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l.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

80774 May 31, 1988 SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA, respondents. Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner. The Solicitor General for public respondent.

FELICIANO, J.: In line with an Innovation Program sponsored by petitioner San Miguel Corporation ("Corporation;" "SMC") and under which management undertook to grant cash awards to "all SMC employees ... except [ED-HO staff, Division Managers and higher-ranked personnel" who submit to the Corporation Ideas and suggestions found to be beneficial to the Corporation, private respondent Rustico Vega submitted on 23 September 1980 an innovation proposal. Mr. Vega's proposal was entitled "Modified Grande Pasteurization Process," and was supposed to eliminate certain alleged defects in the quality and taste of the product "San Miguel Beer Grande:"
Title of Proposal Modified Grande Pasteurization Process Present Condition or Procedure At the early stage of beer grande production, several cases of beer grande full goods were received by MB as returned beer fulls (RBF). The RBF's were found to have sediments and their contents were hazy. These effects are usually caused by underpasteurization time and the pasteurzation units for beer grande were almost similar to those of the steinie. Proposed lnnovation (Attach necessary information) In order to minimize if not elienate underpasteurization of beer grande, reduce the speed of the beer grande pasteurizer thereby, increasing the pasteurization time and the pasteurization acts for grande beer. In this way, the self-life (sic) of beer grande will also 1 be increased.

Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3) years and was then holding the position of "mechanic in the Bottling Department of the SMC Plant Brewery situated in Tipolo, Mandaue City. Petitioner Corporation, however, did not find the aforequoted proposal acceptable and consequently refused Mr. Vega's subsequent demands for a cash award under the Innovation Program. On 22 February 1983., a Complaint 2 (docketed as Case No. RABVII-0170-83) was filed against petitioner Corporation with Regional Arbitration Branch No. VII (Cebu City) of the then.", Ministry of Labor and Employment. Frivate respondent Vega alleged there that his proposal "[had] been accepted by the methods analyst and implemented by the Corporation [in] October 1980," and that the same "ultimately and finally solved the problem of the Corporation in the production of Beer Grande." Private respondent thus claimed entitlement to a cash prize of P60,000.00 (the maximum award per proposal offered under the Innovation Program) and attorney's fees. In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that private respondent had no cause of action. It denied ever having approved or adopted Mr. Vega's proposal as part of the Corporation's brewing procedure in the production of San Miguel Beer Grande. Among other things, petitioner stated that Mr. Vega's proposal was tumed down by the company "for lack of originality" and that the same, "even if implemented [could not] achieve the desired result." Petitioner further alleged that the Labor Arbiter had no jurisdiction, Mr. Vega having improperly bypassed the grievance machinery procedure prescribed under a then existing collective bargaining agreement between management and employees, and available administrative remedies provided under the rules of the Innovation Program. A counterclaim for moral and exemplary damages, attorney's fees, and litigation expenses closed out petitioner's pleading. In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of complainant Vega in this case is "not a necessary incident of his employment" and that said claim is not among those mentioned in Article 217 of the Labor Code, dismissed the complaint for lack of jurisdiction. However, in a gesture of "compassion and to show the government's concern for the workingman," the Labor Arbiter also directed petitioner to pay Mr. Vega the sum of P2,000.00 as "financial assistance." The Labor Arbiter's order was subsequently appealed by both parties, private respondent Vega assailing the dismissal of his complaint for lack of jurisdiction and petitioner Corporation questioning the propriety of the award of "financial assistance" to Mr. Vega. Acting on the appeals, the public respondent National Labor Relations Commission, on 4 September 1987, rendered a Decision, 5 the dispositive portion of which reads:
WHEREFORE, the appealed Order is hereby set aside and another udgment entered, order the respondent to pay the complainant the amount of P60,000.00 as explained above. SO ORDERED.

In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation, invoking Article 217 of the Labor Code, seeks to annul the Decision of public respondent Commission in Case No. RAB-VII-01 70-83 upon the ground that the Labor Arbiter and the Commission have no jurisdiction over the subject matter of the case. The jurisdiction of Labor Arbiters and the National Labor Relations Commission is outlined in Article 217 of the Labor Code, as last amended by Batas Pambansa Blg. 227 which took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the commission . (a) The Labor Arbiters shall have the original and exclusive jurisdiction to hear and decide within thirty (30) working days after submission of the case by the parties for decision, the following cases involving are workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Those that workers may file involving wages, hours of work and other terms and conditions of employment; 3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees' compensation, social security, medicare and maternity benefits; 4. Cases involving household services; and 5. Cases arising from any violation of Article 265 of this; Code, including questions involving the legality of strikes and lockouts. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (Emphasis supplied)

While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire universe of money claims that might be asserted by workers against their employers has been absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but rather within the context formed by paragraph 1 related to unfair labor practices), paragraph 2 (relating to claims concerning terms and conditions of employment), paragraph 4 (claims relating to household services, a particular species of employeremployee relations), and paragraph 5 (relating to certain activities prohibited to employees or to employers).<re||an1w> It is evident that there is a unifying element which runs through paragraphs 1 to 5 and that is, that they all refer to cases or disputes arising out of or in connection with an employer-employee relationship. This is, in other words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended. We reach the above conclusion from an examination of the terms themselves of Article 217, as last amended by B.P. Blg. 227, and even though earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction of the

Labor Arbiters and the NLRC "cases arising from employer employee relations," 6 which clause was not expressly carried over, in printer's ink, in Article 217 as it exists today. For it cannot be presumed that money claims of workers which do not arise out of or in connection with their employer-employee relationship, and which would therefore fall within the general jurisdiction of the regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident of such relationship. Put a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the employeremployee relationship. Applying the foregoing reading to the present case, we note that petitioner's Innovation Program is an employee incentive scheme offered and open only to employees of petitioner Corporation, more specifically to employees below the rank of manager. Without the existing employer-employee relationship between the parties here, there would have been no occasion to consider the petitioner's Innovation Program or the submission by Mr. Vega of his proposal concerning beer grande; without that relationship, private respondent Vega's suit against petitioner Corporation would never have arisen. The money claim of private respondent Vega in this case, therefore, arose out of or in connection with his employment relationship with petitioner. The next issue that must logically be confronted is whether the fact that the money claim of private respondent Vega arose out of or in connection with his employment relation" with petitioner Corporation, is enough to bring such money claim within the original and exclusive jurisdiction of Labor Arbiters. In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the sale and repair of motor vehicles, while private respondent was the sales Manager of petitioner. Petitioner had sued private respondent for non-payment of accounts which had arisen from private respondent's own purchases of vehicles and parts, repair jobs on cars personally owned by him, and cash advances from the corporation. At the pretrial in the lower court, private respondent raised the question of lack of jurisdiction of the court, stating that because petitioner's complaint arose out of the employeremployee relationship, it fell outside the jurisdiction of the court and consequently should be dismissed. Respondent Judge did dismiss the case, holding that the sum of money and damages sued for by the employer arose from the employer-employee relationship and, hence, fell within the jurisdiction of the Labor Arbiter and the NLRC. In reversing the order of dismissal and requiring respondent Judge to take cognizance of the case below, this Court, speaking through Mme. Justice Melencio-Herrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor Code had jurisdiction over" all other cases arising from employer-employee relation, unless, expressly excluded by this Code." Even then, the principle followed by this Court was that, although a controversy is between an employer

and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in negating jurisdiction of the Labor Arbiter, although the parties were an employer and two employees, Mr. Justice Abad Santos stated: The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary. It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise. And in Singapore Airlines Limited v. Pao, 122 SCRA 671, 677, the following was said: Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal cars, and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance to the Labor Code. The cause of action was one under the civil laws, and it does not breach any provision of the Labor Code or the contract of employment of DEFENDANT. Hence the civil courts, not the Labor 8 Arbiters and the NLRC should have jurisdiction.

It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt, involved a claim for damages by two (2) employees against the employer company and the General Manager thereof, arising from the use of slanderous language on the occasion when the General Manager fired the two (2) employees (the Plant General Manager and the Plant Comptroller). The Court treated the claim for damages as "a simple action for damages for tortious acts" allegedly committed by private respondents, clearly if impliedly suggesting that the claim for damages did not necessarily arise out of or in connection with the employer-employee relationship. Singapore Airlines Limited v. Pao, also cited in Molave, involved a claim for liquidated damages not by a worker but by the employer company, unlike Medina. The important principle that runs through these three (3) cases is that where the claim to the principal relief sought 9 is to be resolved not by reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolution of the dispute requires expertise, not in labor management relations nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims

fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears. Applying the foregoing to the instant case, the Court notes that the SMC Innovation Program was essentially an invitation from petitioner Corporation to its employees to submit innovation proposals, and that petitioner Corporation undertook to grant cash awards to employees who accept such invitation and whose innovation suggestions, in the judgment of the Corporation's officials, satisfied the standards and requirements of the Innovation Program 10 and which, therefore, could be translated into some substantial benefit to the Corporation. Such undertaking, though unilateral in origin, could nonetheless ripen into an enforceable contractual (facio ut des) 11 obligation on the part of petitioner Corporation under certain circumstances. Thus, whether or not an enforceable contract, albeit implied arid innominate, had arisen between petitioner Corporation and private respondent Vega in the circumstances of this case, and if so, whether or not it had been breached, are preeminently legal questions, questions not to be resolved by referring to labor legislation and having nothing to do with wages or other terms and conditions of employment, but rather having recourse to our law on contracts. WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September 1987 of public respondent National Labor Relations Commission is SET ASIDE and the complaint in Case No. RAB-VII-0170-83 is hereby DISMISSED, without prejudice to the right of private respondent Vega to file a suit before the proper court, if he so desires. No pronouncement as to costs. SO ORDERED. Fernan, Gutierrez, Jr., Bidin and Cortes, JJ., concur. \

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 145855 November 24, 2004

PEPSI-COLA PRODUCTS PHILIPPINES, INC., petitioner, vs. THE COURT OF APPEALS, and PEPSI-COLA PRODUCTS PHILIPPINES, INC. EMPLOYEES & WORKERS UNION (UOEF No. 70) represented by its incumbent president, ISIDRO REALISTA, respondents.

DECISION

CALLEJO, SR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R SP No. 50690, setting aside the decision of the National Labor Relations Commission (NLRC) in NLRC RABX Case No. RO-7-0234-86 and the reinstatement of the decision of the Executive Labor Arbiter in the said case. The facts, as culled from the records of the case, are as follows: Pepsi-Cola Products Philippines, Inc. Employees and Workers Union (PCEWU) is a dulyregistered labor union of the employees of the Pepsi-Cola Distributors of the Philippines (PCDP).2 On July 14, 1986, PCEWU, through its local union president, Arisedes T. Bombeo, filed a Complaint against PCDP with the Regional Arbitration Branch No. X of the Department of Labor and Employment (DOLE), Cagayan de Oro City, for payment of overtime services rendered by fifty-three (53) of its members, who were employed as salesmen, warehousemen, truck helpers, route salesmen, route sales workers, distributors, conductors and forklift operators, on the eight (8) days duly- designated as Muslim holidays for calendar year 1985, in their respective places of assignment, namely: Iligan City, Tubod, Lanao del Norte and Dipolog City.3 The complaint was docketed as NLRC RABX Case No. RO-7-0234-86. The PCEWU alleged, inter alia, that in previous years, they had been paid overtime pay for services rendered during the eight (8) Muslim holidays in their places of assignment, including Dipolog City. To support its claims, the PCEWU appended to its position paper the following: a photocopy of the applicable provisions of Presidential Decree (P.D.) No. 1083; a certification

dated March 26, 1986 from the Regional Autonomous Government of Region 12-A, Marawi City, attesting to the eight (8) Muslim holidays observed in the said region in calendar year 1985; and the individual computation of the overtime claim of each of the workers concerned.4 In its position paper, the PCDP maintained that there were only five (5) legal Muslim holidays under the Muslim Code. It asserted that under the law, the cities of Cagayan de Oro and Dipolog were not included in the areas that officially observed the Muslim holidays, and that the said holidays were only applicable to Muslims. It also argued that even assuming that the employees were entitled to such overtime pay, only the rank-and-file employees and not the managerial employees should be given such benefit. On May 26, 1987, the Executive Labor Arbiter (ELA)5 rendered a Decision in favor of PCEWU, ordering PCDP to pay the claims of its workers. The decretal portion of the decision reads: WHEREFORE, finding merit in complainants claim, the respondent is hereby ordered to pay the complaining workers their claims for overtime services rendered in calendar year 1985 on duly-designated Muslim holidays corresponding to the following dates: May 20, 1985; June 17, 1985; June 19, 1985; August 26, 1985; September 4, 1985; September 24, 1985; November 25, 1985 and December 19, 1985, for workers involved with places of assignments at Iligan City and Tubod, Lanao del Norte and June 17, 1985; June 19, 1985; August 26, 1985; September 24, 1985 and November 25, 1985, for workers involved in the instant case whose place of assignment is at Dipolog City. Thus: Ponciano Waslo P 649.20 Valentin Estao P 1,003.68 Sergio Estrosas P 711.52 Exequiel Caeda P 1,091.68 Guindelino Labial P 649.20 Domingo Moreno P 728.56 Eufemio Amora P 1,001.44 Salvador Nisnisan P 1,028.40 Leonides Lesonada P 711.52 Zosimo Clemen P 711.52 David Gotengco P 1,017.52 Toriano Cabelbel P 504.24

Arsenio Calumpang P 711.52 Jose Sales, Jr. P 711.52 Prudencio Labra P 1,584.00 Romulo Dalagan P 498.00 Rodrigo dela Cerna P 498.00 Apolinario Oreniano P 649.20 Pablo Cabanos P 504.24 Felicisimo Dadofalsa P 497.20 Simplecio Torres P 1,071.52 Hadji Nur Usman P 1,065.04 Lumna Salic P 697.20 Cornelio Llanos P 1,078.80 Godofredo Anana P 504.24 Conrado Salon P 504.24 Evaristo Tuante P 1,164.83 Roque Clomas P 711.45 Tomas Fillo P 711.45 Bernaflor Macayan P 1,091.68 Gregorio Moreno P 711.52 Cornelio Iway P 1,091.68 Salvador Anggot P 504.24 Felix Lagat P 711.52 Rogelio Mangubat P 504.24

Avelino Jabonillo P 504.52 Alberto Ordona P 801.28 Dominador Ponce P 1,028.88 Robinson Berhay P 635.95 Juanito Cabale P 405.75 Reynaldo Fulgarinas P 444.70 Emelito Pineda P 435.75 Antonio Andante P 315.15 Dionesio Coyoca P 315.15 Alberto Macapanas P 315.15 Nestor Murro P 315.15 Alfredo Nisnisan P 315.15 Joseph Putian P 315.15 Manuel Quirante P 627.30 Antonio Torres P 315.15 Arturo Pelare P 649.00 Further respondent is hereby ordered to pay Complainant an amount equivalent to ten (10) percent of the aggregate award as attorneys fee. SO ORDERED.6 The ELA ruled that, although P.D. No. 1083 does not specifically mention Dipolog City as one of the places where Muslim holidays are observed, it is nevertheless a part of Zamboanga del Norte and the autonomous region in Mindanao where such Muslim holidays are observed. He also ruled that while there were only five (5) Muslim holidays under P.D. No. 1083, and the Regional Legislative Assembly for Region 12 had passed legislation providing for three (3) more Muslim holidays per the Manifestation of the employees, the latter failed to prove that a similar legislation had been approved by the Regional Legislative Assembly for Region 9. The ELA concluded that those employees

assigned in Region 12 were entitled to overtime pay for eight (8) Muslim holidays, but those assigned in Region 9 were not so entitled. The respondent appealed the decision to the NLRC where it reiterated its contention that, P.D. No. 1083 (Code of Muslim Personal Laws of the Philippines,) enumerates only five (5) legal Muslim holidays. It assailed the finding of the ELA that there were three (3) additional Muslim legal holidays in Region 12 based on the certification made by the Chief of the Administrative Division of the Office of Muslim Affairs, considering that the actual existence of any proclamation issued in relation thereto was not even verified. It argued that only Muslims were covered by the legal Muslim holidays benefits, and not all persons found in the places enumerated in P.D. No. 1083. The respondent averred that since the employees failed to specify whether they were Muslims or non-Muslims, they were not entitled to the overtime pay awarded by the ELA. It further claimed that Dipolog City is a distinct political subdivision from the province of Zamboanga del Norte, and is not one of those areas enumerated under P.D. No. 1083.7 On March 21, 1991, the NLRC rendered judgment8 affirming the decision of the ELA with modification: WHEREFORE, the decision appealed from is Modified consistent with the foregoing resolution. For purposes of recomputing the money claims of complainants, the Labor Arbiter is directed to conduct further proceedings affording both parties reasonable opportunity to be heard. The monetary award, as decreed in the decision of May 31, 1987, is hereby Vacated. No findings as to costs. SO ORDERED.9 The NLRC ruled that, since the respondent had been giving overtime pay during Muslim holidays to its employees, such proclamation had ripened into a company policy; hence, the respondent is estopped from denying the claims for overtime services rendered by its rank-andfile employees during the said Muslim holidays.10 The NLRC also declared that the other three (3) holidays considered by the ELA, aside from the five (5) Muslim holidays provided under P.D. No. 1083, were not customarily observed by Filipino Muslims. As such, these should not be included in the computation of overtime pay. It also ruled that since the complainants failed to present their daily time records, there can be no basis for the computation and determination for the claims of overtime pay. There was thus a need to present appropriate company records to determine the proper computation of the claims for overtime pay during the post arbitration stage.11 The NLRC also held that the managerial employees were not entitled to receive overtime pay because they were paid on a monthly basis. Furthermore, such overtime pay did not appear to be included in their monthly salaries, and that they were allowed "day-off" privileges or to offset any absences they may have incurred in case they had already exhausted their respective vacation or sick leave credits. The NLRC also declared that the matter of whether the complainants were managerial employees or not should be threshed out during the post arbitration proceedings.12

The PCDP filed its motion for partial reconsideration of the NLRC decision. The employees also filed a motion for reconsideration of the decision on April 17, 1991. Pending resolution of the said motions, ownership of various Pepsi-Cola bottling plants was transferred to petitioner PepsiCola Products Philippines, Inc. (PCPPI). The NLRC directed the parties to file their respective pleadings concerning the respondents existence as a corporate entity. The PCDP alleged that it had ceased to exist as a corporation on July 24, 1989 and that it has winded up its corporate affairs in accordance with law. It also averred that it was now owned by PCPPI.13 On February 11, 1992, the NLRC issued a Resolution14 dismissing the complaint of the PCEWU for the reason that, with the cessation and dissolution of the corporate existence of the PCDP, rendering any judgment against it is incapable of execution and satisfaction: WHEREFORE, premises considered, judgment is hereby rendered dismissing the aboveentitled case on account of a lawful supervening event, that is the dissolution and cessation of the corporate and juridical personality of respondent company thereby rendering any judgment against it incapable of execution and satisfaction. This is without prejudice to the rights of complainants from pursuing their money claims with the proper forum. This order supersedes the previous orders of this Commission in so far as the enforcement of the money claims of complainants are concerned with this labor tribunal. No findings as to costs. SO ORDERED.15 The NLRC ruled that it was not competent for it to proceed against the PCDP because it had ceased to exist as a juridical entity. Thus, it no longer resolved the respondents motion for partial reconsideration, as well as the motion for reconsideration of the employees. The PCEWU filed a motion for reconsideration of the February 11, 1992 Resolution of the NLRC, but the latter issued a Resolution on June 4, 199216 denying the said motion for lack of merit. The petitioner filed a petition for the nullification of the February 11, 1992 Resolution of the NLRC. In a Resolution dated November 23, 1998, the Court referred the case to the Court of Appeals (CA) for proper disposition.17 In its petition, the petitioner raised the following issues: 1. WHETHER OR NOT PEPSI-COLA PRODUCTS PHILIPPINES, INC., AS SUCCESSOR-IN-INTEREST OF THE DISSOLVED PEPSI-COLA DISTRIBUTORS OF THE PHILIPPINES, [IS] LIABLE OVER [THE] UNPAID OBLIGATION OF THE DISSOLVED CORPORATION TOWARDS ITS EMPLOYEES; 2. WHETHER OR NOT A DISSOLVED CORPORATION IS EXEMPT FROM THE PAYMENT OF ITS OBLIGATION; 3. WHETHER OR NOT THE NLRC HAS JURISDICTION OVER PEPSI-COLA DISTRIBUTORS OF THE PHILIPPINES.18

For its part, the respondent averred that notwithstanding the dissolution of the PCDP while the complaint was pending resolution by the NLRC, the latter continued existing as a corporation for a period of three years from the time when it would have been dissolved, conformably to Section 122 of the Corporation Code. It prayed that judgment be rendered in its favor, thus: WHEREFORE, premises considered, petitioner prays that this Honorable Court issue judgment: 1. Declaring the National Labor Relations Commission to have committed grave abuse of discretion in rendering the assailed resolutions. 2. Reversing the decision of the NLRC in the above-entitled case. 3. Reinstating the decision of the executive labor arbiter on May 4, 1987, ordering respondent to pay the complaining workers their claims for overtime services. 4. Granting petitioner such other reliefs and remedies equitable under the circumstances.19 In its comment on the petition, the Office of the Solicitor General (OSG) recommended that the petition be granted and that the NLRC be ordered to resolve the motions for reconsideration of the petitioner and respondent therein as follows: Indeed, respondent NLRC acted without lawful justification when it dismissed the complaint of petitioner union. PRAYER WHEREFORE, it is respectfully prayed of this Honorable Court that respondent NLRCs Resolution dated February 11, 1992, dismissing the complaint of petitioner union, and Resolution dated June 4, 1992, denying petitioner unions motion for reconsideration, be annulled and set aside; and that respondent NLRC be ordered to decide on the merits [of] petitioner unions motion for reconsideration of April 17, 1991 only insofar as the actual number of Muslim holidays in 1985 is concerned. It is further respectfully prayed that, in as much as the instant Comment is adverse to respondent NLRC, the latter be given an opportunity to submit its own Comment, if it so desires.20 The CA found the petition meritorious, and on April 28, 1998, rendered judgment annulling the February 11, 1992 Resolution of the NLRC. It ruled that the NLRC committed grave abuse of its discretion when it dismissed the complaint, citing the ruling of this Court in Pepsi-Cola Bottling Co., et al. vs. NLRC.21 The CA declared that the PCDP was still in existence when the complaint was filed, and that the supervening dissolution of the corporation did not warrant the dismissal of the complaint against it.22 After all, the appellate court ratiocinated, every corporation is given three (3) years to wind up its affairs. Hence, in case any litigation is filed by or against the corporation within the three (3)-year period which could not be terminated within the expiration

of the same, such period must necessarily be prolonged until the final determination of the case, for if the rule were otherwise, corporations in liquidation would lose what should justly belong to them or would be exempt from the payment of just obligations through mere technicality, something that courts should not countenance.23 However, instead of remanding the case to the NLRC for the resolution of the respondents motion for partial reconsideration and the petitioners motion for reconsideration of the decision of the NLRC, the CA set aside the decision of the NLRC and reinstated the decision of the ELA, thus: WHEREFORE, premises considered, the instant petition is GIVEN DUE COURSE and GRANTED. The questioned resolutions of the NLRC in the above-entitled case are REVERSED and SET ASIDE. The decision of the Executive Labor Arbiter on May 4, 1987, ordering the respondent Pepsi Cola Distributors Philippines and its successor-ininterest Pepsi Cola Products Philippines, Inc., to pay the complaining workers their claims for overtime services, is hereby REINSTATED.24 The petitioners motion for reconsideration of the CA decision was denied by the appellate court on September 15, 2000.25 Petitioner PCPPI, as the successor-in-interest of PCDP, filed the instant petition for review on certiorari with this Court, assailing the decision and resolution of the CA on the following issues: I WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS IS NULL AND VOID INSOFAR AS IT REINSTATED THE DECISION OF THE LABOR ARBITER IN FULL WITHOUT EXPRESSING THEREIN THE FACTS AND LAW ON WHICH IT IS BASED. II. WHETHER OR NOT NON-MUSLIMS LIVING AND WORKING IN PRIVATE COMPANIES LOCATED IN MUSLIM AREAS ARE ENTITLED TO THE MUSLIM HOLIDAY PROVISIONS OF P.D. 1083. III. WHAT IS THE SPIRIT BEHIND THE DECLARATION AND CELEBRATION OF MUSLIM HOLIDAYS? IS IT TO ENABLE MUSLIMS TO OBSERVE, ENJOY, AND CELEBRATE THEIR RELIGION, OR IS IT TO ALLOW MUSLIM AND NONMUSLIM ALIKE TO ENJOY ADDITIONAL HOLIDAYS OVER AND ABOVE THE REGULAR AND NATIONWIDE SPECIAL DAYS ALREADY OBSERVED IN THE COUNTRY. IV. WHETHER OR NOT ALLOWING EVEN NON-MUSLIMS WORKING IN PRIVATE COMPANIES LOCATED IN MUSLIM AREAS, TO BE ENTITLED TO MUSLIM HOLIDAY PAY, IF THEY RENDER WORK DURING MUSLIM HOLIDAYS, WILL PROVE TO BE TOO ONEROUS AND UNFAIR TO THE EMPLOYER IN VIOLATION OF THE LATTERS RIGHT TO EQUAL PROTECTION OF THE LAW. V. WHETHER OR NOT THE MUSLIM HOLIDAY PROVISIONS OF P.D. 1083 COVER THE CITY OF DIPOLOG.

VI. WHETHER OR NOT MANAGERIAL EMPLOYEES ARE ENTITLED TO OVERTIME PAY. VII. WHETHER THERE ARE FIVE (5) OR EIGHT (8) MUSLIM HOLIDAYS TO BE OBSERVED IN THE AREAS AT ISSUE.26 The petitioner avers that the decision of the CA, setting aside the decision of the NLRC and reinstating the decision of the ELA, is null and void because it failed to delve into the factual and legal issues on the merits, such as the number of Muslim legal holidays, and whether nonMuslims, who were assigned in the Muslim areas, were entitled to overtime pay. Despite such failure, it set aside the decision of the NLRC and reinstated that of the ELA. The petitioner avers that this violated Section 14, Article VIII of the Constitution, which reads: Sec. 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the legal basis therefor. For its part, the respondent avers that the decision of the CA is in accord with law and the facts. The OSG opted not to file any comment on the petition. We agree with the ruling of the CA that the NLRC committed a grave abuse of its discretion amounting to lack of jurisdiction in dismissing the case. The NLRC clearly erred in perceiving that, upon the petitioners acquisition of the PCDP, the latter lost its corporate personality. The appellate court delved into and resolved the issue with sufficient fullness, and supported the same with statutory provisions and applicable case law. Under Section 122 of the Corporation Code, a corporation whose corporate existence is terminated in any manner continues to be a body corporate for three (3) years after its dissolution for purposes of prosecuting and defending suits by and against it and to enable it to settle and close its affairs, culminating in the disposition and distribution of its remaining assets. It may, during the threeyear term, appoint a trustee or a receiver who may act beyond that period. The provision which reads in full: SEC. 122. Corporate Liquidation. Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. At any time during the said three (3) years, the corporation is authorized and empowered to convey all of its properties to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its properties in trust for the benefit of its stockholders, members, creditors

and others in interest, all interest which the corporation had in the properties terminates the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest. Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member, who is unknown or cannot be found, shall be escheated to the city or municipality where such assets are located. Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. The termination of the life of a corporate entity does not by itself cause the extinction or diminution of the rights and liabilities of such entity.27 If the three-year extended life has expired without a trustee or receiver having been expressly designated by the corporation, within that period, the board of directors (or trustees) itself, may be permitted to so continue as "trustees" by legal implication to complete the corporate liquidation.28 However, we agree with the petitioners contention that the decision of the CA setting aside the decision of the NLRC and reinstating the decision of the ELA is null and void for lack of jurisdiction. It bears stressing that the Court of Appeals had no appellate jurisdiction over the issue of whether the decision of the NLRC is correct or not. This is so because the only issue in the CA was whether or not the NLRC committed a grave abuse of its discretion in dismissing the complaint simply and merely because PCDP was acquired by herein petitioner while the complaint of the respondent was pending. The issue of the correctness of the NLRC decision was not raised in the Court of Appeals by the petitioner therein (now the respondent). And the reason for this is obvious: the petitioner and the respondent therein which are the complainant-appellee and respondent-appellee in the NLRC had filed their respective motions for reconsideration of the decision of the NLRC, and the latter had yet to resolve such motions when it dismissed the case; thus, rendering moot and academic any resolutions on said motions. By dismissing the case, the NLRC thereby set aside, not only the decision of the ELA, but also its own. The only relief the petitioner in the Court of Appeals was entitled to was the nullification of the assailed Resolution of the NLRC and the reinstatement of the case before it. The petitioner was not entitled to a reversal of the decision of the NLRC on the merits of the appeal and the reinstatement of the decision of the ELA appealed from. In sum, then, the decision of the CA setting aside the decision of the NLRC and reinstating the decision of the ELA is null and void. As we ruled in People v. Court of Appeals:29 If a court is authorized by statute to entertain jurisdiction in a particular case only, and undertakes to exercise the jurisdiction conferred in a case to which the statute has no application, the judgment rendered is void. The lack of statutory authority to make a

particular judgment is akin to lack of subject-matter jurisdiction. In this case, the CA is authorized to entertain and resolve only errors of jurisdiction and not errors of judgment. A void judgment has no legal and binding effect, force or efficacy for any purpose. In contemplation of law, it is non-existent. It behooved the CA, after nullifying the February 11, 1992 Resolution of the NLRC, to order the latter to reinstate the case, inclusive of its decision, and resolve, with reasonable dispatch, the pending motions for reconsideration of the parties. After the NLRC shall have resolved the pending motions, the aggrieved party may then file a petition on certiorari under Rule 65 of the Rules of Court from the decision of the NLRC and its resolution of the said motions. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals, nullifying the February 11, 1992 Decision of the NLRC, is AFFIRMED WITH MODIFICATION. The NLRC is DIRECTED to resolve, with reasonable dispatch, the motions for reconsideration of the parties of its decision. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-59825 September 11, 1982 ERNESTO MEDINA and JOSE G. ONG, petitioners, vs. HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of the Court of First Instance Cf Rizal, Branch XV, Makati, Metro Manila, COSME DE ABOITIZ and PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., respondents.

ABAD SANTOS, J.: Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May, 1979, by Ernesto Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola Bottling Co. of the Philippines, Inc. Medina was the former Plant General Manager and Ong was the former Plant Comptroller of the company. Among the averments in the complaint are the following:
3. That on or about 1:00 o'clock in the afternoon of December 20, 1977, defendant Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of the defendant Pepsi-Cola Bottling Company of the Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro Manila, and without any provocation, shouted and maliciously humiliated the plaintiffs with the use of the following slanderous language and other words of similar import uttered in the presence of the plaintiffs' subordinate employees, thusGOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto Medina). YOU TOO ARE FIRED! '(referring to Jose Ong ) 4. That on January 9, 1978, the herein plaintiffs filed a joint criminal complaint for oral defamation against the defendant Cosme de Aboitiz duly supported with respective affidavits and corroborated by the affidavits of two (2) witnesses: Isagani Hernandez and Jose Ganseco II, but after conducting a preliminary investigation, Hon. Jose B. Castillo, dismissed the complaint allegedly because the expression "Fuck you and "You are both shit to me" were uttered not to slander but to express anger and displeasure; 5. That on February 8, 1978, plaintiffs filed a Petition for Review with the office of the Secretary of Justice (now Ministry of Justice) and on June 13, 1978, the Deputy Minister of Justice, Catalino Macaraig, Jr., issued a resolution sustaining the plaintiff's complaint, reversing the resolution of the Provincial Fiscal and directing him to file against defendant Cosme de Aboitiz an information for Grave Slander. ... ;

6. That the employment records of plaintiffs show their track performance and impeccable qualifications, not to mention their long years of service to the Company which undoubtedly caused their promotion to the two highest positions in Muntinlupa Plant having about 700 employees under them with Ernesto Medina as the Plant General Manager receiving a monthly salary of P6,600.00 excluding other perquisites accorded only to top executives and having under his direct supervision other professionals like himself, including the plaintiff Jose G. Ong, who was the Plant Comptroller with a basic monthly salary of P4,855.00; 7. That far from taking these matters into consideration, the defendant corporation, acting through its President, Cosme de Aboitiz, dismissed and slandered the plaintiffs in the presence of their subordinate employees although this could have been done in private; 8. That the defendants have evidently enjoyed the act of dismissing the plaintiffs and such dismissal was planned to make it as humiliating as possible because instead of allowing a lesser official like the Regional Vice President to take whatever action was necessary under the circumstances, Cosme de Aboitiz himself went to the Muntinlupa Plant in order to publicly upbraid and dismiss the plaintiffs; 9. That the defendants dismissed the plaintiffs because of an alleged delay in the use of promotional crowns when such delay was true with respect to the other Plants, which is therefore demonstrative of the fact that Cosme de Aboitiz did not really have a strong reason for publicly humiliating the plaintiffs by dismissing them on the spot; 10. That the defendants were moved by evil motives and an anti-social attitude in dismissing the plaintiffs because the dismissal was effected on the very day that plaintiffs were awarded rings of loyalty to the Company, five days before Christmas and on the day when the employees' Christmas party was held in the Muntinlupa Plant, so that when plaintiffs went home that day and found their wives and children already dressed up for the party, they didn't know what to do and so they cried unashamedly; xxx xxx xxx 20. That because of the anti-social manner by which the plaintiffs were dismissed from their employment and the embarrassment and degradation they experience in the hands of the defendants, the plaintiffs have suffered and will continue to suffer wounded feelings, sleepless nights, mental torture, besmirched reputation and other similar injuries, for which the sum of P150,000.00 for each plaintiff, or the total amount. of P300,000.00 should be awarded as moral damages; 21. That the defendants have demonstrated their lack of concern for the rights and dignity of the Filipino worker and their callous disregard of Philippine labor and social legislation, and to prevent other persons from following the footsteps of defendants, the amount of P50,000.00 for each plaintiff, or the total sum of P100,000.00, should be awarded as exemplary damages; 22. That plaintiffs likewise expect to spend no less than P5,000.00 as litigation expenses and were constrained to secure the services of counsel for the protection and enforcement of their rights for which they agreed to pay the sum of P10,000.00 and P200.00 per appearance as and for attorney's fees.

The complaint contains the following:

PRAYER WHEREFORE, in view of all the foregoing. it is most respectfully that after proper notice and hearing, judgment be rendered for the plaintiffs and against the defendants ordering them, jointly and solidarily, to pay the plaintiffs the sums of: 1. Unrealized income in such sum as will be established during the trial; 2. P300,000.00 as moral damages; 3. P100,000.00 by way of exemplary damages: 4. P5,000.00 as litigation expenses; 5. P10,000.00 and P200.00 per appearance as and for attorney's fees; and 6. Costs of this suit. Plaintiffs also pray for such further reliefs and remedies as may be in keeping with justice and equity. On June 4, 1979, a motion to dismiss the complaint on the ground of lack of jurisdiction was filed by the defendants. The trial court denied the motion on September 6, 1979, in an order which reads as follows: Up for resolution by the Court is the defendants' Motion to Dismiss dated June 4, 1979, which is basically anchored on whether or not this Court has jurisdiction over the instant petition. The complaint alleges that the plaintiffs' dismissal was without any provocation and that defendant Aboitiz shouted and maliciously humiliated plaintiffs and used the words quoted in paragraph 3 thereof. The plaintiffs further allege that they were receiving salaries of P6,600.00 and P4,855.00 a month. So the complaint for civil damages is clearly not based on an employer-employee relationship but on the manner of plaintiffs' dismissal and the effects flowing therefrom . (Jovito N. Quisaba vs, Sta. Ines-Melale Veneer & Plywood Co., Inc., et al., No. L-38088, Aug. 30,1974.) This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978 and which provides that Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically under the plaintiff's causes of action. Because of the letter dated January 4, 1978 and the statement of plaintiff Medina that his receipt of the amount from defendant company was done "under strong protest," it cannot be said that the demands set forth in the complaint have been paid, waived or other extinguished. In fact, in defendants' Motion to Dismiss, it is stated that 'in the absence of a showing that there was fraud, duress or violence attending said transactions, such Release and Quitclaim Deeds are valid and binding contracts between them, which in effect admits that plaintiffs can prove fraud, violence, duress or violence. Hence a cause of action for plaintiffs exist.

It is noticed that the defamatory remarks standing alone per se had been made the sole cause under the first cause of action, but it is alleged in connection with the manner in which the plaintiffs had been dismissed, and whether the statute of limitations would apply or not would be a matter of evidence. IT has been alreadly settled by jurisprudence that mere asking for reinstatement does not remove from the CFI jurisdiction over the damages. The case must involve unfair labor practices to bring it within the jurisdiction of the CIR (now NLRC). WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is hereby denied. The defendants are hereby directed to interpose their answer within ten (10) days from receipt hereof.

While the trial was underway, the defendants filed a second motion to dismiss the complaint dated January 23, 1981, because of amendments to the Labor Code immediately prior thereto. Acting on the motion, the trial court issued on May 23, 1981, the following order:
Up for resolution by the Court is the defendants' Motion to Dismiss dated January 23, 1981, on grounds not existing when the first Motion to Dismiss dated June 4, 1979 was interposed. The ground relied upon is the promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took effect on May 1, 1980, amending Art. 248 of the Labor Code. The Court agrees with defendants that the complaint alleges unfair labor practices which under Art. 217 of the Labor Code, as amended by P.D. 1691, has vested original and exclusive jurisdiction to Labor Arbiters, and Art. 248, thereof ... "which may include claims for damages and other affirmative reliefs." Under the amendment, therefore, jurisdiction over employee-employer relations and claims of workers have been removed from the Courts of First Instance. If it is argued that this case did not arise from employeremployee relation, but it cannot be denied that this case would not have arisen if the plaintiffs had not been employees of defendant Pepsi-Cola. Even the alleged defamatory remarks made by defendant Cosme de Aboitiz were said to plaintiffs in the course of their employment, and the latter were dismissed from such employment. Hence, the case arose from such employer-employee relationship which under the new Presidential Decree 1691 are under the exclusive, original jurisdiction of the labor arbiters. The ruling of this Court with respect to the defendants' first motion to dismiss, therefore, no longer holds as the positive law has been subsequently issued and being a curative law, can be applied retroactively (Garcia v. Martinez, et al., L-47629, May 28, 1979; 90 SCRA 331-333). It will also logically follow that plaintiffs can reinterpose the same complaint with the Ministry of Labor. WHEREFORE, let this case be, as it is hereby ordered, dismissed, without pronouncement as to costs.

A motion to reconsider the above order was filed on July 7, 1981, but it was only on February 8, 1982, or after a lapse of around seven (7) months when the motion was denied. Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the respondent court committed the following errors:
IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 33150 DESPITE THE FACT THAT JURISDICTION HAD ALREADY ATTACHED WHICH WAS NOT OUSTED BY THE SUBSEQUENT ENACTMENT OF PRESIDENTIAL DECREE 1691; IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN A RETROSPECTIVE EFFECT WHEN PRESIDENTIAL DECREE 1367 WHICH WAS IN FORCE WHEN CIVIL CASE NO. 33150 WAS FILED AND TRIAL THEREOF HAD COMMENCED, WAS NEVER EXPRESSLY REPEALED BY PRESIDENTIAL DECREE 1691, AND IF EVER THERE WAS AN IMPLIED REPEAL, THE SAME IS NOT FAVORED UNDER PREVAILED JURISPRUDENCE; IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE 1691 OF THE PROVISO INSERTED IN ARTICLE 217 OF THE LABOR CODE BY PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS HAVE ACQUIRED JURISDICTION OVER CLAIMS FOR DAMAGES ARISING FROM EMPLOYER-EMPLOYEE RELATIONS TO THE EXCLUSION OF THE REGULAR COURTS, WHEN A READING OF ARTICLE 217 WITHOUT THE PROVISO IN QUESTION READILY REVEALS THAT JURISDICTION OVER DAMAGE CLAIMS IS STILL VESTED WITH THE REGULAR COURTS; IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150 THEREBY VIOLATING THE CONSTITUTIONAL RIGHTS OF THE PETITIONERS NOTABLY THEIR RIGHT TO DUE PROCESS.

The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary. It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise. WHEREFORE, the petition is granted; the respondent judge is hereby ordered to reinstate Civil Case No. 33150 and render a decision on the merits. Costs against the private respondents. SO ORDERED. Barredo (Chairman), Concepcion, Jr. Guerrero, De Castro and Escolin, JJ., concur.

Separate Opinions

AQUINO, J.,dissenting: I dissent with due deference to the opinion penned by Mr. Justice Abad Santos. This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising from the alleged disgraceful termination of petitioners' employment. Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo), The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo). More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case No. R4-STF1-492-78, pp. 40, 288-299, Rollo). The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo). Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo). Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion.

Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be ventilated in court (p. 247, Rollo). After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers, including moral damages, and other claims arising from employer- employee relationship. Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440. In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March 15,1982.) The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of Medina and Ong.

Separate Opinions AQUINO, J.,dissenting: I dissent with due deference to the opinion penned by Mr. Justice Abad Santos. This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising from the alleged disgraceful termination of petitioners' employment. Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo),

The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo). More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case No. R4-STF1-492-78, pp. 40, 288-299, Rollo). The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo). Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo). Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion. Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be ventilated in court (p. 247, Rollo). After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers, including moral damages, and other claims arising from employer- employee relationship. Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440. In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong were within the exclusive jurisdiction of the Labor Arbiter and the

NLRC, as originally provided in article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March 15,1982.) The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of Medina and Ong.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 157010 June 21, 2005

PHILIPPINE NATIONAL BANK, petitioner, vs. FLORENCE O. CABANSAG, respondent. DECISION PANGANIBAN, J.: The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations. Our labor statutes may not be rendered ineffective by laws or judgments promulgated, or stipulations agreed upon, in a foreign country. The Case Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to reverse and set aside the July 16, 2002 Decision2 and the January 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68403. The assailed Decision dismissed the CA Petition (filed by herein petitioner), which had sought to reverse the National Labor Relations Commission (NLRC)s June 29, 2001 Resolution,4 affirming Labor Arbiter Joel S. Lustrias January 18, 2000 Decision.5 The assailed CA Resolution denied herein petitioners Motion for Reconsideration. The Facts The facts are narrated by the Court of Appeals as follows: "In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied for employment, with the Singapore Branch of the Philippine National Bank, a private banking corporation organized and existing under the laws of the Philippines, with principal offices at the PNB Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under the helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of Vice-President of the Bank. At the time, too, the Branch Office had two (2) types of employees:

(a) expatriates or the regular employees, hired in Manila and assigned abroad including Singapore, and (b) locally (direct) hired. She applied for employment as Branch Credit Officer, at a total monthly package of $SG4,500.00, effective upon assumption of duties after approval. Ruben C. Tobias found her eminently qualified and wrote on October 26, 1998, a letter to the President of the Bank in Manila, recommending the appointment of Florence O. Cabansag, for the position. xxxxxxxxx "The President of the Bank was impressed with the credentials of Florence O. Cabansag that he approved the recommendation of Ruben C. Tobias. She then filed an Application, with the Ministry of Manpower of the Government of Singapore, for the issuance of an Employment Pass as an employee of the Singapore PNB Branch. Her application was approved for a period of two (2) years. "On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month and, upon her successful completion of her probation to be determined solely, by the Bank, she may be extended at the discretion of the Bank, a permanent appointment and that her temporary appointment was subject to the following terms and conditions: 1. You will be on probation for a period of three (3) consecutive months from the date of your assumption of duty. 2. You will observe the Banks rules and regulations and those that may be adopted from time to time. 3. You will keep in strictest confidence all matters related to transactions between the Bank and its clients. 4. You will devote your full time during business hours in promoting the business and interest of the Bank. 5. You will not, without prior written consent of the Bank, be employed in anyway for any purpose whatsoever outside business hours by any person, firm or company. 6. Termination of your employment with the Bank may be made by either party after notice of one (1) day in writing during probation, one month notice upon confirmation or the equivalent of one (1) days or months salary in lieu of notice. "Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine Embassy in Singapore processed the employment contract of Florence O. Cabansag and, on March 8, 1999, she was issued by the Philippine Overseas Employment Administration, an Overseas Employment Certificate, certifying that she was a bona fide contract worker for Singapore.

xxxxxxxxx "Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9, 1999, her initial Performance Report. Ruben C. Tobias was so impressed with the Report that he made a notation and, on said Report: GOOD WORK. However, in the evening of April 14, 1999, while Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the Assistant Vice-President and Deputy General Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to tell Florence O. Cabansag to resign from her job. Florence O. Cabansag was perplexed at the sudden turn of events and the runabout way Ruben C. Tobias procured her resignation from the Bank. The next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the information, with the explanation that her resignation was imperative as a cost-cutting measure of the Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch will be sold or transformed into a remittance office and that, in either way, Florence O. Cabansag had to resign from her employment. The more Florence O. Cabansag was perplexed. She then asked Ruben C. Tobias that she be furnished with a Formal Advice from the PNB Head Office in Manila. However, Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit any letter of resignation. "On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and demanded that she submit her letter of resignation, with the pretext that he needed a Chinesespeaking Credit Officer to penetrate the local market, with the information that a Chinesespeaking Credit Officer had already been hired and will be reporting for work soon. She was warned that, unless she submitted her letter of resignation, her employment record will be blemished with the notation DISMISSED spread thereon. Without giving any definitive answer, Florence O. Cabansag asked Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. Tobias told her that she should be out of her employment by May 15, 1999. "However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and adamantly ordered her to submit her letter of resignation. She refused. On April 20, 1999, she received a letter from Ruben C. Tobias terminating her employment with the Bank. xxxxxxxxx "On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against the Respondents, the decretal portion of which reads as follows: WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding respondents guilty of Illegal dismissal and devoid of due process, and are hereby ordered: 1. To reinstate complainant to her former or substantially equivalent position without loss of seniority rights, benefits and privileges; 2. Solidarily liable to pay complainant as follows:

a) To pay complainant her backwages from 16 April 1999 up to her actual reinstatement. Her backwages as of the date of the promulgation of this decision amounted to SGD 40,500.00 or its equivalent in Philippine Currency at the time of payment; b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine Currency at the time of payment; c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in Philippine Currency at the time of payment; d) Monetary equivalent of leave credits earned on Sunday banking in the amount of SGD 1,557.67 or its equivalent in Philippine Currency at the time of payment; e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60 or its equivalent in Philippine Currency at the time of payment. f) Monetary equivalent of unused vacation leave benefits in the amount of SGD 319.85 or its equivalent in Philippine Currency at the time of payment. g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine Currency at the time of payment; 3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its equivalent in Philippine Currency at the time of payment, and moral damages in the amount of PhP 200,000.00, exemplary damages in the amount of PhP 100,000.00; 4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine Currency at the time of payment, representing attorneys fees. SO ORDERED." 6 [Emphasis in the original.] PNB appealed the labor arbiters Decision to the NLRC. In a Resolution dated June 29, 2001, the Commission affirmed that Decision, but reduced the moral damages to P100,000 and the exemplary damages to P50,000. In a subsequent Resolution, the NLRC denied PNBs Motion for Reconsideration. Ruling of the Court of Appeals In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in evidence the Singaporean law supposedly governing the latters employment Contract with respondent. The appellate court found that the Contract had actually been processed by the Philippine Embassy in Singapore and approved by the Philippine Overseas Employment Administration (POEA), which then used that Contract as a basis for issuing an Overseas Employment Certificate in favor of respondent.

According to the CA, even though respondent secured an employment pass from the Singapore Ministry of Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the labor arbiter or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit herself solely to the Ministry of Manpower of Singapores jurisdiction over disputes arising from her employment. The appellate court further noted that a cursory reading of the Ministrys letter will readily show that no such waiver or submission is stated or implied. Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of respondent. The bank had also failed to give her sufficient notice and an opportunity to be heard and to defend herself. The CA ruled that she was consequently entitled to reinstatement and back wages, computed from the time of her dismissal up to the time of her reinstatement. Hence, this Petition.7 Issues Petitioner submits the following issues for our consideration: "1. Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction over the instant controversy; "2. Whether or not the arbitration of the NLRC in the National Capital Region is the most convenient venue or forum to hear and decide the instant controversy; and "3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover moral and exemplary damages and attorneys fees."8 In addition, respondent assails, in her Comment,9 the propriety of Rule 45 as the procedural mode for seeking a review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant consideration. Respondent miscomprehends the Courts discourse in St. Martin Funeral Home v. NLRC,10 which has indeed affirmed that the proper mode of review of NLRC decisions, resolutions or orders is by a special civil action for certiorari under Rule 65 of the Rules of Court. The Supreme Court and the Court of Appeals have concurrent original jurisdiction over such petitions for certiorari. Thus, in observance of the doctrine on the hierarchy of courts, these petitions should be initially filed with the CA.11 Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for Certiorari. In seeking a review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity of employment termination -- petitioner is likewise correct in invoking Rule 45.12 It is true, however, that in a petition for review on certiorari, the scope of the Supreme Courts judicial review of decisions of the Court of Appeals is generally confined only to errors of law. It does not extend to questions of fact. This doctrine applies with greater force in labor cases. Factual questions are for the labor tribunals to resolve. 13 In the present case, the labor arbiter and the NLRC have already determined the factual issues. Their findings, which are supported by substantial evidence, were affirmed by the CA. Thus, they are entitled to great respect and are

rendered conclusive upon this Court, absent a clear showing of palpable error or arbitrary disregard of evidence.14 The Courts Ruling The Petition has no merit. First Issue: Jurisdiction The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as follows: "ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work and other terms and conditions of employment 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount of exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. (b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. x x x x x x x x x." More specifically, Section 10 of RA 8042 reads in part:

"SECTION 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of damages. x x x x x x x x x" Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over claims arising from employer-employee relations, including termination disputes involving all workers, among whom are overseas Filipino workers (OFW).15 We are not unmindful of the fact that respondent was directly hired, while on a tourist status in Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner had to obtain an employment pass for her from the Singapore Ministry of Manpower. Securing the pass was a regulatory requirement pursuant to the immigration regulations of that country.16 Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a local work permit in order to be legally employed here. That permit, however, does not automatically mean that the non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at all imply a waiver of ones national laws on labor. Absent any clear and convincing evidence to the contrary, such permit simply means that its holder has a legal status as a worker in the issuing country.1avvphil.zw+ Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on March 8, 1999, declared her a bona fide contract worker for Singapore. Under Philippine law, this document authorized her working status in a foreign country and entitled her to all benefits and processes under our statutes. Thus, even assuming arguendo that she was considered at the start of her employment as a "direct hire" governed by and subject to the laws, common practices and customs prevailing in Singapore17 she subsequently became a contract worker or an OFW who was covered by Philippine labor laws and policies upon certification by the POEA. At the time her employment was illegally terminated, she already possessed the POEA employment Certificate. Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office in Singapore.18 Significantly, respondents employment by the Singapore branch office had to be approved by Benjamin P. Palma Gil,19 the president of the bank whose principal offices were in Manila. This circumstance militates against petitioners contention that respondent was "locally hired"; and totally "governed by and subject to the laws, common practices and customs" of Singapore, not of the Philippines. Instead, with more reason does this fact reinforce the presumption that respondent falls under the legal definition of migrant worker, in this case one deployed in Singapore. Hence, petitioner cannot escape the application of Philippine laws or the jurisdiction of the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown Internationale v. NLRC:20 "x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers.1awphi1.net For the State assures the basic rights of all workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determination or conventions agreed upon in a foreign country." Second Issue: Proper Venue Section 1(a) of Rule IV of the NLRC Rules of Procedure reads: "Section 1. Venue (a) All cases which Labor Arbiters have authority to hear and decide may be filed in the Regional Arbitration Branch having jurisdiction over the workplace of the complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall be filed before the Regional Arbitration Branch where the complainant resides or where the principal office of the respondent/employer is situated, at the option of the complainant. "For purposes of venue, workplace shall be understood as the place or locality where the employee is regularly assigned when the cause of action arose. It shall include the place where the employee is supposed to report back after a temporary detail, assignment or travel. In the case of field employees, as well as ambulant or itinerant workers, their workplace is where they are regularly assigned, or where they are supposed to regularly receive their salaries/wages or work instructions from, and report the results of their assignment to their employers." Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant worker "refers to a person who is to be engaged, is engaged or has been engaged in a remunerated activity in a state of which he or she is not a legal resident; to be used interchangeably with overseas Filipino worker."21 Undeniably, respondent was employed by petitioner in its branch office in Singapore. Admittedly, she is a Filipino and not a legal resident of that state. She thus falls within the category of "migrant worker" or "overseas Filipino worker." As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal. The law gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2) at the RAB where the principal office of her employer is situated. Since her dismissal by petitioner, respondent has returned to the Philippines -- specifically to her residence

at Filinvest II, Quezon City. Thus, in filing her Complaint before the RAB office in Quezon City, she has made a valid choice of proper venue. Third Issue: Illegal Dismissal The appellate court was correct in holding that respondent was already a regular employee at the time of her dismissal, because her three-month probationary period of employment had already ended. This ruling is in accordance with Article 281 of the Labor Code: "An employee who is allowed to work after a probationary period shall be considered a regular employee." Indeed, petitioner recognized respondent as such at the time it dismissed her, by giving her one months salary in lieu of a one-month notice, consistent with provision No. 6 of her employment Contract. Notice and Hearing Not Complied With As a regular employee, respondent was entitled to all rights, benefits and privileges provided under our labor laws. One of her fundamental rights is that she may not be dismissed without due process of law. The twin requirements of notice and hearing constitute the essential elements of procedural due process, and neither of these elements can be eliminated without running afoul of the constitutional guarantee.22 In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them of the particular acts or omissions for which their dismissal is sought; and 2) the other to inform them of the decision to dismiss them. As to the requirement of a hearing, its essence lies simply in the opportunity to be heard.23 The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission for which her dismissal was being sought. Neither was she given any chance to be heard, as required by law. At any rate, even if she were given the opportunity to be heard, she could not have defended herself effectively, for she knew no cause to answer to. All that petitioner tendered to respondent was a notice of her employment termination effective the very same day, together with the equivalent of a one-month pay. This Court has already held that nothing in the law gives an employer the option to substitute the required prior notice and opportunity to be heard with the mere payment of 30 days salary.24 Well-settled is the rule that the employer shall be sanctioned for noncompliance with the requirements of, or for failure to observe, due process that must be observed in dismissing an employee.25 No Valid Cause for Dismissal Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid grounds or causes for an employees dismissal. The employer has the burden of proving that it was done for any of

those just or authorized causes. The failure to discharge this burden means that the dismissal was not justified, and that the employee is entitled to reinstatement and back wages.29 Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for terminating the employment of respondent. It merely insists that her dismissal was validly effected pursuant to the provisions of her employment Contract, which she had voluntarily agreed to be bound to. Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between them. However, petitioner overlooks the qualification that those terms and conditions agreed upon must not be contrary to law, morals, customs, public policy or public order.30 As explained earlier, the employment Contract between petitioner and respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and terms and conditions of the Contract must not contravene our labor law provisions. Moreover, a contract of employment is imbued with public interest. The Court has time and time again reminded parties that they "are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other."31 Also, while a contract is the law between the parties, the provisions of positive law that regulate such contracts are deemed included and shall limit and govern the relations between the parties.32 Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal.33 Awards for Damages Justified Finally, moral damages are recoverable when the dismissal of an employee is attended by bad faith or constitutes an act oppressive to labor or is done in a manner contrary to morals, good customs or public policy.34 Awards for moral and exemplary damages would be proper if the employee was harassed and arbitrarily dismissed by the employer.35 In affirming the awards of moral and exemplary damages, we quote with approval the following ratiocination of the labor arbiter: "The records also show that [respondents] dismissal was effected by [petitioners] capricious and high-handed manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals, good customs and public policy. Bad faith and fraud are shown in the acts committed by [petitioners] before, during and after [respondents] dismissal in addition to the manner by which she was dismissed. First, [respondent] was pressured to resign for two different and contradictory reasons, namely, cost-cutting and the need for a Chinese[-]speaking credit officer, for which no written advice was given despite complainants request. Such wavering stance or vacillating position indicates bad faith and a dishonest purpose. Second, she was employed on account of her qualifications, experience and readiness for the position of credit officer and pressured to resign a month after she was commended for her good work. Third, the demand for

[respondents] instant resignation on 19 April 1999 to give way to her replacement who was allegedly reporting soonest, is whimsical, fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic] until 15 May 1999 within which to leave. Fourth, the pressures made on her to resign were highly oppressive, anti-social and caused her absolute torture, as [petitioners] disregarded her situation as an overseas worker away from home and family, with no prospect for another job. She was not even provided with a return trip fare. Fifth, the notice of termination is an utter manifestation of bad faith and whim as it totally disregards [respondents] right to security of tenure and due process. Such notice together with the demands for [respondents] resignation contravenes the fundamental guarantee and public policy of the Philippine government on security of tenure. "[Respondent] likewise established that as a proximate result of her dismissal and prior demands for resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock and social humiliation. Her standing in the social and business community as well as prospects for employment with other entities have been adversely affected by her dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the Civil Code. xxxxxxxxx "[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating [respondents] employment and are therefore liable for exemplary damages. This should served [sic] as protection to other employees of [petitioner] company, and by way of example or correction for the public good so that persons similarly minded as [petitioners] would be deterred from committing the same acts."36 The Court also affirms the award of attorneys fees. It is settled that when an action is instituted for the recovery of wages, or when employees are forced to litigate and consequently incur expenses to protect their rights and interests, the grant of attorneys fees is legally justifiable.37 WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. SO ORDERED. Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 122791 February 19, 2003

PLACIDO O. URBANES, JR., doing business under the name & style of CATALINA SECURITY AGENCY, petitioner, vs. THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT and SOCIAL SECURITY SYSTEM, respondents. DECISION CARPIO-MORALES, J.: Before this Court is a Petition for Certiorari under Rule 65 of the Revised Rules of Court assailing the June 22, 1995 Order of the Department of Labor and Employment (DOLE) Secretary which set aside the September 16, 1994 Order of the Regional Director, National Capital Region (NCR). The antecedent facts of the case are as follows: Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency, entered into an agreement1 to provide security services to respondent Social Security System (SSS). During the effectivity of the agreement, petitioner, by letter of May 16, 1994,2 requested the SSS for the upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act 6727 otherwise known as the Wage Rationalization Act, the pertinent provision of which wage order reads: Section 9. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed amount set forth herein for covered workers shall be borne by the principals or the clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client failed to pay the prescribed increase, the construction/service contractors shall be jointly and severally liable with the principal or client. (Emphasis and underscoring supplied.)

As his May 16, 1994 letter to the SSS remained unheeded, petitioner sent another letter,3 dated June 7, 1994, reiterating the request, which was followed by still another letter,4 dated June 8, 1994. On June 24, 1994, petitioner pulled out his agencys services from the premises of the SSS and another security agency, Jaguar, took over.5 On June 29, 1994, petitioner filed a complaint6 with the DOLE-NCR against the SSS seeking the implementation of Wage Order No. NCR-03. In its position paper,7 the SSS prayed for the dismissal of the complaint on the ground that petitioner is not the real party in interest and has no legal capacity to file the same. In any event, it argued that if it had any obligation, it was to the security guards. On the other hand, petitioner in his position paper,8 citing Eagle Security Agency, Inc. v. NLRC,9 contended that the security guards assigned to the SSS do not have any legal basis to file a complaint against it for lack of contractual privity. Finding for petitioner, the Regional Director of the DOLE-NCR issued an Order10 of September 16, 1994, the dispositive portion of which reads, quoted verbatim: WHEREFORE, premises considered, the respondent Social Security System (SSS) is hereby Ordered to pay Complainant the total sum of ONE MILLION SIX HUNDRED THOUSAND EIGHT HUNDRED FIFTY EIGHT AND 46/100 (P 1,600,858.46) representing the wage differentials under Wage Order No. NCR-03 of the ONE HUNDRED SIXTY EIGHT (168) Security Guards of Catalina Security Agency covering the period from December 16, 1993 to June 24, 1994, inclusive within ten (10) days from receipt hereof, otherwise a writ of execution shall be issued to enforce this Order. The claims for the payment of interest and Attorneys fees are hereby ordered dismissed for want of jurisdiction. SO ORDERED. The SSS moved to reconsider the September 16, 1994 Order of the Regional Director, praying that the computation be revised.11 By Order12 of December 9, 1994, the Regional Director modified his September 16, 1994 Order by reducing the amount payable by the SSS to petitioner. The dispositive portion of the Regional Directors Order of December 9, 1994 reads: WHEREFORE, premises considered, the Order of this Office dated September 16, 1994 is hereby modified. Respondent Social Security System is hereby ordered to pay complainant the amount of ONE MILLION TWO HUNDRED THIRTY SEVEN THOUSAND SEVEN HUNDRED FORTY PESOS (P 1,237,740.00) representing the wage differentials under Wage Order No. NCR-03 of the one hundred sixty-eight (168) security guards of Catalina Security

Agency covering the period from December 16, 1993 to June 20, 1994, inclusive, within ten (10) days from receipt of this Order, otherwise, execution shall issue. The SSS appealed13 to the Secretary of Labor upon the following assigned errors, quoted verbatim: A. THE REGIONAL DIRECTOR HAS NO JURISDICTION OF THE CASE AT BAR. B. THE HONORABLE REGIONAL DIRECTOR ERRED IN FINDING THAT COMPLAINANT IS THE REAL PARTY IN INTEREST AND HAS LEGAL CAPACITY TO FILE THE CASE. C. THE HONORABLE REGIONAL DIRECTOR ERRED IN ADOPTING COMPLAINANTS COMPUTATION FOR WAGE ADJUSTMENT UNDER WAGE ORDER NO. NCR-03 AS BASIS OF RESPONDENTS LIABILITY.14 The Secretary of Labor, by Order15 of June 22, 1995, set aside the order of the Regional Director and remanded the records of the case "for recomputation of the wage differentials using P 5,281.00 as the basis of the wage adjustment." And the Secretary held petitioners security agency "JOINTLY AND SEVERALLY liable for wage differentials, the amount of which should be paid DIRECTLY to the security guards concerned." Petitioners Motion for Reconsideration of the DOLE Secretarys Order of June 22, 1995 having been denied by Order16 of October 10, 1995, the present petition was filed, petitioner contending that the DOLE Secretary committed grave abuse of discretion when he: 1. . . . TOTALLY IGNORED THE PROVISION OF ARTICLE 129 OF THE LABOR CODE FOR PERFECTING AN APPEAL FROM THE DECISION OF THE REGIONAL DIRECTOR UNDER ARTICLE 129 INVOKED BY RESPONDENT SSS; 2. . . . DISREGARDED THE PROVISION ON APPEALS FROM THE DECISIONS OR RESOLUTIONS OF THE REGIONAL DIRECTOR, DOLE, UNDER ARTICLE 129 OF THE LABOR CODE, AS AMENDED BY REPUBLIC ACT NO. 6715; 3. . . . TOTALLY OVERLOOKED THE LAW AND PREVAILING JURISPRUDENCE WHEN IT ACTED ON THE APPEAL OF RESPONDENT SSS.17 Petitioner asserts that the Secretary of Labor does not have jurisdiction to review appeals from decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code18 which provides: ART. 129. RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND OTHER BENEFITS. Upon complaint of any interested party, the regional director of the Department of Labor and Employment or any duly authorized hearing officers of the Department is empowered, through summary proceeding and after due notice, to hear and decide any matter involving the recovery of wages and other monetary claims and benefits, including legal interest, owing to an employee

or person employed in domestic or household service or househelper under this Code, arising from employer-employee relations: Provided, That such complaint does not include a claim for reinstatement; Provided, further, That the aggregate money claim of each employee or househelper does not exceed Five Thousand pesos (P5,000.00). The regional director or hearing officer shall decide or resolve the complaint within thirty (30) calendar days from the date of the filing of the same. Any sum thus recovered on behalf of any employee or househelper pursuant to this Article shall be held in a special deposit account by, and shall be paid on order of, the Secretary of Labor and Employment or the regional director directly to the employee or househelper concerned. Any such sum not paid to the employee or househelper, because he cannot be located after diligent and reasonable effort to locate him within a period of three (3) years, shall be held as a special fund of the Department of Labor and Employment to be used exclusively for the amelioration and benefit of workers. Any decision or resolution of the regional director or officer pursuant to this provision may be appealed on the same grounds provided in Article 223 of this Code, within five (5) calendar days from receipt of a copy of said decision or resolution, to the National Labor Relations Commission which shall resolve the appeal within ten (10) calendar days from submission of the last pleading required or allowed under its rules. x x x (Emphasis supplied). Petitioner thus contends that as the appeal of SSS was filed with the wrong forum, it should have been dismissed.19 The SSS, on the other hand, contends that Article 128, not Article 129, is applicable to the case. Article 128 provides: ART. 128. VISITORIAL AND ENFORCEMENT POWERS xxx (b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. xxx An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. x x x (Emphasis supplied). Neither the petitioners contention nor the SSSs is impressed with merit. Lapanday Agricultural Development Corporation v. Court of Appeals20 instructs so. In that case, the security agency

filed a complaint before the Regional Trial Court (RTC) against the principal or client Lapanday for the upward adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued that it is the National Labor Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the case, it involving the enforcement of wage adjustment and other benefits due the agencys security guards as mandated by several wage orders. Holding that the RTC has jurisdiction over the controversy, this Court ruled: We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and damages on account of petitioner's alleged breach of its obligation under their Guard Service Contract. The action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While the resolution of the issue involves the application of labor laws, reference to the labor code was only for the determination of the solidary liability of the petitioner to the respondent where no employer-employee relation exists.21 x x x (Emphasis and underscoring supplied). In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards,22 the relief sought has to do with the enforcement of the contract between him and the SSS which was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts. But even assuming arguendo that petitioners complaint were filed with the proper forum, for lack of cause of action it must be dismissed.1awphi1.nt Articles 106, 107 and 109 of the Labor Code provide: ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into contract with another person for the performance of the formers work, the employees of the contractor and of the latters 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 wage 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 (Emphasis and underscoring supplied) ART. 107 INDIRECT EMPLOYER. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an

employer, contracts with an independent contractor for the performance of any work, task, job or project. ART. 109. SOLIDARY LIABILTY. The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.(Emphasis supplied.) In the case of Eagle Security Agency, Inc. v. NLRC,23 this Court held: The Wage Orders are explicit that payment of the increases are "to be borne" by the principal or client. "To be borne", however, does not mean that the principal, PTSI in this case, would directly pay the security guards the wage and allowance increases because there is no privity of contract between them. The security guards' contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of the Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665]. On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former availed of the security services provided by the latter. In return, the security agency collects from its client payment for its security services. This payment covers the wages for the security guards and also expenses for their supervision and training, the guards' bonds, firearms with ammunitions, uniforms and other equipments, accessories, tools, materials and supplies necessary for the maintenance of a security force. Premises considered, the security guards' immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractor's payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal. In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be held solidarily liable with EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim an adjustment from PTSI for an increase in consideration to cover the increases payable to the security guards. x x x (Emphasis and underscoring supplied). Passing on the foregoing disquisition in Eagle, this Court, in Lapanday,24 held:

It is clear also from the foregoing that it is only when [the] contractor pays the increases mandated that it can claim an adjustment from the principal to cover the increases payable to the security guards. The conclusion that the right of the contractor (as principal debtor) to recover from the principal (as solidary co-debtor) arises only if he has paid the amounts for which both of them are jointly and severally liable is in line with Article 1217 of the Civil Code which provides: "Art. 1217. Payment made by one the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made payment make claim from his co-debtors only the share which corresponds to each, with interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. x x x"25 (Emphasis and underscoring supplied). In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-security guards "the increases" mandated by Wage Order No. NCR-03.1awphi1.nt The records do not show that petitioner has paid the mandated increases to the security guards. The security guards in fact have filed a complaint26 with the NLRC against petitioner relative to, among other things, underpayment of wages. WHEREFORE, the present petition is hereby DISMISSED, and petitioners complaint before the Regional Director is dismissed for lack of jurisdiction and cause of action. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez and Corona, JJ., concur.

THIRD DIVISION

YUSEN AIR AND SEA SERVICE PHILIPPINES, INCORPORATED, Petitioner,

G.R. No. 154060

Present:

PANGANIBAN, J., Chairman SANDOVAL-GUTIERREZ, CORONA, - versus CARPIO MORALES, and GARCIA, JJ.

Promulgated: ISAGANI A. VILLAMOR, Respondent. August 16, 2005 x----------------------------------------------------------------------------------x

DECISION

GARCIA, J.:

Via this petition for review on certiorari under Rule 45 of the Rules of
Court, petitioner Yusen Air and Sea Service Philippines, Incorporated, urges us to annul and set aside the following orders of the Regional Trial Court at Paraaque City, Branch 258, in its Civil Case No. 02-0063, to wit:

1.

Order dated March 20, 2002,[1] dismissing, on ground of lack of jurisdiction, petitioners complaint for injunction and damages with prayer for a temporary restraining order filed by it against herein respondent, Isagani A. Villamor; and Order dated June 21, 2002,[2] denying petitioners motion for reconsideration.

2.

The facts:

Petitioner, a corporation organized and existing under Philippines laws, is engaged in the business of freight forwarding. As such, it is contracted by clients to pick-up, unpack, consolidate, deliver, transport and distribute all kinds of cargoes, acts as cargo or freight accommodation and enters into charter parties for the carriage of all kinds of cargoes or freight.

On August 16, 1993, petitioner hired respondent as branch manager in its Cebu Office. Later, petitioner reclassified respondents position to that of Division Manager, which position respondent held until his resignation on February 1, 2002.

Immediately after his resignation, respondent started working for

Aspac International, a corporation engaged in the same line of business as


that of petitioner.

On February 11, 2002, in the Regional Trial Court at Paraaque City, petitioner filed against respondent a complaint[3] for injunction and damages with prayer for a temporary restraining order. Thereat docketed as Civil Case No. 02-0063 which was raffled to Branch 258 of the court, the complaint alleged, inter alia, as follows:

7.

That [respondent] duly signed an undertaking to abide by the policies of the [Petitioner] which includes the provision on the employees responsibility and obligation in cases of conflict of interest, which reads:

No employee may engage in any business or undertaking that is directly or indirectly in competition with that of the company and its affiliates or engage directly or indirectly in any undertaking or activity prejudicial to the interests of the company or to the performance of his/her job or work assignments. The same provision will be implemented for a period of two (2) years from the date of an employees resignation, termination or separation from the company. 8. That in clear violation and breach of his undertaking and agreement with the policies of [petitioner], [respondent] joined Aspac International, within two years from [his] date of resignation, whose business is directly in conflict with that of [petitioner]. (Underscoring supplied; words in bracket ours).

Petitioner thus prayed for a judgment enjoining respondent from further pursuing his work at Aspac International, and awarding it P2,000,000 as actual damages; P300,000 as exemplary damages; and another P300,000 as attorneys fees.

On March 4, 2002, apparently not to be outdone, respondent filed against petitioner a case for illegal dismissal before the National Labor Relations Commission.

Meanwhile, instead of filing his answer in Civil Case No. 02-0063, respondent filed a Motion to Dismiss,[4] arguing that the RTC has no jurisdiction over the subject matter of said case because an employeremployee relationship is involved.

On March 20, 2002, the trial court issued the herein first assailed order dismissing petitioners complaint for lack of jurisdiction over the subject matter thereof on the ground that the action was for damages arising from employer-employee relations. Citing Article 217 of the Labor Code, the trial court ruled that it is the labor arbiter which had jurisdiction over petitioners complaint:

xxx the Court, after going over all the assertions, averments and arguments of the parties and after carefully evaluating the same, is of the firm and honest opinion that the arguments raised by [respondent] movant are more in conformity with the rules and jurisprudence as this case involves an employeremployee relationship and is within the exclusive original jurisdiction of the NLRC pursuant to Art. 217 of the Labor Code of the Philippines. Not only that, there is even a pending case for illegal dismissal against herein [petitioner] filed by [respondent] before the Regional Arbitration Branch VII in Cebu City. WHEREFORE, this case is hereby ordered DISMISSED for lack of jurisdiction. SO ORDERED. (Words in bracket ours).

In time, petitioner moved for a reconsideration but its motion was denied by the trial court in its subsequent order of June 21, 2002.

Hence, petitioners present recourse, maintaining that its cause of action did not arise from employer-employee relations even if the claim therein is based on a provision in its handbook, and praying that Civil Case No. 02-0063 be remanded to the court a quo for further proceedings.

The petition is impressed with merit.

At the outset, we take note of the fact that the 2-year prohibition against employment in a competing company which petitioner seeks to enforce thru injunction, had already expired sometime in February 2004. Necessarily, upon the expiration of said period, a suit seeking the issuance of a writ of injunction becomes functus oficio and therefore moot. As things go, however, it was not possible for us, due to the great number of cases awaiting disposition, to have decided the instant case earlier. However, the issue of damages remains unresolved. In Philippine National Bank v. CA,[5] we declared:

In the instant case, aside from the principal action for damages, private respondent sought the issuance of a temporary restraining order and writ of preliminary injunction to enjoin the foreclosure sale in order to prevent an alleged irreparable injury to private respondent. It is settled that these injunctive reliefs are preservative remedies for the protection of substantive rights and interests. Injunction is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. When the act sought to be enjoined ha[s] become fait accompli, only the prayer for provisional remedy should be denied. However, the trial court should still proceed with the determination of the principal action so that an adjudication of the rights of the parties can be had.

Along similar vein, the damage aspect of the present suit was never rendered moot by the lapse of the 2-year prohibitive period against employment in a competing company.

This brings us to the sole issue of whether petitioner's claim for damages arose from employer-employee relations between the parties.

We rule in the negative.

Actually, the present case is not one of first impression. In a kindred case, Dai-Chi Electronics Manufacturing vs. Villarama,[6] with a substantially similar factual backdrop, we held that an action for breach of contractual obligation is intrinsically a civil dispute.

There, a complaint for damages was filed with the regular court by an employer against a former employee who allegedly violated the noncompete provision of their employment contract when, within two years from the date of the employees resignation, he applied with, and was hired by a corporation engaged in the same line of business as that of his former employer. The employer sought to recover liquidated damages. The trial court ruled that it had no jurisdiction over the subject matter of the

controversy because the complaint was for damages arising from employer-employee relations, citing Article 217 (4) of the Labor Code, as amended by R.A. No. 6715, which stated that it is the Labor Arbiter who had original and exclusive jurisdiction over the subject matter of the case.

When the case was elevated to this Court, we held that the claim for damages did not arise from employer-employee relations, to wit:

Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages agreed upon in the contract as redress for private respondents breach of his contractual obligation to its damage and prejudice. Such cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so when we consider that the stipulation refers to the post-employment relations of the parties.

[W]hile seemingly the cause of action arose from employer-employee relations, the employers claim for damages is grounded on wanton failure and refusal without just cause to report to duty coupled with the averment that the employee maliciously and with bad faith violated the terms and conditions of the contract to the damage of the employer. Such averments removed the controversy from the coverage of the Labor Code of the Philippines and brought it within the purview of Civil Law.

Indeed, jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be cognizable by the Labor Arbiter, must have a reasonable causal connection with any of the claims provided for in that article. Only if there is such a connection with the other claims can a claim for damages be considered as arising from employer-employee relations.

Article 217, as amended by Section 9 of RA 6715, provides:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: xxx 4. xxx xxx

Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;" xxx xxx xxx

In San Miguel Corporation vs. National Labor Relations

Commission,[7] we had occasion to construe Article 217, as


amended by B.P. Blg. 227. Article 217 then provided that the Labor Arbiter had jurisdiction over all money claims of workers, but the phrase arising from employer-employee relation was deleted. We ruled thus:

While paragraph 3 above refers to all money claims of workers, it is not necessary to suppose that the entire universe of money claims that might be asserted by workers against their employers has been absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but rather within the context formed by paragraph 1 (relating to unfair labor practices), paragraph 2 (relating to claims concerning terms and conditions of employment), paragraph 4 (claims relating to household services, a particular species of employer-employee relations), and paragraph 5 (relating to certain activities prohibited to employees or employers). It is evident that there is a unifying element which runs through paragraph 1 to 5 and that is, that they all refer to cases or disputes arising out of or in connection with an

employer-employee relationship. This is, in other words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended. We reach the above conclusion from an examination of the terms themselves of Article 217, as last amended by B.P. Blg 227, and even though earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction of the Labor Arbiters and the NLRC cases arising from employer employee relations, which clause was not expressly carried over, in printers ink, in Article 217 as it exists today. For it cannot be presumed that money claims of workers which do not arise out of or in connection with their employer-employee relationship, and which would therefore fall within the general jurisdiction of regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the money claims of workers referred to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident of such relationship. Put a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the employer-employee relationship.

When, as here, the cause of action is based on a quasi-delict or tort, which has no reasonable causal connection with any of the claims provided for in Article 217, jurisdiction over the action is with the regular courts.[8]

As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages based on the parties contract of employment as redress for respondent's breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so must this be in the present case, what with the reality that the stipulation refers to the post-employment relations of the parties.

For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is one of claim for damages arising from a breach of contract, which is within the ambit of the regular courts jurisdiction.[9]

It is basic that jurisdiction over the subject matter is determined upon the allegations made in the complaint, irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted therein, which is a matter resolved only after and as a result of a trial. Neither can jurisdiction of a court be made to depend upon the defenses made by a defendant in his answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend almost entirely upon the defendant.[10]

ACCORDINGLY, the assailed orders of the lower court are SET ASIDE and Civil Case No. 02-0063 REMANDED to it for trial on the merits of the main claim for damages.

SO ORDERED.

independent contractor

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 79004-08 October 4, 1991 FRANKLIN BAGUIO AND 15 OTHERS, BONIFACIO IGOT AND 6 OTHERS, ROY MAGALLANES AND 4 OTHERS, CLAUDIO BONGO, EDUARDO ANDALES and 4 OTHERS, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (3rd DIVISION), GENERAL MILLING CORPORATION and/or FELICIANO LUPO, respondents. Public Attorney's Office for petitioners. Joseph M. Baduel & Steve R. Siclot for private respondents.

MELENCIO-HERRERA, J.: The liability of an employer in job contracting, vis-a-vis his contractor's employees, is the sole issue brought to the fore in this labor dispute. This Petition for certiorari seeks to set aside the Resolution, dated 27 February 1987, of public respondent National Labor Relations Commission (NLRC), Third Division, which reversed the Resolution of its First Division, dated 27 December 1985, and absolved private respondent General Milling Corporation (GMC) from any and all liability to petitioners. Sometime in 1983, private respondent Feliciano LUPO, a building contractor, entered into a contract with GMC, a domestic corporation engaged in flour and feeds manufacturing, for the construction of an annex building inside the latter's plant in Cebu

City. In connection with the aforesaid contract, LUPO hired herein petitioners either as carpenters, masons or laborers. Subsequently, LUPO terminated petitioners' services, on different dates. As a result, petitioners filed Complaints against LUPO and GMC before the NLRC Regional Arbitration Branch No. VII, Cebu City, for unpaid wages, COLA differentials, bonus and overtime pay. In a Decision, dated 21 November 1984, the Executive Labor Arbiter, Branch VII, found LUPO and GMC jointly and severally liable to petitioners, premised on Article 109 of the Labor Code, infra, and ordered them to pay the aggregate amount of P95,382.92. Elevated on appeal on 14 December 1984, the NLRC (First Division) denied the same for lack of merit in a Resolution, dated 27 December 1985. Upon Motion for Reconsideration, filed on 27 February 1986, the case was reassigned to the Third Division. In a Resolution of 27 February 1987, that Division absolved GMC from any liability. It opined that petitioners were only hired by LUPO as workers in his construction contract with GMC and were never meant to be employed by the latter. Petitioners now assail that judgment in this Petition for Certiorari. Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's obligations to them. They seek recovery from GMC based on Article 106 of the Labor Code, infra, which holds the employer jointly and severally liable with his contractor for unpaid wages of employees of the latter. In his "Manifestation in lieu of Comment," the Solicitor General recognizes the solidary liability of GMC and LUPO but bases recovery on Article 108 of the Labor Code, infra, contending that inasmuch as GMC failed to require them LUPO a bond to answer for the latter's obligations to his employees, as required by said provision, GMC should, correspondingly, be deemed solidarily liable. In their respective Comments, both GMC and the NLRC maintain that Article 106 finds no application in the instant case because it is limited to situations where the work being performed by the contractor's employees are directly related to the principal business of the employer. The NLRC further opines that Article 109 on "Solidary Liability" finds no application either because GMC was neither petitioners' employer nor indirect employer. Upon the facts and circumstances, we uphold the solidary liability of GMC and LUPO for the latter's liabilities in favor of employees whom he had earlier employed and dismissed. Recovery, however, should not be based on Article 106 of the Labor Code. This provision treats specifically of "labor-only" contracting, which is not the set-up between GMC and LUPO.

Article 106 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 (Emphasis supplied).

In other words, a person is deemed to be engaged in "labor only" contracting where (1) 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 (2) the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer (See Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code; emphasis supplied). Since the construction of an annex building inside the company plant has no relation whatsoever with the employer's business of flour and feeds manufacturing, "labor-only" contracting does not exist. Article 106 is thus inapplicable. Instead, it is "job contracting," covered by Article 107, which is involved, reading:
Art. 107. Indirect Employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. (Emphasis supplied).

Specifically, there is "job contracting" where (1) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) the contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. It may be that LUPO subsequently ran out of capital and was unable to satisfy the award to petitioners. That

was an after-the-fact development, however, and does not detract from his status as an independent contractor. Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a contract with an independent contractor, LUPO, for the construction of an annex building, a work, task, job or project not directly related to GMC's business of flour and feeds manufacturing. Being an "indirect employer," GMC is solidarily liable with LUPO for any violation of the Labor Code pursuant to Article 109 thereof, reading:
Art. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with a contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

The provision of existing law referred to is Article 1728 of the Civil Code, which states, among others, that "the contractor is liable for all the claims of laborers and others employed by him ..." The foregoing interpretation finds a precedent in the case o Deferia v. NLRC (G.R. No. 78713, 27 February 1991) per Sarmiento, J., where Articles 107 and 109 were applied as the statutory basis for the joint and several liability of the employer with his contractor, in addition to Article 106, since the situation in that case was clearly one of "labor-only" contracting. The NLRC submission that Article 107 is not applicable in the instant case for the reason that the coverage thereof is limited to one "not an employer" whereas GMC is such an employer as defined in Article 97 (b) of the Labor Code, 1 is not well-taken. Under the peculiar set-up herein, GMC is, in fact, "not an employer" (in the sense of not being a direct employer) as understood in Article 106 of the Labor Code, but qualifies as an "indirect employer" under Article 107 of said Code. The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-only" contracting. Here, by operation of law, the contractor is merely considered as an agent of the employer, who is deemed "responsible to the workers to the same extent as if the latter were directly employed by him." On the other hand, Article 107 deals with "job contracting." In the latter situation, while the contractor himself is the direct employer of the employees, the employer is deemed, by operation of law, as an indirect employer. In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with Article 106. A contrary interpretation would render the provisions of Article 107 meaningless considering that everytime an employer engages a contractor, the latter is always acting in the interest of the former, whether directly or indirectly, in relation to his employees.

It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee relationship between the owner of the project and the employees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No. 50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is evidently because, as heretofore stated, the "labor-only" contractor is considered as a mere agent of an employer. In contrast, in "job contracting," no employer-employee relationship exists between the owner and the employees of his contractor. The owner of the project is not the direct employer but merely an indirect employer, by operation of law, of his contractor's employees. As an indirect employer, and for purposes of determining the extent of its civil liability, GMC is deemed a "direct employee" of his contractor's employees pursuant to the last sentence of Article 109 of the Labor Code. As a consequence, GMC can not escape its joint and solidary liability to petitioners. Further, Article 108 of the Labor Code requires the posting of a bond to answer for wages that a contractor fails to pay, thus:
Article 108. Posting of Bond. An employer or indirect employer may require the contractor or subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the employees showed the contractor or subcontractor, as the case may be, fails to pay the same.

Having failed to require LUPO to post such a bond, GMC must answer for whatever liabilities LUPO may have incurred to his employees. This is without prejudice to its seeking reimbursement from LUPO for whatever amount it will have to pay petitioners. WHEREFORE, the Petition for certiorari is GRANTED. The Resolution of respondent NLRC, Third Division, dated 27 February 1987, is hereby SET ASIDE, and the Decision of the Labor Arbiter, dated 21 November 1984, is hereby REINSTATED. SO ORDERED. Paras, Sarmiento and Regalado, JJ., concur.

Separate Opinions

PADILLA, J.,: The present petition seeks to have General Milling Corporation (the Company) held liable for the unpaid wages of the petitioners in solidum with the contractor (Lupo) who recruited the petitioners' services. This majority finds for the petitioners in the total adjudged sum of P95,382.92, a conclusion with which I am in complete accord. But I am not quite comfortable, and therefore disagree, with the legal basis on which the company's liability is determined. As determined by the majority, such liability of the company is called for by Article 107, Chapter III, Title II, Book III of the Labor Code, which is as follows:
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job, or project. (emphasis supplied)

It is strongly urged by the majority that the phrase "not being an employer" found in said Article 107 be given a circumspect appraisal. To my mind, there is no other interpretation of this provision of the Code than that an indirect employer, to be categorized as such, must not be an EMPLOYER as this term is defined under the Code. Article 97 of the same Title of the Labor Code defines an EMPLOYER as
ART. 97. Definition. As used in this Title a) ... b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivision and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions, or organizations. ... (emphasis supplied)

From the foregoing basic premises, it is my submission that the company (General Milling Corporation) is an employer in every sense of the word. It engages in the primary enterprise of manufacturing flour and feeds, it definitely employs employees and workers in its plant and outlets to work in various capacities. Therefore, the company cannot, in any way, be considered an indirect employer, as the term is defined, for purposes of the petitioner's cause of action against it. To hold as the majority does, that Article 107 does apply in this case, would, in my view, render useless the phrase "not being an employer" contained therein. Evidently, the framers of the Labor Code had a purpose in mind in providing for such qualification. Such a qualification, as I see it, gives protection to those workers hired or recruited by a contractor to work on some job for a person who is not himself engaged in any enterprise. An example easily comes to mind: a person who wishes to have a residential house built. He engages an architect or engineer to undertake the project

who, in turn, hires laborers, masons and carpenters. Should the architect or engineer renege on his obligations to the workers he shall have recruited, to whom will the latter seek relief? By mandate of Article 107, above-quoted, the owner of the house, who is not himself an employer as defined by law, shall be held accountable. This is where, in my view, Article 107 properly applies. In the present case, however, the company's liability to the petitioners properly comes under Article 106, Chapter III, Title II, Book III of the Code, which, in its entirety, 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 the 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 the 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. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such case, 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.

It appears abundantly clear that the juridical relationship envisioned in Article 106 involves an employer, as defined by the Code. It thus applies to the juridical situation involved in this case, where the actors are General Milling Corporation (as the employer), Lupo (as the contractor) and the petitioners (as the employees or workers). Article 106, upon careful examination, deals with three (3) situations in the juridical relationship between employer-contractor-employee. It does not deal solely with "laboronly" contracting. The first situation in Article 106 is where the employer (project owner) enters into a contract with a contractor for the performance of some job or work; the employees recruited by such contractor shall be paid, according to Article 106, first paragraph, in accordance with the requirements of the Labor Code. Stated in another way, the first paragraph of Article 106, provides the manner by which such employees shall be paid

their wages and that is, in compliance with the provisions of the Labor Code. This, therefore, would include the rules on manner of payment, minimum wage, place of payment, etc. In an employer-contractor-employee relationship, it is clear that the contractor is the real employer and, therefore, responsible to his workers for their wages. However, should such contractor fail or renege on his said obligation, to whom will the unpaid worker have recourse? The second paragraph of Article 106 resolves the seeming dilemma of the workers by providing that the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the extent of the work performed by them, meaning that the EMPLOYER shall solidarily answer for the payment of wages corresponding to the amount of work undertaken by the contractor's employees in the project. This is the second situation contemplated by Article 106. The third and final situation treated in Article 106 is contained in the fourth paragraph thereof. It pertains to what the majority perceives (erroneously, in my view) as the sole coverage of Article 106-that of a "labor-only" contracting and the extent of the rights and liabilities of the parties involved in such a relationship. As explained in the ponencia, for this scheme or situation to exist, two (2) circumstances must concur: one, the contractor who recruits the workers must have 'no substantial capital or investment in the form of tools, equipment, machineries and work premises,' and two, 'such workers are so engaged to perform activities directly related to the employer's principal business.' Should there be a finding of 'labor-only' contracting, the law expressly provides that the EMPLOYER (or project owner) shall be considered the direct employer of such workers. Such juridical relationship would then spawn a whole gamut of employer's obligations, including obligations under the workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. 1 From the facts of this case as presented, the second paragraph of article 106 finds clear application. Because of contractor Lupo's default in the payment of petitioners' wages, owing to his insolvency, the employer (company) must comply with its joint and several obligation to answer for Lupo's accountability to his employees for their unpaid wages. Thereafter, should the company be inclined to do so, it may seek reimbursement from Lupo. In sum, it is my submission that the company's solidary liability to the petitioners ought to be predicated on the basis, not of Article 107 of the Labor Code (which applies only to non-employers while the company in this case is an employer) but rather, upon the express declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not non-employers) as the company in the case at bar.

Separate Opinions

PADILLA, J.,

The present petition seeks to have General Milling Corporation (the Company) held liable for the unpaid wages of the petitioners in solidum with the contractor (Lupo) who recruited the petitioners' services. This majority finds for the petitioners in the total adjudged sum of P95,382.92, a conclusion with which I am in complete accord. But I am not quite comfortable, and therefore disagree, with the legal basis on which the company's liability is determined. As determined by the majority, such liability of the company is called for by Article 107, Chapter III, Title II, Book III of the Labor Code, which is as follows:
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job, or project. (emphasis supplied)

It is strongly urged by the majority that the phrase "not being an employer" found in said Article 107 be given a circumspect appraisal. To my mind, there is no other interpretation of this provision of the Code than that an indirect employer, to be categorized as such, must not be an EMPLOYER as this term is defined under the Code. Article 97 of the same Title of the Labor Code defines an EMPLOYER as
ART. 97. Definition. As used in this Title a) ... b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivision and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions, or organizations. ... (emphasis supplied)

From the foregoing basic premises, it is my submission that the company (General Milling Corporation) is an employer in every sense of the word. It engages in the primary enterprise of manufacturing flour and feeds, it definitely employs employees and workers in its plant and outlets to work in various capacities. Therefore, the company cannot, in any way, be considered an indirect employer, as the term is defined, for purposes of the petitioner's cause of action against it. To hold as the majority does, that Article 107 does apply in this case, would, in my view, render useless the phrase "not being an employer" contained therein. Evidently, the framers of the Labor Code had a purpose in mind in providing for such qualification. Such a qualification, as I see it, gives protection to those workers hired or recruited by a contractor to work on some job for a person who is not himself engaged in any enterprise. An example easily comes to mind: a person who wishes to have a residential house built. He engages an architect or engineer to undertake the project who, in turn, hires laborers, masons and carpenters. Should the architect or engineer renege on his obligations to the workers he shall have recruited, to whom will the latter

seek relief? By mandate of Article 107, above-quoted, the owner of the house, who is not himself an employer as defined by law, shall be held accountable. This is where, in my view, Article 107 properly applies. In the present case, however, the company's liability to the petitioners properly comes under Article 106, Chapter III, Title II, Book III of the Code, which, in its entirety, 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 the 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 the 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. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such case, 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.

It appears abundantly clear that the juridical relationship envisioned in Article 106 involves an employer, as defined by the Code. It thus applies to the juridical situation involved in this case, where the actors are General Milling Corporation (as the employer), Lupo (as the contractor) and the petitioners (as the employees or workers). Article 106, upon careful examination, deals with three (3) situations in the juridical relationship between employer-contractor-employee. It does not deal solely with "laboronly" contracting. The first situation in Article 106 is where the employer (project owner) enters into a contract with a contractor for the performance of some job or work; the employees recruited by such contractor shall be paid, according to Article 106, first paragraph, in accordance with the requirements of the Labor Code. Stated in another way, the first paragraph of Article 106, provides the manner by which such employees shall be paid their wages and that is, in compliance with the provisions of the Labor Code. This,

therefore, would include the rules on manner of payment, minimum wage, place of payment, etc. In an employer-contractor-employee relationship, it is clear that the contractor is the real employer and, therefore, responsible to his workers for their wages. However, should such contractor fail or renege on his said obligation, to whom will the unpaid worker have recourse? The second paragraph of Article 106 resolves the seeming dilemma of the workers by providing that the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the extent of the work performed by them, meaning that the EMPLOYER shall solidarily answer for the payment of wages corresponding to the amount of work undertaken by the contractor's employees in the project. This is the second situation contemplated by Article 106. The third and final situation treated in Article 106 is contained in the fourth paragraph thereof. It pertains to what the majority perceives (erroneously, in my view) as the sole coverage of Article 106-that of a "labor-only" contracting and the extent of the rights and liabilities of the parties involved in such a relationship. As explained in the ponencia, for this scheme or situation to exist, two (2) circumstances must concur: one, the contractor who recruits the workers must have 'no substantial capital or investment in the form of tools, equipment, machineries and work premises,' and two, 'such workers are so engaged to perform activities directly related to the employer's principal business.' Should there be a finding of 'labor-only' contracting, the law expressly provides that the EMPLOYER (or project owner) shall be considered the direct employer of such workers. Such juridical relationship would then spawn a whole gamut of employer's obligations, including obligations under the workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. 1 From the facts of this case as presented, the second paragraph of article 106 finds clear application. Because of contractor Lupo's default in the payment of petitioners' wages, owing to his insolvency, the employer (company) must comply with its joint and several obligation to answer for Lupo's accountability to his employees for their unpaid wages. Thereafter, should the company be inclined to do so, it may seek reimbursement from Lupo. In sum, it is my submission that the company's solidary liability to the petitioners ought to be predicated on the basis, not of Article 107 of the Labor Code (which applies only to non-employers while the company in this case is an employer) but rather, upon the express declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not non-employers) as the company in the case at bar.
#

Footnotes
1 Art. 97. Definitions. ... (b) "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivisions and instrumentalities, all governmentowned or controlled corporations and institutions, as well as non-profit private institutions, or organizations.

Padilla, J.:

San Miguel Corporation, petitioner, vs. MAERC Integrated Services, Inc.; and Emerberto Orque, ROGELIO PRADO, JR., EDDIE SELLE, ALEJANDRO ANNABIEZA, ANNIAS JUAMO-AS, CONSORCIO MANLOLOYO, ANANIAS ALCONTIN, REY GESTOPA, EDGARDO NUEZ, JUNEL CABATINGAN, PAUL DUMAQUETA, FELIMON ECHAVEZ, VITO SEALANA, DENECIA PALAO, ROBERTO LAPIZ, BALTAZAR LABIO, LEONARDO BONGO, EL CID ICALINA, JOSE DIOCAMPO, ADELO CANTILLAS, ISAIAS BRANZUELA, RAMON ROSALES, GAUDENCIO PESON, HECTOR CABAOG, EDGARDO DAGMAYAN, ROGELIO CRUZ, ROLANDO ESPINA, BERNARDINO REGIDOR, ARNELIO SUMALINOG, GUMERSINDO ALCONTIN, LORETO NUEZ, JOEBE BOY DAYON, CONRADO MESANQUE, MARCELO PESCADOR, MARCELINO JABAGAT, VICENTE DEVILLERES, VICENTE ALIN, RODOLFO PAHUGOT, RUEL NAVARES, DANILO ANABIEZA, ALEX JUEN, JUANITO GARCES, SILVINO LIMBAGA, AURELIO JURPACIO, JOVITO LOON, VICTOR TENEDERO, SASING MORENO, WILFREDO HORTEZUELA, JOSELITO MELENDEZ, ALFREDO GESTOPA, REGINO GABUYA, JORGE GAMUZARNO, LOLITO COCIDO, EFRAIM YUBAL, VENERANDO ROAMAR, GERARDO BUTALID, HIPOLITO VIDAS, VENGELITO FRIAS, VICENTE CELACIO, CORLITO PESTAAS, ERVIN HYROSA, ROMMEL GUERERO, RODRIGO ENERLAS, FRANCISCO CARBONILLA, NICANOR CUIZON, PEDRO BRIONES, RODOLFO CABALHUG, TEOFILO RICARDO, DANILO R. DIZON, ALBERTO EMBONG, ALFONSO ECHAVEZ, GONZALO RORACEA, MARCELO CARACINA, RAUL BORRES, LINO TONGALAMOS, ARTEMIO BONGO, JR., ROY AVILA, MELCHOR FREGLO, RAUL CABILLADA, EDDIE CATAB, MELENCIO DURANO, ALLAN RAGO, DOMINADOR CAPARIDA, JOVITO CATAB, ALBERT LASPIAS, ALEX ANABIEZA, NESTOR REYNANTE, EULOGIO GESTOPA, MARIO BOLO, EDERLITO A. BALOCANO, JOEL PEPITO, REYNALDO LUDIA, MANUEL CINCO, ALLAN AGUSTIN, PABLITO POLEGRATES, CLYDE PRADO, DINDO MISA, ROGER SASING, RAMON ARCALLANA, GABRIEL SALAS, EDWIN SASAN, DIOSDADO BARRIGA, MOISES SASAN, SINFORIANO CANTAGO, LEONARDO MARTURILLAS, MARIO RANIS, ALEJANDRO RANIDO, JEROME PRADO, RAUL OYAO, VICTOR CELACIO, GERALDO ROQUE, ZOSIMO CARARATON, VIRGILIO ZANORIA, JOSE ZANORIA, ALLAN ZANORIA, VICTORINO SENO, TEODULO JUMAO-AS, ALEXANDER HERA, ANTHONY ARANETA, ALDRIN SUSON, VICTOR VERANO, RUEL SUFRERENCIA, ALFRED NAPARATE, WENCESLAO BACLOHON, EDUARDO LANGITA, FELIX ORDENEZA, ARSENIO LOGARTA, EDUARDO DELA VEGA, JOVENTINO CANOOG, ROGELIO ABAPO, RICARDO RAMAS, JOSE BANDIALAN, ANTONIO BASALAN, LYNDON BASALAN, WILFREDO ALIVIANO, BIENVENIDO ROSARIO, JESUS CAPANGPANGAN, RENATO MENDOZA, ALEJANDRO CATANDEJAN, RUBEN TALABA, FILEMON ECHAVEZ, MARCELINO CARACENA, IGNACIO MISA, FELICIANO AGBAY, VICTOR MAGLASANG, ARTURO HEYROSA, ALIPIO TIROL, ROSENDO MONDARES, ANICETO LUDIA, REYNALDO LAVANDERO, REUYAN HERCULANO, TEODULO NIQUE, EMERBERTO ORQUE, ZOSIMO BAOBAO, MEDARDO SINGSON, ANTONIO

PATALINGHUG, ERNESTO SINGSON, ROBERTO TORRES, CESAR ESCARIO, LEODEGARIO DOLLECIN, ALBERTO ANOBA, RODRIGO BISNAR, ZOSIMO BINGAS, ROSALIO DURAN, SR., ROSALIO DURAN, JR., ROMEO DURAN, ANTONIO ABELLA, MARIANO REPOLLO, POLEGARPO DEGAMO, MARIO CEREZA, ANTONIO LAOROMILLA, PROCTUSO MAGALLANES, ELADIO TORRES, WARLITO DEMANA, HENRY GEDARO, DOISEDERIO GEMPERAO, ANICETO GEMPERAO, JERRY CAPAROSO, SERLITO NOYNAY, LUCIANO RECOPELACION, JUANITO GARCES, FELICIANO TORRES, RANILO VILLAREAL, FERMIN ALIVIANO, JUNJIE LAVISTE, TOMACITO DE CASTRO, JOSELITO CAPILINA, SAMUEL CASQUEJO, LEONARDO NATAD, BENJAMIN SAYSON, PEDRO INOC, EDWARD FLORES, EDWIN SASAN, JOSE REY INOT, EDGAR CORTES, ROMEO LOMBOG, NICOLAS RIBO, JAIME RUBIN, ORLANDO REGIS, RICKY ALCONZA, RUDY TAGALOG, VICTORINO TAGALOG, EDWARD COLINA, RONIE GONZAGA, PAUL CABILLADA, WILFREDO MAGALONA, JOEL PEPITO, PROSPERO MAGLASANG, ALLAN AGUSTIN, FAUSTO BARGAYO, NOMER SANCHEZ, JOLITO ALIN, BIRNING REGIDOR, GARRY DIGNOS, EDWIN DIGNOS, DARIO DIGNOS, ROGELIO DIGNOS, JIMMY CABIGAS, FERNANDO ANAJAO, ALEX FLORES, FERNANDO REMEDIO, TOTO MOSQUIDA, ALBERTO YAGONIA, VICTOR BARIQUIT, IGNACIO MISA, ELISEO VILLARENO, MANUEL LAVANDERO, VIRCEDE, MARIO RANIS, JAIME RESPONSO, MARIANITO AGUIRRE, MARCIAL HERUELA, GODOFREDO TUACAO, PERFECTO REGIS, ROEL DEMANA, ELMER CASTILLO, WINEFREDO CALAMOHOY, RUDY LUCERNAS, ANTONIO CAETE, EFRAIM YUBAL, JESUS CAPANGPANGAN, DAMIAN CAPANGPANGAN, TEOFILO CAPANGPANGAN, NILO CAPANGPANGAN, CORORENO CAPANGPANGAN, EMILIO MONDARES, PONCIANO AGANA, VICENTE DEVILLERES, MARIO ALIPAN, ROMANITO ALIPAN, ALDEON ROBINSON, FORTUNATO SOCO, CELSO COMPUESTO, WILLIAM ITORALDE, ANTONIO PESCADOR, JEREMIAS RONDERO, ESTROPIO PUNAY, LEOVIJILDO PUNAY, ROMEO QUILONGQUILONG, WILFREDO GESTOPA, ELISEO SANTOS, HENRY ORIO, JOSE YAP, NICANOR MANAYAGA, TEODORO SALINAS, ANICETO MONTERO, RAFAELITO VERZOSA, ALEJANDRO RANIDO, HENRY TALABA, ROMULO TALABA, DIOSDADO BESABELA, SYLVESTRE TORING, EDILBERTO PADILLA, ALLAN HEROSA, ERNESTO SUMALINOG, ARISTON VELASCO, JR., FERNANDO LOPEZ, ALFONSO ECHAVEZ, NICANOR CUIZON, DOMINADOR CAPARIDA, ZOSIMO CORORATION, ARTEMIO LOVERANES, DIONISIO YAGONIA, VICTOR CELOCIA, HIPOLITO VIDAS, TEODORO ARCILLAS, MARCELINO HABAGAT, GAUDIOSO LABASAN, LEOPOLDO REGIS, AQUILLO DAMOLE, WILLY ROBLE and NIEL ZANORIA, respondents. DECISION BELLOSILLO , J.: TWO HUNDRED NINETY-ONE (291) workers filed their complaints (nine [9] complaints in all) against San Miguel Corporation (petitioner herein) and Maerc Integrated Services, Inc. (respondent herein), for illegal dismissal, underpayment of wages, non-payment of service incentive leave pays and other labor standards benefits, and for separation pays from 25 June to 24 October 1991. The complainants alleged that they were hired by San Miguel Corporation

(SMC) through its agent or intermediary Maerc Integrated Services, Inc. (MAERC) to work in two (2) designated workplaces in Mandaue City: one, inside the SMC premises at the Mandaue Container Services, and another, in the Philphos Warehouse owned by MAERC. They washed and segregated various kinds of empty bottles used by SMC to sell and distribute its beer beverages to the consuming public. They were paid on a per piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis. Complainants alleged that long before SMC contracted the services of MAERC a majority of them had already been working for SMC under the guise of being employees of another contractor, Jopard Services, until the services of the latter were terminated on 31 January 1988. SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC, an independent contractor whose primary corporate purpose was to engage in the business of cleaning, receiving, sorting, classifying, etc., glass and metal containers. It appears that SMC entered into a Contract of Services with MAERC engaging its services on a non-exclusive basis for one (1) year beginning 1 February 1988. The contract was renewed for two (2) more years in March 1989. It also provided for its automatic renewal on a month-tomonth basis after the two (2)-year period and required that a written notice to the other party be given thirty (30) days prior to the intended date of termination, should a party decide to discontinue with the contract. In a letter dated 15 May 1991, SMC informed MAERC of the termination of their service contract by the end of June 1991. SMC cited its plans to phase out its segregation activities starting 1 June 1991 due to the installation of labor and cost-saving devices. When the service contract was terminated, complainants claimed that SMC stopped them from performing their jobs; that this was tantamount to their being illegally dismissed by SMC who was their real employer as their activities were directly related, necessary and desirable to the main business of SMC; and, that MAERC was merely made a tool or a shield by SMC to avoid its liability under the Labor Code. MAERC for its part admitted that it recruited the complainants and placed them in the bottle segregation project of SMC but maintained that it was only conveniently used by SMC as an intermediary in operating the project or work directly related to the primary business concern of the latter with the end in view of avoiding its obligations and responsibilities towards the complaining workers. The nine (9) cases were consolidated. On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC was an independent contractor. He dismissed the complaints for illegal dismissal but ordered MAERC to pay complainants' separation benefits in the total amount of P2,334,150.00. MAERC and SMC were also ordered to jointly and severally pay complainants their wage differentials in the amount of P845,117.00 and to pay attorney's fees in the amount of P317,926.70.

The complainants appealed the Labor Arbiter's finding that MAERC was an independent contractor and solely liable to pay the amount representing the separation benefits to the exclusion of SMC, as well as the Labor Arbiter's failure to grant the Temporary Living Allowance of the complainants. SMC appealed the award of attorney's fees. The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a labor-only contractor and that complainants were employees of SMC. The NLRC also held that whether MAERC was a job contractor or a labor-only contractor, SMC was still solidarily liable with MAERC for the latter's unpaid obligations, citing Art. 109 of the Labor Code. Thus, the NLRC modified the judgment of the Labor Arbiter and held SMC jointly and severally liable with MAERC for complainants' separation benefits. In addition, both respondents were ordered to pay jointly and severally an indemnity fee of P2,000.00 to each complainant. SMC moved for a reconsideration which resulted in the reduction of the award of attorney's fees from P317,926.70 to P84,511.70. The rest of the assailed decision was unchanged. On 12 March 1998, SMC filed a petition for certiorari with prayer for the issuance of a temporary restraining order and/or injunction with this Court which then referred the petition to the Court of Appeals. On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC. The appellate court also denied SMC's motion for reconsideration in a resolution dated 26 July 2000. Hence, petitioner seeks a review of the Court of Appeals judgment before this Court. Petitioner poses the same issues brought up in the appeals court and the pivotal question is whether the complainants are employees of petitioner SMC or of respondent MAERC. Relying heavily on the factual findings of the Labor Arbiter, petitioner maintained that MAERC was a legitimate job contractor. It directed this Court's attention to the undisputed evidence it claimed to establish this assertion: MAERC is a duly organized stock corporation whose primary purpose is to engage in the business of cleaning, receiving, sorting, classifying, grouping, sanitizing, packing, delivering, warehousing, trucking and shipping any glass and/or metal containers and that it had listed in its general information sheet two hundred seventy-eight (278) workers, twenty-two (22) supervisors, seven (7) managers/officers and a board of directors; it also voluntarily entered into a service contract on a non-exclusive basis with petitioner from which it earned a gross income of P42,110,568.24 from 17 October 1988 to 27 November 1991; the service contract specified that MAERC had the selection, engagement and discharge of its personnel, employees or agents or otherwise in the direction and control thereof; MAERC admitted that it had machinery, equipment and fixed assets used in its business valued at P4,608,080.00; and, it failed to appeal the Labor Arbiter's decision which declared it to be an independent contractor and ordered it to solely pay the separation benefits of the complaining workers.

We find no basis to overturn the Court of Appeals and the NLRC. Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial evidence. Particularly when passed upon and upheld by the Court of Appeals, they are binding and conclusive upon the Supreme Court and will not normally be disturbed. This Court has invariably held that in ascertaining an employer-employee relationship, the following factors are considered: (a) the selection and engagement of employee; (b) the payment of wages; (c) the power of dismissal; and, (d) the power to control an employee's conduct, the last being the most important. Application of the aforesaid criteria clearly indicates an employeremployee relationship between petitioner and the complainants. Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC's workers. It also appears that majority of the complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC in 1988. The incorporators of MAERC admitted having supplied and recruited workers for SMC even before MAERC was created. The NLRC also found that when MAERC was organized into a corporation in February 1988, the complainants who were then already working for SMC were made to go through the motion of applying for work with Ms. Olga Ouano, President and General Manager of MAERC, upon the instruction of SMC through its supervisors to make it appear that complainants were hired by MAERC. This was testified to by two (2) of the workers who were segregator and forklift operator assigned to the Beer Marketing Division at the SMC compound and who had been working with SMC under a purported contractor Jopard Services since March 1979 and March 1981, respectively. Both witnesses also testified that together with other complainants they continued working for SMC without break from Jopard Services to MAERC. As for the payment of workers' wages, it is conceded that MAERC was paid in lump sum but records suggest that the remuneration was not computed merely according to the result or the volume of work performed. The memoranda of the labor rates bearing the signature of a VicePresident and General Manager for the Vismin Beer Operations as well as a director of SMC appended to the contract of service reveal that SMC assumed the responsibility of paying for the mandated overtime, holiday and rest day pays of the MAERC workers. SMC also paid the employer's share of the SSS and Medicare contributions, the 13th month pay, incentive leave pay and maternity benefits. In the lump sum received, MAERC earned a marginal amount representing the contractors share. These lend credence to the complaining workers' assertion that while MAERC paid the wages of the complainants, it merely acted as an agent of SMC. Petitioner insists that the most significant determinant of an employer-employee relationship, i.e., the right to control, is absent. The contract of services between MAERC and SMC provided that MAERC was an independent contractor and that the workers hired by it "shall not, in any manner and under any circumstances, be considered employees of the Company, and that the Company has no control or supervision whatsoever over the conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the Contractor's obligations under the Contract."

In deciding the question of control, the language of the contract is not determinative of the parties' relationship; rather, it is the totality of the facts and surrounding circumstances of each case. Despite SMCs disclaimer, there are indicia that it actively supervised the complainants. SMC maintained a constant presence in the workplace through its own checkers. Its asseveration that the checkers were there only to check the end result was belied by the testimony of Carlito R. Singson, head of the Mandaue Container Service of SMC, that the checkers were also tasked to report on the identity of the workers whose performance or quality of work was not according to the rules and standards set by SMC. According to Singson, "it (was) necessary to identify the names of those concerned so that the management [referring to MAERC] could call the attention to make these people improve the quality of work." Viewed alongside the findings of the Labor Arbiter that the MAERC organizational set-up in the bottle segregation project was such that the segregators/cleaners were supervised by checkers and each checker was also under a supervisor who was in turn under a field supervisor, the responsibility of watching over the MAERC workers by MAERC personnel became superfluous with the presence of additional checkers from SMC. Reinforcing the belief that the SMC exerted control over the work performed by the segregators or cleaners, albeit through the instrumentality of MAERC, were letters by SMC to the MAERC management. These were letters written by a certain Mr. W. Padin addressed to the President and General Manager of MAERC as well as to its head of operations, and a third letter from Carlito R. Singson also addressed to the President and General Manager of MAERC. More than just a mere written report of the number of bottles improperly cleaned and/or segregated, the letters named three (3) workers who were responsible for the rejection of several bottles, specified the infraction committed in the segregation and cleaning, then recommended the penalty to be imposed. Evidently, these workers were reported by the SMC checkers to the SMC inspector. While the Labor Arbiter dismissed these letters as merely indicative of the concern in the endresult of the job contracted by MAERC, we find more credible the contention of the complainants that these were manifestations of the right of petitioner to recommend disciplinary measures over MAERC employees. Although calling the attention of its contractors as to the quality of their services may reasonably be done by SMC, there appears to be no need to instruct MAERC as to what disciplinary measures should be imposed on the specific workers who were responsible for rejections of bottles. This conduct by SMC representatives went beyond a mere reminder with respect to the improperly cleaned/segregated bottles or a genuine concern in the outcome of the job contracted by MAERC. Control of the premises in which the contractor's work was performed was also viewed as another phase of control over the work, and this strongly tended to disprove the independence of the contractor. In the case at bar, the bulk of the MAERC segregation activities was accomplished at the MAERC-owned PHILPHOS warehouse but the building along with the machinery and equipment in the facility was actually being rented by SMC. This is evident from the memoranda of labor rates which included rates for the use of forklifts and the warehouse at

the PHILPHOS area, hence, the NLRCs conclusion that the payment for the rent was cleverly disguised since MAERC was not in the business of renting warehouses and forklifts. Other instances attesting to SMCs supervision of the workers are found in the minutes of the meeting held by the SMC officers on 5 December 1988. Among those matters discussed were the calling of SMC contractors to have workers assigned to segregation to undergo and pass eye examination to be done by SMC EENT company doctor and a review of compensation/incentive system for segregators to improve the segregation activities. But the most telling evidence is a letter by Mr. Antonio Ouano, Vice-President of MAERC dated 27 May 1991 addressed to Francisco Eizmendi, SMC President and Chief Executive Officer, asking the latter to reconsider the phasing out of SMCs segregation activities in Mandaue City. The letter was not denied but in fact used by SMC to advance its own arguments. Briefly, the letter exposed the actual state of affairs under which MAERC was formed and engaged to handle the segregation project of SMC. It provided an account of how in 1987 Eizmendi approached the would-be incorporators of MAERC and offered them the business of servicing the SMC bottle-washing and segregation department in order to avert an impending labor strike. After initial reservations, MAERC incorporators accepted the offer and before long trial segregation was conducted by SMC at the PHILPHOS warehouse. The letter also set out the circumstances under which MAERC entered into the Contract of Services in 1988 with the assurances of the SMC President and CEO that the employment of MAERC's services would be long term to enable it to recover its investments. It was with this understanding that MAERC undertook borrowings from banking institutions and from affiliate corporations so that it could comply with the demands of SMC to invest in machinery and facilities. In sum, the letter attested to an arrangement entered into by the two (2) parties which was not reflected in the Contract of Services. A peculiar relationship mutually beneficial for a time but nonetheless ended in dispute when SMC decided to prematurely end the contract leaving MAERC to shoulder all the obligations to the workers. Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC. In that case, it was held that the law did not require one to possess both substantial capital and investment in the form of tools, equipment, machinery, work premises, among others, to be considered a job contractor. The second condition to establish permissible job contracting was sufficiently met if one possessed either attribute. Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a labor-only contractor despite the finding that MAERC had investments amounting to P4,608,080.00 consisting of buildings, machinery and equipment. However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect

that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether the contractor was carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment. In Neri, the Court considered not only the fact that respondent Building Care Corporation (BBC) had substantial capitalization but noted that BCC carried on an independent business and performed its contract according to its own manner and method, free from the control and supervision of its principal in all matters except as to the results thereof. The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for their principal. The status of BCC had also been passed upon by the Court in a previous case where it was found to be a qualified job contractor because it was "a big firm which services among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc." Furthermore, there were only two (2) complainants in that case who were not only selected and hired by the contractor before being assigned to work in the Cagayan de Oro branch of FEBTC but the Court also found that the contractor maintained effective supervision and control over them. In comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor. Moreover, while MAERCs investments in the form of buildings, tools and equipment amounted to more than P4 Million, we cannot disregard the fact that it was the SMC which required MAERC to undertake such investments under the understanding that the business relationship between petitioner and MAERC would be on a long term basis. Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which was then having labor problems in its segregation division, none of its workers was also ever assigned to any other establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers. Petitioner also alleged that the Court of Appeals erred in ruling that "whether MAERC is an independent contractor or a labor-only contractor, SMC is liable with MAERC for the latter's unpaid obligations to MAERC's workers." On this point, we agree with petitioner as distinctions must be made. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.

On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees. This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case, petitioner's liability is that of a direct employer and thus solidarily liable with MAERC. SMC also failed to comply with the requirement of written notice to both the employees concerned and the Department of Labor and Employment (DOLE) which must be given at least one (1) month before the intended date of retrenchment. The fines imposed for violations of the notice requirement have varied. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer. For its failure, petitioner was justly ordered to indemnify each displaced worker P2,000.00. The NLRC and the Court of Appeals affirmed the Labor Arbiters award of separation pay to the complainants in the total amount of P2,334,150.00 and of wage differentials in the total amount of P845,117.00. These amounts are the aggregate of the awards due the two hundred ninety-one (291) complainants as computed by the Labor Arbiter. The following is a summary of the computation of the benefits due the complainants which is part of the Decision of the Labor Arbiter. SUMMARY NAME SALARY DIFFERENTIAL SEPARATION PAY TOTAL

Case No. O6-1165-91 1. Rogelio Prado, Jr P3,056.00 2. Eddie Selle 3,056.00 3. Alejandro Annabieza 3,056.00 4. Ananias Jumao-as 3,056.00 5. Consorcio Manloloyo 3,056.00 6. Anananias Alcotin 3,056.00 7. Rey Gestopa 2,865.00 8. Edgardo Nuez 2,865.00 9. Junel Cabatingan 2,865.00 10. Paul Dumaqueta 2,865.00 11. Felimon Echavez 2,843.00 12. Vito Sealana 2,843.00 13. Denecia Palao 2,843.00 14. Roberto Lapiz 3,056.00 15. Baltazar Labio 3,056.00

P8,190.00 P11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,055.00 8,190.00 11,055.00 8,190.00 11,055.00 8,190.00 11,055.00 8,190.00 10,673.00 8,190.00 10,673.00 8,190.00 10,673.00 8,190.00 11,246.00 8,190.00 11,246.00

16. Leonardo Bongo 17. El Cid Icalina 18. Jose Diocampo 19. Adelo Cantillas 20. Isaias Branzuela 21. Ramon Rosales 22. Gaudencio Peson 23. Hector Cabaog 24. Edgardo Dagmayan 25. Rogelio Cruz 26. Rolando Espina 27. Bernardino Regidor 28. Arnelio Sumalinog 29. Gumersindo Alcontin 30. Loreto Nuez 31. Joebe Boy Dayon 32. Conrado Mesanque 33. Marcelo Pescador 34. Marcelino Jabagat 35. Vicente Devilleres 36. Vicente Alin 37. Rodolfo Pahugot 38. Ruel Navares 39. Danilo Anabieza 40. Alex Juen 41. Juanito Garces 42. Silvino Limbaga 43. Aurelio Jurpacio 44. Jovito Loon 45. Victor Tenedero 46. Sasing Moreno 47. Wilfredo Hortezuela 48. Joselito Melendez 49. Alfredo Gestopa 50. Regino Gabuya 51. Jorge Gamuzarno 52. Lolito Cocido 53. Efraim Yubal 54. Venerando Roamar 55. Gerardo Butalid 56. Hipolito Vidas 57. Vengelito Frias 58. Vicente Celacio 59. Corlito Pestaas 60. Ervin Hyrosa 61. Rommel Guerero

3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00

8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00

62. Rodrigo Enerlas 63. Francisco Carbonilla 64. Nicanor Cuizon 65. Pedro Briones 66. Rodolfo Cabalhug 67. Teofilo Ricardo 68. Danilo R. Dizon 69. Alberto Embong 70. Alfonso Echavez 71. Gonzalo Roracea 72. Marcelo Caracina 73. Raul Borres 74. Lino Tongalamos 75. Artemio Bongo, Jr. 76. Roy Avila 77. Melchor Freglo 78. Raul Cabillada 79. Eddie Catab 80. Melencio Durano 81. Allan Rago 82. Dominador Caparida 83. Jovito Catab 84. Albert Laspias 85. Alex Anabieza 86. Nestor Reynante 87. Eulogio Estopa 88. Mario Bolo 89. Ederlito A. Balocano 90. Joel Pepito 91. Reynaldo Ludia 92. Manuel Cinco 93. Allan Agustin 94. Pablito Polegrates 95. Clyde Prado 96. Dindo Misa 97. Roger Sasing 98. Ramon Arcallana 99. Gabriel Salas 100. Edwin Sasan 101. Diosdado Barriga 102. Moises Sasan 103. Sinforiano Cantago 104. Leonardo Marturillas 105. Mario Ranis 106. Alejandro Ranido 107. Jerome Prado

3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00 3,056.00

8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 5,460.00 8,516.00 5,460.00 8,516.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00 8,190.00 11,246.00

108. Raul Oyao 3,056.00 109. Victor Celacio 3,056.00 TOTAL P330,621.00 Case No. 07-1177-91 110. Gerardo Roque 3,056.00 Case No. 07-1176-91 111. Zosimo Cararaton P3,056.00 Case No. 07-1219-91 112. Virgilio Zanoria P3,056.00 113. Jose Zanoria 3,056.00 114. Allan Zanoria 3,056.00 115. Victorino Seno 3,056.00 116. Teodulo Jumao-as 3,056.00 117. Alexander Hera 3,056.00 118. Anthony Araneta 3,056.00 119. Aldrin Suson 3,056.00 120. Victor Verano 3,056.00 121. Ruel Sufrerencia 3,056.00 122. Alfred Naparate 3,056.00 123. Wenceslao Baclohon 3,056.00 124. Eduardo Langita 3,056.00 TOTAL P39,728.00 Case No. 07-1283-91 125. Feliz Ordeneza P2,816.00 126. Arsenio Logarta 3,056.00 127. Eduardo dela Vega 3,056.00 128. Joventino Canoog 3,056.00 TOTAL P11,984.00 Case No. 10-1584-91 129. Regelio Abapo P3,056.00 Case No. 08-1321-91 130. Ricardo Ramas P3,056.00 Case No. 09-1507-91 131. Jose Bandialan P2,816.00 132. Antonio Basalan 2,816.00 133. Lyndon Basalan 2,816.00 134. Wilfredo Aliviano 2,816.00 135. Bienvenido Rosario 2,816.00 136. Jesus Capangpangan 2,816.00 137. Renato Mendoza 2,816.00 138. Alejandro Catandejan 2,816.00 139. Ruben Talaba 2,816.00 140. Filemon Echavez 2,816.00 141. Marcelino Caracena 2,816.00 142. Ignacio Misa 2,816.00 143. Feliciano Agbay 2,816.00

8,190.00 5,460.00 P884,520.00 P5,460.00 P8,192.00 P5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 5,460.00 8,190.00 8,190.00 P76,440.00 P8,190.00 8,190.00 8,190.00 8,190.00 P32,760.00 8,190.00 P8,190.00 P8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00 8,190.00

11,246.00 8,516.00 P1,215141.00 P8,516.00 11,246.00 P8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 8,516.00 11,246.00 11,246.00 P116,168.00 P11,006.00 11,246.00 11,246.00 11,246.00 P44,744.00 11,246.00 P11,246.00 P11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00 11,006.00

144. Victor Maglasang 145. Arturo Heyrosa 146. Alipio Tirol 147. Rosendo Mondares 148. Aniceto Ludia 149. Reynaldo Lavandero 150. Reuyan Herculano 151. Teodula Nique TOTAL Case No. 06-1145-91 152. Emerberto Orque 153. Zosimo Baobao 154. Medardo Singson 155. Antonio Patalinghug 156. Ernesto Singson 157. Roberto Torres 158. Cesar Escario 159. Leodegario Dollecin 160 Alberto Anoba 161. Rodrigo Bisnar 162. Zosimo Bingas 163. Rosalio Duran, Sr. 164. Rosalio Duran, Jr. 165. Romeo Duran 166. Antonio Abella 167. Mariano Repollo 168. Polegarpo Degamo 169. Mario Cereza 170. Antonio Laoronilla 171. Proctuso Magallanes 172. Eladio Torres 173. Warlito Demana 174. Henry Gedaro 175. Doisederio Gemperao 176. Aniceto Gemperao 177. Jerry Caparoso 178. Serlito Noynay 179. Luciano Recopelacion 180. Juanito Garces 181. Feliciano Torres 182. Ranilo Villareal 183. Fermin Aliviano 184. Junjie Laviste 185. Tomacito de Castro 186. Joselito Capilina 187. Samuel Casquejo

2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 P59,136.00 P171,990.00 P231,126.00 P2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 2,816.00 P8,190.00 P11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00 8,190.00 11,006.00

188. 189. 190. 191. 192. 193. 194. 195. 196. 197. 198. 199. 200. 201. 202. 203. 204. 205. 206. 207. 208. 209. 210. 211. 212. 213. 214. 215. 216. 217. 218. 219. 220. 221. 222. 223. 224. 225. 226. 227. 228. 229. 230. 231. 232. 233.

Leonardo Natad Benjamin Sayson Pedro Inoc Edward Flores Edwin Sasan Jose Rey Inot Edgar Cortes Romeo Lombog Nicolas Ribo Jaime Rubin Orlando Regis Ricky Alconza Rudy Tagalog Victorino Tagalog Edward Colina Ronie Gonzaga Paul Cabillada Wilfredo Magalona Joel Pepito Prospero Maglasang Allan Agustin Fausto Bargayo Nomer Sanchez Jolito Alin Birning Regidor Garry Dignos Edwin Dignos Dario Dignos Rogelio Dignos Jimmy Cabigas Fernando Anajao Alex Flores Fernando Remedio Toto Mosquido Alberto Yagonia Victor Bariquit Ignacio Misa Eliseo Villareno Manuel Lavandero Vircede Mario Ranis Jaime Responso Marianito Aguirre Marcial Heruela Godofredo Tuacao Perfecto Regis

2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00

234. 235. 236. 237. 238. 239. 240. 241. 242. 243. 244. 245. 246. 247. 248. 249. 250. 251. 252. 253. 254. 255. 256. 257. 258. 259. 260. 261. 262. 263. 264. 265. 266. 267. 268. 269. 270. 271. 272. 273. 274. 275. 276. 277. 278. 279.

Roel Demana 2,816.00 8,190.00 11,006.00 Elmer Castillo 2,816.00 8,190.00 11,006.00 Wilfredo Calamohoy 2,816.00 8,190.00 11,006.00 Rudy Lucernas 2,816.00 8,190.00 11,006.00 Antonio Caete 2,816.00 8,190.00 11,006.00 Efraim Yubal 2,816.00 8,190.00 11,006.00 Jesus Capangpangan 2,816.00 8,190.00 11,006.00 Damian Capangpangan 2,816.00 8,190.00 11,006.00 Teofilo Capangpangan 2,816.00 8,190.00 11,006.00 Nilo Capangpangan 2,816.00 8,190.00 11,006.00 Cororeno Capangpangan 2,816.00 8,190.00 11,006.00 Emilio Mondares 2,816.00 8,190.00 11,006.00 Ponciano Agana 2,816.00 8,190.00 11,006.00 Vicente Devilleres 2,816.00 8,190.00 11,006.00 Mario Alipan 2,816.00 8,190.00 11,006.00 Romanito Alipan 2,816.00 8,190.00 11,006.00 Aldeon Robinson 2,816.00 8,190.00 11,006.00 Fortunato Soco 2,816.00 8,190.00 11,006.00 Celso Compuesto 2,816.00 8,190.00 11,006.00 William Itoralde 2,816.00 8,190.00 11,006.00 Antonio Pescador 2,816.00 8,190.00 11,006.00 Jeremias Rondero 2,816.00 8,190.00 11,006.00 Estropio Punay 2,816.00 8,190.00 11,006.00 Leovijildo Punay 2,816.00 8,190.00 11,006.00 Romeo Quilongquilong 2,816.00 8,190.00 11,006.00 Wilfredo Gestopa 2,816.00 8,190.00 11,006.00 Eliseo Santos 2,816.00 8,190.00 11,006.00 Henry Orio 2,816.00 8,190.00 11,006.00 Jose Yap 2,816.00 8,190.00 11,006.00 Nicanor Manayaga 2,816.00 8,190.00 11,006.00 Teodoro Salinas 2,816.00 8,190.00 11,006.00 Aniceto Montero 2,816.00 8,190.00 11,006.00 Rafaelito Versoza 2,816.00 8,190.00 11,006.00 Alejandro Ranido 2,816.00 8,190.00 11,006.00 Henry Talaba 2,816.00 8,190.00 11,006.00 Romulo Talaba 2,816.00 8,190.00 11,006.00 Diosdado Besabela 2,816.00 8,190.00 11,006.00 Sylvestre Toring 2,816.00 8,190.00 11,006.00 Edilberto Padilla 2,816.00 8,190.00 11,006.00 Allan Herosa 2,816.00 8,190.00 11,006.00 Ernesto Sumalinog 2,816.00 8,190.00 11,006.00 Ariston Velasco, Jr. 2,816.00 8,190.00 11,006.00 Fernando Lopez 2,816.00 8,190.00 11,006.00 Alfonso Echavez 2,816.00 8,190.00 11,006.00 Nicanor Cuizon 2,816.00 8,190.00 11,006.00 Dominador Caparida 2,816.00 8,190.00 11,006.00

280. Zosimo Cororation 281. Artemio Loveranes 282. Dionisio Yagonia 283. Victor Celocia 284. Hipolito Vidas 285. Teodoro Arcillas 286. Marcelino Habagat 287. Gaudioso Labasan 288. Leopoldo Regis 289. Aquillo Damole 290. Willy Roble TOTAL RECAP CASE NO.

2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 2,816.00 8,190.00 11,006.00 P391,424.00 P1,138,410.00 P1,529,834.00

SALARY DIFFERENTIAL 06-1165-91 P330,621.00 07-1177-91 3,056.00 06-1176-91 3,056.00 07-1219-91 39,728.00 07-1283-91 11,984.00 10-1584-91 3,056.00 08-1321-91 3,056.00 09-1507-91 59,136.00 06-1145-91 391,424.00 GRAND TOTAL P845,117.00

SEPARATION PAY P884,520.00 5,460.00 8,190.00 76,440.00 32,760.00 8,190.00 8,190.00 171,990.00 1,138,410.00 P2,334,150.00

TOTAL P1,215,141.00 8,516.00 11,246.00 116,168.00 44,744.00 11,246.00 11,246.00 231,126.00 1,529,834.00 P3,179,267.00

However, certain matters have cropped up which require a review of the awards to some complainants and a recomputation by the Labor Arbiter of the total amounts. A scrutiny of the enumeration of all the complainants shows that some names38 appear twice by virtue of their being included in two (2) of the nine (9) consolidated cases. A check of the Labor Arbiters computation discloses that most of these names were awarded different amounts of separation pay or wage differential in each separate case where they were impleaded as parties because the allegations of the length and period of their employment for the separate cases, though overlapping, were also different. The records before us are incomplete and do not aid in verifying whether these names belong to the same persons but at least three (3) of those names were found to have identical signatures in the complaint forms they filed in the separate cases. It is likely therefore that the Labor Arbiter erroneously granted some complainants separation benefits and wage differentials twice. Apart from this, we also discovered some names that are almost identical.39 It is possible that the minor variance in the spelling of some names may have been a typographical error and refer to the same persons although the records seem to be inconclusive.

Furthermore, one of the original complainants40 was inadvertently omitted by the Labor Arbiter from his computations.41 The counsel for the complainants promptly filed a motion for inclusion/correction42 which motion was treated as an appeal of the Decision as the Labor Arbiter was prohibited by the rules of the NLRC from entertaining any motion at that stage of the proceedings.43 The NLRC for its part acknowledged the omission44 but both the Commission and subsequently the Court of Appeals failed to rectify the oversight in their decisions. Finally, the NLRC ordered both MAERC and SMC to pay P84,511.70 in attorneys fees which is ten percent (10%) of the salary differentials awarded to the complainants in accordance with Art. 111 of the Labor Code. The Court of Appeals also affirmed the award. Consequently, with the recomputation of the salary differentials, the award of attorneys fees must also be modified. WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated 28 April 2000 and the Resolution dated 26 July 2000 are AFFIRMED with MODIFICATION. Respondent Maerc Integrated Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private respondents herein) separation benefits and wage differentials as may be finally recomputed by the Labor Arbiter as herein directed, plus attorneys fees to be computed on the basis of ten percent (10%) of the amounts which complainants may recover pursuant to Art. 111 of the Labor Code, as well as an indemnity fee of P2,000.00 to each complainant. The Labor Arbiter is directed to review and recompute the award of separation pays and wage differentials due complainants whose names appear twice or are notably similar, compute the monetary award due to complainant Niel Zanoria whose name was omitted in the Labor Arbiters Decision and immediately execute the monetary awards as found in the Labor Arbiters computations insofar as those complainants whose entitlement to separation pay and wage differentials and the amounts thereof are no longer in question. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 75801 March 20, 1991 DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. THE MINISTER OF LABOR and SAMAHANG PAGKAKAISANG MANGGAGAWA SA RMC-GATCORD, respondents. The Chief Legal Counsel for petitioner. Armando V. Ampil for private respondent.

PARAS, J.:p On 3 February 1981, Samahang Pagkakaisang Manggagawa sa RMC-Gatcord (Samahan for brevity), in representation of its 1,000 workers/members, filed a complaint against Riverside Mills Corporation (RMC for brevity) for non-payment of Presidential Decree 1713's P1.00 daily wage increase and P60.00 monthly Emergency Cost of Living Allowance (ECOLA) with the Ministry (now Department) of Labor and Employment. After trial, the Ministry's NCR Director Severo M. Pucan issued an order on July 9, 1981 mandating RMC "to pay the complainants-Samahan additional mandatory ECOLA of P60.00/month and the P1.00 increase in the minimum wage, retroactive as of August 1981." Deputy Minister Vicente Leogardo, Jr. affirmed the said decision on January 6, 1982, upon appeal by the company, Riverside Mills Corporation. It also appears that petitioner DBP had instituted extra-judicial foreclosure proceedings as early as 1983 on the properties and other assets of RMC as a result of the latter's failure to meet its obligations on the loan it had previously secured from DBP. Thereafter, the total balance of the judgment award in the labor case previously mentioned, was recomputed at three million three hundred one thousand nine hundred ninety seven pesos and seventy five centavos (P3,301,997.75) in an order issued by Director Severo M. Pucan dated April 11, 1985.

On 21 January 1986, DBP received a Notice of Conference from Severo Pucan of the Ministry of Labor and Employment (MOLE) ordering DBP to appear before Atty. Roberto A. Jerez on January 23, 1986 at 2:00 p.m. to testify in Case No. NCR-FSD-2-205-81. It was only in that conference that DBP learned that the respondent-Samahan was able to secure a decision in its favor in the labor case above-mentioned, which they wanted to enforce against DBP. On 21 April 1986, a Notice of Garnishment was served upon DBP for the amount of P3,301,997.75. The pivotal issue in this case is whether or not a writ of garnishment may be issued against the proceeds of RMC's properties foreclosed by DBP and sold to Rosario Textile Mills, by the application of the worker's right of preference under Article 110 of the Labor Code. Republic Act No. 6715 amending Article 110 of the Labor Code reads:
Sec. 1. Article 110 of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby further amended to read as follows: Art. 110. Worker's preference in case of bankruptcy. In the event of bankruptcy or liquidation of the employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims shall be paid in full before the claims of the Government and other creditors may be paid. (Amendments italicized)

Accordingly, Section 10, Rule III, Book III of the Omnibus Rules Implementing the Labor Code has also been amended by Section I of the Rules and Regulations Implementing R.A. 6715, as approved by the then Secretary of Labor on May 24, 1989, which now provides:
Sec. 10. Payment of wages and other monetary claims in case of bankruptcy . In case of bankruptcy or liquidation of the employer's business, the unpaid wages and other monetary claims of the employees shall be given first preference and shall be paid in full before the claims of the Government and other creditors may be paid.

Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. However, despite said amendments, the same interpretation of Article 110 as applied in the case of Development Bank of the Philippines vs. Hon. Labor Arbiter Ariel C. Santos et al. (171 SCRA 138) was adopted by this Court in recent cases (G.R. No. 86932, DBP vs. NLRC et al., June 27, 1990; G.R. Nos. 82763-64, DBP vs. NLRC et al., March 19, 1990). Because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation of, and must always be reckoned with the provisions of the Civil Code on concurrence and preference of credits (DBP vs. NLRC, et al., supra), thus, it may not be invoked by employees of RMC, like private respondent-Samahan herein, in the absence of a formal declaration of bankruptcy or judicial liquidation order.

Hence, the disputed garnishment of the money paid by Rosario Textile Mills to DBP corresponding to the partial installment of the sales price of RMC's foreclosed properties is not justified. Clearly, the authority of the sheriff is limited to money or properties belonging to Riverside Mills Corporation, the judgment debtor in the labor case concerned. Hence, when the sheriff garnished the monies paid by Rosario Textile Mills to DBP, the sheriff, in effect had garnished funds not belonging to Riverside Mills Corporation but to DBP. This is violative of the basic rule that the power of the court or tribunal in the execution of its judgment extends only over properties unquestionably belonging to the judgment debtor (Special Services Corporation vs. Centro La Paz, 121 SCRA 748 [1985], DBP vs. Hon. Sec. of Labor et al., G. R. No. 79251, November 28, 1989, citing the case of National Mines and Allied Worker's Union vs. Hon. Vera et al., 133 SCRA 259 [1984]). Undoubtedly, when the sheriff garnished the funds belonging to the Development Bank of the Philippines, he exceeded the authority vested in him in the writ of execution, and when the Deputy Minister of Labor sustained the same in his order, he acted with grave abuse of discretion correctible by certiorari. PREMISES CONSIDERED, the instant petition for certiorari is hereby GRANTED. The assailed Order of the Ministry of Labor is hereby REVERSED and SET ASIDE and the restraining order issued is hereby MADE permanent. SO ORDERED. Melencio-Herrera and Regalado, JJ., concur.

Separate Opinions
PADILLA, J., dissenting: I dissent for the same reasons stated in my dissent in DBP vs. NLRC G.R. Nos. 8276364, 19 March 1990.

SARMIENTO, J., dissenting:

Consistent with my stand in DBP v. NLRC, Arbiter Isabel P. Ortiguera and Labor Alliance For National Development, 1 Bolinao v. Padolina 2 and more recently, in DBP v. NLRC, and Dorothy S. Ancheta, et al., 3 to the effect that workers now enjoy "absolute preference" in the payment of labor claims, above and beyond taxes due to the government, and credits belonging to private persons, and further, that there is no need of prior declaration of bankruptcy or judicial order of liquidation in order that this preference may be availed of by labor, I dissent again. The express decree of the Constitution 4 and explicit language of Republic Act No. 6715 5 have not yet, I am sorry to say, been appreciated by the majority.

Separate Opinions PADILLA, J., dissenting: I dissent for the same reasons stated in my dissent in DBP vs. NLRC G.R. Nos. 8276364, 19 March 1990. SARMIENTO, J., dissenting: Consistent with my stand in DBP v. NLRC, Arbiter Isabel P. Ortiguera and Labor Alliance For National Development, 1 Bolinao v. Padolina 2 and more recently, in DBP v. NLRC, and Dorothy S. Ancheta, et al., 3 to the effect that workers now enjoy "absolute preference" in the payment of labor claims, above and beyond taxes due to the government, and credits belonging to private persons, and further, that there is no need of prior declaration of bankruptcy or judicial order of liquidation in order that this preference may be availed of by labor, I dissent again. The express decree of the Constitution 4 and explicit language of Republic Act No. 6715 5 have not yet, I am sorry to say, been appreciated by the majority

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. Nos. 97008-09 July 23, 1993 VIRGINIA G. NERI and JOSE CABELIN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC) and BUILDING CARE CORPORATION, respondents. R.L. Salcedo & Improso Law Office for petitioners. Bengzon, Zarnaga, Narciso, Cudala, Pecson, Bengzon & Jimenez for Bldg. Care Corp. Bautista, Picaso, Buyco, Tan & Fider for respondent FEBTC.

BELLOSILLO, J.: Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other specific services to various firms, to compel Far Bast Bank and Trust Company to recognize them as its regular employees and be paid the same wages which its employees receive. Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial capitalization of P1 Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that consequently its employees were not employees of Far East Bank and Trust Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National Labor Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is engaged in "labor-only" contracting hence, they conclude, they are employees of respondent FEBTC. Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent BCC, a corporation engaged in providing technical, maintenance, engineering, housekeeping, security and other specific services to its clientele. They were assigned to work in the Cagayan de Oro City Branch of respondent FEBTC on 1

May 1979 and 1 August 1980, respectively, Neri an radio/telex operator and Cabelin as janitor, before being promoted to messenger on 1 April 1989. On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration Branch No. 10 of the Department of Labor and Employment to compel the bank to accept them as regular employees and for it to pay the differential between the wages being paid them by BCC and those received by FEBTC employees with similar length of service. On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. 1 Respondent BCC was considered an independent contractor because it proved it had substantial capital. Thus, petitioners were held to be regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC which on 28 September 1990 affirmed the decision on appeal. 2 On 22 October 1990, NLRC denied reconsideration of its affirmance, 3 prompting petitioners to seek redress from this Court. Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to adduce evidence purporting to show that it invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of its business. Moreover, petitioners argue that they perform duties which are directly related to the principal business or operation of FEBTC. If the definition of "labor-only" contracting 4 is to be read in conjunction with job contracting, 5 then the only logical conclusion is that BCC is a "labor only" contractor. Consequently, they must be deemed employees of respondent bank by operation of law since BCC is merely an agent of FEBTC following the doctrine laid down in Philippine Bank of Communications v. National Labor Relations Commission 6 where we ruled that where "labor-only" contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the employees of the "labor-only" contractor; hence, FEBTC should be considered the employer of petitioners who are deemed its employees through its agent, "labor-only" contractor BCC. We cannot sustain the petition. Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. 7 BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting. It is well-settled that there is "labor-only" contracting where: (a) 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, (b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer. 8 Article 106 of the Labor Code defines "labor-only" contracting thus

Art. 106. Contractor or subcontractor. . . . . 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 by such persons are performing activities which are directly related to the principal business of such employer . . . . (emphasis supplied).

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the contractor to prove that he has both capital and the requisite investment, then the conjunction "and" should have been used. But, having established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for it to refute petitioners' contention that the activities they perform are directly related to the principal business of respondent bank. Be that as it may, the Court has already taken judicial notice of the general practice adopted in several government and private institutions and industries of hiring independent contractors to perform special services. 9 These services range from janitorial, 10 security 11 and even technical or other specific services such as those performed by petitioners Neri and Cabelin. While these services may be considered directly related to the principal business of the employer, 12 nevertheless, they are not necessary in the conduct of the principal business of the employer. In fact, the status of BCC as an independent contractor was previously confirmed by this Court in Associated Labor Unions-TUCP v. National Labor Relations Commission, 13 where we held thus
The public respondent ruled that the complainants are not employees of the bank but of the company contracted to serve the bank. Building Care Corporation is a big firm which services, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc. It is a qualified independent contractor. The public respondent correctly ruled against petitioner's contentions . . . . (Emphasis supplied).

Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank, under the "right of control" test they must still be considered employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated. In the Shipside case, 14 we ruled

. . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE occasionally issued instructions to them, that alone does not in the least detract from the fact that only STEVEDORES is the employer of the private respondents, for in legal contemplation, such instructions carry no more weight than mere requests, the privity of contract being between SHIPSIDE and STEVEDORES . . . .

Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work in the Cagayan de Oro Branch of FFBTC. BCC likewise acknowledges that petitioners are its employees. The record is replete with evidence disclosing that BCC maintained supervision and control over petitioners through its Housekeeping and Special Services Division: petitioners reported for work wearing the prescribed uniform of BCC; leaves of absence were filed directly with BCC; and, salaries were drawn only from BCC. 15 As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed by the latter. On the other hand, on 24 May 1988, Cabelin filed a complaint for underpayment of wages, non-integration of salary adjustments mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for illegal deduction 16 against BCC alone which was provisionally dismissed on 19 August 1988 upon Cabelin's manifestation that his money claim was negligible. 17 More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional janitors would be hired from the company if the promotion was to be effected. 18 Furthermore, BCC was to be paid in lump sum unlike in the situation in Philippine Bank of Communications 19 where the contractor, CESI, was to be paid at a daily rate on a per person basis. And, the contract therein stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its contract with various clients according to its "own manner and method, free from the control and supervision" of its principals in all matters "except as to the results thereof."
20

Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein, the Court ruled that CESI was a "labor-only" contractor because upholding the contract between the contractor and the bank would in effect permit employers to avoid the necessity of hiring regular or permanent employees and would enable them to keep their employees indefinitely on a temporary or casual basis, thus denying them security of tenure in their jobs. This of course violates the Labor Code. BCC has not committed any violation. Also, the former case was for illegal dismissal; this case, on the other hand, is for conversion of employment status so that petitioners can receive the same salary being given to regular employees of FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC but of BCC. At any rate,

the finding that BCC in a qualified independent contractor precludes us from applying the Philippine Bank of Communications doctrine to the instant petition. The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse of discretion, and we find none in the case before us, we are bound by the findings of the Labor Arbiter as affirmed by respondent NLRC. IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED. SO ORDERED. Cruz, Grio-Aquino, Davide, Jr. and Quiason, JJ., concur.

Footnotes
1 Annex "7", Petition; Rollo, pp. 38-55. 2 Annex "5", Petition; Rollo, pp. 17-25. 3 Annex "9", Petition; Rollo, pp. 62-64. 4 Sec. 9. Labor-only contracting. Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person: (1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and (2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which the workers are habitually employed (Rule VIII, Book III, Implementing Rules of the Labor Code). 5 Sec. 9. Job contracting. There is job-contracting permissible under the Code if the following conditions are met: (1) The contractor carries on an independent business and undertakes the contract work on his account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business. 6 G.R. No. L-66598, 19 December 1986, 146 SCRA 347. 7 NLRC Resolution, 28 September 1990, p. 15; Rollo, p. 53, and Labor Arbiter Decision, 16 November 1989, p. 7; Rollo, p. 24. 8 Baguio v. National Labor Relations Commission, G.R. Nos. 79004-08, 4 October 1991, 202 SCRA 465. 9 Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized Labor Association v. Drillon, G.R. No. 78791, 9 May 1990, 185 SCRA 191.

10 Rhone-Poulenc Agrochemicals Philippines, Inc. v. National Labor Relations Commission, G.R. Nos. 102633-35, 19 January 1993. 11 Shipside, Inc. v. National Labor Relations Commission, G.R. No. 50358, 2 November 1982, 118 SCRA 99. 12 See Guarin v. National Labor Relations Commission, G.R. No. 86010, 3 October 1989, 178 SCRA 267. 13 G.R. No. 101784, 21 October 1991, Third Division, Minute Resolution. 14 See Note 11 at p. 106. 15 NLRC Resolution, 28 September 1990, p. 15; Rollo, p. 53, and Labor Arbiter Decision, 16 November 1989, p. 7; Rollo, p. 24. 16 Solicitor General's Comment, p. 6; Rollo, p. 231. 17 Id. 18 Id., p. 7, citing Letter, Annex "7-A", Records, p. 241. 19 See Note 6. 20 Sec. 8, Rule VIII, Book III, Implementing Rules of the Labor Code. 21 See Canlubang Security Agency Corporation v. National Labor Relations Commission, G.R. No. 97942, 8 December 1992.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 126586 February 2, 2000

ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD CORPORATION AND/OR RICKY SEE (PRESIDENT), respondents. KAPUNAN, J.: This petition for certiorari under Rule 65 seeks to annul and set aside the decision,1 promulgated on 21 June 1996, of the National Labor Relations Commission ("NLRC") which reversed the decision2 of the, Labor Arbiter, rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to reinstate Alexander Vinoya to his former position and pay him backwages. Private respondent Regent Food Corporation is a domestic corporation principally engaged in the manufacture and sale of various food products. Private respondent Ricky See, on the other hand, is the president of RFC and is being sued in that capacity. Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his services were terminated on 25 November 1991. The parties presented conflicting versions of facts. Petitioner Alexander Vinoya claims that he applied and was accepted by RFC as sales representative on 26 May 1990. On the same date, a company identification card3 was issued to him by RFC. Petitioner alleges that he reported daily to the office of RFC, in Pasig City, to take the latter's van for the delivery of its products. According to petitioner, during his employ, he was assigned to various supermarkets and grocery stores where he booked sales orders and collected payments for RFC. For this task, he was required by RFC to put up a monthly bond of P200.00 as security deposit to guarantee the performance of his obligation as sales representative. Petitioner contends that he was under the direct control and supervision of Mr. Dante So and Mr. Sadi Lim, plant manager and senior salesman of RFC, respectively. He avers that on 1 July 1991, he was transferred by RFC to Peninsula Manpower Company, Inc. ("PMCI"), an agency which provides RFC with additional contractual workers pursuant to a contract for the supply of manpower services (hereinafter referred to as the "Contract of Service").4 After his transfer to PMCI, petitioner was allegedly reassigned to RFC as sales

representative. Subsequently, on 25 November 1991, he was informed by Ms. Susan Chua, personnel manager of RFC, that his services were terminated and he was asked to surrender his ID card. Petitioner was told that his dismissal was due to the expiration of the Contract of Service between RFC and PMCI. Petitioner claims that he was dismissed from employment despite the absence of any notice or investigation. Consequently, on 3 December 1991, petitioner filed a case against RFC before the Labor Arbiter for illegal dismissal and non-payment of 13th month pay.5 Private respondent Regent Food Corporation, on the other hand, maintains that no employeremployee relationship existed between petitioner and itself. It insists that petitioner is actually an employee of PMCI, allegedly an independent contractor, which had a Contract of Service6 with RFC. To prove this fact, RFC presents an Employment Contract7 signed by petitioner on 1 July 1991, wherein PMCI appears as his employer. RFC denies that petitioner was ever employed by it prior to 1 July 1991. It avers that petitioner was issued an ID card so that its clients and customers would recognize him as a duly authorized representative of RFC. With regard to the P200.00 pesos monthly bond posted by petitioner, RFC asserts that it was required in order to guarantee the turnover of his collection since he handled funds of RFC. While RFC admits that it had control and supervision over petitioner, it argues that such was exercised in coordination with PMCI. Finally, RFC contends that the termination of its relationship with petitioner was brought about by the expiration of the Contract of Service between itself and PMCI and not because petitioner was dismissed from employment. On 3 December 1991, when petitioner filed a complaint for illegal dismissal before the Labor Arbiter, PMCI was initially impleaded as one of the respondents. However, petitioner thereafter withdrew his charge against PMCI and pursued his claim solely against RFC. Subsequently, RFC filed a third party complaint against PMCI. After considering both versions of the parties, the Labor Arbiter rendered a decision,8 dated 15 June 1994, in favor of petitioner. The Labor Arbiter concluded that RFC was the true employer of petitioner for the following reasons: (1) Petitioner was originally with RFC and was merely transferred to PMCI to be deployed as an agency worker and then subsequently reassigned to RFC as sales representative; (2) RFC had direct control and supervision over petitioner; (3) RFC actually paid for the wages of petitioner although coursed through PMCI; and, (4) Petitioner was terminated per instruction of RFC. Thus, the Labor Arbiter decreed, as follows: ACCORDINGLY, premises considered respondent RFC is hereby declared guilty of illegal dismissal and ordered to immediately reinstate complainant to his former position without loss of seniority rights and other benefits and pay him backwages in the amount of P103,974.00. The claim for 13th month pay is hereby DENIED for lack of merit. This case, insofar as respondent PMCI [is concerned] is DISMISSED, for lack of merit. SO ORDERED.9

RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision,10 dated 21 June 1996, the NLRC reversed the findings of the Labor Arbiter. The NLRC opined that PMCI is an independent contractor because it has substantial capital and, as such, is the true employer of petitioner. The NLRC, thus, held PMCI liable for the dismissal of petitioner. The dispositive portion of the NLRC decision states: WHEREFORE, premises considered, the appealed decision is modified as follows: 1. Peninsula Manpower Company Inc. is declared as employer of the complainant; 2. Peninsula is ordered to pay complainant his separation pay of P3,354.00 and his proportionate 13th month pay for 1991 in the amount of P2,795.00 or the total amount of P6,149.00. SO ORDERED.11 Separate motions for reconsideration of the NLRC decision were filed by petitioner and PMCI. In a resolution,12 dated 20 August 1996, the NLRC denied both motions. However, it was only petitioner who elevated the case before this Court. In his petition for certiorari, petitioner submits that respondent NLRC committed grave abuse of discretion in reversing the decision of the Labor Arbiter, and asks for the reinstatement of the latter's decision. Principally, this petition presents the following issues: 1. Whether petitioner was an employee of RFC or PMCI. 2. Whether petitioner was lawfully dismissed. The resolution of the first issue initially boils down to a determination of the true status of PMCI, whether it is a labor-only contractor or an independent contractor. In the case at bar, RFC alleges that PMCI is an independent contractor on the sole ground that the latter is a highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles of Incorporation and the Treasurer's Affidavit13 submitted by PMCI to the Securities and Exchange Commission showing that it has an authorized capital stock of One Million Pesos (P1,000,000.00), of which Three Hundred Thousand Pesos (P300,000.00) is subscribed and Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC, PMCI is a duly organized corporation engaged in the business of creating and hiring a pool of temporary personnel and, thereafter, assigning them to its clients from time to time for such duration as said clients may require. RFC further contends that PMCI has a separate office, permit and license and its own organization.

Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal.14 In labor-only contracting, the following elements are present: (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; (b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal.15 On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.16 A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur: (a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof; (b) The contractor or subcontractor has substantial capital or investment; and (c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.17 Previously, in the case of Neri vs. NLRC,18 we held that in order to be considered as a job contractor it is enough that a contractor has substantial capital. In other words, once substantial capital established it is no longer necessary for the contractor to show evidence that it has investment in the form of tools, equipment, machineries, work premises, among others. The rational for this is that Article 106 of the Labor Code does not require that the contractor possess both substantial capital and investment in the form of tools, equipment, machineries, work premises, among others.19 The decision of the Court in Neri, thus, states: Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.20 However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the Court considered not only the fact that it had substantial capitalization. The Court noted that

BCC carried on an independent business and undertook the performance of its contract according to its own manner and method, free from the control and supervision of its principal in all matters except as to the results thereof.21 The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for its principal.22 Thus, the Court ruled that BCC was an independent contractor. The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox Corporation vs. NLRC.23 In the said case, petitioner Fuji Xerox implored the Court to apply the Neri doctrine to its alleged job-contractor, Skillpower, Inc., and declare the same as an independent contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly capitalized venture registered with the Securities and Exchange Commission, the Department of Labor and Employment, and the Social Security System with assets exceeding P5,000,000.00 possessing at least 29 typewriters, office equipment and service vehicles, and its own pool of employees with 25 clerks assigned to its clients on a temporary basis.24 Despite the evidence presented by Fuji Xerox the Court refused to apply the Neri case and explained: Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of finding that it had substantial capital, although there was no evidence that it had investments in the form of tools, equipment, machineries and work premises. But the Court in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services (radio/telex operator and janitor) to the employer; that in another case, the Court had already found that BCC was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the endresult; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one.25 Not having shown the above circumstances present in Neri, the Court declared Skillpower, Inc. to be engaged in labor-only contracting and was considered as a mere agent of the employer. From the two aforementioned decisions, it may be inferred that it is not enough to show substantial capitalization or investment in the form of tools, equipment, machineries and work premises, among others, to be considered as an independent contractor. In fact, jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several factors might be considered such as, but not necessarily confined to, whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.26 Given the above standards and the factual milieu of the case, the Court has to agree with the conclusion of the Labor Arbiter that PMCI is engaged in labor-only contracting.

First of all, PMCI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, among others, to qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind, cannot be considered as substantial capitalization. In the case of Neri, which was promulgated in 1993, BCC had a capital stock of P1,000,000.00 which was fully subscribed and paid-for. Moreover, when the Neri case was decided in 1993, the rate of exchange between the dollar and the peso was only P27.30 to $127 while presently it is at P40.390 to $1.28 The Court takes judicial notice of the fact that in 1993, the economic situation in the country was not as adverse as the present, as shown by the devaluation of our peso. With the current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000,00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor. Second, PMCI did not carry on an independent business nor did it undertake the performance of its contract according to its own manner and method, free from the control and supervision of its principal, RFC. The evidence at hand shows that the workers assigned by PMCI to RFC were under the control and supervision of the latter. The Contract of Service itself provides that RFC can require the workers assigned by PMCI to render services even beyond the regular eight hour working day when deemed necessary.29 Furthermore, RFC undertook to assist PMCI in making sure that the daily time records of its alleged employees faithfully reflect the actual working hours.30 With regard to petitioner, RFC admitted that it exercised control and supervision over him.31 These are telltale indications that PMCI was not left alone to supervise and control its alleged employees. Consequently, it can be, concluded that PMCI was not an independent contractor since it did not carry a distinct business free from the control and supervision of RFC. Third, PMCI was not engaged to perform a specific and special job or service, which is one of the strong indicators that an entity is an independent contractor as explained by the Court in the cases of Neri and Fuji. As stated in the Contract of Service, the sole undertaking of PMCI was to provide RFC with a temporary workforce able to carry out whatever service may be required by it.32 Such venture was complied with by PMCI when the required personnel were actually assigned to RFC. Apart from that, no other particular job, work or service was required from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency for RFC. Since the undertaking of PMCI did not involve the performance of a specific job, but rather the supply of manpower only, PMCI clearly conducted itself as labor-only contractor. Lastly, in labor-only contracting, the employees recruited, supplied or placed by the contractor perform activities which are directly related to the main business of its principal. In this case, the work of petitioner as sales representative is directly related to the business of RFC. Being in the business of food manufacturing and sales, it is necessary for RFC to hire a sales representative like petitioner to take charge of booking its sales orders and collecting payments for such. Thus, the work of petitioner as sales representative in RFC can only be categorized as clearly related to, and in the pursuit of the latter's business. Logically, when petitioner was assigned by PMCI to RFC, PMCI acted merely as a labor-only contractor. Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such, cannot be considered as the employer of petitioner.

However, even granting that PMCI is an independent contractor, as RFC adamantly suggests, still, a finding of the same will not save the day for RFC. A perusal of the Contract of Service entered into between RFC and PMCI reveals that petitioner is actually not included in the enumeration of the workers to be assigned to RFC. The following are the workers enumerated in the contract: 1. Merchandiser 2. Promo Girl 3. Factory Worker 4. Driver33 Obviously, the above enumeration does not include the position of petitioner as sales representative. This only shows that petitioner was never intended to be a part of those to be contracted out. However, RFC insists that despite the absence of his position in the enumeration, petitioner is deemed included because this has been agreed upon between itself and PMCI. Such contention deserves scant consideration. Had it really been the intention of both parties to include the position of petitioner they should have clearly indicated the same in the contract. However, the contract is totally silent on this point which can only mean that petitioner was never really intended to be covered by it. Even if we use the "four-fold test" to ascertain whether RFC is the true employer of petitioner that same result would be achieved. In determining the existence of employer-employee relationship the following elements of the "four-fold test" are generally considered, namely: (1) the selection and engagement of the employee or the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the employee.34 Of these four, the "control test" is the most important.35 A careful study of the evidence at hand shows that RFC possesses the earmarks of being the employer of petitioner. With regard to the first element, the power to hire, RFC denies any involvement in the recruitment and selection of petitioner and asserts that petitioner did not present any proof that he was actually hired and employed by RFC. It should be pointed out that no particular form of proof is required to prove the existence of an employer-employee relationship.36 Any competent and relevant evidence may show the relationship.37 If only documentary evidence would be required to demonstrate that relationship, no scheming employer would ever be brought before bar of justice.38 In the case at bar, petitioner presented the identification card issue to him on 26 May 1990 by RFC as proof that it was the latter who engaged his services. To our mind, the ID card is enough proof that petitioner was previously hired by RFC prior to his transfer as agency worker to PMCI. It must be noted that the Employment Contract between petitioner and PMCI was dated 1 July 1991. On the other hand, the ID card issued by RFC to petitioner was dated 26 May 1990, or more than one year before the Employment Contract was signed by petitioner in favor of PMCI. It makes one wonder why, if petitioner was indeed recruited by PMCI as its own employee on 1 July 1991,

how come he had already been issued an ID card by RFC a year earlier? While the Employment Contract indicates the word "renewal," presumably an attempt to show that petitioner had previously signed a similar contract with PMCI, no evidence of a prior contract entered into petitioner and PMCI was ever presented by RFC. In fact, despite the demand made by the counsel of petitioner for production of the contract which purportedly shows that prior to 1 July 1991 petitioner was already connected with PMCI, RFC never made a move to furnish the counsel of petitioner a copy of the alleged original Employment Contract. The only logical conclusion which may be derived from such inaction is that there was no such contract end that the only Employment Contract entered into between PMCI and petitioner was the 1 July 1991 contract and no other. Since, as shown by the ID card, petitioner was already with RFC on 26 May 1990, prior to the time any Employment Contract was agreed upon between PMCI and petitioner, it follows that it was RFC who actually hired and engaged petitioner to be its employee. With respect to the payment of wages, RFC disputes the argument of petitioner that it paid his wages on the ground that petitioner did not submit any evidence to prove that his salary was paid by it, or that he was issued payslip by the company. On the contrary, RFC asserts that the invoices39 presented by it, show that it was PMCI who paid petitioner his wages through its regular monthly billings charged to RFC. The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the Labor Code, do not issue payslips directly to their employees.40 Under the current practice, a third person, usually the purported contractor (service or manpower placement agency), assumes the act of paying the wage.41 For this reason, the lowly worker is unable to show proof that it was directly paid by the true employer. Nevertheless, for the workers, it is enough that they actually receive their pay, oblivious of the need for payslips, unaware of its legal implications.42 Applying this principle to the case at bar, even though the wages were coursed through PMCI, we note that the funds actually came from the pockets of RFC. Thus, in the end, RFC is still the one who paid the wages of petitioner albeit indirectly. As to the third element, the power to dismiss, RFC avers that it was PMCI who terminated the employment of petitioner. The facts on record, however, disprove the allegation of RFC. First of all, the Contract of Service gave RFC the right to terminate the workers assigned to it by PMCI without the latter's approval. Quoted hereunder is the portion of the contract stating the power of RFC to dismiss, to wit: 7. The First party ("RFC") reserves the right to terminate the services of any worker found to be unsatisfactory without the prior approval of the second party ("PMCI").43 In furtherance of the above provision, RFC requested PMCI to terminate petitioner from his employment with the company. In response to the request of RFC, PMCI terminated petitioner from service. As found by the Labor Arbiter, to which we agree, the dismissal of petitioner was indeed made under the instruction of RFC to PMCI. The fourth and most important requirement in ascertaining the presence of employer-employee relationship is the power of control. The power of control refers to the authority of the employer

to control the employee not only with regard to the result of work to be done but also to the means and methods by which the work is to be accomplished.44 It should be borne in mind, that the "control test" calls merely for the existence of the right to control the manner of doing the work, and not necessarily to the actual exercise of the right.45 In the case at bar, we need not belabor ourselves in discussing whether the power of control exists. RFC already admitted that it exercised control and supervision over petitioner.46 RFC, however, raises the defense that the power of control was jointly exercised with PMCI. The Labor Arbiter, on the other hand, found that petitioner was under the direct control and supervision of the personnel of RFC and not PMCI. We are inclined to believe the findings of the Labor Arbiter which is supported not only by the admission of RFC but also by the evidence on record. Besides, to our mind, the admission of RFC that it exercised control and supervision over petitioner, the same being a declaration against interest, is sufficient enough to prove that the power of control truly exists. We, therefore, hold that an employer-employee relationship exists between petitioner and RFC. Having determined the real employer of petitioner, we now proceed to ascertain the legality of his dismissal from employment. Since petitioner, due to his length of service, already attained the status of a regular employee,47 he is entitled to the security of tenure provided under the labor laws. Hence, he may only be validly terminated from service upon compliance with the legal requisites for dismissal. Under the Labor Code, the requirements for the lawful dismissal of an employee are two-fold, the substantive and the procedural aspects. Not only must the dismissal be for a valid or authorized cause,48 the rudimentary requirements of due process notice and hearing49 must, likewise, be observed before an employee may be dismissed. Without the concurrence of the two, the termination would, in the eyes of the law, be illegal.50 As the employer, RFC has the burden of proving that the dismissal of petitioner was for a cause allowed under the law and that petitioner was afforded procedural due process. Sad to say, RFC failed to discharge this burden. Indeed, RFC never pointed to any valid or authorized cause under the Labor Code which allowed it to terminate the services of petitioner. Its lone allegation that the dismissal was due to the expiration or completion of contract is not even one of the grounds for termination allowed by law. Neither did RFC show that petitioner was given ample opportunity to contest the legality of his dismissal. In fact, no notice of such impending termination was ever given him. Petitioner was, thus, surprised that he was already terminated from employment without any inkling as to how and why it came about. Petitioner was definitely denied due process. Having failed to establish compliance with the requirements on termination of employment under the Labor Code, the dismissal of petitioner is tainted with illegality. An employee who has been illegally dismissed is entitled to reinstatement to his former position without loss of seniority rights and to payment of full backwages corresponding to the period from his illegal dismissal up to actual reinstatement.51 Petitioner is entitled to no less. WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21 June 1996, as well as its resolution, promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The

decision of the Labor Arbiter, rendered on 15 June 1994, is hereby REINSTATED and AFFIRMED.1wphi1.nt SO ORDERED. labor dispute

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 87700 June 13, 1990 SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES, MARCELA PURIFICACION, ET AL., petitioners, vs. HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and SAN MIGUEL CORPORATION, respondents. Romeo C. Lagman for petitioners. Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.

MELENCIO-HERRERA, J.: Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil action for certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March 1989 in Civil Case No. 57055 of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als." Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig. for short), for its part, defends the Writ on the ground of absence of any employer-employee relationship between it and the contractual workers employed by the companies Lipercon Services, Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of personality to represent said workers for purposes of collective bargaining. The Solicitor General agrees with the position of SanMig. The antecedents of the controversy reveal that:

Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are independent contractors duly licensed by the Department of Labor and Employment (DOLE). SanMig entered into those contracts to maintain its competitive position and in keeping with the imperatives of efficiency, business expansion and diversity of its operation. In said contracts, it was expressly understood and agreed that the workers employed by the contractors were to be paid by the latter and that none of them were to be deemed employees or agents of SanMig. There was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and SanMig on the other. Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized representative of the monthly paid rank-and-file employees of SanMig with whom the latter executed a Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary, probationary, or contract employees and workers are excluded from the bargaining unit and, therefore, outside the scope of this Agreement." In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and D'Rite workers had signed up for union membership and sought the regularization of their employment with SMC. The Union alleged that this group of employees, while appearing to be contractual workers supposedly independent contractors, have been continuously working for SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither casual nor seasonal as they are performing work or activities necessary or desirable in the usual business or trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting situation. It was then demanded that the employment status of these workers be regularized. On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex D, Petition). On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F, Petition). As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2) notices of strike were consolidated and several conciliation conferences were held to settle the dispute before the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G, Petition). Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers in various SMC plants and offices.

On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON and/or D'RITE for the purposes of collective bargaining; b. calling for and holding a strike vote, to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; c. inciting, instigating and/or inducing the employees or workers of LIPERCON and D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the bargaining unit referred to in the CBA,...; d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; e. using the employees or workers of LIPERCON AND D'RITE to man the strike area and/or picket lines and/or barricades which the defendants may set up at the plants and offices of plaintiff within the bargaining unit referred to in the CBA ...; f. intimidating, threatening with bodily harm and/or molesting the other employees and/or contract workers of plaintiff, as well as those persons lawfully transacting business with plaintiff at the work places within the bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and egress from, the work places within the bargaining unit referred to in the CBA .., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex H, Petition)

Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining Order for the purpose of maintaining the status quo, and set the application for Injunction for hearing. In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of lack of jurisdiction over the case/nature of the action, which motion was opposed by SanMig. That Motion was denied by respondent Judge in an Order dated 11 April 1989. After several hearings on SanMig's application for injunctive relief, where the parties presented both testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned Order (Annex A, Petition) granting the application and enjoining the Union from Committing the acts complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer for whatever damages petitioners may sustain by reason thereof.

In issuing the Injunction, respondent Court rationalized:


The absence of employer-employee relationship negates the existence of labor dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance. The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What could be discerned is that there is no employer-employee relationship between plaintiff and the contractual workers employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding the question of the existence of employer-employee relationship has already been made. To finally resolve this dispute, the court must extensively consider and delve into the manner of selection and engagement of the putative employee; the mode of payment of wages; the presence or absence of a power of dismissal; and the Presence or absence of a power to control the putative employee's conduct. This necessitates a full-blown trial. If the acts complained of are not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the other hand, a writ of injunction does not necessarily expose defendants to irreparable damages. Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)

Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the implementation of the Injunction issued by respondent Court. The Union construed this to mean that "we can now strike," which it superimposed on the Order and widely circulated to entice the Union membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo). In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's plants and offices. On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and discussion on their other demands, such as wage distortion and appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement between SanMig and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be recalled effective 8 May 1989 to their former jobs or equivalent positions under the same terms and conditions prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return to work. After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required the parties to submit their memoranda simultaneously, the last of which was filed on 9 January 1990.

The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the present controversy and properly issued the Writ of Preliminary Injunction to the resolution of that question, is the matter of whether, or not the case at bar involves, or is in connection with, or relates to a labor dispute. An affirmative answer would bring the case within the original and exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts. Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose out of a labor dispute and is directly connected or interwoven with the cases pending with the NCMB-DOLE, and is thus beyond the ambit of the public respondent's jurisdiction. That the acts complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the private respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo). On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of any labor dispute between itself and the Union. SanMig submits, in particular, that "respondent Court is vested with jurisdiction and judicial competence to enjoin the specific type of strike staged by petitioner union and its officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to compel the employer to hire and thereby create an employment relationship with contractual workers, especially were the contractual workers were recognized by the union, under the governing collective bargaining agreement, as excluded from, and therefore strangers to, the bargaining unit. B. A strike is a coercive economic weapon granted the bargaining representative only in the event of a deadlock in a labor dispute over 'wages, hours of work and all other and of the employment' of the employees in the unit. The union leaders cannot instigate a strike to compel the employer, especially on the eve of certification elections, to hire strangers or workers outside the unit, in the hope the latter will help re-elect them. C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does not arise out of a labor dispute, is an abuse of right, and violates the employer's constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476, Rollo).

We find the Petition of a meritorious character. A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee." While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless of whether the disputants stand in the proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among others, the terms and conditions of

employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of employer and employee. That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute. Further, the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship between it and those workers and because the demand violates the terms of their CBA. Obvious then is that representation and association, for the purpose of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent such representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the controversy below is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83). Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably linked with those issues. The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not controlling as in that case there was no controversy over terms, tenure or conditions, of employment or the representation of employees that called for the application of labor laws. In that case, what the petitioning union demanded was not a change in working terms and conditions, or the representation of the employees, but that its members be hired as stevedores in the place of the members of a rival union, which petitioners wanted discharged notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis of those facts unique to that case, that such a demand could hardly be considered a labor dispute. As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the suit below was instituted on

6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide the following cases involving all workers including "1. unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other terms and conditions of employment; ... and 5. cases arising from any violation of Article 265 of this Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the plain command of the law. The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the case within the jurisdictional boundaries of regular Courts. That claim for damages is interwoven with a labor dispute existing between the parties and would have to be ventilated before the administrative machinery established for the expeditious settlement of those disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice (Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321). We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to determine whether it should contract out the performance of some of its work to independent contractors. However, the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be placed in proper perspective and equilibrium. WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from taking any further action in Civil Case No. 57055 except for the purpose of dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor and Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs. SO ORDERED.