Regino dela Cruz is the Chief Dispatcher, the selection and engagement of the complainant as a dispatcher of the respondents was made thru him and with the acquiescence of the management.

Also, it is admitted by the respondents, as borne out by the records, including the affidavit of Regino dela Cruz, that complainant was receiving a fixed daily rate from the respondent. The Labor Arbiter is therefore correct when she ruled that what complainant received from the respondents is a remuneration for services rendered.

The power of dismissal which respondents exercised over the person of the complainant is clearly established by complainants' Exhibit "A" (rebuttal). This exhibit refers to a disciplinary memorandum to the - complainant written in Visayan dialect. This exhibit was not refuted by the respondents.

Also, we agree with the observation of the Labor Arbiter that respondent's Chief Dispatcher is exercising his supervision and control over the complainant who is a dispatcher as clearly manifested in Exhibit "D" (rebuttal) for the complainant.

A close scrutiny of the same exhibit would reveal that complainant was indeed signing a daily time record of their hours of work.

The evidences [sic] submitted by the complainant have proven that complainant is really an employee of the respondents.

The question whether an employer-employee relationship exists is a question of fact. As long as the findings of the labor agencies on this question are supported by substantial evidence, the findings will not be disturbed on review in this Court. Review in this Court concerning factual findings in labor cases is confined to determining allegations of lack of jurisdiction or grave abuse of discretion.3

We agree with the finding that an employer-employee relationship existed between petitioner and private respondent, such finding being supported by substantial evidence. Petitioner has failed to refute the evidence presented by private respondent. He points to his Chief Dispatcher, Regino de la Cruz, as the one who exercised the powers of an employer over the "dispatchers." Petitioner argues that under an agreement with Regino de la Cruz, it is the latter who selects and engages the "dispatchers," dictates their time, supervises the performance of their work, and pays their wages. He further argues that the "disciplinary memorandum" issued by him was not addressed to private respondent but to Regino de la Cruz, as employer of private respondent, to remind him regarding the discipline of the "dispatchers."

Petitioner's contention is without merit. In determining whether there is an employer-employee relationship between the parties the following questions must be considered: (a) who has the power of selection and engagement of the employee? (b) who pays the wages of employee? (c) who has the power of dismissal? and; (d) who has the power to control the employee's conduct?4 Of these powers the power of control over the employees' conduct is generally regarded as determinative of the existence of the relationship.5 The "control test," under which the person for whom the services are rendered reserves the right to direct not only the end to be achieved but also the means for reaching such end, is generally relied on by the courts.6

Petitioner would have us believe that Chief Dispatcher Regino de la Cruz exercised these powers on his own and independently of petitioner. This is untenable. Petitioner admits that Regino de la Cruz was merely assigned to do dispatch work. While Regino dela Cruz took charge of the hiring of men and paid their wages, he did so as he was told by petitioner. The payment of salaries and wages came from petitioner. Regino de la Cruz filled up and signed daily time records for dispatchers and took disciplinary action against erring employees in accordance with instructions given to him by petitioner. In sum, it cannot be said that Regino de la Cruz was the employer of the "dispatchers" or that he was an independent contractor. He was himself only an employee of petitioner.

Indeed the "control test" only requires the existence of the right to control the manner of doing the work in a person, not necessarily the actual exercise of the power by him, which he can delegate.7 Consequently, in the case at bar, the power is exercised by Regino de la Cruz but it is power which is only delegated to him so that in truth the power inherently and primarily is possessed by petitioner. De la Cruz is a mere supervisor, while petitioner is the real employer.

Petitioner does not claim that Regino de la Cruz and his dispatchers were independent contractors. Even if this be his contention, however, the argument would still be without merit. Job contracting is permissible only if the following conditions are met: (1) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) the contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.8In the absence of these requisites, what exists is a "labor-only" contract under which the person acting as contractor is considered merely an agent or intermediary of the employer who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him.9 As held in Broadway   Motors, Inc. v. NLRC,10 citing Philippine Bank of Communications v. NLRC, 11 the "labor-only" contractor is a mere agent of the employer who is responsible to the employees of the "labor-only" contractor as if such employees had been employed by him directly. In such a case the statute establishes an employer-employee relationship between the employer and the employees of the "labor-only" contractor to prevent any violation or circumvention of the provisions of the Labor Code, by holding both the employer and the "labor-only" contractor responsible to the employees.

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For this reason, we hold that Regino de la Cruz can, at most, be considered a "labor-only" contractor and, therefore, a mere agent of petitioner. As he is acting in behalf of petitioner, private respondent Hermes de la Cruz is actually the employee of petitioner.

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISION G.R. No. 119935 February 3, 1997UNITED SOUTH DOCKHANDLERS, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION (Fourth Division) and BEATO SINGURAN, respondents.

PUNO, J.:

Petitioner United South Dockhandlers, Inc. (USDI) seeks to reverse the decision of the National Labor Relations Commission, dated December 19, 1994, for awarding Beato Singuran separation pay equivalent to 15 months per year of service despite his alleged serious misconduct.

USDI provides arrastre, stevedoring and other related cargo-handling services to all domestic vessels berthed at the government-owned Port of Cebu.

Respondent Beato Singuran worked for USDI for about seventeen (17) years. He was its foreman/timekeeper when he was dismissed on May 25, 1993.

The records show that two (2) metal lamp posts in the custody of USDI were reported missing. The  lamp posts were part of the bad order cargoes (discargadas) unloaded from a vessel of Sulpicio Lines, Inc., a client of USDI, and kept at the pier area where respondent Singuran was assigned.  On February 20,  1993, without the consent of  USDI, Singuran ordered his subordinates to load the lamp posts into a cargo truck and had them delivered to Adelfa Homeowners Association.

Petitioner  put   respondent  under  preventive   suspension pending  his investigation which was set on March 26, 1993 and April 13, 1993. Singuran admitted he   took   the  subject   lamp posts  and manifested that it was unnecessary to conduct an investigation. He returned the lamp posts upon USDI's demand. On May 25, 1993, he received his letter of dismissal. 1

In return, Singuran filed a complaint for illegal dismissal with prayer for reinstatement and backwages against USDI before the Regional Arbitration Branch of the National Labor Relations Commission. 2

On April  29, 1994, Labor Arbiter Dominador A. Almirante dismissed respondent's complaint. He ruled that Singuran occupied a position of trust and confidence; that he was afforded procedural due process; and that there was a valid cause to dismiss him based on loss of trust and  confidence  due   to  dishonesty.  Despite   said  findings,   the   labor arbiter found the dismissal too severe a penalty. Thus, Singuran was awarded   separation  pay.  3  The   rationale   for   the  award   is  quoted below:

Ordinarily, an employee who has been dismissed from the service on a legal  ground does not deserve an award of separation pay.   In this case, considering the length of service of the complainant of almost 18   years   without   any   prior   derogatory   record,   we   feel   that   the extreme   penalty   of   dismissal   is   disproportionately   imposed. Respondent   did   not   suffer   any  material   damage  by   the   infraction committed by complainant, the lump [sic] posts subject of the offense having been returned by him to respondent (USDI). The value of the subject items, although not having been alleged, can be gleaned to be minimal. . . .

xxx xxx xxx

Petitioner appealed to the NLRC.

On December 19, 1994, the labor arbiter's decision was affirmed by the   Fourth   Division   (Cebu   City)   of   the   National   Labor   Relations Commission. 4 It held:

We find no reversible error in the appealed Decision.

The complainant  is  a  long-service  employee and his  small  misdeed herein should not be used to sever his right to tenurial security and lifeline not only for himself but likewise for his family. Moreover, as the Labor Arbiter has found, this is a case of a first offense and the lamp post, apparently of small value, was returned. In other words, there was no damage done.

Discipline to be meaningful must be corrective and progressive, not punitive.

However, the complainant did not question the award of the Labor Arbiter.

WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit. Consequently, the appealed Decision is hereby AFFIRMED.

SO ORDERED.

USDI's motion for reconsideration was denied. 5 Hence, this petition.

Petitioner contends that Singuran was dismissed for a valid cause, and considering the nature and gravity of his offense, he should not have been given separation pay by public respondents.

In   its   Comment   filed   on   November   17,   1995,   6   Solicitor   General supported   the   stand  of  petitioner   that   respondent   Singuran   is  not 

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entitled  to separation pay because of  his  misconduct.  Nonetheless, NLRC maintains that equity and compassionate justice demand that Singuran be awarded separation pay equivalent to 15 days month pay per year of service. 7

We grant the petition.

The issue before us is not novel. It is settled that an employee found guilty   of   serious   misconduct   or   other   acts   reflecting   his   moral character is not entitled to separation pay. Thus, in the leading case of Philippine Long Distance Telephone, Co. vs. National Labor Relations Commission 8 this Court, en banc, held:

The Court feels that distinctions are in order. We note that heretofore the separation pay, when it was considered warranted, was required regardless of the nature or degree of the ground proved, be it mere inefficiency  or   something graver   like   immorality  or  dishonesty.  The benediction of compassion was made to cover a multitude of sins, as it were,   and   to   justify   the   helping   hand   to   the   validly   dismissed employee whatever the reason for his dismissal. This policy should be re-examined. It is time we rationalize the exception, to make it fair to both labor and management, especially to labor.

xxx xxx xxx

We   hold   that   henceforth   separation   pay   shall   be   allowed   as   a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting  on  his  moral   character.  Where   the   reason   for   the   valid dismissal is, for example, habitual intoxication or an offense involving moral   turpitude,   like   theft   or   illicit   sexual   relations  with   a   fellow worker,   the   employer  may   not   be   required   to   give   the   dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary  rule would,  as  the petitioner argues,  have the effect  of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that  the  separation pay has  nothing to  do with   the  wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it   is  not  unlikely   that  he  will   commit  a   similar  offense   in  his  next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of  its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate   the  penalty  but   it   certainly  will  not   condone   the  offense. Compassion for the poor is not an imperative of every humane society but only when the recipient is  not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they 

happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like   the   workers   who   have   tainted   the   cause   of   labor   with   the blemishes of their own character.

The above doctrine has been consistently applied by this Court in a long line of cases. 9

Respondent   cannot  use   social   justice   to   shield  wrongdoing.   10  He occupied a position of trust and confidence. Petitioner relied on him to protect the properties of the company. Respondent betrayed this trust when he ordered the subject lamp posts to be delivered to the Adelfa Homeowners'  Association. The offense he committes involves moral turpitude. 11 Indeed a City prosecutor found probable cause to file an information for qualified theft against him.

It   is   incorrect   to   state   that   Singuran   committed  a  minor  misdeed because of the recovery of the stolen posts. It is unrebutted that the posts were not returned oluntarily, but only after the discovery of their loss and upon demand by petitioner. The fact that USDI did not suffer pecuniary  damage  will   not  obliterate   respondent's   betrayal   of   the trust   and   confidence   reposed   by   petitioner.   12  Neither  would   his length of service justify his dishonesty or mitigate his liability. 13 His length   of   service  with   petitioner   even   aggravates   his   offense.   He should have been more loyal to petitioner company from which he has derived his family bread and butter for seventeen (17) years.

WHEREFORE, the decision of the National Labor Relations Commission in NLRC Case No. V-0247-94, is MODIFIED by deleting the award for separation pay in favor of private respondent Beato Singuran.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-21696 February 25, 1967VISAYAN STEVEDORE TRANSPORTATION COMPANY (VISTRANCO) and RAFAEL XAUDARO, petitioners, vs.COURT OF INDUSTRIAL RELATIONS, UNITED WORKERS' & FARMERS' ASSOCIATION (UWFA) VENANCIO DANO-OG, BUENAVENTURA AGARCIO and 137 others, respondents.Pelaez, Jalandoni & Jamir for petitioners.Luis B. Presbiterio for respondents.Mariano B. Tuason for respondent Court of Industrial Relations.CONCEPCION, C.J.:

Appeal by certiorari, taken by the Visayan Stevedoring Transportation Co. — hereinafter referred to as the Company — and Rafael Xaudaro from an order of the Court of Industrial Relations the dispositive part of which reads:

The   Court,   finding   respondents   guilty   of   unfair   labor   practice   as charged,   directs   them   to   cease   and  desist   from   such  unfair   labor 

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practice and to reinstate the complainants, with back wages from the date they were laid off until reinstated.

The Company is engaged in the loading and unloading of vessels, with a   branch   office   in   Hinigaran,   Negros   Occidental,   under   the management of said Rafael Xaudaro. Its workers are supplied by the United  Workers   and   Farmers   Association,   a   labor   organization  — hereinafter referred to as UWFA — whose men (affiliated to various labor   unions)   have   regularly  worked   as   laborers   of   the   Company during every milling season since immediately after World War II up to the milling season immediately preceding November 11, 1955, when the Company refused to engage the services of  Venancio Dano-og, Buenaventura, Agarcio and 137 other persons named in the complaint filed in case No. 62-ULP-Cebu of the Court of Industrial Relations — and hereinafter referred to as the Complainants — owing, they claim, to   their   union   activities.   At   the   behest   of   the   UWFA   and   the Complainants, a complaint for unfair labor practice was, accordingly, filed against the Company and Xaudaro with the Court of Industrial Relations  — hereinafter   referred   to  as   the  CIR  —  in  which   it  was docketed as Case No. 62-ULP-Cebu. In due course, its Presiding Judge issued the order appealed from, which was affirmed by the CIR sitting en banc. Hence this petition for review by certiorari.

The issues raised in this appeal,  are (1) whether there is employer-employee relationship between the Company and the Complainants; (2) whether the Company has been guilty of unfair labor practice; and (3)   whether   the   order   of   reinstatement   of   Complainants,   with backpay, is a reversible error.1äwphï1.ñët

With respect to the first question, the Company maintains that it had never had an employer-employee relationship with the Complainants, the latter's services having allegedly been engaged by the UWFA not by the Company, and that, in any event, whatever contractual relation there may have been between the Company and the Complainants had ceased at the end of each milling season, so that the Company can not be guilty of unfair  labor practice in refusing to renew said relation at the beginning of the milling season in November, 1955.

This pretense is untenable. Although Complainants, through the labor union   to   which   they   belong,   form   part   of   UWFA,   there   was   no independent contract between the latter, as an organization, and the Company. After the first milling season subsequently to the liberation of   the   Philippines,   Complainants  merely   reported   for  work,   at   the beginning of each succeeding milling season, and their services were invariably   availed   of   by   the   Company,   although   an   officer   of   the UWFA or union concerned determined the laborers who would work at a given time, following a rotation system arranged therefor.

In the performance of their  duties, Complainants worked, however, under the direction and control of the officers of the Company, whose paymaster, or disbursing officer paid the corresponding compensation directly to said Complainants, who, in turn, acknowledged receipt in payrolls of the Company. We have already held that laborers working under these conditions are employees of the Company,1 in the same manner   as  watchmen   or   security   guards   furnished,   under   similar circumstances, by watchmen or security agencies,2 inasmuch as the agencies   and/or   labor   organizations   involved   therein   merely 

performed the role of a representative or agent of the employer in the recruitment of men needed for the operation of the latter's business.3

As regards the alleged termination of employer-employee relationship between   the  Company  and   the  Complainants  at   the   conclusion  of each milling season, it is, likewise, settled that the workers concerned are considered, not separated from the service, but, merely on leave of   absence,   without   pay,   during   the   off-season,   their   employer-employee relationship being merely deemed suspended, not severed, in the meanwhile.4

Referring to the unfair labor practice charge against the Company, we find, with the CIR, that said charge is substantially borne out by the evidence  of   record,   it  appearing   that   the  workers  not  admitted  to work beginning from November, 1955, were precisely those belonging to the UWFA and the Xaudaro, the Company Branch Manager, had told   them point-blank   that   severance  of   their   connection  with   the UWFA was the remedy, if they wanted to continue working with the Company.

As to the payment of back wages, the law5 explicitly vests in the CIR discretion   to   order   the   reinstatement   with   back   pay   of   laborers dismissed due to union activities, and the record does not disclose any cogent reason to warrant interference with the action taken by said Court.6

Wherefore,   the   order   and   resolution   appealed   from   are   hereby affirmed, with costs against petitioners herein. It is so ordered.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 100665 February 13, 1995ZANOTTE SHOES/LEONARDO LORENZO, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, HON. BENIGNO C. VILLARENTE, JR., JOSEPH LLUZ, LOLITO LLUZ, NOEL ADARAYAN, ROGELIO SIRA, VIRGINIA HERESANO, GENELITO HERESANO and CARMELITA DE DIOS, respondents.

 

VITUG, J.:

This  petition  for  certiorari  assails   the 24th April  1991 resolution of respondent National Labor Relations Commission ("NLRC"), as well as its resolution of 30 May 1991 denying a motion for reconsideration, which has dismissed herein petitioners'  appeal of  the 16th October 1989 decision of Labor Arbiter Benigno C. Villarente, Jr.

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Private   respondents   filed   a   complaint   for   illegal   dismissal   and   for various  monetary   claims,   including   the   recovery   of   damages   and attorney's   fees,   against   petitioners.   In   their   supplemental   position paper,   the   complainants   subsequently   confined   themselves   to   the illegal dismissal charge and abandoned the monetary claims. One of the original eight complainants, Virgilio Alcunaba, decided to resume his  work with petitioners,  thus  leaving the rest  to pursue the case. Private respondents averred that they started to work for petitioners on, respectively, the following dates:

NAME DATE

1 Joseph Lluz March, 1985

2 Noel Adarayan Feb. 17, 1980

3 Rogelio Sira January, 1982

4 Lolito Lluz March, 1982

5 Virginia Heresano May, 1987

6 Genelito Heresano 20-Oct-87

7 Carmelita de Dios January, 1975 1

that   they  worked   for   a  minimum of   twelve  hours   daily,   including Sundays and holidays when needed;  that they were paid on piece-work basis; that it "angered" petitioner Lorenzo when they requested to be made members of the Social Security System ("SSS"); and that, when   they   demanded   an   increase   in   their   pay   rates,   they   were prevented   (starting   24   October   1988)   from   entering   the   work premises.

Petitioners, in turn, claimed that their business operations were only seasonal,   normally   twice   a   year,   one   in   June   (coinciding  with   the opening   of   school   classes)   and   another   in   December   (during   the Christmas holidays),  when heavy job orders would come in. Private respondents,   according   to   petitioners,   were   engaged   on   purely contractual basis and paid the rates conformably with their respective agreements.

On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered judgment in favor of the complainants, thus:

WHEREFORE, judgment is hereby rendered declaring that there was an   employer-employee   relationship   between   complainants   and respondents and that the former were regular employees of the latter. Accordingly, respondents are hereby directed to pay all complainants their   respective   separation   pay   based   on   their   one-half   month's earnings per year of service, a fraction of at least six months to be considered one whole year, or the following amounts:

1 Joseph Lluz P 7,488.00 (3 yrs. & 7 mos.)

2 Noel Adarayan 12,636.00 (8 yrs. & 8 mos.)

3 Rogelio Sira 8,828.00 (6 yrs. & 9 mos.)

4 Lolito Lluz 8,828.00 (6 yrs. & 7 mos.)

5 Genelito Heresano 1,404.00 (1 year)

6 Virginia Heresano 665.00 (1 yr. & 5 mos.)

7 Carmelita de Dios 19,656.00 (13 yrs. & 9 mos.)

Total P 59,515.002

 

Respondents are also hereby directed to pay complainants'  counsel the amount of P5,950.00 which is equivalent to 10% of the above total awards as attorney's fees.

SO ORDERED. 3