Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-15045             January 20, 1961

IN RE: PETITION FOR EXEMPTION FROM COVERAGE BY THE SOCIAL SECURITY SYSTEM. ROMAN CATHOLIC ARCHBISHOP OF MANILA, petitioner-appellant, vs.SOCIAL SECURITY COMMISSION, respondent-appellee.

Feria, Manglapus and Associates for petitioner-appellant.Legal Staff, Social Security System and Solicitor General for respondent-appellee.

GUTIERREZ DAVID, J.:

On September 1, 1958, the Roman Catholic Archbishop of Manila, thru counsel, filed with the Social Security Commission a request that "Catholic Charities, and all religious and charitable institutions and/or organizations, which are directly or indirectly, wholly or partially, operated by the Roman Catholic Archbishop of Manila," be exempted from compulsory coverage of Republic Act No. 1161, as amended, otherwise known as the Social Security Law of 1954. The request was based on the claim that the said Act is a labor law and does not cover religious and charitable institutions but is limited to businesses and activities organized for profit. Acting upon the recommendation of its Legal Staff, the Social Security Commission in its Resolution No. 572, series of 1958, denied the request. The Roman Catholic Archbishop of Manila, reiterating its arguments and raising constitutional objections, requested for reconsideration of the resolution. The request, however, was denied by the Commission in its Resolution No. 767, series of 1958; hence, this appeal taken in pursuance of section 5(c) of Republic Act No. 1161, as amended.

Section 9 of the Social Security Law, as amended, provides that coverage "in the System shall be compulsory upon all members between the age of sixteen and sixty rears inclusive, if they have been for at least six months a the service of an employer who is a member of the System, Provided, that the Commission may not compel any employer to become member of the System unless he shall have been in operation for at least two years and has at the time of admission, if admitted for membership during the first year of the System's operation at least fifty employees, and if admitted for membership the following year of operation and thereafter, at least six employees x x x." The term employer" as used in the law is defined 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 subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government" (par. [c], see. 8), while an "employee" refers to "any person who performs services for an 'employer' in which either or both mental and physical efforts are used and who receives compensation for such services" (par. [d], see. 8). "Employment", according to paragraph [i] of said section 8, covers any service performed by an employer except those expressly enumerated thereunder, like employment under the Government, or any of its political subdivisions, branches or instrumentalities including corporations owned and controlled by the Government, domestic service in a private home, employment purely casual, etc.

From the above legal provisions, it is apparent that the coverage of the Social Security Law is predicated on the existence of an employer-employee relationship of more or less permanent nature and extends to employment of all kinds except those expressly excluded.

Appellant contends that the term "employer" as defined in the law should — following the principle of ejusdem generis — be limited to those who carry on "undertakings or activities which have the element of profit or gain, or which are pursued for profit or gain," because the phrase ,activity of any kind" in the definition is preceded by the words "any trade, business, industry, undertaking." The contention cannot be sustained. The rule ejusdem generisapplies only where there is uncertainty. It is not controlling where the plain purpose and intent of the Legislature would thereby be hindered and defeated. (Grosjean vs. American Paints Works [La], 160 So. 449). In the case at bar, the definition of the term "employer" is, we think, sufficiently comprehensive as to include religious and charitable institutions or entities not organized for profit, like herein appellant, within its meaning. This is made more evident by the fact that it contains an exception in which said institutions or entities are not included. And, certainly, had the Legislature really intended to limit the operation of the law to entities organized for profit or gain, it would not have defined an "employer" in such a way as to include the Government and yet make an express exception of it.

It is significant to note that when Republic Act No. 1161 was enacted, services performed in the employ of institutions organized for religious or charitable purposes were by express provisions of said Act excluded from coverage thereof (sec. 8, par. [j] subpars. 7 and 8). That portion of the law, however, has been deleted by express provision of Republic Act No. 1792, which took effect in 1957. This is clear indication that the Legislature intended to include charitable and religious institutions within the scope of the law.

In support of its contention that the Social Security Law was intended to cover only employment for profit or gain, appellant also cites the discussions of the Senate, portions of which were quoted in its brief. There is, however, nothing whatsoever in those discussions touching upon the question of whether the law should be limited to organizations for profit or gain. Of course, the said discussions dwelt at length upon the need of a law to meet the problems of industrializing society and upon the plight of an employer who fails to make a profit. But this is readily explained by the fact that the majority of those to be affected by the operation of the law are corporations and industries which are established primarily for profit or gain.

Appellant further argues that the Social Security Law is a labor law and, consequently, following the rule laid down in the case of Boy Scouts of the Philippines vs. Araos (G.R. No. L-10091, January 29, 1958) and other cases1, applies only to industry and occupation for purposes of profit and gain. The cases cited, however, are not in point, for the reason that the law therein involved expressly limits its application either to commercial, industrial, or agricultural establishments, or enterprises. .

Upon the other hand, the Social Security Law was enacted pursuant to the "policy of the Republic of the Philippines to develop, establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the Philippines and shall provide protection to employees against the hazards of disability, sickness, old age and death." (See. 2, Republic Act No. 1161, as amended.) Such enactment is a legitimate exercise of the police power. It affords protection to labor, especially to working women and minors, and is in full accord with the constitutional provisions on the "promotion of social justice to insure the well-being and economic security of all the people." Being in fact a social legislation, compatible with the policy of the Church to ameliorate living conditions of the working class, appellant cannot arbitrarily delimit the extent of its provisions to relations between capital and labor in industry and agriculture.

There is no merit in the claim that the inclusion of religious organizations under the coverage of the Social Security Law violates the constitutional prohibition against the application of public funds for the use, benefit or support of any priest who might be employed by appellant. The funds contributed to the System created by the law are not public funds, but funds belonging to the members which are merely held in trust by the Government. At any rate, assuming that said funds are impressed with the character of public funds, their payment as retirement death or disability benefits would not constitute a violation of the cited provisions of the Constitution, since such payment shall be made to the priest not because he is a priest but because he is an employee.

Neither may it be validly argued that the enforcement of the Social Security Law impairs appellant's right to disseminate religious information. All that is required of appellant is to make monthly contributions to the System for covered employees in its employ. These contributions, contrary to appellant's contention, are not in the nature of taxes on employment." Together with the contributions imposed upon the employees and the Government, they are intended for the protection of said employees against the hazards of disability, sickness, old age and death in line with the constitutional mandate to promote social justice to insure the well-being and economic security of all the people.

IN VIEW OF THE FOREGOING, Resolutions Nos. 572 kind 767, series of 1958, of the Social Security Commission are hereby affirmed. So ordered with costs against appellant.

Paras, C.J., Padilla, Bautista Angelo, Paredes and Dizon, JJ., concur.Concepcion, Reyes, J.B.L. and Barrera, JJ., concur in the result.Bengzon, J., reserves his vote.

Footnotes

1 UST Hospital Employees Association vs. UST Hospital, G.R. No. L-6988, May 24, 1954; San Beda College vs. National Labor Union, G.R. No. L-7649, October 29, 1955; Quezon Institute vs. Velasco & Quezon Institute vs. Parazo, G.R. Nos. L-7742-43, November 23, 1955.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-21223             August 31, 1966

PHILIPPINE BLOOMING MILLS CO., INC. (As Employer) and FRANCISCO TONG (As Assistant General Manager) and Attorney-in-Fact of SUSUMO SONODA, SENJI TANAKA, TAKASHIKO KUMAMOTO, HITOSHI NAKAMURA, TETSUO KODU, (Employees), petitioners and appellants, vs.SOCIAL SECURITY SYSTEM, respondent and appellee.

Demetrio B. Salem for petitioners and appellants.Office of the Solicitor General Edilberto Barot and Solicitor Camilo D. Quiason for respondent and appellee.

BARRERA, J.:

The facts of this case are not disputed:

The Philippine Blooming Mills Co., Inc., a domestic corporation since the start of its operations in 1957, has been employing Japanese technicians under a pre-arranged contract of employment, the minimum period of which employment is 6 months and the maximum is 24 months.

From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese technicians. In connection with the employment of these aliens, it sent an inquiry to the Social Security System (SSS) whether these employees are subject to compulsory coverage under the System, which inquiry was answered by the First Deputy Administrator of the SSS, under date of August 29, 1957, as follows:

SIR:

With reference to your letter of August 24, 1957, hereunder are our answers to your queries:

Aliens employed in the Philippines:

Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who are employed temporarily shall, upon their departure from the Philippines, be entitled to a rebate of a proportionate amount of their contributions; their employers shall be entitled to the same proportionate rebate of their contributions in behalf of said aliens employed by them. (Rule I, Sec. 3[d], Rules and Regulations.)

Starting September, 1957, and until the aforementioned Japanese employees left the Philippines on October 26, 1958, the corresponding premium contributions of the employer and the employees on the latter's memberships in the SSS were as follows:

Name SS Number Monthly Salary Amount of Premiums 

Contributed

2.5%(Employee)

3.5%(Employer)

Total

Susumu Sonoda 03-075177 P520.00 P175.00 P245.00 P420.00

Senji Tanaka 03-075178 520.00 175.00 245.00 420.00

Kahei Tanaka 03-075179 500.00 175.00 245.00 420.00

Takashiko Kumamoto 03-075180 500.00 175.00 245.00 420.00

Hitoshi Nakamura 03-075181 500.00 175.00 245.00 420.00

Tetsuo Kudo 03-075182 500.00 175.00 245.00 420.00

T o t a l — P1,050.00 P1,470.00 P2,520.00

On October 7, 1958, the Assistant General Manager of the corporation, on its behalf and as attorney-in-fact of the Japanese technicians, filed a claim with the SSS for the refund of the premiums paid to the System, on the ground of termination of the members' employment. As this claim was denied, they filed a petition with the Social Security Commission for the return or refund of the premiums, in the total sum of P2,520.00, paid by the employer corporation and the 6 Japanese employees, plus attorneys' fees. This claim was controverted by the SSS, alleging that Rule IX of the Rules and Regulations of the System, as amended, requires membership in the System for at least 2 years before a separated or resigned employee may be allowed a return of his personal contributions. Under the same rule, the employer is not also entitled to a refund of the premium contributions it had paid.

After hearing, the Commission denied the petition for the reason that, although under the original provisions of Section 3 (d) of Rule I of the Rules and Regulations of the SSS, alien-employees (who are employed temporarily) and their employers are entitled to a rebate of a proportionate amount of their respective contributions upon the employees' departure from the Philippines, said rule was amended by eliminating that portion granting a return of the premium contributions. This amendment became effective on January 14, 1958, or before the employment of the subject aliens terminated. The rights of covered employees who are separated from employment, under the present Rules, are covered by Rule IX which allows a return of the premiums only if they have been members for at least 2 years.

It is this resolution of the Commission that is the subject of the present appeal, appellants contending that the amendment of the Rules and Regulations of the SSS, insofar as it eliminates the provision on the return of premium contributions, originally embodied in Section 3(d) of Rule I, constituted an impairment of obligations of contract. It is claimed, in effect, that when appellants-employees became members in September, 1957, and paid the corresponding premiums to the System, it1 is subject to the condition that upon their departure from the Philippines, these employees, as well as their employer, are entitled to a rebate of a proportionate amount of their respective contributions.

The contention cannot be sustained. Appellants' argument is based on the theory that the employees' membership in the System established contractual relationship between the members and the System, in the sense contemplated and protected by the constitutional prohibition against its impairment by law. But, membership in this institution is not the result of a bilateral, consensual agreement where the rights and obligations of the parties are defined by and subject to their will.

Republic Act 1161 requires compulsory coverage of employers and employees under the System. It is actually a legal imposition, on said employers and employees, designed to provide social security to the workingmen. Membership in the SSS is, therefore, in compliance with a lawful exercise of the police power of the State, to which the principle of non-impairment of the obligation of contract is not a proper defense.

As pointed out by the Solicitor General, the issue that should be determined in this case is whether, in implementing the SSS law and denying appellants' claim for refund of their premium contributions, due process was observed.

The Rules and Regulations promulgated by the SSS, pursuant to the rule-making authority granted in Section 4(a) of Republic Act 1161, was duly approved by the President on July 18, 1957, and published in the Official Gazette on September 15, 1957.2 These rules and regulations, among others, provide:

I

DETERMINATION OF COMPULSORY COVERAGE

3. The determination of whether an employer or an employee shall be compulsorily covered shall be vested in the Commission. The following general principles shall guide the Commission in deciding each case:

x x x           x x x           x x x

(d) Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who ate employed temporarily and whose visas are only for fixed terms shall, upon their departure from the Philippines, be entitled to a rebate of a proportionate amount of their contributions; their employers shall be entitled to the same proportionate rebate of their contributions in behalf of said aliens employed by them.

XI

AMENDMENTS AND EFFECTIVITY

1. The Commission may, by appropriate resolution, amend, repeal, revise and/or modify all or any part or parts of these Rules and Regulations, as well as adopt any additional rule or rules, whenever the need therefor should arise. Any amendment and/or additional rule, however, shall not take effect until and after the corresponding resolution of the Commission has been submitted to and approved by the President of the Philippines.

2. These Rules and Regulations, any amendment thereof, or any additional rule or rules subsequently adopted by the Commission, shall take effect on the date they are approved by the President of the Philippines.

Rule I Section 3 (d) and Rule IX, however, were later amended, which amendment was approved by the President on January 14, 1958, to read as follows:

(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec. 3, Rule I)

EFFECT OF SEPARATION FROM EMPLOYMENT

When an employee under compulsory coverage is separated from employment, his employer's contribution on his account shall cease at the end of the month of separation; but such employee may continue his membership in the System and receive the benefits of the Act, as amended, in accordance with these rules. If he continues paying the 6 per cent monthly premiums representing his as well as the employer's contribution, based on his monthly salary at the time of his separation; but if at the time of his separation the covered employee has been a member of the System for at least two years, he shall have the option to choose any one of the following adjustments of his membership in the System:

1. A refund of an amount equivalent to his total contributions of two and one-half per centum plus interests at the rate of three per centum per annum, compounded annually;

x x x           x x x           x x x (Rule IX)

These amended Rules were published in the November 10, 1958 issue of the Official Gazette.3

It is not here disputed that the Rules and Regulations of the SSS, having been promulgated in implementation of a law, have the force and effect of a statute;" that the amendment thereto, although approved by the President on January 14, 1958, was published in the Official Gazette in November, 1958, or after the employment of the Japanese technicians had ceased and the corresponding claim for the refund of the premium contributions was filed with the System. The question pertinent to this case now is whether or not appellants are bound by the amended Rules requiring membership for two years before refund of the premium contributions may be allowed. 1äwphï1.ñët

These rules and regulations were promulgated to provide guidelines to be observed in the enforcement of the law. As a matter of fact, Section 3 of Rule I is merely an enumeration of the "general principles to (shall) guide the Commission" in the determination of the extent or scope of the compulsory coverage of the law. One of these guiding principles is paragraph (d) relied upon by appellants, on the coverage of temporarily-employed aliens. It is not here pretended, that the amendment of this Section 3(d) of Rule I, as to eliminate the provision granting to these aliens the right to a refund of part of their premium contributions upon their departure from the Philippines, is not in implementation of the law or beyond the authority of the Commission to do.

It may be argued, however, that while the amendment to the Rules may have been lawfully made by the Commission and duly approved by the President on January 14, 1958, such amendment was only published in the November 1958 issue of the Official Gazette, and after appellants' employment had already ceased. Suffice it to say, in this regard, that under Article 2 of the Civil Code,5 the date of publication of laws in the Official Gazette is material for the purpose of determining their effectivity, only if the statutes themselves do not so provide.

In the present case, the original Rules and Regulations of the SSS specifically provide that any amendment thereto subsequently adopted by the Commission, shall take effect on the date of its approval by the President. Consequently, the delayed publication of the amended rules in the Official Gazette did not affect the date of their effectivity, which is January 14, 1958, when they were approved by the President. It follows that when the Japanese technicians were separated from employment in October, 1958, the rule governing refund of premiums is Rule IX of the amended Rules and Regulations, which requires membership for 2 years before such refund of premiums may be allowed.

Wherefore, finding no error in the resolution of the Commission appealed from, the same is hereby affirmed, with costs against the appellants. So ordered.

Concepcion, C.J., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.Reyes J.B.L., J., reserves his vote.Regala, J., is on leave.

Footnotes

1Appellants must be referring to their obligation to pay the premium-contributions and retain membership in the System.

2Vol. 53, No. 17, p. 5588.

3Vol. 54, No. 1, p. 7388.

4U.S. v. Tupasi Molina, 29 Phil. 119, cited in People v. Que Po Lay, G.R. No. L-6791, March 29, 1954.

5"ART. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided. ...

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-33722 July 29, 1988

FEDERICO YLARDE and ADELAIDA DORONIO petitioners, vs.EDGARDO AQUINO, MAURO SORIANO and COURT OF APPEALS, respondents.

Buenaventura C. Evangelista for petitioners.

Modesto V. Cabanela for respondent Edgardo Aquino.

Manuel P. Pastor for respondent Mauro Soriano.

 

GANCAYCO, J.:

In this petition for review on certiorari seeking the reversal of the decision of the Court of Appeals in CA-G.R. No. 36390-R entitled "Federico Ylarde, et al. vs. Edgardo Aquino, et al.," a case which originated from the Court of First Instance of Pangasinan, We are again caned upon determine the responsibility of the principals and teachers towards their students or pupils.

In 1963, private respondent Mariano Soriano was the principal of the Gabaldon Primary School, a public educational institution located in Tayug, Pangasinan-Private respondent Edgardo Aquino was a teacher therein. At that time, the school was fittered with several concrete blocks which were remnants of the old school shop that was destroyed in World War II. Realizing that the huge stones were serious hazards to the schoolchildren, another teacher by the name of Sergio Banez started burying them one by one as early as 1962. In fact, he was able to bury ten of these blocks all by himself.

Deciding to help his colleague, private respondent Edgardo Aquino gathered eighteen of his male pupils, aged ten to eleven, after class dismissal on October 7, 1963. Being their teacher-in-charge, he ordered them to dig beside a one-ton concrete block in order to make a hole wherein the stone can be buried. The work was left unfinished. The following day, also after classes, private respondent Aquino called four of the original eighteen pupils to continue the digging. These four pupils — Reynaldo Alonso, Francisco Alcantara, Ismael Abaga and Novelito Ylarde, dug until the excavation was one meter and forty centimeters deep. At this point, private respondent Aquino alone continued digging while the pupils remained inside the pit throwing out the loose soil that was brought about by the digging.

When the depth was right enough to accommodate the concrete block, private respondent Aquino and his four pupils got out of the hole. Then, said private respondent left the children to level the loose soil around the open hole while he went to see Banez who was about thirty meters away. Private respondent wanted to borrow from Banez the key to the school workroom where he could get some rope. Before leaving. , private respondent Aquino allegedly told the children "not to touch the stone."

A few minutes after private respondent Aquino left, three of the four kids, Alonso, Alcantara and Ylarde, playfully jumped into the pit. Then, without any warning at all, the remaining Abaga jumped on top of the concrete block causing it to slide down towards the opening. Alonso and Alcantara were able to scramble out of the excavation on time but unfortunately fo Ylarde, the concrete block caught him before he could get out, pinning him to the wall in a standing position. As a result thereof, Ylarde sustained the following injuries:

1. Contusion with hematoma, left inguinal region and suprapubic region.

2. Contusion with ecchymosis entire scrotal region.

3. Lacerated wound, left lateral aspect of penile skin with phimosis

4. Abrasion, gluteal region, bilateral.

5. Intraperitoneal and extrapertitoneal extravasation of blood and urine about 2 liters.

6. Fracture, simple, symphesis pubis

7. Ruptured (macerated) urinary bladder with body of bladder almost entirely separated from its neck.

REMARKS:

1. Above were incurred by crushing injury.

2. Prognosis very poor.

(Sgd.) MELQUIADES A. BRAVO

Physician on Duty. 1

Three days later, Novelito Ylarde died.

Ylarde's parents, petitioners in this case, filed a suit for damages against both private respondents Aquino and Soriano. The lower court dismissed the complaint on the following grounds: (1) that the digging done by the pupils is in line with their course called Work Education; (2) that Aquino exercised the utmost diligence of a very cautious person; and (3) that the demise of Ylarde was due to his own reckless imprudence. 2

On appeal, the Court of Appeals affirmed the Decision of the lower court.

Petitioners base their action against private respondent Aquino on Article 2176 of the Civil Code for his alleged negligence that caused their son's death while the complaint against respondent Soriano as the head of school is founded on Article 2180 of the same Code.

Article 2176 of the Civil Code provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre- existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

On the other hand, the applicable provision of Article 2180 states:

Art. 2180. x x x

xxx xxx xxx

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. 3

The issue to be resolved is whether or not under the cited provisions, both private respondents can be held liable for damages.

As regards the principal, We hold that he cannot be made responsible for the death of the child Ylarde, he being the head of an academic school and not a school of arts and trades. This is in line with Our ruling in Amadora vs. Court of Appeals, 4 wherein this Court thoroughly discussed the doctrine that under Article 2180 of the Civil Code, it is only the teacher and not the head of an academic school who should be answerable for torts committed by their students. This Court went on to say that in a school of arts and trades, it is only the head of the school who can be held liable. In the same case, We explained:

After an exhaustive examination of the problem, the Court has come to the conclusion that the provision in question should apply to all schools, academic as well as non-academic. Where the school is academic rather than technical or vocational in nature, responsibility for the tort committed by the student will attach to the teacher in charge of such student, following the first part of the provision. This is the general rule. In the case of establishments of arts and trades, it is the head thereof, and only he, who shall be held liable as an exception to the general rule. In other words, teachers in general shall be liable for the acts of their students except where the school is technical in nature, in which case it is the head thereof who shall be answerable. Following the canon of reddendo singula sinquilis 'teachers' should apply to the words "pupils and students' and 'heads of establishments of arts and trades to the word "apprentices."

Hence, applying the said doctrine to this case, We rule that private respondent Soriano, as principal, cannot be held liable for the reason that the school he heads is an academic school and not a school of arts and trades. Besides, as clearly admitted by private respondent Aquino, private respondent Soriano did not give any instruction regarding the digging.

From the foregoing, it can be easily seen that private respondent Aquino can be held liable under Article 2180 of the Civil Code as the teacher-in-charge of the children for being negligent in his supervision over them and his failure to take the necessary precautions to prevent any injury on their persons. However, as earlier pointed out, petitioners base the alleged liability of private respondent Aquino on Article 2176 which is separate and distinct from that provided for in Article 2180.

With this in mind, the question We need to answer is this: Were there acts and omissions on the part of private respondent Aquino amounting to fault or negligence which have direct causal relation to the death of his pupil Ylarde? Our answer is in the affirmative. He is liable for damages.

From a review of the record of this case, it is very clear that private respondent Aquino acted with fault and gross negligence when he: (1) failed to avail himself of services of adult manual laborers and instead utilized his pupils aged ten to eleven to make an excavation near the one-ton concrete stone which he knew to be a very hazardous task; (2) required the children to remain inside the pit even after they had finished digging, knowing that the huge block was lying nearby and could be easily pushed or kicked aside by any pupil who by chance may go to the perilous area; (3) ordered them to level the soil around the excavation when it was so apparent that the huge stone was at the brink of falling; (4) went to a place where he would not be able to check on the children's safety; and (5) left the children close to the excavation, an obviously attractive nuisance.

The negligent act of private respondent Aquino in leaving his pupils in such a dangerous site has a direct causal connection to the death of the child Ylarde. Left by themselves, it was but natural for the children to play around. Tired from the strenuous digging, they just had to amuse themselves with whatever they found. Driven by their playful and adventurous instincts and not knowing the risk they were facing three of them jumped into the hole while the other one jumped on the stone. Since the stone was so heavy and the soil was loose from the digging, it was also a natural consequence that the stone would fall into the hole beside it, causing injury on the unfortunate child caught by its heavy weight. Everything that occurred was the natural and probable effect of the negligent acts of private respondent Aquino. Needless to say, the child Ylarde would not have died were it not for the unsafe situation created by private respondent Aquino which exposed the lives of all the pupils concerned to real danger.

We cannot agree with the finding of the lower court that the injuries which resulted in the death of the child Ylarde were caused by his own reckless imprudence, It should be remembered that he was only ten years old at the time of the incident, As such, he is expected to be playful and daring. His actuations were natural to a boy his age. Going back to the facts, it was not only him but the three of them who jumped into the hole while the remaining boy jumped on the block. From this, it is clear that he only did what any other ten-year old child would do in the same situation.

In ruling that the child Ylarde was imprudent, it is evident that the lower court did not consider his age and maturity. This should not be the case. The degree of care required to be exercised must vary with the capacity of the person endangered to care for himself. A minor should not be held to the same degree of care as an adult, but his conduct should be judged according to the average conduct of persons of his age and experience. 5 The standard of conduct to which a child must conform for his own protection is that degree of care ordinarily exercised by children of the same age, capacity, discretion, knowledge and experience under the same or similar circumstances. 6 Bearing this in mind, We cannot charge the child Ylarde with reckless imprudence.

The court is not persuaded that the digging done by the pupils can pass as part of their Work Education. A single glance at the picture showing the excavation and the huge concrete block 7 would reveal a dangerous site requiring the attendance of strong, mature laborers and not ten-year old grade-four pupils. We cannot comprehend why the lower court saw it otherwise when private respondent Aquino himself admitted that there were no instructions from the principal requiring what the pupils were told to do. Nor was there any showing that it was included in the lesson plan for their Work Education. Even the Court of Appeals made mention of the fact that respondent Aquino decided all by himself to help his co-teacher Banez bury the concrete remnants of the old school shop. 8 Furthermore, the excavation should not be placed in the category of school

gardening, planting trees, and the like as these undertakings do not expose the children to any risk that could result in death or physical injuries.

The contention that private respondent Aquino exercised the utmost diligence of a very cautious person is certainly without cogent basis. A reasonably prudent person would have foreseen that bringing children to an excavation site, and more so, leaving them there all by themselves, may result in an accident. An ordinarily careful human being would not assume that a simple warning "not to touch the stone" is sufficient to cast away all the serious danger that a huge concrete block adjacent to an excavation would present to the children. Moreover, a teacher who stands in loco parentis to his pupils would have made sure that the children are protected from all harm in his company.

We close by categorically stating that a truly careful and cautious person would have acted in all contrast to the way private respondent Aquino did. Were it not for his gross negligence, the unfortunate incident would not have occurred and the child Ylarde would probably be alive today, a grown- man of thirty-five. Due to his failure to take the necessary precautions to avoid the hazard, Ylarde's parents suffered great anguish all these years.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the questioned judgment of the respondent court is REVERSED and SET ASIDE and another judgment is hereby rendered ordering private respondent Edagardo Aquino to pay petitioners the following:

(1) Indemnity for the death of Child Ylarde P30,000.00

(2) Exemplary damages 10,000.00

(3) Moral damages 20,000.00

SO ORDERED.

Narvasa Cruz, Griño-Aquino and Medialdea, JJ., concur.

 

Footnotes

1 Pages 2-3, Rollo.

2 Decision of the Court of First Instance of Pangasinan, page 22, Original Record.

3 Article 2180 of the Civil Code.

4 G.R. No. L-47745, April 15, 1988.

5 Sangco Philippine Law on Torts and Damages, 1978 ed., p. 62.

6 Ibid, p. 123.

7 Exh. "B," Original Exhibit.

8 Decision of the Court of Appeals; page 33, Rollo.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 91307 January 24, 1991

SINGER SEWING MACHINE COMPANY, petitionervs.HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents.

Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner.

Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.

 

GUTIERREZ, JR., J.:p

This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the resolution of then Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying the motion for reconsideration in the case entitled "In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio (SIMACUB)" docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED).

On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining agent of all collectors of the Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the Company").

The Company opposed the petition mainly on the ground that the union members are actually not employees but are independent contractors as evidenced by the collection agency agreement which they signed.

The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members and the Company, granted the petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it. The motion for reconsideration of the Secretary's resolution was denied. Hence, this petition in which the Company alleges that public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion in that:

a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of employer-employee relationship is at issue;

b) the right of petitioner to due process was denied when the evidence of the union members' being commission agents was disregarded by the Labor Secretary;

c) the public respondents patently erred in finding that there exists an employer-employee relationship;

d) the public respondents whimsically disregarded the well-settled rule that commission agents are not employees but are independent contractors.

The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the Company's position that the union members are independent contractors. To prove that union members are employees, it is asserted that they "perform the most desirable and necessary activities for the continuous and effective operations of the business of the petitioner Company" (citing Article 280 of the Labor Code). They add that the termination of the agreement by the petitioner pending the resolution of the case before the DOLE "only shows the weakness of petitioner's stand" and was "for the purpose of frustrating the constitutionally mandated rights of the members of private respondent union to self-organization and collective organization." They also contend that under Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor Code, which defines job-contracting, they cannot legally qualify as independent contractors who must be free from control of the alleged employer, who carry independent businesses and who have substantial capital or investment in the form of equipment, tools, and the like necessary in the conduct of the business.

The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude that no employer-employee relationship exists. Hence, if the union members are not employees, no right to organize for purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following elements are generally considered in the determination of the employer-employee relationship; "(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 — although the latter is the most important element" (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).

The Collection Agency Agreement defines the relationship between the Company and each of the union members who signed a contract. The petitioner relies on the following stipulations in the agreements: (a) a collector is designated as a collecting agent" who is to be considered at all times as an independent contractor and not employee of the Company; (b) collection of all payments on installment accounts are to be made monthly or oftener; (c) an agent is paid his compensation for service in the form of a commission of 6% of all collections made and turned over plus a bonus on said collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful performance and observance of the terms and conditions under the agreement; (e) he is subject to all the terms and conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum monthly collection performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either party unless the agent has a pending obligation or indebtedness in favor of the Company.

Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They quote paragraph 2 which states that an agent shall utilize only receipt forms authorized and issued by the Company. They also note paragraph 3 which states that an agent has to submit and deliver at least once a week or as often as required a report of all collections made using report forms furnished by the Company. Paragraph 4 on the monthly collection quota required by the Company is deemed by respondents as a control measure over the means by which an agent is to perform his services.

The nature of the relationship between a company and its collecting agents depends on the circumstances of each particular relationship. Not all collecting agents are employees and neither are all collecting agents independent contractors. The collectors could fall under either category depending on the facts of each case.

The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except only as to the result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the petitioner.

The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports shall be submitted at least once a week is not necessarily an indication of control over the means by which the job of collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the purpose of avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company. Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only with respect to the end result of the collection since the requirements regulate the things to be done after the performance of the collection job or the rendition of the service.

The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to encourage a collecting agent to report at least the minimum amount of proceeds. In fact, paragraph 5, section b gives a bonus, aside from the regular commission every time the quota is reached. As a requirement for the fulfillment of the contract, it is subject to agreement by both parties. Hence, if the other contracting party does not accede to it, he can choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former take control only over the amount of collection, which is a result of the job performed.

The respondents' contention that the union members are employees of the Company is based on selected provisions of the Agreement but ignores the following circumstances which respondents never refuted either in the trial proceedings before the labor officials nor in its pleadings filed before this Court.

1. The collection agents are not required to observe office hours or report to Singer's office everyday except, naturally and necessarily, for the purpose of remitting their collections.

2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on the part of the collection agents from working elsewhere. Nor are these agents required to account for their time and submit a record of their activity.

3. The manner and method of effecting collections are left solely to the discretion of the collection agents without any interference on the part of Singer.

4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts assigned to them.

5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on the amounts of collection each of them make. They do not receive any commission if they do not effect any collection even if they put a lot of effort in collecting. They are paid commission on the basis of actual collections.

6. The commissions earned by the collection agents are directly deducted by them from the amount of collections they are able to effect. The net amount is what is then remitted to Singer." (Rollo, pp. 7-8)

If indeed the union members are controlled as to the manner by which they are supposed to perform their collections, they should have explicitly said so in detail by specifically denying each of the facts asserted by the petitioner. As there seems to be no objections on the part of the respondents, the Court finds that they miserably failed to defend their position.

A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee relationship between the Company and the collection agents cannot be sustained.

The plain language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with the first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123 SCRA 679 [1983]). No such words as "to hire and employ" are present. Moreover, the agreement did not fix an amount for wages nor the required working hours. Compensation is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule, thus:

We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly approximates that of an independent contractor than that of an employee. The latter is paid for the labor he performs, that is, for the acts of which such labor consists the former is paid for the result thereof . . . .

xxx xxx xxx

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would not necessarily be entitled to compensation therefor. His right to compensation depends upon and is measured by the tangible results he produces."

Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily time frame imposed on him (Investment Planning Corporation of the Philippines v. Social Security System, supra; See alsoSocial Security System v. Court of Appeals, 30 SCRA 210 [1969]).

The grounds specified in the contract for termination of the relationship do not support the view that control exists "for the causes of termination thus specified have no relation to the means and methods of work that are ordinarily required of or imposed upon employees." (Investment Planning Corp. of the Phil. v. Social Security System, supra)

The last and most important element of the control test is not satisfied by the terms and conditions of the contracts. There is nothing in the agreement which implies control by the Company not only over the end to be achieved but also over the means and methods in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).

The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.

Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this case. Respondents assert that the said provision on job contracting requires that for one to be considered an independent contractor, he must have "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." There is no showing that a collection agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the Labor Code which provides:

Art. 106. Contractor or subcontractor. — Whenever an employer 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 subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor 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.

xxx xxx xxx

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 persons 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." (p. 20)

It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether the employer is solidarily liable to the employees of an alleged contractor and/or sub-contractor for unpaid wages in case it is proven that there is a job-contracting situation.

The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the petitioner itself which prayed for the reversal of the Order of the Med-Arbiter on the ground that the union members are not its employees. Hence, the petitioner submitted itself as well as the issue of existence of an employment relationship to the jurisdiction of the DOLE which was faced with a dispute on an application for certification election.

The Court finds that since private respondents are not employees of the Company, they are not entitled to the constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for their "union" to be granted their petition for direct certification. This Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra:

. . . The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the workmen's compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit because, it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein . . . . (At p. 689)

WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989, respectively are hereby REVERSED and SET ASIDE. The petition for certification election is ordered dismissed and the temporary restraining order issued by the Court on December 21, 1989 is made permanent.

SO ORDERED.

Fernan, C.J., Feliciano and Bidin, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-21930             August 31, 1966

AGAPITA PAJARILLO, ET AL., petitioners-appellants, vs.SOCIAL SECURITY SYSTEM, respondent-appellee.

Paulino Manongdo for petitioners-appellants.Orlando L. Espinas for respondent-appellee.

BARRERA, J.:

This is an appeal by Agapita Pajarillo, et al., from the resolution of the Social Security Commission, denying their petition to be exempted from coverage of the Social Security System.

There is no controversy as to the facts of this case. Appellants are owners of fishing boats being used for fishing at sea, namely:

Owner Name of Vessel

Agapita Pajarillo Bagong Kalayaan

Basilio Medina Stella Maris

Rosario Relloso Villa Florida

Teofila Campana Salenian

Melicia Totanes Nazareno

Melicia Totanes San Pedro

Ireneo Racelis Ricardo

Salvador Boral Villa Rosario

Cesar King Felipa

Ramon King Tacia

Jaime King Aday

Amelia Reyes Queen Mary

Amelia Reyes Nanay

Teofilo Nasis Teresita

Rosario Reyes Charing Uno

Rosario Reyes Charing Dos

Aurora Sales Aurora

As such property-owners, they enter into agreement1 with the so-called patrons or pilots, whereby the latter take charge of appellants fishing vessels, equipment, and gear used for fishing. Once entrusted with the equipment, the pilot "hires" the crew to man the boat and secures their provisions. This is usually financed from loans obtained in the form of advances from fish dealers, and payable in kind when the boat returns with catch from the fishing trip. (pp. 23-24, t.s.n.).

These fishing trips are not regular. The fishermen go out to the sea only when there is no moon or it is not yet very bright. For this reason, even in months of fine weather, the most that a boat can make are 18 fishing days every month. These men have no regular income. If the trip yields a catch, the proceeds thereof are divided into three parts: one part goes to the owner of the boat and equipment; one part is set aside to cover expenses like crude oil and for maintenance of the boat, and the other one-third is divided among the men, with the pilot getting 3 times the share of a crew-member; and the "machinist", who tends or operates the engine of the motorized boat, receiving twice the share of a crew-member. (pp. 9, 23, t.s.n.).

The men (usually 12 for every vessel, including the pilot) are under no obligation to stay in one outfit. Sometimes, they join as members of the crew for one night only; sometimes two, or three days. Then, they leave and join other outfits. (pp. 18-19, t.s.n.). Even the pilot himself is not bound to retain his charge for any definite duration. He can return the boat to its owner anytime, if he does not want to manage it anymore. (p. 11, t.s.n.). The vessel-owners, appellants in the present case, required to register as employers with the Social Security System, filed a joint petition with the Social Security Commission, claiming that there exists no employer-employee relationship between them and the crew of their fishing vessels, and praying that they be exempted from the compulsory coverage of the law. After hearing, their petition was denied, the Commission holding that while the services of the crew-members are engaged by the pilots, the latter are mere employees or agents of the boat-owners. Thus, it is contended, a boat-owner can abolish the employment of the crew-members by withdrawing from the pilot the authority to take charge of the vessel. Appellants, consequently, were directed to report their coverage and that of their respective pilots and crew-members to the Commission and to pay the prescribed premiums pursuant to Sections 18, 19 and 20 of the Republic Act 1161, as amended. The boat-owners filed the present appeal.

The only issue raised before the Commission and presented in this appeal is, as stated by the Commission itself, "whether under the facts set forth above, there exists an employer-employee relationship between the petitioners and the crew-members of their respective fishing boats within the meaning of Republic Act 1161, as amended.

Under the law, an employer is a "person, natural or juridical, domestic or foreign, who carries on 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. "2 In the case at bar, the pilots are not under the orders of the boat-owners as regards their employment. They go out to sea not upon direction of the boat-owners, but upon their own volition as to when, how long and where to go fishing. Much less do the boat-owners in any way control the crew-members with whom the former have no relationship whatsoever. These crew-members simply join every trip for which the pilots allow them, without any reference to the owners of the vessel.

On the other hand, an employee is defined as a "person who performs services for an 'employer' in which either or both mental and physical efforts are used and who receives compensation for such services, where there is an employer-employee relationship."3 In the present case, neither the pilots nor the crew-members receive compensation from the boat-owners. They only share in their own catch produced by their own efforts. There is no showing that outside of their one-third share, the boat-owners have anything to do with the distribution of the rest of the catch among the pilots and the crew-members. The latter perform no service for the boat-owners, but mainly for their own benefit.1äwphï1.ñët

In the undertaking in question, the boat-owners obviously are not responsible for the wage, salary, or fee of the pilot and crew-members. Their sole participation in the venture is the furnishing or delivery of the equipment used for fishing, after which, they merely wait for the boat's return and receive their share in the catch, if there is any. For this part, a person who joins the outfit is entitled to a share or participation in the fruit of the fishing trip. If it gives no return, the men get nothing. It appears to us, therefore, that the undertaking is in the nature of a joint venture, with the boat-owner supplying the boat and its equipments, and the pilot and crew-members contributing the necessary labor, and the parties getting specific shares for their respective contributions.

But, even assuming arguendo that the pilot and crew-members may be treated as employees of the boat-owners, they cannot also be made subject to compulsory coverage under the Social Security Act. As previously stated, the men are under no obligation to remain in the outfit for any definite period. Thus, 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. Also, a fishing boat has no regular schedule of fishing trips. It all depends on the weather and other natural conditions, and the volition of the pilots and crew-men themselves. And, even when a fishing trip is completed, it is no assurance of income for the fishermen and the boat-owner as well. Clearly, the services rendered by the fishermen are no different from the agricultural labor performed by a share or leasehold tenant or worker, which is specifically excluded from the definition of "employment",4 and exempted from the coverage of the Social Security Act.

Add to this the extreme difficulty, if not impossibility, of determining the monthly wage of earning of these fishermen for the purpose of fixing the amount of their and the supposed employer's contributions,5 and there is even reason to exempt the parties to this kind of undertaking from compulsory registration with the Social security System.

In view of the foregoing considerations, the resolution of the Social Security Commission appealed from is hereby set aside, and petitioners-appellants are declared exempted from compulsory coverage of the Social Security law. No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar Sanchez and Castro, JJ., concur.Regala, J., is on leave.

Footnotes

1All agreements entered into in connection with this occupation are not in writing.

2Sec. 8(c), Rep. Act 1161.

3Sec. 8(d), Ibid., as amended by Rep. Act 2658.

4"SEC. 8. Term defined. — ... .

x x x           x x x           x x x

"(j) Employment. — Any service performed by an employee for his employer, except —

"(1) Agricultural labor when performed by a share or leasehold tenant or worker who is not paid any regular daily wage or base pay and who does not work for an uninterrupted period of at least six months in a year; ... ."

(Rep Act 1161, as amended by Rep. Act 2658).

5See Secs. 18 and 19, Ibid.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-7945 December 1, 1914

CANDIDO PASCUAL, plaintiff-appellant, vs.EUGENIO DEL SAZ OROZCO, ET AL., defendants-appellees.

C. W. Ney and O'Brien & De Witt for appellant.Hausermann, Cohn & Fisher for appellees.

 

TRENT, J.:

The plaintiff appeals from a judgment upon the merits in favor of the defendants, and insists that the court erred:

1. In holding that the interpretation placed upon article 30 of the bank's charter by the decision of the Supreme Court herein is not the law of the case.

2. In holding that the defendants had a right to deduct their compensation from the gross profits of the bank.

3. In holding that it was proper for defendants to compute their compensation upon the gross profits before charging against such gross profits the aggregate amount of accounts written off as uncollectible (dudosa y fallida) as shown in Exhibits C-1 to C-9, inclusive.

4. In holding that any of the debit items appearing in Exhibits C-1 to C-9 and especially the industrial and internal-revenue taxes, are items that should be charged against capital and not against current profits.1awphil.net

5. In holding that it was within the power of the stockholders of the bank to ratify the so-called interpretation by defendants of said article 30.

This action was commenced by the plaintiff as a shareholder of the Banco Español-Filipino for the benefit of the bank and all of the stockholders thereof. Its purpose is to require the defendants as former directors and councilors of the bank to refund a portion of the compensation paid to them for their services, on the ground that the amounts thereof have been wrongfully computed.

The complaint contains three separate causes of action, of which the first only is here involved. The defendants' demurrer to this cause of action was sustained upon the ground that the facts alleged therein were not sufficient to entitle the plaintiff to the relief sought. Upon appeal this judgment was reversed and the record returned for further proceedings. (19 Phil. Rep., 82.) The complaint was not thereafter amended.

The question raised by the plaintiff in his first assignment of error requires an examination of the pertinent allegations in the first cause of action. These allegations are as follows.

X. That, notwithstanding the fact that article 30 of the said by-laws (Exhibit B) clearly and unequivocally prescribes that the net profits of the said bank shall be apportioned as follows: Then per cent for the board of directors, five per cent for the board of managers (composed of counselors and trustees) in compensation for their services as such, and the remainder, eighty-five per cent, integrally for the shareholders of the said bank, the defendants, as such members of the said boards of directors and managers, respectively, did, during each and all of the years specified, fraudulently and to the great detriment of the said Bank and its shareholders, and without the knowledge, consent or acquiescence of the latter, appropriate to themselves for their own use from the profits of the said Bank sums of money reaching an approximate amount of twenty thousand pesos, or a total sum of one hundred thousand pesos during the five years aforementioned, by deducting their said ten and five per cent, respectively, from the gross profits instead of deducting them from the net profits of the said bank.

XI. That the said defendants, during the time mentioned, carefully concealed in all the balances and reports of the said Bank published by them every indication that might gave the stockholders of the said Bank the slightest suspicion that the said defendants were fraudulently appropriating to themselves the funds of the same; and that the plaintiff learned of such appropriation, by a mere chance, in the month of November, 1907.

The Banco Español-Filipino was a banking corporation which, until January 1, 1908, was controlled by the by-laws and regulations annexed to the complaint as Exhibits A and B. On November 13, 1903, the plaintiff acquired 10 shares of the capital stock and has been the registered holder of these shares since that date. The defendants filled, during the time mentioned in the complaint, the offices of director, consiliario, and sindico, and collectively constituted the board of government. The only compensation to which the defendants were entitled for their services is that prescribed by article 30 of the by-laws then in force.

This article reads: "Of the profits or gains which may result from the bank's operations, after deducting all the expenses of its administration and the part, if any, which corresponds to the legal reserve fund, there shall be set apart ten per cent remaining shall belong integrally to the shareholders pro data the number of shares owned by each."

Since the date on which the plaintiff acquired his shares, the earnings of each half-year of the bank have been liquidated in the manner set forth in the Exhibits C-1 to C-9, inclusive, attached to the agreed statement of facts, and the respective defendants have individually collected for their services the sums specified in Exhibit D.

Under date of November 15, 2907, the plaintiff addressed to the defendants a letter alleging that the earnings of the bank had not been apportioned in accordance with the provisions of article 30, supra, and making demand upon them for the refund to the bank of a portion of the amounts received by them in compensation for their services. The defendants refused to comply with this demand and on December 7, 1907, the plaintiff commenced an action seeking the same relief herein prayed for. This action was dismissed, and on December 21, 1907, the shareholders of the bank were convened in a special meeting "for the express purpose of discussing and taking action relative to the alleged interpretation of article 30 of the by-laws." At this shareholders' meeting there were present, either in person or by proxy, 183 persons and entities, holding 6,499 shares of the total issue of 7,500. Among those present at this meeting was plaintiff's attorney. The plaintiff's letter, referred to above, was read, as was the complaint which the plaintiff had previously filed, and, after a discussion in

which the appellant's attorney took part, a resolution was adopted ratifying and approving the distribution of the bank's earnings as made, and authorizing the defendants to proceed in the same manner with the earnings of the latter half of the year 1907. In favor of this resolution there was a total of 555 votes, representing 5,550 shares. Soon thereafter the present action was commenced.

As will be seen from the plaintiff's first assignment of error and the argument of counsel relating thereto, it is strongly urged that inquiry respecting the interpretation and application of article 30, supra, has been closed by the decision of this court rendered upon the demurrer of the defendants to the complaint. Under the doctrine ofstare decisis the plaintiff insists that "the law of the case" has been established and that it has been necessarily decided that the remuneration received by the defendants for their services was not in accordance with article 30.

The decision is relied upon by the plaintiff is that of Pascual vs. Del Saz Orozco (19 Phil. Rep., 82). "The law of the case," established by that decision, is the law of the case which was before the court and which the court thereby decided.1awphil.net

The plaintiff, as will be seen from paragraphs 10 and 11, above quoted, whose sufficiency was then and there under consideration, alleged that the defendants, in violation of article 30, had fraudulently misappropriated to themselves certain funds of the bank by computing their percentages upon the gross earnings of the bank and, by a series of fraudulent concealment's, had withheld the knowledge thereof from the shareholders. The demurrer admitted the facts as alleged and raised the question of the right of the plaintiff to recover upon those facts. The ruling of the lower court was to the effect that, even assuming the facts to be as alleged in the complaint, the plaintiff had no right of action. On appeal the Supreme Court considered this very question and necessarily none other, which relates to the point now under consideration, and, in reversing the ruling of the lower court, decided that, assuming the facts to be as alleged in the complaint, the plaintiff did have a cause of action. If these were the facts of the case now under consideration, there would be neither occasion nor opportunity to further discuss the law applicable thereto. But the case which the present appeal presents is not the case at all. Since that decision was rendered the case has been tried and the facts now before the court for consideration are not the allegations that the defendants fraudulently mis-appropriated to themselves certain funds of the bank, and by a series of concealment's withheld the knowledge thereof from the shareholders, but the real facts as they have been stipulated in the agreed statement. These facts are that the defendants did not, as alleged, fraudulently misappropriate certain funds of the bank by computing their percentages upon the gross earnings, but the first deduct the expenses of administration, and that none of the acts of the defendants were tainted in any way with fraud.

In this particular the case now under consideration is clearly differentiated and distinguished from the former case. In the case the court decided that the defendants may not fraudulently compute their percentages upon the gross earnings, and that a complaint which alleges that they have done so states a cause of action. This was question submitted and decided. The question submitted upon the present appeal is whether the computation really made is in accordance with article 30. This holding is not in conflict with the rule announced in the cases cited and relied upon by counsel for the plaintiff.

For example, in the case of Heidt vs. Minor (113 Cal., 385), the court said: "Moreover, the rule of the law of the case only applies when, on subsequent trial, the issues and the facts found remain substantially the same." itc@alf

In the case of Foregerson et al. vs. Smith (104 Ind., 246), the court laid down this rule: "But where the questions are necessarily involved, . . . the judgment on appeal rules the case throughout all its subsequent stages. The decision is an adjudication concluding the courts and the parties. It is not, of

course, conclusive in judgment in the case in which it was rendered, upon the parties and those in privity with them. . . . We regard the former decision as adjudicating all of the controlling questions in the case, for it was not possible to reach the conclusion there announced without deciding that the property in the promissory notes in controversy was in the administrator of the estate of Mahala Shaw deceased."

In Standard Sewing Machine Co. vs. Leslie (118 Fed., 557), the court used this language: "It is a familiar and entirely righteous rule that a court of review is precluded from agitating the questions that were made, considered, and decided on previous reviews. The former decision furnishes 'the law of the case' not only to the tribunal to which the cause is remanded, but to the appellate tribunal itself on a subsequent writ or appeal."

Now, has the remuneration of the defendants for their services been computed in accordance with article 30 of the by-laws?

The item of "profit and loss" for each half year, during the entire period covered by the complaint, was made up by crediting to it all the items of net profits produced by the various accounts of the bank, including the accounts of current debtors, the profits from exchange, the profits in the sale of money, the profits from the discount of bills and notes, the net proceeds from the real properties of the bank after the payment of all the expense thereof, including taxes, insurance, and repairs, and all other net profits obtained by the bank. To the debit of this "profit and loss" account were entered all sums paid out by the bank as interest upon fixed deposits or credit balances of current accounts. The items of "general expenses" included salaries, light , water, stationery, stamps, attorneys' fees, and all other items of general expenses incurred either by the main office in Manila or by the branch office in Iloilo. In short, it appears that every expenditure of whatever nature made from the funds of the bank, with the exception of the industrial tax (later internal-revenue tax) and amounts set off against bad accounts, was included in the item of "general expenses," or, what amounted to the same thing, deducted from the "profit and loss" account before computing the remuneration received by the respective defendants for their services. Upon this point it might be well to set out in full Exhibit C-1. (Exhibits C-2 to C-9, inclusive, were made up in the same manner.) This exhibit is as follows:

1903.

December 31. Balance of the account of profit and loss ............................. $196,580.22 Deduction of surplus of June 30, last ..................................... 7,816.38¯¯¯¯¯¯¯¯¯ 188,763.84 Do. General expenses ............................................................... 51,753.77 ¯¯¯¯¯¯¯¯¯ 137,010.07 Compensation for the board of government, 15 per cent ....................................................................................... 20,551.51 ¯¯¯¯¯¯¯¯¯ 116,458.56 Dividend of 4 per cent on $1,500,000 .................................... 60,000.00 ¯¯¯¯¯¯¯¯¯ 56,458.56 Industrial tax (later internal revenue) 5 per cent of $60,000 ....................................................................................... 3,000.00 ¯¯¯¯¯¯¯¯¯ 53,458.56 Balance on June 30 carried forward ..................................... 7,816.38 ¯¯¯¯¯¯¯¯¯ 61,274.94 Amount for bad accounts .................................................... 60,000.00 ¯¯¯¯¯¯¯¯¯ Balance for next semester ................................. 1,274.94 ¯¯¯¯¯¯¯¯¯

To this method of computing the defendants' remuneration the objection of the plaintiff is twofold:

(a) That before computing the defendants' remuneration there was not first deducted from the earnings or gains the amount payable as industrial tax (later internal revenue), and

(b) That before computing the defendant's remuneration there was not first deducted from the earnings or gains the amounts retained to cover bad accounts.

From an examination of article 30 it will be seen that only two items from the gross profits of the bank are to be deducted before computing the compensation of the directors and board of government (the defendants constituted both the directors and the board of government), to wit: Expenses of administration and the amount, if any, corresponding to the legal reserve fund. On December 31, 1903, the legal reserve fund of P225,000 was not only completed, but a voluntary reserve fund of P665,000, authorized by the charter, had accumulated. From the various Exhibits, C-1 to C-9, inclusive, it is apparent that nothing whatever was applied to this reserve fund, and, as the correctness of these exhibits is not disputed, it is also apparent that nothing was due this fund at any time during the period covered by the complaint. Unless, therefore, the items of industrial tax (later internal-revenue tax) and the amounts set aside to cover bad debts that there is no merit in the plaintiff's contention.

At the outset it may be said that the proper disposition of this case is rendered difficult by the inaccurate language used in article 30. This article provides for a percentage of the profits (utilidades y ganacias), and it may be at once said that these are not necessarily net profits, as claimed by counsel for the plaintiff. Profits may be either gross profits or net profits, and there are innumerable methods of computing each of these. Likewise, "expenses of administration" may or may not include all amounts expended in the conduct of business. Indeed, it is somewhat unusual that a provision of the bank's charter, so difficult of exact definition, should be so lacking in precision. Hardly less unusual, from an American point of view, is the incorporation into the bank's charter of the measure of remuneration of the board of government. This, is America, has generally been considered a detail in the internal management of a corporation to be controlled by the shareholders themselves, who, in many instances, even delegate to the directors the power of fixing their own salaries.

The remuneration received by the defendants is not even alleged to be excessive. The two active managers of the bank received, during the period in question, sums amounting to approximately P15,000 per year, while the other defendants, not participating in the active management of the corporation, received sums amounting in no instance to a salary of P2,500 per year. All of the defendants received, during the four and a half years, P201,825.81, or an approximate yearly average of P45,000 per year Bearing in mind the magnitude of the business and the fact that the bank prospered under the management of the defendants, there is no wonder that no claim is made of excessive compensation. During all these years the plaintiff, as well as the other shareholders of the bank, remained silent, apparently content with the increased prosperity of the business, although at the increased prosperity of the business, although at the end of each fiscal year they had the opportunity to examine the books of the bank and inform themselves of the method by which the defendants computed their compensation. And, furthermore, an extraordinary meeting of the shareholders was duly convened on December 21, 1907, for the express purpose, as we have indicated, of discussing the interpretation placed upon article 30 by the defendants.

The industrial tax, which the appellant insists should be first deducted from the earnings before computing the percentages, was fixed by law at 5 per cent of the dividends distributed among the shareholders of the bank. In order to make the deduction of this tax, its amount must first be a known quantity. Since its amount is a percentage of the dividends, the amount of the latter must likewise by a known quantity before the operation can be made. The amount available as dividends is dependent upon the amount due and payable out of profits to the defendants for their services. Therefore, this amount due the defendants from the profits must be known before the amount remaining for dividends can be fixed. For example, if the remaining earnings, after deducting from the gross earnings the general expenses, is the sum of P58,000, how much is to be deducted therefrom as internal-revenue tax before computing the percentage of the defendants? The law said

that the amount of this tax should be 5 per cent of the dividends distributed. The amount to be distributed depends upon how much may be left after the remuneraton of the defendants is paid. It is no reply to this argument to point out that the total profits may be or are usually sufficiently great to permit a declaration of the maximum dividend of P60,000 and that in such cases t is simple matter to compute 5 per cent of P60,000, for the rule of computation, established by article 30, is a general one, applicable alike in all cases, whether the earnings of the bank be great in small. This article does not establish two rules of computations, one which is only feasible or practicable when the earnings are sufficiently large to warrant a dividend in the maximum amount and another and different rule when the dividend falls below that amount.

Again, in our opinion the nature of the old industrial tax negatives the idea that it is one of the items of "expenses of administration" referred to in article 30. This tax was levied by law, not upon the earnings or profits of the bank, but only upon such earnings or profits as were actually distributed among the shareholders as dividends. It was purely a dividend tax, collected for convenience in a lump sum from the company, but levied solely and exclusively upon the distributed dividends. To deduct this tax from the amount upon which the remuneration of the defendants was computed would have made the defendants contributors to the tax levied upon the company-shareholders. Article 30 does not require the defendants as employees of the bank to contribute to the payment of the bank's taxes. The discrimination made by article 30 between "expenses of administration" and other disbursements is reasonable and in accordance with the principles of the contract which existed between the bank and the defendants. That was a contract of employment in which one of the contracting parties agreed to supply the capital and the other his services, and to divide in a stipulated proportion the proceeds of the application of the services of the one to the capital of the other. Since it was incumbent upon the bank to furnish the capital, so it was incumbent upon it to maintain the same. Any tax which tended directly to impair the amount of the capital should consequently have been paid by the hirer of the services and not by the servant. There could be no real difference in principle between the failure to furnish the capital in the first place and the failure to replace any part of it which disappears by reason of a tax levied thereon. We, therefore, conclude that the method employed by the defendants for the liquidation of the bank's business, in so far as the industrial tax (internal-revenue tax) is concerned, was strictly in accordance with article 30 of the by-laws.

DEDUCTION OF AMOUNTS TO COVER BAD ACCOUNTS

When the defendant Orozco took over the management of the bank, he reported to the board of directors its financial situation, embracing among other thins a loss from bad accounts for the past of over P500,000. It probably would have been possible to cover this entire amount of losses from funds in the reserve, existing for just such purposes, but to have done so would have left the bank without a present reserve. It was decided to preserve the reserve fund intact, and carry the bad accounts as accounts in suspense until the same could be gradually and conveniently wiped out. Consequently, in each half yearly liquidation the dividends distributed to the shareholders were strictly limited to 4 per cent per semester, and the earnings after payment of the expenses of administration, the remuneration of defendants, the taxes, and the said dividends were applied pro tanto to the extinction of the ad accounts held in suspense. It does not clearly appear whether these funds, which were used for that purpose, first went into the voluntary reserve fund and were then applied to the extinction of the bad accounts in suspense or were applied directly by the semiannual liquidation's from the profit and loss accounts. The process followed is immaterial since the result must be the same. The important fact is that in each semester there was an excess of net profits over and above the 4 per cent provided in article 31 of the by-laws. This excess of net profits was divisible under that article, one-half to the shareholders and one-half to the legal reserve, voluntary reserve, or additional dividends as the case might be. Instead, the entire excess of net profits went to extinguish bad accounts whose extinction would have exhausted the reserve fund and required its replenishment. To the extent that one-half of the excess of net profits were not distributed as

dividends, but were put to the purposes of reserve, the shareholders made a sacrifice for their own welfare. Whether this was validly done or not is of no importance of this time for the reason that the remuneration of the defendants was not affected in any way thereby. As to the remaining half of the excess net profits, the application made was in direct accord with the by-laws, since the application of the funds to the purposes of the reserve fund is exactly the same as if the reserve fund had been employed for the purpose and then replenishment by these funds.

According to article 30, the net profits belonged to the shareholders. According to article 31, these not profits, belonging to the shareholders, should be partially divided among them and partially kept intact in the bank, according to the amount thereof, to the status of the legal reserve, and to the wishes of the board of government respecting a voluntary reserve. From the fact that part of either the legal or voluntary reserve, it cannot be said that such portion of the net profits had ceased to belong to the share-holders. these excess net profits are, in a sense, still in the bank and still belong to the shareholders within the meaning of article 30. to hold that the bad accounts of the bank should have been extinguished by the gross earnings instead of the net profits, would, in effect, compel the defendants, as employees, to contribute to the replenishing of the depleted reserves of the bank.

It would be wholly unjust to include under "expenses of administration" during the time the defendants were in charge, the losses previously sustained by the defendants' predecessors in office. These defendants were in no wise connected with the bank no were they in any way responsible for those losses. To interpret article 30 so would result in the incoming manager becoming an heir to an insolvent inheritance. Under such conditions no one would be found to accept the office and the bank would have to cease its operations.

As to the responsibility of the defendants for the losses which occurred during the period covered by the complaint, it might be said in the first place that the greater part of these losses constitutes the third cause of action of appellant's complaint and was made the subject of a separate appeal to this court. In the second place, it has not been shown that any part of such losses were written off as bad debts during the period of time in question. And it is upon this fact that we rest our holding on this point. Therefore, we are not now called upon to decide whether the defendants could have treated these losses in the same manner as they did those occurring prior to December 31, 1905.

The judgment appealed from is affirmed. 1 In this opinion it has been our intention to set forth at some length our reasons for affirming this judgment at the close of the last session.

Arellano, C.J., Carson and Araullo, JJ., concur.

Footnotes

1 March 21, 1914. Not reported.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-14183           November 28, 1959

BENEDICTO DINGLASAN, petitioner, vs.NATIONAL LABOR UNION, respondent.

Rafael Dinglasan for petitioner.Eulogio R. Lerum for respondent.

BARRERA, J.:

This is a petition to review the decision of the Court of Industrial Relations of February 27, 1958 (in Case No. 3—ULP), finding the petitioner guilty of unfair labor practice under the Industrial Peace Act.1

On June 30, 1953, the respondent union filed with the above-mentioned court a complaint for alleged unfair labor practice committed by the petitioner, in that he locked out from employment 46 drivers, members of the respondent union, on June 27, 1953.

Before filing his answer, the petitioner asked for the dismissal of the complaint on the grounds that the court had no jurisdiction over the person of the petitioner and the subject matter of the action, and the respondent union was not the real party in interest. The petitioner claimed that there existed no employer-employee relationship between the petitioner and the drivers, members of the respondent union, the relationship being one of lessor and lessee only, as the jeeps being used by the said drivers were rented out by the petitioner under the so-called "boundary system". The motion was denied by the court in its order of February 16, 1954, but on petitioner's motion for reconsideration, the court, en banc, in its resolution of June 23, 1954, unanimously reconsidered its first order and finally declared that there was no employer-employee relationship between the parties.

The respondent union appealed to this Court, and on March 23, 1956, we rendered a decision (in G. R. No. L-7945) * reversing the said resolution and holding that an employer-employee relationship existed between the parties. The said decision became final on May 29, 1956.

In view of the decision of this Court, the petitioner, on June 4, 1957, filed in the court a quo his answer to the complaint of June 30, 1953, denying (1) the legitimacy of the respondent union, and (2) the charge unfair labor practice, claiming that he acted in good faith based on his honest belief that he was not an employer of the drivers, members of the respondent union, but only a lessor of his jeepneys.

Thereafter, the case was heard, and on February 27, 1958, the court rendered a decision, as follows:

It would appear that the main question at issue is whether the respondent has committed the charges alleged in the complaint.

According to the complaint, the respondent had knowledge of the formation of a union on June 26, 1953 and respondent upon learning the same decided on dismissing all the driver members because he did not want to have a union within his company. This Particular union, it turned out, was a chapter or affiliate of the complainant union which was organized sometime on June 24, 1953. On June 27, 1953, the respondent dismissed the drivers appearing in the complaint by refusing them the use of the jeepneys regularly assigned to them.

On the other hand, respondent claims otherwise. The respondent, it is alleged fearing that a strike might be called by the drivers decided on not renting out the jeepneys on said date, June 27, 1953.

Based on the versions submitted in evidence by the parties, it is clear that the respondent engaged in the unfair labor practice charged in the complaint, amounting to a virtual lockout of his employee drivers, hence constituting discrimination under Republic Act No. 875. As the records of this case disclose, the act of locking out committed by respondent was made without the required notice and no collective bargaining negotiation were ever made. The mere suspicion by respondent, that a strike might be called by the union, is no justification for such an act.

We hold therefore, the respondent guilty of the unfair labor practices in the complaint.

However, there are certain aspects of this case which merit consideration. It has been contended by respondent, since the beginning of this case, that he is not the employer of the drivers listed in the complaint and had honestly acted under the such belief. This very Court itself, unanimously were of the same opinion that there was no employer-employee relationship. In the application of the affirmative reliefs granted by the law, this good faith the respondent must be taken into consideration in those portions where the law allows this Court to use it sound discretion and judgment. And the particular portion we have in mind in Section 5 of Republic Act No. 875.

Furthermore, it appears that some of the drivers listed in the complaint have neither to returned to work or are already working elsewhere and there is a need for further proceedings in this respect.

IN VIEW OF THE FOREGOING, this Court hereby orders the respondent:

(1) To cease and desist from further committing the unfair labor practices complained of;

(2) To reinstate the drivers listed in the complaint, except those who have been already reinstated;

(3) To pay back wages to all drivers listed in the complaint, but in the exercise of the Court's discretion said back wages shall commence only from May 29. 1956, based on the minimum daily wage of P4.00, deducting therefrom and from said date the period when said drivers have found substantially equivalent and regular employment for themselves, for which reason further hearings shall be had for the sole purpose of determining the respective amount of back wages due each driver up to the time they are actually re-employed by respondent.

SO ORDERED.

On March 8, 1958, petitioner filed a motion for reconsidering which was denied by the court in its resolution en banc, of July 30, 1958. hence, this petition for review.

It is the contention of responding union that petitioner, upon learning that his drivers had formed a labor union among themselves, refused on June 27, 1953, to let the muse and operate the jeepneys regularly assigned to them, which act, it is alleged, constitutes an unlawful lockout and an unfair labor practice. The petitioner, on the other hand, claims that he did not lock out his drivers, members

of the respondent union, on June 27, 1953, as contended by them. Believing honestly that no employer-employee relationship existed between him and them, and fearing that the drivers were intending to declare a strike and might abandon his jeepneys in the streets of the city, he decided, as a precautionary measure to protect his interest, to suspend their operation temporarily and consult his attorney. Upon obtaining his counsel's advice, he immediately announced to the drivers the following morning, June 28, that they could then take out his jeepneys. While some four or five of them needed petitioner's request, the others refused to return to operate. Those who took advantage of petitioner's offer had, however, to come back after a few hours because some of the drivers on strike had admonished them to return the jeepneys and join the strike. For some days this situation continued until on October 8, 1953, when the case was first submitted for decision, thirty-four (34) of the forty six (46) drivers had already returned to work under the same conditions as before June 27, 1953.

We have examined the record and we are satisfied that what occurred on June 26, 1953, and the days following was substantially as testified to by petitioner Benedicto Dinglasan and his witnesses, three of whom are among the drivers of his Jeepneys, two (Julio Ongpin and Francisco Leaño) are completely disinterested persons, two are patrolmen, and the remaining two are his employees, as against the sole testimony of Juanito Cruz, President of the local group of the respondent labor union, and the essentially hear say declaration of Zosimo Yjares who claims to be the secretary of the drivers' association.

While we agree with the lower court that the act of the petitioner in suspending the operation of his jeepneys on June 27, is legally and technically not in consonance with the industrial Peace Act (the court a quo termed it "a virtual lockout") so as to entitle the drivers to be reinstated nevertheless, as the trial court correctly stated in its decision,.

there are certain aspects of this case which merit consideration. It has been contended by respondent, since the beginning of his case, that he is not the employer of the drivers listed in the complaint and has honestly noted under such belief. This very Court itself, unanimously were of the same opinion that there was no employer-employee relationship. In the application of the affirmative reliefs granted by law, this good faith of the respondent must be taken into consideration in those portions where the law allows this court or use its sound discretion and judgment. The particular portion we have in mind is Section 5 of Republic Act No. 875.

In the exercise of this discretion, that is, whether the reinstatement will be with or without back pay, aside from the fact that there was no willful violation of the Industrial Peace Act, there is an additional circumstance that may be considered in favor of herein petitioner. As already mentioned above, petitioner, the day following his suspension of the operation of the jeepneys, urged the drivers to return and resume the work, notwithstanding which, the latter not only refused, but even compelled those who did, to joint the strike. It is clear therefrom that the cassation or stoppage of the operation after June 27, was not the direct consequence of petitioner's locking them up or of any willful unfair or discriminatory act of the former, but the result of their (the drivers) voluntary and deliberate refusal to return to work. Taking into account the foregoing circumstances and considering their similarity to those in the case of Philippines marine Radio Officers' Association vs. Court of Industrial Relation et al., 102 Phil., 373, wherein it was held that there is no reason for granting backpay if there is not been any willful unfair labor practice or refusal of the respondent companies to admit their laborers back to work, while the drivers members of respondent union may, in this case, be entitled to reinstatement, we find no justification for their receiving back wage for the period that they themselves refused to return to work.

Wherefore, the decision appealed from is accordingly modified in the sense that the reinstatement will be without back pay. In all other respects, the same is affirmed, without costs. So ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Endencia and Gutierrez David, JJ.,concur.

Footnotes

1 Republic Act No. 875.

* National Labor Union vs. Dinglasan, 98 Phil., 694;5 2 Off. Gaz. 94), 1933.

The Lawphil Project - Arellano Law Foundation

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:

I

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

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:

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 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.

Footnotes

1 Brotherhood Labor Unity Movement of the Philippines v. Zamora, 147 SCRA 49, 54 [1987], citingMafinco Trading Corporation v. Ople, 70 SCRA 139 [1976].

2 Docketed as NLRC NCR CA 00344-92 and NLRC NCR 00-08-05033-91.

3 Rollo, 202.

4 Rollo, p. 70-71.

5 Rollo, p. 78.

6 Petition, p. 17; Rollo, p. 22.

7 Rollo, p. 73.

8 Cathedral School of Technology v. National Labor Relations Commission, 214 SCRA 551, 558 [1992] citing RJL Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454 [1984]; Murillo v. Sun Valley Realty, Inc., 163 SCRA 271 [1988].

9 Bernardo Jimenez and Jose Jimenez v. National Labor Relations Commission, G.R. No. 116960, April 2, 1996.

10 Ibid., citing Canlubang Security Agency v. National Labor Relations Commission, 216 SCRA 280 [1992]; Ruga v. National Labor Relations Commission, 181 SCRA 266 [1990]; Makati Haberdashery, Inc. v. National Labor Relations Commission, 179 SCRA 448 [1989].

11 Investment Planning Corporation of the Phils. v. Social Security System, 21 SCRA 924, 929 [1967].

12 Dy Keh Beng v. International Labor and Marine Union of the Philippines, 90 SCRA 161, 167 [1979].

13 Rollo, pp. 67-68.

14 Ibid.

15 Supra.

16 People v. Distributors Division, Smoked Fish Workers Union, Local No. 20377, Sup. 7 N.Y. 2d 185,187 in "Words and Phrases," loc. cit.

17 Supra.

18 MAM Realty Development Corporation v. National Labor Relations Commission, 244 SCRA 797, 800-801 [1995], citing Zanotte Shoes/Leonardo Lorenzo v. National Labor Relations Commission, 241 SCRA 261 [1995]; Dy Keh Beng v. International Labor and Marine Union of the Philippines, 90 SCRA 161 [1979].

19 Philippine Geothermal, Inc. v. National Labor Relations Commission, 189 SCRA 211, 215 [1990]citing Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Olalia v. Drilon, 185 SCRA 190 (1990].

20 Rollo, pp. 67-68.

21 206 SCRA 643, 650 [1992].

22 Rollo, p. 34.

23 120 SCRA 774 [1983].

24 174 SCRA 191 [1989].

25 185 SCRA 21 [1990].

26 221 SCRA 469 [1993].

27 See Supra., Note 24 at 194.

28 Nitto Enterprises v. National Labor Relations Commission, 248 SCRA 654, 662 [1995] citingCentury Textile Mills, Inc. v. National Labor Relations Commission, 161 SCRA 528 [1988]; Gold City Integ. Port Services, Inc. v. National Labor Relations Commission, 189 SCRA 811 [1990]; Kwikway Eng. Works v. NLRC, 195 SCRA 526 [1991].

29 Ibid.

30 Ibid.

31 210 SCRA 277, 286 [1992].

32 Supra.

33 Rollo, p. 70.

34 Torillo v. Leogardo, Jr., 197 SCRA 471, 477 [1991].

35 Lopez, Jr. v. National Labor Relations Commission, 245 SCRA 644, 650 [1995] citing General Textile Inc. v. National Labor Relations Commission, 243 SCRA 232 [1995].

36 Ibid., citing A' Prime Security Services, Inc. v. National Labor Relations Commission, 220 SCRA 142 [1993].

37 Philippine Airlines, Inc. v. Court of Appeals, 185 SCRA 110, 123 [1990], citing Aparri v. CA, 13 SCRA 611, Dy v. Kuizon, 113 Phil. 592; Borromeo v. Zaballero, 109 Phil. 332.

38 Santos vs. Court of Appeals, 221 SCRA 42, 46 [1993], citing Section 7, Rule 51 of the Revised Rules of Court, which can be applied by analogy in this case.

39 Regalado, Florenz D., Remedial Law Compendium, Vol. I, 5th Revised Edition, p. 378, citingOrtigas, Jr. v. Lufthansa German Airlines, L-28773, June 30, 1975; Soco v. Militante, L-58961, June 28, 1983.

40 Radio Communications of the Philippines, Inc. v. NLRC, 210 SCRA 222, 227 [1992], citing Piczon v. Court of Appeals, 190 SCRA 31 [1990].

41 Ibid.

42 189 SCRA 767 [1990].

43 182 SCRA 353 [1990].

44 142 SCRA 269 [1986].

45 Businessday Information Systems and Services, Inc. v. NLRC, 221 SCRA 9, 14 [1993].

46 Art. 279. Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

47 G.R. No. 111651, November 28, 1996.

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Republic of the PhilippinesSUPREME COURT

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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.

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 ofservice. 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.

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.

Feliciano, Romero, Melo and Francisco, JJ., concur.

Footnotes

1 Rollo, p. 48.

2 Rollo, pp. 28-30.

3 Rollo, p. 38.

4 See Zanotte Shoes/Leonardo Lorenzo vs. NLRC, et al., G.R. No. 100665, 13 February 1995,citing Dy Keh Beng vs. International Labor and Marine Union of the Philippines, et al., 90 SCRA 161.

5 Flores vs. Nuestro, 160 SCRA 568, citing Roman Catholic Archbishop of Manila vs. Social Security Commission, 1 SCRA 10; Insular Life Assurance Co., Ltd. vs. Social Security Commission, 3 SCRA 739; Insular Lumber Company vs. SSS, 7 SCRA 121; SSS vs. CA, 30 SCRA 210.

6 Rollo, p. 35.

7 Article 283, Labor Code provides:

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 loses 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 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 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.

8 Article 283, Labor Code, supra.

9 Tramat Mercantile, Inc., and David Ong vs. Hon. Court of Appeals and Melchor de la Cuesta, G.R. No. 111008, 07 November 1994.

10 See Section 31, Corporation Code.

11 Section 65, Corporation Code.

12 See De Asis and Co., Inc. vs. Court of Appeals, 136 SCRA 599.

13 Exemplified in Article 144, Corporation Code; see also Section 13, Presidential Decree 115 (Trust Receipts Law).

14 See Sunio vs. NLRC, 127 SCRA 390; General Bank and Trust Company, et al. vs. Court of Appeals and Manuel E. Batucan, 135 SCRA 569.

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-26298 September 28, 1984

CMS ESTATE, INC., petitioner, vs.SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.

Sison Dominguez & Cervantes for petitioner.

The Legal Counsel for respondent SSS.

 

CUEVAS, J.:

This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System, declaring CMS subject to compulsory coverage as of September 1, 1957 and "directing the Social Security System to effect such coverage of the petitioner's employees in its logging and real estate business conformably to the provision of Republic Act No. 1161, as amended was certified to Us by the defunct Court of Appeals 1 for further disposition considering that purely questions of law are involved.

Petitioner is a domestic corporation organized primarily for the purpose of engaging in the real estate business. On December 1, 1952, it started doing business with only six (6) employees. It's Articles of Incorporation was amended on June 4, 1956 in order to engage in the logging business. The Securities and Exchange Commission issued the certificate of filing of said amended articles on June 18, 1956. Petitioner likewise obtained an ordinary license from the Bureau of Forestry to operate a forest concession of 13,000 hectares situated in the municipality of Baganga, Province of Davao.

On January 28, 1957, petitioner entered into a contract of management with one Eufracio D. Rojas for the operation and exploitation of the forest concession The logging operation actually started on April 1, 1957 with four monthly salaried employees. As of September 1, 1957, petitioner had 89 employees and laborers in the logging operation. On December 26, 1957, petitioner revoked its contract of management with Mr. Rojas.

On August 1, 1958, petitioner became a member of the Social Security System with respect to its real estate business. On September 6, 1958, petitioner remitted to the System the sum of P203.13 representing the initial premium on the monthly salaries of the employees in its logging business. However, on October 9, 1958, petitioner demanded the refund of the said amount, claiming that it is not yet subject to compulsory coverage with respect to its logging business. The request was denied by respondent System on the ground that the logging business was a mere expansion of petitioner's activities and for purposes of the

Social Security Act, petitioner should be considered a member of the System since December 1, 1952 when it commenced its real estate business.

On November 10, 1958, petitioner filed a petition with the Social Security Commission praying for the determination of the effectivity date of the compulsory coverage of petitioner's logging business.

After both parties have submitted their respective memoranda, the Commission issued on January 14, 1960, Resolution No. 91, 2

 the dispositive portion of which reads as follows:

Premises considered, the instant petition is hereby denied and petitioner is hereby adjudged to be subject to compulsory coverage as of Sept. 1, 1957 and the Social Security System is hereby directed to effect such coverage of petitioner's employees in its logging and real estate business conformably to the provisions of Rep. Act No. 1161, as amended.

SO ORDERED.

Petitioner's motion for reconsideration was denied in Resolution No. 609 of the Commission.

These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits that respondent Commission erred in holding —

(1) that the contributions required of employers and employees under our Social Security Act of

1954 are not in the nature of excise taxes because the said Act was allegedly enacted by Congress in the exercise of the police power of the State, not of its taxing power;

(2) that no contractee — independent contractor relationship existed between petitioner and Eufracio D. Rojas during the time that he was operating its forest concession at Baganga, Davao;

(3) that a corporation which has been in operation for more than two years in one business is immediately covered with respect to any new and independent business it may subsequently engage in;

(4) that a corporation should be treated as a single employing unit for purposes of coverage under the Social Security Act, irrespective of its separate, unrelated and independent business established and operated at different places and on different dates; and

(5) that Section 9 of the Social Security Act on the question of compulsory membership and employers should be given a liberal interpretation.

Respondent, on the other hand, advances the following propositions, inter alia:

(1) that the Social Security Act speaks of compulsory coverage of employers and not of business;

(2) that once an employer is initially covered under the Social Security Act, any other business undertaken or established by the same employer is likewise subject in spite of the fact that the latter has not been in operation for at least two years;

(3) that petitioner's logging business while actually of a different, distinct, separate and independent nature from its real estate business should be considered as an operation under the same management;

(4) that the amendment of petitioner's articles of incorporation, so as to enable it to engage in the logging business did not alter the juridical personality of petitioner; and

(5) the petitioner's logging operation is a mere expansion of its business activities.

The Social Security Law was enacted pursuant to the policy of the government "to develop, establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the Philippines, and shall provide protection against the hazards of disability, sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus clear that said enactment implements the general welfare mandate of the Constitution and constitutes a legitimate exercise of the police power of the State. As held in the case of Philippine Blooming Mills Co., Inc., et al. vs. SSS 3 —

Membership in the SSS is not a result of bilateral, concensual agreement where the rights and obligations of the parties are defined by and subject to their will, RA 1161 requires compulsory coverage of employees and employers under the System. It is actually a legal imposition on said employers and employees, designed to provide social security to the workingmen. Membership in the SSS is therefore, in compliance with the lawful exercise of the police power of the State, to which the principle of non-impairment of the obligation of contract is not a proper defense.

xxx xxx xxx

The taxing power of the State is exercised for the purpose of raising revenues. However, under our Social Security Law, the emphasis is more on the promotion of the general welfare. The Act is not part of out Internal Revenue Code nor are the contributions and premiums therein dealt with and provided for, collectible by the Bureau of Internal Revenue. The funds contributed to the System belong to the members who will receive benefits, as a matter of right, whenever the hazards provided by the law occur.

All that is required of appellant is to make monthly contributions to the System for covered employees in its employ. These contributions, contrary to appellant's contention, are not 'in the nature of taxes on employment.' Together with the contributions imposed upon employees and the Government, they are intended for the protection of said employees against the hazards of disability, sickness, old age and death in line with the constitutional mandate to promote social justice to insure the well-being and economic

security of all the people. 4

Because of the broad social purpose of the Social Security Act, all doubts in construing the Act should favor coverage rather than exemption.

Prior to its amendment, Sec. 9 of the Act provides that before an employer could be compelled to become a member of the System, he must have been in operation for at least two years and has at the time of admission at least six employees. It should be pointed out that it is the employer, either natural, or judicial person, who is subject to compulsory coverage and not the business. If the intention of the legislature was to consider every venture of the employer as the basis of a separate coverage, an express provision to that effect could have been made. Unfortunately, however, none of that sort appeared provided for in the said law.

Should each business venture of the employer be considered as the basis of the coverage, an employer with more than one line of business but with less than six employees in each, would never be covered although he has in his employ a total of more than six employees which is sufficient to bring him within the ambit of compulsory coverage. This would frustrate rather than foster the policy of the Act. The legislative intent must be respected. In the absence of an express provision for a separate coverage for each kind of business, the reasonable interpretation is that once an employer is covered in a particular kind of business, he should be automatically covered with respect to any new name. Any interpretation which would defeat rather than promote the ends for which the Social Security Act was enacted should be eschewed. 5

Petitioner contends that the Commission cannot indiscriminately combine for purposes of coverage two distinct and separate businesses when one has not yet

been in operation for more than two years thus rendering nugatory the period for more than two years thus rendering nugatory the period of stabilization fixed by the Act. This contention lacks merit since the amendatory law, RA 2658, which was approved on June 18, 1960, eliminated the two-year stabilization period as employers now become automatically covered immediately upon the start of the business.

Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:

Sec. 10. Effective date of coverage. — Compulsory coverage of the employer shall take effect on the first day of his operation, and that of the employee on the date of his employment. (Emphasis supplied)

As We have previously mentioned, it is the intention of the law to cover as many persons as possible so as to promote the constitutional objective of social justice. It is axiomatic that a later law prevails over a prior statute and moreover the legislative in tent must be given effect. 6

Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in an independent business of his own consisting of the operation of the timber concession of the former. Rojas was appointed as operations manager of the logging consession; 7

 he has no power to appoint or hire employees; as the term implies, he only manages the employees and it is petitioner who furnishes him the necessary equipment for use in the logging business; and he is not free from the control and

direction of his employer in matter connected with the performance of his work. These factors clearly indicate that Rojas is not an independent contractor but merely an employee of petitioner; and should be entitled to the compulsory coverage of the Act.

The records indubitably show that petitioner started its real estate business on December 1, 1952 while its logging operation was actually commenced on April 1, 1957. Applying the provision of Sec. 10 of the Act, petitioner is subject to compulsory coverage as of December 1, 1952 with respect to the real estate business and as of April 1, 1957 with respect to its logging operation.

WHEREFORE, premises considered, the appeal is hereby DISMISSED. With costs against petitioner.

SO ORDERED.

Makasiar (Chairman), Aquino, Abad Santos and Escolin, JJ., concur.

Concepcion, Jr. and Guerrero, JJ., are on leave.

 

Footnotes

1 C.A. Decision, pp. 41-59, rollo.

2 Page 17 of the Record on Appeal, p. 11, Rollo.

3 17 SCRA 1077.

4 Roman Catholic Archibishop of Manila vs. Social Security Commission, 1 SCRA 16.

5 Franklin Baker of the Phil. vs. SSS, 7 SCRA 840.

6 Lopez vs. Commissioner of Customs, 37 SCRA 327.

7 Contract of Management, p 47, Rollo.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 128667 December 17, 1999

RAFAEL A. LO, petitioner, vs.COURT OF APPEALS and GREGORIO LUGUIBIS, respondents.

 

MENDOZA, J.:

This is a petition for review by certiorari of the decision 1 of the Court of Appeals, dated January 31, 1996, affirming the resolution 2 of the Social Security Commission, dated May 3, 1994, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, this Commission finds and so holds that petitioner Gregorio Luguibis had been employed from September, 1957 to September, 1970 with respondent Jose Lo and from January, 1981 to September, 1984 with respondent Rafael Lo Rice and Corn Mill.

Accordingly, respondent Jose Lo is hereby directed to report the petitioner's name for SS

coverage effective September, 1957 and to pay to the SSS within thirty (30) days from receipt hereof the amount of ONE THOUSAND THREE HUNDRED FORTY TWO PESOS (P1,342.00), representing the unpaid SS contributions in favor of petitioner covering the period from September, 1957 to September, 1970, plus the amount of THIRTEEN THOUSAND NINE HUNDRED SIXTY THREE PESOS AND NINETY EIGHT CENTAVOS (P13,963.98), representing the penalty liability for late payment computed as of December, 1993, and the damages amounting to TWELVE THOUSAND FIVE HUNDRED EIGHTY FIVE PESOS AND THREE CENTAVOS (P12,585.03), for failure to report petitioner for coverage prior to the contingency pursuant to Section 24 (a) of the SS Law, as amended.

Likewise, respondent Rafael Lo as owner of Rafael Lo Rice and Corn Mill Factory is hereby directed to report the petitioner's name for SS coverage retroactive January, 1981; to pay to the SSS within thirty (30) days from receipt hereof the amount of TWO THOUSAND ONE HUNDRED THIRTY SEVEN PESOS AND TWENTY FIVE CENTAVOS (P2,137.25), representing the unpaid SS/Medicare/EC contributions in favor of petitioner covering the period from January, 1981 to September, 1984, plus the amount of NINE THOUSAND TWENTY FIVE PESOS AND TWENTY FOUR CENTAVOS (P9,025.24), representing the penalty liability for late payment

computed as of December, 1993, and the damages amounting to SEVEN THOUSAND ONE HUNDRED EIGHTY SIX PESOS AND EIGHTY CENTAVOS (P7,186.80), for misrepresenting petitioner's true date of employment pursuant to Section 24 (b) of the SS Law, as amended.

Meanwhile, the SSS is hereby ordered to pay to petitioner his monthly retirement pension benefit effective September, 1984, the date he was separated from employment, upon his filing of the proper claim supported by pertinent documents.

The facts are as follows:

On April 22, 1953, private respondent Gregorio Luguibis began working as a mechanic at the Polangui Rice Mill, Inc., owned by Jose Lo. Private respondent was paid P4.00 daily. In 1959, in addition to his work at the rice mill, he asked to render services as a mechanic at the Polangui Bijon Factory also owned by Jose Lo. His wage was later increased, and from 1964 to 1970, when he resigned due to illness, he was receiving a daily wage of P10.00.

It appears that the management of the rice mill and noodle factory, originally owned by Jose Lo, were transferred in 1978 to his son, petitioner Rafael Lo, and his sister, Leticia Lo. Petitioner took over the rice mill, which then became known as the Rafael Lo Rice and Corn Mill, while Leticia Lo became the operator and manager of the Polangui Bijon Factory. 3

In 1981, private respondent was rehired by Jose Lo, as mechanic, with a daily wage of P34.00, plus allowance. While repairing one of the defective machines at the noodle factory on August 11, 1984, private respondent met an accident and suffered injuries which forced him to retire soon thereafter.

In 1985, private respondent filed his application for retirement benefits with the Social Security System (SSS). His application, however, was denied since per SSS records he became a member only in 1983, and contributions in his favor were remitted only from October 1983 to September 1984. As private respondent knew that SSS contributions of P3.50 have been deducted from his monthly salary since compulsory SSS coverage took effect in 1957, private respondent filed a petition with the Social Security Commission against petitioner Rafael Lo and Jose Lo. On May 3, 1994, the Commission upheld private respondent's claim and ordered petitioner and Jose Lo to remit to the SSS the unpaid contributions in favor of private respondent for the periods September 1957-September 1970, and January 1981-September 1984, including penalties and charges.

Instead of filing a notice of appeal, petitioner then filed a petition for review 4 with the Court of Appeals. The appellate court, nonetheless, took cognizance of the petition as an appeal and decided it on the merits.

On January 3, 1996, the Court of Appeals affirmed the decision of the Commission, except that it ordered petitioner to pay to the SSS the amount representing the unpaid

contributions for the period January 1981 to September 1983, instead of the period January 1981 to September 1984.

When the appellate court denied his motion for reconsideration, 5 petitioner filed this petition for review, where he assigns the following errors: 6

I. THE FINDING THAT THE BULK OF THE CLAIMS HAS NOT PRESCRIBED IS NOT IN ACCORD WITH AND/OR CONTRARY TO THE APPLICABLE LAW AND DECISIONS OF THIS HONORABLE COURT.

II. THE FINDINGS OF FACT THAT IMPELLED THE HONORABLE COURT OF APPEALS TO REJECT THE DEFENSE IS BASED ON A MISAPPREHENSION OF FACTS, IS UNSUPPORTED BY THE EVIDENCE, AND THERE IS GRAVE ABUSE OF DISCRETION.

First. Petitioner argues that the right of private respondent to file an action to claim his SSS benefits has already prescribed. He claims that the Court of Appeals should not have applied to this case the ruling in People v.Monteiro, 7 where it was held that the period of prescription for failure to register with the SSS commences on the day of the discovery of the violation. According to petitioner, Monteiro can only be applied to penal offenses, whereas the present case involves civil claims and should,

therefore, be governed by the Civil Code provisions on prescription. Petitioner argues:

Payment of SS premium, as stated in the Decision, is an obligation created by law hence, without need of demand, it becomes due on the date when such payment should be made. Hence, under Article 1150 [of the Civil Code], the right of action to recover unremitted SS premium accrues on the date it is payable and maybe brought beginning such date. If the period of non-remittance covers a certain period, say 10 years, such claim is divisible into as many parts as there are installments due, although for purposes of convenience and avoidance of multiplicity of suits, such accumulated claims may be brought in a single case. However, for purposes of prescription the accumulated claims should be segregated to determine which have already prescribed. This is no different from a claim for backwages, underpayment and the like under the Labor Code which fall due periodically mostly on a weekly or even daily basis where all claims more than 3 years old reckoned from the date of the filing of the claim are segregated and considered prescribed. Which is unlike a claim for separation pay which is unitary or indivisible, the same being based on the length of service of an employee and accrues only on the date

he is separated from the service. 8

The argument is untenable.

Sec. 22 (b), par. 2, of Republic Act No. 1161, or the SSS Law, as amended, states:

The right to institute the necessary action against the employer may be commenced within twenty (20) years from the time the delinquency is known or the assessment is made by the SSS, or from the time the benefit accrues, as the case may be. (emphasis supplied)

The clear and explicit language of the statute leaves no room for doubt as to its application. 9 Indeed, in Benedicto v. Abad Santos, 10 we held that §22(b) of R.A. 1161 applies to administrative and civil actions against an employer for his failure to remit SSS contributions. Criminal actions for violations of the SSS law, on the other hand, prescribes in four years, as provided in Act No. 3326. 11

Private respondent, in this case, discovered the delinquency of petitioner in remitting his SSS contributions only after his separation from employment on September 13, 1984. Prior thereto, private respondent could not have known that his SSS contributions were not being remitted by petitioner since deductions were made on his salary monthly. Thus, even if petitioner is correct in saying that the prescriptive period should be counted from the day on which the corresponding action could have been instituted, the action in this case could only be instituted when the delinquency was made known to the private respondent and not when the obligation to pay the premiums accrued.

Thus, even if the case of People v. Monteiro were not applied to the present case, R.A. 1161, §22(b) expressly provides that the period of prescription to file the necessary action against the employer should likewise commence on the day said violation was discovered.

Petitioner likewise contends that the 20-year prescriptive period does not apply to private respondent's claims prior to 1980 because Presidential Decree No. 1636, which amended R.A. 1161 to provide for such period, took effect on January 1, 1980. Hence, since R.A. 1161 did not originally provide for a prescriptive period prior to its amendment, the Civil Code provisions on prescription should govern.

The argument has no merit.

In amending R.A. 1161, P.D. 1636 provided for a 20-year prescriptive period and, in effect, extended the 10-year period of prescription provided by the Civil Code. For cases,

therefore, with rights arising prior to P.D. 1636, the 20-year prescriptive period shall take effect as long as the original prescriptive period has not expired. 12

Even assuming that the prescriptive period has begun to run in this case prior to the discovery of the violation in 1985, it could have started only at the time the benefit accrued, i.e., in September 1970 when private respondent left his job due to illness. On January 1, 1980, when P.D. 1636 took effect, the 10-year prescriptive period has not expired and was, thus, deemed extended to 20 years.

In any case, as earlier stated, the provision of §22(b) of R.A. 1161 is clear that the period of prescription commences to run only upon the discovery of the violation, which in this case took place in 1985. When the complaint was filed on August 14, 1985, therefore, less than one year has passed since the discovery of the delinquency. Nor do we find it necessary to discuss petitioner's contention that the Civil Code principles on divisible obligations and payments in installments should be applied, considering the clear and unmistakable language of R.A. 1161.

Second. Petitioner questions the finding of the Commission that private respondent was a regular employee of the rice mill and bijon factory when the compulsory SSS coverage took effect in 1957. He alleges that the Court of Appeals' findings are unsupported by evidence, and committed grave abuse of discretion in arriving at its decision.13

According to petitioner, the Court of Appeals itself found Leticia Lo's testimony "not very credible," 14 since the reports she submitted did not contain all the names of the

employees of the rice mill and noodle factory 15 which she mentioned in her testimony.

The contention has no merit. The appellate court did not just rely on the testimony of Leticia Lo but on the findings of the Social Security Commission, thus:

The Commission did not err in finding that Gregorio Luguibis was a regular employee of Jose Lo from September 1957 to September 1970 and a regular employee of the Rafael Lo Rice and Corn Mill from January, 1981 to September 1984. Such conclusion was reached after a thorough consideration of all the evidence (sic) presented by the parties. Hearings were conducted where Gregorio Luguibis, Jesus Balingasa, Rafael Lo, Leticia Lo, and Bernard Redillas testified. Documentary evidence (sic) were also presented as correctly found by the Commission, the evidence (sic) of Luguibis were more convincing.

The testimony of Gregorio Luguibis was explicit and clear. He named the exact dates of his actual employment at the rice mill, the nature of his work, and the amount of wages he was paid. Balingasa corroborated Lugubi's testimony with respect to the fact that the latter was indeed employed as mechanic at the rice mill.

On the other hand, the evidence of the opposing party with respect to the issue of when Luguibis became an employee of the rice mill and bijon factory was inconsistent. Rafael Lo alleged in one pleading that Luguibis became an employee at the rice mill on October 10, 1983 while he testified on cross-examination that Luguibis was hired sometime in 1980. Rafael's sister Leticia testified upon being cross-examined that prior to 10 October

1983, Luguibis was never hired as regular employee at the rice mill. 16

Time and again we have ruled that "in reviewing administrative decisions . . . the findings of fact made therein must be respected as long as they are supported by substantial evidence, even if not overwhelming or preponderant; that it is not for the reviewing court to weigh the conflicting evidence, determine the credibility of the witnesses, or otherwise substitute its own judgment for that of the administrative agency on the sufficiency of the evidence; that the administrative decision in matters, within the executive jurisdiction, can only be set aside on proof of grave abuse of discretion, fraud, or error of law." 17

Clearly, the Court of Appeals and the Commission had sufficient basis in concluding that private respondent was an employee of petitioner in 1957, when compulsory SSS coverage took effect.

WHEREFORE, the petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.

Footnotes

1 Per Justice Buenaventura J. Guerrero, concurred in by Justices Minerva P. Gonzaga Reyes (now Associate Justice of the Supreme Court) and Romeo A. Brawner.

2 Per Commissioner Raoul M. Inocentes.

3 Rollo, p. 47.

4 Id., p. 22.

5 Id., p. 70.

6 Id., p. 10.

7 192 SCRA 548 (1990).

8 Petition, p. 5; Rollo, p. 13.

9 Paat v. Court of Appeals, 266 SCRA 167 (1997).

10 183 SCRA 434 (1990).

11 Id., at 440.

12 See Pan Philippine Corp. v. Workman's Compensation Commission, 101 Phil. 66 (1957).

13 Id., p. 16.

14 CA Decision, p. 13.

15 Rollo, p. 17.

16 CA Decision, p. 13.

17 Timbancaya vs. Vicente, 9 SCRA 852, 854 (1963).

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. L-28134 June 30, 1971

SOCIAL SECURITY SYSTEM, petitioner, vs.THE COURT OF APPEALS and THE PHILIPPINE GUARDS PROTECTION UNIT, respondents.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. de Castro, Solicitor Antonio M. Martinez, Attorney Luz M. Villamor and Attorney Rafael M. Buñag for petitioner.

Alejandro P. Capitulo for private respondent.

 

VILLAMOR, J.:

This is an appeal by the Social Security System from the judgment of the Court of Appeals declaring null and void the membership of private cases Philippine Guards Protection Unit in the Social Security System from August 1, 1958 to June 17, 1960, pursuant to Republic Act No. 1161 (The Social security Act of 1954), as amended by Republic Act No. 1792 and accordingly excluding it from compulsory coverage during that period; declaring the said private cases

a member of the Social Security System only as of June 18, 1960, pursuant Republic Act No. 2658, which farther amended the said Section 9; and ordering the Social Security System to refund to the said cases the contributions remitted by the latter to the System corresponding to the first period mentioned.

The following proceedings gave rise to the present appeal:

On February 18, 1960, as a result of a letter sent by the Social Security System to the Philippine Guards Protection Unit threatening it with court action if it did not continue to remit its contributions to the System, the said protection unit, owned and operated by Clemente V. Eslao filed with the Social Security Commission a petition for exclusion from coverage under the System and for a refund its remittances for September and October 1958. The reason given by the unit is that it is not subject to compulsory coverage under the Social Security Act of 1954, as amended by Republic Act No. 1792, because it is not the employer, but merely the agent of the thirty-nine security guards or watchmen whose names appear in its membership list, for, actually, it has only one employee, namely, the clerk-secretary of the office. Under Section 9 of the Social Security Act of 1954, as amended by Republic Act No. 1792, which work effect on June 21, 1957, "the Commission may not compel any employer to become a member of the System unless he shall have been in operation for at least two years and has, at the time of admission, if admitted for membership during the first year of the System's operation, at least fifty employees and if admitted for membership in the following year of operation and thereafter, at least six employees ...."

After the issues had been joined and the case heard, the Social Security Commission, on April 12, 1961, handed down a resolution finding the Philippine Guards Protection Unit the employer of the security guards or watchmen, and accordingly declaring the latter subject to compulsory coverage. A motion to reconsider was filed, but the same was denied in an order of May 8, 1961. Hence, an appeal was interposed by the Philippine Guards Portion Unit with the Court of Appeals, which reversed the resolution and order of the Commission in a decision promulgated on July 24, 1967, the dispositive portion whereof is summarized in the opening sentence of this Opinion.

We have noticed that although under the judgment of the Court of Appeals private respondent's membership in the System as of June 18, 1960, has been expressly declared and recognized pursuant to Section 9 of the Social Security Act of 1954, as amended by Republic Act No. 2658, which eliminated among others, the requirement under Republic Act. No. 1792 that the employer should have at least six employees for purposes of compulsory coverage, it is not clear from the appealed decision if it is also the sense and intent of that court that the security guards or watchmen in the roster of private respondent should, under Republic Act No. 2658, likewise not be considered employees of the said respondent. As it now stands, the decision under review can be interpretend to mean that private cases became a member of the system as of June 18, 1960, when Republic Act No. 2658 took effect, because it had at least one employee, but that the security guards or watchmen in its roster should not — as under Republic Act No. 1792 — be considered private respondent's employees. To dispel any

doubt and obviate further suits on the matter, we hereby make it clear that the issue for resolution is whether or not for purposes of social security coverage, the security guards or watchmen in question should be considered private respondent's employee's not only under Republic Act No. 1792, but also under Republic Act No. 2658.

The pertinent facts concerning the mechanics of the tripartite relationship among the Philippine Guards Protection Unit, its clients and the security guards or watchmen, which were substantially adopted by the Court of Appeals, are succinctly stated in the basic resolution of the Social Security Commission, to wit:

... [W]henever a person approaches the owner of the agencies for employment, the owner tells him to secure a license as a special watchman and in the meantime, the owner would look for persons or establishments that need the service of a guard or guards. If no such persons or establishments are found after the applicant has secured a license, he remains with the agency as an "extra guard" and he is utilized by the agency as a substitute for those guards going on vacation or for those who are sick or otherwise absent (t.s.n., April 4, 1960, pp. 11-12). The owner may refuse to accommodate an applicant if he so desires (t.s.n., April 28, 1960, pp. 6-7). When a person or establishment requiring the service of a guard is found by the owner, a contract is entered into between the owner of the agency and the client, either orally or in writing (t.s.n., April 4, 1960, p. 17)

The owner collects from the client the fee for the service and from the amount received, the owner pays the salary of the guard, retaining a part thereof for himself as his "commission" as long as the watchman is assigned to guard the premises of a client (t.s.n., April 4, 1960, p. 18).

The owner of the agency furnishes the firearms and ammunitions, but the watchmen buy their own uniforms (t.s.n., April 4, 1960, pp. 20, 21).

If a client is dissatisfied with the service of a guard, as when a guard is always late, the agency may change the guard if the client so requests, or it may impose a fine on the guard as a disciplinary measure (t.s.n., April 4, 1960, pp. 17-18).

The reasons of the Court of Appeals for concluding that there is no employer-employee relationship between private cases and the security guards and watchmen may be summarized as follows: (a) it is to the employing units or companies that the watchmen render their services, hence, it is the former that are the employers of the watchmen, pursuant to Section 8 (c) of the Act, which defines an employer as one who "uses the services of another person who is under his orders as regards the employment," and to Section 8(d), which defines an employee as one "who performs services for an employer in which either or both mental and physical efforts are used and who receives compensation for such services where there is an employer-employee relation." While the companies or units hand over the watchmen's compensation to private respondent, which in turn pays the salaries of the watchmen after deducting a

commission, whatever right or interest private cases has in the said salaries is limited to receiving the same for, in behalf of and in trust for the watchmen, subject to its right to deduct its commission for securing work for them. (b) Since no service is rendered by the watchmen to private respondent, it follows that in relation to their duties of guarding, watching and protecting the interests of the companies or units, the watchmen receive no orders from private cases but from the said companies or units. (c) It is the companies or units that hire or engage the watchmen, because without their asking for the latter's services, the watchmen concerned cannot be employed in the said companies or units. (d) The employing company or unit has the right to ask for a change or replacement or even to terminate its agreement with private respondent. (e) The Supreme Court has in a number of cases, recognized special watchmen as employees of the companies to which they are assigned; and while those cases involve the interpretation of the Workers Compensation Act and not the Social Security Act, the two laws being kindred legislations aimed at providing protection to the employees against the hazards of disability, sickness and death it would not be improper to adopt a uniform interpretation.

Several considerations constrain us to differ with the views expressed above, and the conclusion arrived at, by cases Court of Appeals.

The Social Security Act of 1954, in its Section 8, contains, for purposes of social security coverage, definitions of terms, among which are the following:

(c) Employer. — Any person, natural or juridical, domestic or foreign, who carries on 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 subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government.

(d) Employee. — Any person who performs services for an "employer" in which either or both mental and physical efforts are used and who receives compensation for such services, where there is an employer-employee relationship.

Tested against the criteria in Section 8 (c) and (d) of the Act, Cases Philippine Guards Protection unit must be considered an employer of the thirty-nine security guards or watchmen, and the latter employees of said respondent. Private respondent carries on a business — watchmen's service — from which it derives its income in the form of what it terms "commission". It uses the services of other persons — the guards or watchmen — to carry on its business. Without them, cases would not be in business, which consists solely in the letting out of watchmen's services for a fee. The guards or watchmen render their services to private respondent by allowing themselves to be assigned by said respondent, which, furnishes them arms and ammunition, guard and protect, the properties and interests of private respondents clients, thus enabling that respondents to fulfill

its contractual obligation. Who the clients will be under what terms and conditions the services will be rendered, are matters determined not by the guards or the watchmen, but not by private respondents. On the other hand the client companies have no hand in selecting who among the guards or watchmen shall be assigned to them. It is private respondents that issues assignment orders and instruction and exercise control and supervision over the guard or watchmen, so much so that if for one reason or another, the client is dissatisfied with a services of a particular guard the client cannot himself terminate the services of a particular guard, but has to notify private respondents, which either substitutes with another or metes out to him disciplinary measures. That in the course of a watchman's assignment the client conceivably issues instruction to him, does not in the least detract from the fact that private respondents is the said employer of the said watchman, for in contemplation such instruction carry no more weight than mere request, the privity of contract between the client and private respondents, not between the client, the guardsman or watchman. Collolarily, such giving out of instructions inevitably spring from the clients right predicated on the contract for services entered into by it with private respondents.

In the matter of compensation, there can be question to all the guards or watchmen receive compensation from private respondents and not from private companies or establishments whose premises they are guarding. The fee contracted to be paid by the client is admittedly not equal to the salary of a guard or a watchman; such fee is arrived at independently of the salary to which the guard or watchman

is entitled under his arrangements with private respondent. All the fees received by private respondent from its clients constitute, its gross income; and the salaries it pays to the guards or watchmen and to its clerk-secretary, its ex for, say, office rent, light, water and telephone services, licenses, firearms and ammunition, are expenses incurred in the operation of the business. The net income or profit arrived at after deducting these expenses from the gross income. Consequently, the term "commission" as applied to the difference between the fee received from a client and the salary paid to a guard or watchman is a misnomer and its use by private cases can alter the relationship of employer and employee between it and the guards or watchmen.

In defining an employee, sanction 8(d) employs the phrase "who receives compensation for such services, where is an employer-employee relationship." Considering our view that the guards or watchmen included in its roster are private respondent's employees, and considering, further, that private respondent is bona fide independent contractor, the client companies may not be deemed employers of said guards or watchmen, pursuant to Section 8(j) (10), which reads:

Employees of bona fide independent contractors shall not be deemed employees of the employer engaging the service of said contractors.

In Viana v. Al-Lagadan and Pica, 99 Phil., 408, 411-412, we said:

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 employee's conduct — although the latter is the most important element (35 AM. Jur. 445). ....

From our earlier discussion it can be seen that all the four elements enumerated above are present to make out a relationship of employer and employee between private cases and its thirty-nine security guards or watchmen.

The cases cited by respondent Court of Appeals, none of which, by the way, involves an interpretation of the Social Security Act of 1954, are not applicable. Associated Watchmen and Social Security Union (PTWO), et al. v. United States Lines, et al., 101 Phil., 896, involved a determination of whether a labor dispute existed between the watchmen and the companies to which they were assigned by the watchmen's agencies, and applied Section 2 of Republic Act No. 875 (The Industrial Peace Act), which defined a labor dispute as "any controversy concerning terms, tenure ... regardless of whether the disputants stand in the proximate relation of employer and employee." Maligaya Ship Watchmen Agency, et al. v. Associated Watchmen And Security Union (PTWO), 103 Phil., 920, involved the determination of who among the members of watchmen's agencies should be allowed to take part in certification elections; and we there held that the watchmen

who were actually guarding the ships and their cargo should be considered laborers or employees of the shipping lines for purposes of the elections, in view, among others, of the following considerations:

... [T]here never were contracts between the shipping lines and their agencies, on the one hand, and the watchmen agencies-petitioners, on the other. The guarding of each ship and its cargo was never the subject of a contract between one and the other. The watchmen agencies never undertook for a specified sum the guarding of the vessels and their cargo, were never paid therefor a lump sum without reference to the number of watchmen performing the duties of guarding and the wages that each should receive for his work. ....

The fact situation in the case is quite different from that in the present, for here there is admittedly a contract entered into, other orally or in writing, between private respondent and its client companies, and, precisely, the guarding of the companies' premises and properties is the subject of the contracts. In the payment by the client to private respondents of compensation, there is reference to the number of watchmen but none to the wages each shall receive for his work.

In Nicolas, et al. v. Dacara, et al., 106 Phil., 934, the issue was whether a sum of money in the hands of protective agency representing "salaries of guards employed by the different companies affiliated with the detective and

protective agency" could be garnished for the payment of back wages judicially adjudicated in favor of other guards affiliated with the same protective agency. We there held, citing Maligaya Ship Watchmen Agency, that since the money in question secured by the sheriff represented wages due the guards "from companies that have employed their services, that the said amount really and actually represents such wages," the same could not be attached or garnished for the debts of the protective agency to the other guards. Again, there is no similarity between that case and the present, for here the security guards or watchmen receive their salaries not from the companies whose premises and properties they guard, but from private respondent itself. In Compañia Maritima v. Cabagnot Vda. de Hio, et al. 107 Phil., 873, we held that for purposes of workmen's compensation benefits, a watchman recruited by a protective agency to guard the premises of a company should be considered an employee of said company should be considered an employee of said company; but there "it was found by the (Workmen's Compensation) Commission that the salary of the deceased was paid directly from the funds of petitioner," the Compañia Maritima. It will be borne in mind, moreover, that in contradistinction with Section 8(j) (10) of the Social Security Act of 1954 (quoted above), under Section 39 of the Workmen's Compensation Act the term "employer" 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 the reason that there is an independent contractor in the same, or for any other reason, is not the direct employer of laborers employed there."

There are practical considerations why private respondents Philippine Guards Protection Unit, and not its clients, would be considered, for purposes of social security coverage, the employer of the 39 guards or watchmen listed in its roster (a) A watchman is not permanently assigned to a client; for one reason or another he may be pulled out of a particular assignment and detailed to another client. Consequently, different clients have to deduct premiums from different watchmen at different times and remit them to the System together with the clients' own share of the premiums. (b) Under the arrangements between private respondents and its the clients, the latter do not determine how much salary is to be plaid to the watchmen. The clients merely pay to private respondent the fee stipulated in their contracts. How, then, can a client deduct the premiums due from a watchman? And how can it determine the amount of the watchman's premium as well as its own? (c) Service performed by one person for another is not considered an employment if the same is "purely casual and not for the purpose of occupation or business of the employer" (Section 8[j][3], Social Security Act of 1954). Under private respondent's hypothesis, a watchman may at times be considered an employee and at other times not, depending on whether or not he happens to be assigned to a client which carries on a trade business, industry, undertaking or activity of any kind (Section 8[c], supra). A fortiori, of private respondent's 39 watchmen, some may be covered by the System's plan, while others not. To pursue the matter further, all the 39 watchmen may be covered sometimes, and not at other times. (d) If private respondent's clients are considered the watchmen's employees, it may happen that the 39 different watchmen, have 39 different employers,

which absurd, considering that all the watchmen are on the payroll and under the supervision of only one entity.

PREMISES CONSIDERED, the judgment appealed from is reversed and set aside. Private respondents membership in the Social Security System from August 1, 1958 up to the present is declared valid and effective. Coverage in the System upon all its employees falling within the required age level, including its security guards or watchmen, is hereby declared compulsory; and private respondent is directed to pay or remit to petitioner all back premiums due. Costs against private respondent.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo and Makasiar, JJ., concur.

Castro, J., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSupreme Court

Manila

 FIRST DIVISION

  

ALEXANDER B. GATUS,                                  Petitioner,

     

- versus -     SOCIAL SECURITY SYSTEM,

Respondent.

G.R. No. 174725 

Present: CORONA, C.J.,     Chairperson,     VELASCO, JR.,LEONARDO-DE CASTRO,DEL CASTILLO, andPEREZ, JJ. Promulgated:  January 26, 2011

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  x  

D E C I S I O N  LEONARDO-DE CASTRO, J.:  

This is a petition for review on certiorari of the Decision[1] of the Court of

Appeals dated May 24, 2006 in CA-G.R. SP No. 88691 (the assailed Decision)

and theResolution[2] dated August 7, 2006 issued by the same court in said case. 

 

The facts, as summarized by the Court of Appeals, are as follows:

 [Petitioner Alexander B.] Gatus worked at the Central Azucarera de Tarlac

beginning on January 1, 1972.  He was a covered member of the SSS (SS No. 02-0055015-6).  He optionally retired from Central Azucarera de Tarlac upon reaching 30 years of service on January 31, 2002, at the age of 62 years.  By the time of his retirement, he held the position of Tender assigned at the Distillery Cooling Tower.

 In the course of his employment in Central Azucarera de Tarlac, he was

certified fit to work on October 21, 1975 and was accordingly promoted to a year-round regular employment.

 He suffered chest pains and was confined at the Central Luzon Doctor’s

Hospital in Tarlac City on August 12, 1995.  Upon discharge on August 17, 1995, he was diagnosed to be suffering from Coronary Artery Disease (CAD): Triple Vessel and Unstable Angina.  His medical records showed him to be hypertensive for 10 years and a smoker.

 On account of his CAD, he was given by the SSS the following EC/SSS

Permanent Partial Disability (PPD) benefits: (a) 8 monthly pensions effective September 1, 1994 and (b) 4 monthly pensions effective January 3, 1997.  He became an SSS retirement pensioner on February 1, 2002.

 Sometime in 2003, an SSS audit revealed the need to recover the EC

benefits already paid to him on the ground that his CAD, being attributed to his chronic smoking, was not work-related.  He was notified thereof through a letter dated July 31, 2003.

 Convinced that he was entitled to the benefits, he assailed the decision but

the SSS maintained its position.  The SSS also denied his motion for reconsideration.

 He elevated the matter to the ECC, which denied his appeal on

December 10, 2004, essentially ruling that although his CAD was a cardiovascular disease listed as an occupational disease under Annex A of the Implementing Rules on Employees’ Compensation, nothing on record established the presence of the qualifying circumstances for responsibility; that it was incumbent upon him to prove that the nature of his previous employment and the conditions prevailing therein had increased the risk of contracting his CAD; and that he had failed to prove this requisite.  The ECC concluded:

 As explained medically, the development of IHD or

otherwise termed as Coronary Artery Disease (CAD) is caused by atherosclerosis, the hardening of the inner lining of arteries.  One of the risk factors considered by medical science for the development of atherosclerosis is smoking.  Appellant had been documented to be a chronic smoker and such factor which is not in any way related to any form of employment increased his risk of contracting heart disease. Hence, this recourse, wherein he contends that he had contracted the

disease due to the presence of harmful fuel smoke emission of methane gas from a nearby biological waste digester and a railway terminal where diesel-fed locomotive engines had “spew(ed) black smoke;” and that he had been exposed for 30 years to various smoke emissions that had contained carbon monoxide, carbon dioxide, sulfur, oxide of nitrogen and unburned carbon.[3]  (Emphases added.)

  

In the assailed Decision, the Court of Appeals held that petitioner is not

entitled to compensation benefits under Presidential Decree No. 626, as amended,

affirming the Decision of the Employees’ Compensation Commission (ECC),

which was likewise a confirmation of the audit conducted by the Social Security

System (SSS).

 

Thus, this petition wherein, even without assistance of counsel, petitioner

comes to this Court contending that “the appellate court’s decision is flawed [and]

if not reversed will result in irreparable damage to the interest of the petitioner.”[4]

 

Petitioner lists the following as errors in the questioned Decision: 

 I.                   The appellate court’s decision is against existing jurisprudence on

increased risk theory of rebook condition and progression and

deterioration of illness that supervened during employment and persisted after optional retirement.

 II.                Violation of due process.[5]

  

The Court of Appeals agreed with the ECC’s findings that based on his

medical records, petitioner has been hypertensive for ten (10) years and smokes 20

packs of cigarettes a year.[6]  His medical condition was explained in the following

manner by the ECC: Ischemic Heart Disease (IHD) is the generic designation for a group of

closely related syndromes resulting from ischemia – an imbalance between the supply and demand of the heart for oxygenated blood.  Because coronary artery narrowing or obstruction owing to atherosclerosis underlies MI, it is often termed coronary artery disease (CAD). Atherosclerosis which is primarily due to smoking, diet, hypertension and diabetes is the main culprit in the development of CAD. (Pathologic Basis of Disease by Robbins, 5th edition.)[7] (Emphasis supplied.)

  

Petitioner claims that he was in good health when he first entered

the Central Azucarera de Tarlac as a factory worker at the Alcohol Distillery Plant

in 1972.[8]  He alleges that in the course of his employment he suffered “essential

hypertension” starting 1995, when he experienced chest pains and was confined at

the Central Luzon Doctor’s Hospital in Tarlac City; that he was diagnosed as

having “Coronary Artery Disease (CAD) [Triple] Vessel and Angina Pectoris” and

hypertension; that he was initially granted disability benefits by the SSS but his

request for additional benefits was denied; and that the ECC denied his appeal due

to allegations of smoking. He asserts that he has cited “technical, scientific and

medical authorities to bolster his claim” including the exposure he experienced for

thirty (30) years from the alcohol distillery to “hydrocarbons and [locomotives],”

carbon monoxide, carbon dioxide, sulfur, phosphorous, nitrogen oxides and soot

(particulate matter). [9]

 

Petitioner uses various references, including encyclopedia and medical

books, to discuss the general effects of pollution, mostly caused by the burning of

fossil fuels, to people with cardiovascular diseases; and the aggravation of

coronary artery diseases brought about by exposure to carbon monoxide.

[10]  Petitioner claims that “air pollution (carbon monoxide and lead from gasoline)

contributed to the development of essential hypertension and its complications:

[c]oronary artery disease, hypertensive cardiovascular disease and stroke.”[11]

 

Petitioner insists that the allegation of cigarette smoking was not proven and

that the ECC did not present a document signed by competent medical authority to

back such claim.  Petitioner claims that there is no showing that the ECC records

were elevated to the Court of Appeals, and that the latter had completely ignored

his evidence.

 

In its Comment[12] dated December 11, 2006, respondent SSS alleges that

the Decision of the Court of Appeals affirming the Decision of the ECC was in

accordance with law and existing jurisprudence.  Respondent SSS further alleges

that as viewed from the records of the case, the petitioner failed to show proof by

mere substantial evidence that the development of his disease was work-related;

[13] that petitioner’s heart ailment had no causal relation with his employment; and

that “[as] viewed from by his lifestyle, he was a chain smoker, a habit [which

had] contributed to the development of his heart ailment.”[14]

 

Respondent further alleges that medical findings have revealed that nicotine

in cigarette smoke damages the blood vessels of the heart, making them susceptible

to the hardening of the inner lining of the arteries.  As to petitioner’s contention

that there were harmful fuel and smoke emissions due to the presence of methane

gas from a nearby biological waste as well as a railway terminal where diesel-fed

locomotive engines spewed black smoke, respondent counters that these were mere

allegations that were not backed by scientific and factual evidence and that

petitioner had failed to show which harmful emissions or substances were present

in his working environment and how much exposure thereto had contributed to the

development of his illness.  Respondent points out that petitioner’s “bare

allegations do not constitute such evidence that a reasonable mind might accept as

adequate to support the conclusion that there is a causal relationship between his

working conditions” and his sickness and that “the law is clear that award of

compensation cannot rest on speculations or presumptions.”[15]

 

The sole issue to be determined is whether the Court of Appeals committed

grave abuse of discretion in affirming the finding of the ECC that petitioner’s

ailment is not compensable under Presidential Decree No. 626, as amended.

 

The grounds for compensability are set forth in Section 1, Rule III of the

Amended Rules on Employees’ Compensation (the “Amended Rules”), the

pertinent portion of which states:

 RULE III

Compensability 

Sec.  1. Grounds — x x x (b)  For the sickness and the resulting disability or death to be

compensable, the sickness must be the result of an occupational disease listed under Annex “A” of these Rules with the conditions set therein satisfied; otherwise, proof must be shown that the risk of contracting the disease is increased by the working conditions.

  

Further, under Annex “A” of the Amended Rules,  

For an occupational disease and the resulting disability or death to be compensable, all of the following conditions must be satisfied:

 1.  The employee's work must involve the risks described herein; 2. The disease was contracted as a result of the employee's exposure to the described risks; 3.  The disease was contracted within a period of exposure and under such other factors necessary to contract it; 4.      There was no notorious negligence on the part of the employee.

  

Cardiovascular diseases are considered as occupational when contracted

under any of the following conditions:

 (a)  If the heart disease was known to have been present during employment there must be proof that an acute exacerbation clearly precipitated by the unusual strain by reason of the nature of his work. (b)  The strain of work that brings about an acute attack must be of sufficient severity and must be followed within twenty-four (24) hours by the clinical signs of a cardiac insult to constitute causal relationship. (c)  If a person who was apparently asymptomatic before subjecting himself to strain at work showed signs and symptoms of cardiac injury during the performance of his work and such symptoms and signs persisted, it is reasonable to claim a causal relationship.[16]

  

The burden of proof is thus on petitioner to show that any of the above

conditions have been met in his case.  The required proof is further discussed

in Ortega v. Social Security Commission[17]:

 The requisite quantum of proof in cases filed before administrative or

quasi-judicial bodies is neither proof beyond reasonable doubt nor preponderance of evidence. In this type of cases, a fact may be deemed established if it is supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. In this case, substantial evidence abounds.[18]

  

As found by the Court of Appeals, petitioner failed to submit substantial

evidence that might have shown that he was entitled to the benefits he had applied

for.  We thus affirm in toto the findings and conclusions of the Court of Appeals in

the questioned Decision and quote with approval the following pronouncements of

the appellate court:

 The degree of proof required under P.D. 626 is merely substantial

evidence, which means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Accordingly, the claimant must show, at least by substantial evidence, that the development of the disease was brought about largely by the conditions present in the nature of the job.  What the law requires is a reasonable work connection, not a direct causal relation.

 Gatus was diagnosed to have suffered from CAD; Triple Vessel and

Unstable Angina, diseases or conditions falling under the category of Cardiovascular Diseases which are not considered occupational diseases under the Amended Rules on Employees Compensation.  His disease not being listed as an occupational disease, he was expected to show that the illness or the fatal disease was caused by his employment and the risk of contracting the disease was increased or aggravated by the working conditions.  His proof would constitute a reasonable basis for arriving at a conclusion that the conditions of his employment had caused the disease or that such working conditions had aggravated the risk of contracting the illness or the fatal disease.

 Under ECC Resolution No. 432 dated July 20, 1977, cardiovascular

disease is deemed compensable under any of the following conditions, viz: 

(a)                If the heart disease was known to have been present during employment, there must be proof that an acute exacerbation was clearly precipitated by the unusual strain by reasons of the nature of his work.

 (b)               The strain of work that brings about an acute attack

must be of sufficient severity and must be followed within 28 hours of the clinical signs of cardiac insult to constitute causal relationship.

 x x x x Gatus did not discharge the burden of proof imposed under the Labor

Code to show that his ailment was work-related.  While he might have been exposed to various smoke emissions at work for 30 years, he did not submit satisfactory evidence proving that the exposure had contributed to the development of his disease or had increased the risk of contracting the illness.  Neither did he show that the disease had progressed due to conditions in his job as a factory worker.  In fact, he did not present any physician’s report in

order to substantiate his allegation that the working conditions had increased the risk of acquiring the cardiovascular disease.

 Verily, his mere contention of exposure to various smoke emissions in the

working environment for a period of time does not ipso facto make the resulting disability compensable.  Awards of compensation cannot rest on speculations or presumptions, for the claimant must prove a positive proposition.  As pronounced in Sante v. Employees’ Compensation Commission:

 x x x What kind and quantum of evidence would constitute

an adequate basis for a reasonable man (not necessarily a medical scientist) to reach one or the other conclusion, can obviously be determined only on a case-to-case basis.  That evidence must, however, be real and substantial, and not merely apparent; for the duty to prove work-causation or work-aggravation imposed by existing law is real… not merely apparent… Moreover, he failed to show the presence of any of the conditions imposed

for cardio-vascular diseases by Sec. 18.  Hence, the affirmance of the SSS decision was properly made.

 The petitioner’s plight might call for sympathy, particularly in the light of

his 30 years of service to the company, but his petition cannot be granted on that basis alone.  The policy of extending the applicability of P.D. 626 as many qualified employees as possible should be balanced by the equally vital interest of denying undeserving claims for compensation.

 In fine, Gatus was not qualified for the disability benefits under the

employees compensation law. WHEREFORE, the Decision of the Employees Compensation

Commission is AFFIRMED.[19]

  

Petitioner filed a Motion for Reconsideration but this was denied by the

Court of Appeals in its Resolution dated August 7, 2006, which states:

 Finding nothing cogent and persuasive in the petitioner’s Motion for

Reconsideration dated June 20, 2006, we DENY the motion. We point out that our decision of May 24, 2006 has fully explained the

bases for the ruling we have made, including the matters being discussed by the

petitioner in his Motion for Reconsideration. We consider it repetitious and redundant to discuss them herein again.[20]

  

The questioned Decision deemed as established fact that petitioner is a

cigarette smoker; but petitioner vehemently denies this, saying there is no

competent evidence to prove he had that habit.  What petitioner would like this

Court to do is to pass upon a question of fact, which the ECC, the SSS, and the

Court of Appeals have used to deny his claim for compensation.  This is not

allowed under Section 1 of Rule 45, which states that "[t]he petition shall

raise only questions of law which must be distinctly set forth."[21] Hence, questions

of fact may not be taken up in a petition for review on certiorari such as this case

now before us.  As we have held previously:

 A question of fact exists when the doubt centers on the truth or falsity of

the alleged facts while a question of law exists if the doubt centers on what the law is on a certain set of facts. There is a question of fact if the issue requires a review of the evidence presented or requires the re-evaluation of the credibility of witnesses. However, if the issue raised is capable of being resolved without need of reviewing the probative value of the evidence, the question is one of law.[22]

  

This was emphasized in La Union Cement Workers Union v. National Labor

Relations Commission,[23] thus:

 As an overture, clear and unmistakable is the rule that the Supreme Court is not a trier of facts. Just as well entrenched is the doctrine that pure issues of fact may not be the proper subject of appeal by certiorari under Rule 45 of the Revised Rules of Court as this mode of appeal is generally confined to questions of law. We therefore take this opportunity again to reiterate that only questions of law, not questions of fact, may be raised before the Supreme Court in a petition for

review under Rule 45 of the Rules of Court. This Court cannot be tasked to go over the proofs presented by the petitioners in the lower courts and analyze, assess and weigh them to ascertain if the court a quo and the appellate court were correct in their appreciation of the evidence.[24]

  

The matter of petitioner’s cigarette smoking, established by two competent

government agencies and the appellate court, is thus a matter that cannot be

questioned before us via petition for review.

 

There is no doubt that petitioner deserves sympathy because even the

benefits already given to him were questioned after the SSS found that he was a

chronic cigarette smoker.  For humanitarian reasons, as he pursued his claim all the

way to the Court as an indigent litigant, and due to his advancing age, we would

like to clarify that what had already been given him should no longer be taken

away from him.  But he is not entitled to further compensation for his condition.

 

We have once more put great weight to the factual findings of administrative

agencies and quasi-judicial bodies, namely the SSS and the ECC, as they have

acquired expertise in all matters relating to employee compensation and disability

benefits.  As we have held in Ortega v. Social Security Commission[25]:

 It is settled that the Court is not a trier of facts and accords great weight to

the factual findings of lower courts or agencies whose function is to resolve factual matters. It is not for the Court to weigh evidence all over again. Moreover, findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are

generally accorded not only respect but finality when affirmed by the Court of Appeals.[26]

  

WHEREFORE, premises considered, the petition is hereby DENIED.

 SO ORDERED.    

                                                 TERESITA J. LEONARDO-DE CASTRO                                       Associate Justice

   

WE CONCUR:     

RENATO C. CORONAChief JusticeChairperson

      

PRESBITERO J. VELASCO, JR.Associate Justice

MARIANO C. DEL CASTILLOAssociate Justice

               

   JOSE PORTUGAL PEREZ

Associate Justice        

CERTIFICATIONPursuant to Section 13, Article VIII of the Constitution, I certify that the

conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.   

RENATO C. CORONA                                                            Chief Justice

 

[1]               Rollo, pp. 15-20; penned by Associate Justice Lucas P. Bersamin (now a member of this Court) with Associate Justices Renato C. Dacudao and Mariflor Punzalan Castillo, concurring.

[2]               Id. at 28.[3]               Id. at 16-17.[4]               Id. at 2.[5]               Id.[6]               CA rollo, p. 17.[7]               Id. at 18.[8]               Rollo, p. 2.[9]               Id. at 3.[10]             Id. at 3-5.[11]             Id. at 5.[12]             Id. at 54-59.[13]             Id. at 55.[14]             Id. at 56.[15]             Id. at 57.[16]             No. 18, Annex “A,” Amended Rules on Employees’ Compensation.[17]             G.R. No. 176150, June 25, 2008, 555 SCRA 353.[18]             Id. at 364.[19]             Rollo, pp. 18-20.[20]             Id. at 28.[21]             The Petition was filed on August 31, 2006, prior to the amendment of Rule 45 by A.M. No. 07-7-12-SC

on December 27, 2007.  The text of Rule 45, Section 1 then read:      

A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

[22]             Development Bank of the Philippines v. Traders Royal Bank, G.R. No. 171982, August 18, 2010.[23]             G.R. No. 174621, January 30, 2009, 577 SCRA 456.[24]             Id. at 462.[25]             Supra note 17.[26]             Id. at 363-364.

FIRST DIVISION

                                               

NELY T. CO,                                                      G.R. No. 160265

                              Petitioner,

           

Present:

                                                                    PUNO, C.J., Chairperson,

  CARPIO,

             -  v e r s u s  -     CORONA,

                                                          LEONARDO-DE CASTRO and

                                                                   BERSAMIN, JJ.

 

 

PEOPLE OF THE

PHILIPPINES, SOCIAL

SECURITY SYSTEM,

OFFICE OF THE SOLICITOR

GENERAL and SPOUSES JOSE

and MERCEDES LIM.*,

                       Respondents. Promulgated:

July 13, 2009

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D E C I S I O N

CORONA, J.:

This is a petition for review on certiorari[1] of the May 15, 2003 and October

6, 2003 resolutions[2] of the Court of Appeals (CA) in CA-G.R. SP No.

69510.

On January 12, 2001, an Information charging petitioner Nely T. Co with

violation of Section 22(d) in relation to Section 28(e) of RA [3] 1161, as amended by

RA 8282 (the Social Security Law of 1997)[4] was filed in the Regional Trial Court

(RTC), Quezon City, Branch 78, on the basis of the complaint of respondent

spouses Jose and Mercedes Lim, who claimed to be petitioner’s employees.

[5] Petitioner was accused of failing to remit the compulsory contributions of

respondent spouses to respondent Social Security System (SSS).[6]

On July 3, 2001, petitioner filed a motion to quash the Information, arguing

that the facts alleged in the Information did not constitute an offense because

respondent spouses were not her employees. In support of her motion,

petitioner cited the ruling of the National Labor Relations Commission (NLRC) on

the issue of whether petitioner and respondent spouses had an employer-

employee relationship with her or her company.

Prior to this, on March 27, 2000 (before the filing of the Information),

respondent spouses had filed a labor case for illegal dismissal and nonpayment of

overtime pay, holiday pay, holiday premium pay, service incentive leave and

13th month pay against Ever-Ready Phils., Inc.[7] and its officers Joseph Thomas Co,

William Co, Wilson Co and petitioner.[8]

On September 29, 2000, labor arbiter (LA) Ernesto S. Dinopol rendered a

decision dismissing the complaint for lack of merit. He held that respondent

spouses had voluntarily left the company as shown by the deeds of release and

quitclaim they executed. They were also not entitled to their monetary claims

under Article 82 of the Labor Code because they were field personnel of the

company.[9]

Aggrieved, both parties appealed to the NLRC. In a resolution dated May 31,

2001, it affirmed the decision of the LA and ruled that the respondent spouses, as

sales representatives, were independent contractors.[10] Therefore, there was no

employer-employee relationship between the parties. This NLRC resolution

attained finality on December 20, 2001.[11]

Notwithstanding the NLRC ruling on the lack of employer-employee

relationship between petitioner and respondent spouses, Judge Percival Mandap

Lopez of the RTC denied petitioner’s motion to quash (the Information charging

violation of the SSS law) in a resolution dated November 12, 2001. [12] On March 8,

2002, petitioner filed a petition for certiorari and prohibition against Judge Lopez

in the CA seeking to set aside the November 12, 2001 RTC resolution denying her

motion to quash.

In a resolution dated January 13, 2003, the CA required petitioner to

implead the People of the Philippines, SSS, Office of the Solicitor General and

respondent spouses.[13] For petitioner’s failure to comply with this order, the CA

dismissed the petition on May 15, 2003 and denied reconsideration on October 6,

2003. According to the CA, petitioner was bound by the negligence of her former

counsel.

Hence, this petition.

For our resolution are the following issues: (1) whether petitioner’s motion

for reconsideration of the CA’s dismissal of the petition was correctly denied and

(2) whether petitioner’s motion to quash should have been granted by the RTC.

On the first issue, petitioner argues that the CA should have granted her

motion for reconsideration of the May 15, 2003 resolution. She asserts that

under Rule 37, Section 1 (a) of the Rules of Court, the abandonment of her case

by her former counsel[14] amounted to extrinsic fraud which was a meritorious

ground.

Petitioner is incorrect. Extrinsic fraud is a valid ground in a motion for new

trial, not a motion for reconsideration:

SECTION 1. Grounds of and period for filing motion for new trial or reconsideration. ― Within the period for taking an appeal, the aggrieved party may move the trial court to set aside the judgment or final order and grant a new trial for one or more of the following causes materially affecting the substantial rights of said party:

(a) Fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded against and by reason of which such aggrieved party has probably been impaired in his rights; or

(b) Newly discovered evidence, which he could not, with reasonable diligence, have discovered and produced at the trial, and which if presented would probably alter the result.

Within the same period, the aggrieved party may also move for reconsideration upon   the   grounds   that   the  damages  awarded  are  excessive,   that   the  evidence   is insufficient to justify the decision or final order, or that the decision or final order is contrary to law. (Emphasis supplied)

Petitioner asserted no other ground aside from extrinsic fraud. Therefore, her

motion was properly denied and we do not see the need to discuss the merits of

such ground.

Nevertheless, in the interest of justice and to prevent undue delay in the

disposition of this case, we tackle the next issue raised by petitioner despite the

CA’s proper dismissal of her petition.[15] This was a criminal case and the

possibility of a person being deprived unjustly of her liberty due to the procedural

lapse of counsel was a strong and compelling reason to warrant suspension of the

Rules of Court.[16] For the rule-making power of this Court is coupled with the duty

to protect and promote constitutional and substantive rights,[17] not to defeat

them. Thus, the rules of procedure should be viewed as mere tools designed to

facilitate the attainment of justice. Their strict and rigid application, resulting in

technicalities that tend to frustrate rather than promote substantial justice, must

always be avoided.[18]

 

Petitioner maintains that the factual finding in the illegal dismissal case that

respondent spouses were not her employees is binding in this case. There being

no employer-employee relationship, respondent spouses were not entitled to

coverage under RA 1161, as amended, and petitioner should not be penalized

under said law. We agree.

Well-settled is the rule that the mandatory coverage of RA 1161, as

amended, is premised on the existence of an employer-employee relationship.

[19] Applicable here isSmith Bell & Co., Inc. v. Court of Appeals:[20]

Based on the records of the case at bar and those of G.R. No. L-44620, it is clear that the resolution of this Court dated 26 January 1977, rendered in G.R. No. L-44620 [illegal dismissal case], constitutes a bar to SSC Case No. 2453. We, therefore, find merit in the petition at bar.

xxx xxx xxx

It is true that in SSC Case No. 2453, private respondents sought to enforce their alleged right to compulsory coverage by the SSS on the main allegation that they are employees of petitioner company. On the other hand, in NLRC Case No. ROVII-153, private respondents, in order to support their position that they were illegally dismissed by petitioner company from their work, maintained that there was an employee-

employer relationship existing between petitioner and private respondents at the time of such dismissal. In other words, the issue common to both cases is whether there existed an employee-employer relationship at the time of the occurrence of the acts complained of both in SSC Case No. 2453 and NLRC Case No. RO-VII-153.

It is well to note that the said issue was adjudged with finality in G.R. No. L-44620, through this Court's resolutions dated 26 January 1977 and 14 March 1977. The dismissal of the petition of the herein private respondents in G.R. No. L-44620, though contained in a minute resolution, was an adjudication on the merits of the case.

The present controversy, therefore, squarely falls under the umbrage of res judicata, particularly, under the rule on "conclusiveness of judgment." Following this rule, as stated inBienvenida Machoca Arcadio vs. Carriaga, Jr., we hold that the judgment in G.R. No. L-44620 bars SSC Case No. 2453, as the relief sought in the latter case is inextricably related to the ruling in G.R. No. L-44620 to the effect that private respondents, are not employees of petitioner.[21] (Emphasis supplied)

The only difference is that the instant case is a criminal case whereas the

case in Smith Bell was a civil case. However, the doctrine of conclusiveness of

judgment also applies in criminal cases. As we declared in Constantino v.

Sandiganbayan (First Division):[22]

Although the instant case involves a criminal charge whereas Constantino involved an administrative charge, still the findings in the latter case are binding herein because the same set of facts are the subject of both cases. What is decisive is that the issues already litigated in a final and executory judgment preclude — by the principle of bar by prior judgment, an aspect of the doctrine of res judicata, and even under the doctrine of "law of the case," — the re-litigation of the same issue in another action. It is well established that when a right or fact has been

judicially tried and determined by a court of competent jurisdiction, so long as it remains unreversed, it should be conclusive upon the parties and those in privity with them. The dictum therein laid down became the law of the case and what was once irrevocably established as the controlling legal rule or decision continues to be binding between the same parties as long as the facts on which the decision was predicated continue to be the facts of the case before the court. Hence, the binding effect and enforceability of that dictum can no longer be resurrected anew since such issue had already been resolved and finally laid to rest, if not by the principle of res judicata, at least by conclusiveness of judgment.

It may be true that the basis of administrative liability differs from criminal liability as the purpose of administrative proceedings on the one hand is mainly to protect the public service, based on the time-honored principle that a public office is a public trust. On the other hand, the purpose of the criminal prosecution is the punishment of crime. However, the dismissal by the Court of the administrative case against Constantino based on the same subject matter and after examining the same crucial evidence operates to dismiss the criminal case because of the precise finding that the act from which liability is anchored does not exist.

It is likewise clear from the decision of the Court in Constantino that the level of proof required in administrative cases which is substantial evidence was not mustered therein. The same evidence is again before the Court in connection with the appeal in the criminal case. Ineluctably, the same evidence cannot with greater reason satisfy the higher standard in criminal cases such as the present case which is evidence beyond reasonable doubt.[23]

We are mindful that in Republic v. Asiapro Cooperative,[24] we ruled that the

question on the existence of an employer-employee relationship for the purpose

of determining the coverage of the SSS law falls within the jurisdiction of the

Social Security Commission (SSC) which is primarily charged with the duty of

settling disputes under RA 1161, as amended.[25] In that case, the SSS filed a

petition in the SSC praying that Asiapro Cooperative (Asiapro) be directed to

register as an employer, to report its owners-members as covered employees

under the compulsory coverage of SSS and to remit the necessary contributions in

accordance with the law.[26] Asiapro sought the dismissal of the petition alleging

that no employer-employee relationship existed between it and its owners-

members, thus SSC had no jurisdiction over it. We held that, based on Section 5

of RA 8282,[27] SSC had jurisdiction over the petition.

Republic v. Asiapro Cooperative, however, is inapplicable here as this case

does not concern the issue of jurisdiction of the SSC. Furthermore, the question of

the existence of an employer-employee relationship was already disposed of with

finality, albeit in the context of an illegal dismissal case in the NLRC. There was no

need for the RTC to make an independent finding because the doctrine of

conclusiveness of judgment had already set in.

The reasons for establishing the principle of "conclusiveness of judgment" are founded on sound public policy, and to grant this petition would have the effect of unsettling this well-settled doctrine. It is allowable to reason back from a judgment to the basis on which it stands, upon the obvious principle that where a conclusion is indisputable, and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion. When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith,   it  cannot be again  litigated between the same parties without  virtually impeaching   the  correctness  of   the   former  decision,  which,   from motives  of  public policy, the law does not permit to be done.[28]

Res judicata has two concepts. The first is bar by prior judgment under Rule 39,

Section 47 (b), and the second is conclusiveness of judgment under Rule 39, Section 47

(c). Both concepts are founded on the principle of estoppel, and are based on the

salutary public policy against unnecessary multiplicity of suits. Like the splitting of causes

of action, res judicata is in pursuance of such policy.Matters settled by a Court's final 

judgment should not be litigated upon or invoked again. Relitigation of issues already 

settled   merely   burdens   the   Courts   and   the   taxpayers,   creates   uneasiness   and 

confusion, and wastes valuable time and energy that could be devoted to worthier 

cases.[29] (Emphasis supplied)

To sum up, the final and executory NLRC decision (to the effect that

respondent spouses were not the employees of petitioner) was binding on this

criminal case for violation of RA 1161, as amended. Accordingly, the RTC

committed grave abuse of discretion when it refused to grant petitioner’s motion

to quash the Information. Simply said, any conviction for violation of the SSS law

based on the erroneous premise of the existence of an employer-employee

relationship would be a transgression of petitioner’s constitutional rights.

WHEREFORE, the petition is hereby GRANTED. Criminal Case No. Q-01-

97619 is ORDERED dismissed.

No costs.

SO ORDERED.

 

RENATO C. CORONA

Associate Justice

 

 

WE    CONCUR:

REYNATO S. PUNO

Chief Justice

Chairperson

ANTONIO T. CARPIO         TERESITA J. LEONARDO-DE CASTRO Associate Justice Associate Justice

LUCAS P. BERSAMIN

Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the

conclusions in the above decision had been reached in consultation before the

case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

*               The Court of Appeals and Regional Trial Court, Quezon City, Branch 78 were originally impleaded as public respondents. However, they were excluded pursuant to Rule 45, Section 4 of the Rules of Court. 

[1]               Under Rule 45 of the Rules of Court.  Rollo, p. 3.[2]               Penned by Associate Justice Eloy R. Bello, Jr. (retired) and concurred in by then Presiding Justice Cancio

C. Garcia (now retired Supreme Court Justice) and Associate Justice Mariano C. del Castillo of the First Division of the Court of Appeals. Id., pp. 23-24.

[3]               Republic Act.[4] Should be Section 22(a) and (b) in relation to Section 22(e):

Sec. 22. Remittance of Contributions. — (a) The contribution imposed in the preceding section shall be remitted to the SSS within the first ten (10) days of each calendar month following the month for which they are applicable or within such time as the Commission may prescribe. Every employer required to deduct and to remit such contributions shall be liable for their payment and if any contribution is not paid to the SSS as herein prescribed, he shall pay besides the contribution a penalty thereon of three percent (3%) per month from the date the contribution falls due until paid. If deemed expedient and advisable by the Commission, the collection and remittance of contributions shall be made quarterly or semi-annually in advance, the contributions payable by the employees to be advanced by their respective employers: Provided, That upon separation of an employee, any contribution so paid in advance but not due shall be credited or refunded to his employer.

(b) The contributions payable under this Act in cases where an employer refuses or neglects to pay the same shall be collected by the SSS in the same manner as taxes are made collectible under the National Internal Revenue Code, as amended. Failure or refusal of the employer to pay or remit the contributions herein prescribed shall not prejudice the right of the covered employee to the benefits of the coverage.

xxx xxx xxx

Sec. 28. Penal Clause. — xxx

(e) Whoever fails or refuses to comply with the provisions of this Act or with the rules and regulations promulgated by the Commission, shall be punished by a fine of not less than Five thousand pesos (P5,000) nor more than Twenty thousand pesos (P20,000), or imprisonment for not less than six (6) years and one (1) day nor more than twelve (12) years or both, at the discretion of the court: Provided, That where the violation consists in failure or refusal to register employees or himself, in case of the covered self-employed, or to deduct contributions from the employees' compensation and remit the same to the SSS,

the penalty shall be a fine of not less than Five thousand pesos (P5,000) nor more than Twenty thousand pesos (P20,000) and imprisonment for not less than six (6) years and one (1) day nor more than twelve (12) years.

[5]               Docketed as Criminal Case No. Q-01-97619.  The information read:The undersigned accuses [petitioner] of Violation of Sec. 22(d), in relation to Section 28(e) of

Republic Act No. 1161, as amended, committed as follows:

That on or about and during the period from September 1997 to March 2000 in Quezon City, Philippines, the above-named accused, being then the owner of Ever Ready Marketing, with address located at No. 37 Sibuyan St., this City, a compulsorily covered employer under the Social Security Law, as amended, did then and there [willfully] and unlawfully fail, neglect and refuse and still fails, neglects and refuses to remit to the Social Security System (SSS) at East Avenue, Diliman, this City, contributions for SSS Medicare and Employees Compensation (EC) for its covered employees in the amount of P173,393.00, Philippine Currency, and the 3% penalty imposed thereon in the amount of P164,843.03 computed as of April 28, 2000 as well as the additional 3% penalty that have accrued from such date until said contributions is paid, despite demand made upon said accused to comply therewith.

CONTRARY TO LAW. (Rollo, p. 80.)

[6]               Id., p. 234.[7]               Formerly Richie’s Commercial/Ever-Ready Marketing.[8]               Docketed as NLRC-NCR-Case No. 00-03-01826-2000.[9]               Rollo, pp. 63-64.[10]             Third Division.  Penned by Commissioner Ireneo B. Bernardo and concurred in by Presiding

Commissioner Lourdes C. Javier and Commissioner Tito F. Genilo.  Id., pp. 66-70.[11]             Id., p. 72.[12]             Id., pp. 54-55.   Petitioner did not file a motion for reconsideration of the November 12, 2001 resolution

of the RTC.  She argued in her petition in the CA that the question raised was purely one of law.  Id., p. 75.[13]             Id., p. 130.[14]             Atty. Ateneones S. Bacale.[15]             See Bunao v. Social Security System, G.R. No. 15906, 13 December 2005, 477 SCRA 564, 570-571.[16]             De Guzman v. People, G.R. No. 167492, 22 March 2007, 518 SCRA 767, 772, citing Alonzo v. Villamor,

et al., 16 Phil. 315 (1910).[17]             See Section 5(5), Article VIII, Constitution.[18]             De Guzman v. Sandiganbayan, G.R. No. 103276, 11 April 1996, 256 SCRA 171, 179.[19]             Chua v. Court of Appeals, 483 Phil. 126, 136 (2004), citing Security System v. Court of Appeals, G.R. No.

100388, 14 December 2000, 348 SCRA 1, 10–11.[20]             G.R. No. 59692, 11 October 1990, 190 SCRA 362.  This ruling was reiterated in Commander Realty, Inc.

v. Fernandez, G.R. No. 167945, 14 July 2006, 495 SCRA 146, 157-164.[21]             Id., pp. 370-372, citation omitted.[22]             G.R. No. 140656, 13 September 2007, 533 SCRA 205.[23]             Id., pp. 228-230, citations omitted.[24]             G.R. No. 172101, 23 November 2007, 538 SCRA 659.[25]             Id., p. 672.[26]             Id., p. 664.[27]             Sec. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits,

contributions and penalties thereon or any other matter related thereto, shall be cognizable by [SSC], xxxx

[28] Rasdas v. Estenor, G.R. No. 157605, 13 December 2005, 477 SCRA 538, 550, citing Kidpalos v. Baguio Gold Mining Co., 122 Phil. 249 (1965) and National Housing Authority v. Baello, G.R. No. 143230, 20 August 2004, 437 SCRA 86.

[29]             Camara v. Court of Appeals, 369 Phil. 858, 865 (1999).