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G.R. No.

L-21278

December 27, 1966

FEATI UNIVERSITY, petitioner,


vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations
and FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.
---------------------------------------G.R. No. L-21462

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,


vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
---------------------------------------G.R. No. L-21500

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,


vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
Rafael Dinglasan for petitioner.
Cipriano Cid and Associates for respondents.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered together, and
the parties were allowed to file only one brief for the three cases.
On January 14, 1963, the President of the respondent Feati University Faculty ClubPAFLU hereinafter referred to as Faculty Club wrote a letter to Mrs. Victoria L.
Araneta, President of petitioner Feati University hereinafter referred to as University
informing her of the organization of the Faculty Club into a registered labor union.
The Faculty Club is composed of members who are professors and/or instructors of
the University. On January 22, 1963, the President of the Faculty Club sent another
letter containing twenty-six demands that have connection with the employment of the
members of the Faculty Club by the University, and requesting an answer within ten
days from receipt thereof. The President of the University answered the two letters,
requesting that she be given at least thirty days to study thoroughly the different
phases of the demands. Meanwhile counsel for the University, to whom the demands
were referred, wrote a letter to the President of the Faculty Club demanding proof of its
majority status and designation as a bargaining representative. On February 1, 1963,
the President of the Faculty Club again wrote the President of the University rejecting
the latter's request for extension of time, and on the same day he filed a notice of
strike with the Bureau of Labor alleging as reason therefor the refusal of the University
to bargain collectively. The parties were called to conferences at the Conciliation
Division of the Bureau of Labor but efforts to conciliate them failed. On February 18,
1963, the members of the Faculty Club declared a strike and established picket lines
in the premises of the University, resulting in the disruption of classes in the University.
Despite further efforts of the officials from the Department of Labor to effect a
settlement of the differences between the management of the University and the
striking faculty members no satisfactory agreement was arrived at. On March 21,
1963, the President of the Philippines certified to the Court of Industrial Relations the
dispute between the management of the University and the Faculty Club pursuant to
the provisions of Section 10 of Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club and certain
incidents related to said dispute, various cases were filed with the Court of Industrial
Relations hereinafter referred to as CIR. The three cases now before this Court
stemmed from those cases that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for certiorari and
prohibition with writ of preliminary injunction", docketed as G.R. No. L-21278, praying:
(1) for the issuance of the writ of preliminary injunction enjoining respondent Judge
Jose S. Bautista of the CIR to desist from proceeding in CIR Cases Nos. 41-IPA,
1183-MC, and V-30; (2) that the proceedings in Cases Nos. 41-IPA and 1183-MC be
annulled; (3) that the orders dated March 30, 1963 and April 6, 1963 in Case No. 41-

IPA, the order dated April 6, 1963 in Case No. 1183-MC, and the order dated April 29,
1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge be ordered
to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon the
University's filing a bond of P1,000.00, ordering respondent Judge Jose S. Bautista as
Presiding Judge of the CIR, until further order from this Court, "to desist and refrain
from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the
Court of Industrial Relations)."1 On December 4, 1963, this Court ordered the
injunction bond increased to P100,000.00; but on January 23, 1964, upon a motion for
reconsideration by the University, this Court reduced the bond to P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30
involved in the Case G.R. No. L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the
members of the Faculty Club. As we have stated, the dispute between the University
and the Faculty Club was certified on March 21, 1963 by the President of the
Philippines to the CIR. On the strength of the presidential certification, respondent
Judge Bautista set the case for hearing on March 23, 1963. During the hearing, the
Judge endeavored to reconcile the part and it was agreed upon that the striking faculty
members would return to work and the University would readmit them under a status
quo arrangement. On that very same day, however, the University, thru counsel filed a
motion to dismiss the case upon the ground that the CIR has no jurisdiction over the
case, because (1) the Industrial Peace Act is not applicable to the University, it being
an educational institution, nor to the members of the Faculty Club, they being
independent contractors; and (2) the presidential certification is violative of Section 10
of the Industrial Peace Act, as the University is not an industrial establishment and
there was no industrial dispute which could be certified to the CIR. On March 30, 1963
the respondent Judge issued an order denying the motion to dismiss and declaring
that the Industrial Peace Act is applicable to both parties in the case and that the CIR
had acquired jurisdiction over the case by virtue of the presidential certification. In the
same order, the respondent Judge, believing that the dispute could not be decided
promptly, ordered the strikers to return immediately to work and the University to take
them back under the last terms and conditions existing before the dispute arose, as
per agreement had during the hearing on March 23, 1963; and likewise enjoined the
University, pending adjudication of the case, from dismissing any employee or laborer
without previous authorization from the CIR. The University filed on April 1, 1963 a
motion for reconsideration of the order of March 30, 1963 by the CIR en banc, and at
the same time asking that the motion for reconsideration be first heard by the CIR en
banc. Without the motion for reconsideration having been acted upon by the CIR en
banc, respondent Judge set the case for hearing on the merits for May 8, 1963. The
University moved for the cancellation of said hearing upon the ground that the court en
banc should first hear the motion for reconsideration and resolve the issues raised
therein before the case is heard on the merits. This motion for cancellation of the
hearing was denied. The respondent Judge, however, cancelled the scheduled
hearing when counsel for the University manifested that he would take up before the
Supreme Court, by a petition for certiorari, the matter regarding the actuations of the
respondent Judge and the issues raised in the motion for reconsideration, specially the
issue relating to the jurisdiction of the CIR. The order of March 30, 1963 in Case 41IPA is one of the orders sought to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by respondent
Judge, the University had employed professors and/or instructors to take the places of
those professors and/or instructors who had struck. On April 1, 1963, the Faculty Club
filed with the CIR in Case 41-IPA a petition to declare in contempt of court certain
parties, alleging that the University refused to accept back to work the returning
strikers, in violation of the return-to-work order of March 30, 1963. The University filed,
on April 5,1963, its opposition to the petition for contempt, denying the allegations of
the Faculty Club and alleging by way of special defense that there was still the motion
for reconsideration of the order of March 30, 1963 which had not yet been acted upon
by the CIR en banc. On April 6, 1963, the respondent Judge issued an order stating
that "said replacements are hereby warned and cautioned, for the time being, not to
disturb nor in any manner commit any act tending to disrupt the effectivity of the order
of March 30,1963, pending the final resolution of the same."2 On April 8, 1963, there
placing professors and/or instructors concerned filed, thru counsel, a motion for
reconsideration by the CIR en banc of the order of respondent Judge of April 6, 1963.
This order of April 6, 1963 is one of the orders that are sought to be annulled in case
G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty
Club on March 8, 1963 before the CIR, praying that it be certified as the sole and
exclusive bargaining representative of all the employees of the University. The
University filed an opposition to the petition for certification election and at the same
time a motion to dismiss said petition, raising the very same issues raised in Case No.

41-IPA, claiming that the petition did not comply with the rules promulgated by the CIR;
that the Faculty Club is not a legitimate labor union; that the members of the Faculty
Club cannot unionize for collective bargaining purposes; that the terms of the
individual contracts of the professors, instructors, and teachers, who are members of
the Faculty Club, would expire on March 25 or 31, 1963; and that the CIR has no
jurisdiction to take cognizance of the petition because the Industrial Peace Act is not
applicable to the members of the Faculty Club nor to the University. This case was
assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act
on the motion to dismiss, however, the Faculty Club filed on April 3, 1963 a motion to
withdraw the petition on the ground that the labor dispute (Case No. 41-IPA) had
already been certified by the President to the CIR and the issues raised in Case No.
1183-MC were absorbed by Case No. 41-IPA. The University opposed the withdrawal,
alleging that the issues raised in Case No. 1183-MC were separate and distinct from
the issues raised in Case No. 41-IPA; that the questions of recognition and majority
status in Case No. 1183-MC were not absorbed by Case No. 41-IPA; and that the CIR
could not exercise its power of compulsory arbitration unless the legal issue regarding
the existence of employer-employee relationship was first resolved. The University
prayed that the motion of the Faculty Club to withdraw the petition for certification
election be denied, and that its motion to dismiss the petition be heard. Judge Baltazar
Villanueva, finding that the reasons stated by the Faculty Club in the motion to
withdraw were well taken, on April 6, 1963, issued an order granting the withdrawal.
The University filed, on April 24, 1963, a motion for reconsideration of that order of
April 6, 1963 by the CIR en banc. This order of April 6, 1963 in Case No. 1183-MC is
one of the orders sought to be annulled in the case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against
the administrative officials of the University. The Faculty Club, through the Acting Chief
Prosecutor of the CIR, filed with the CIR a complaint docketed as Case No. V-30,
charging President Victoria L. Araneta, Dean Daniel Salcedo, Executive VicePresident Rodolfo Maslog, and Assistant to the President Jose Segovia, as officials of
the University, with indirect contempt of court, reiterating the same charges filed in
Case No. 41-IPA for alleged violation of the order dated March 30, 1963. Based on the
complaint thus filed by the Acting Chief Prosecutor of the CIR, respondent Judge
Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest
the above named officials of the University so that they may be dealt with in
accordance with law, and the same time fixed the bond for their release at P500.00
each. This order of April 29, 1963 is also one of the orders sought to be annulled in the
case, G.R. No. L-2l278.
The principal allegation of the University in its petition for certiorari and prohibition with
preliminary injunction in Case G.R. No. L-21278, now before Us, is that respondent
Judge Jose S. Bautista acted without, or in excess of, jurisdiction, or with grave abuse
of discretion, in taking cognizance of, and in issuing the questioned orders in, CIR
Cases Nos. 41-IPA 1183-MC and V-30. Let it be noted that when the petition
for certiorari and prohibition with preliminary injunction was filed on May 10, 1963 in
this case, the questioned order in CIR Cases Nos. 41-IPA, 1183-MC and V-30 were
still pending action by the CIR en banc upon motions for reconsideration filed by the
University.
On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and
prohibition with preliminary injunction, admitting some allegations contained in the
petition and denying others, and alleging special defenses which boil down to the
contentions that (1) the CIR had acquired jurisdiction to take cognizance of Case No.
41-IPA by virtue of the presidential certification, so that it had jurisdiction to issue the
questioned orders in said Case No. 41-IPA; (2) that the Industrial Peace Act (Republic
Act 875) is applicable to the University as an employer and to the members of the
Faculty Club as employees who are affiliated with a duly registered labor union, so that
the Court of Industrial Relations had jurisdiction to take cognizance of Cases Nos.
1183-MC and V-30 and to issue the questioned orders in those two cases; and (3) that
the petition for certiorari and prohibition with preliminary injunction was prematurely
filed because the orders of the CIR sought to be annulled were still the subjects of
pending motions for reconsideration before the CIR en banc when said petition
for certiorari and prohibition with preliminary injunction was filed before this Court.

by order April 6, 1963, granted the motion to withdraw. The University filed a motion for
reconsideration of that order of April 6, 1963 by the CIR en banc. That motion for
reconsideration was pending action by the CIR en banc when the petition
forcertiorari and prohibition with preliminary injunction in Case G.R. no. L-21278 was
filed on May 10, 1963. As earlier stated this Court, in Case G.R. No. L-21278, issued a
writ of preliminary injunction on May 10, 1963, ordering respondent Judge Bautista,
until further order from this Court, to desist and refrain from further proceeding in the
premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in
Case G.R. No. L-21278, the CIR en banc issued a resolution denying the motion for
reconsideration of the order of April 6, 1963 in Case No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by way of
an appeal from the resolution of the CIR en banc, dated June 5, 1963, denying the
motion for reconsideration of the order of April 6, 1963 in Case No. 1183-MC. This
petition was docketed as G.R. No. L-21462. In its petition for certiorari, the University
alleges (1) that the resolution of the Court of Industrial Relations of June 5, 1963 was
null and void because it was issued in violation of the writ of preliminary injunction
issued in Case G.R. No. L-21278; (2) that the issues of employer-employee
relationship, the alleged status as a labor union, majority representation and
designation as bargaining representative in an appropriate unit of the Faculty Club
should have been resolved first in Case No. 1183-MC prior to the determination of the
issues in Case No. 41-IPA and therefore the motion to withdraw the petition for
certification election should not have been granted upon the ground that the issues in
the first case have been absorbed in the second case; and (3) the lower court acted
without or in excess of jurisdiction in taking cognizance of the petition for certification
election and that the same should have been dismissed instead of having been
ordered withdrawn. The University prayed that the proceedings in Case No. 1183-MC
and the order of April 6, 1963 and the resolution of June 5, 1963 issued therein be
annulled, and that the CIR be ordered to dismiss Case No. 1183-MC on the ground of
lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other, allegations in
the petition for certiorari; and specially alleging that the lower court's order granting the
withdrawal of the petition for certification election was in accordance with law, and that
the resolution of the court en banc on June 5, 1963 was not a violation of the writ of
preliminary injunction issued in Case G.R. No. L-21278 because said writ of injunction
was issued against Judge Jose S. Bautista and not against the Court of Industrial
Relations, much less against Judge Baltazar Villanueva who was the trial judge of
Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated,
Case No. 41-IPA relates to the strike staged by the members of the Faculty Club and
the dispute was certified by the President of the Philippines to the CIR. The University
filed a motion to dismiss that case upon the ground that the CIR has no jurisdiction
over the case, and on March 30, 1963 Judge Jose S. Bautista issued an order denying
the motion to dismiss and declaring that the Industrial Peace Act is applicable to both
parties in the case and that the CIR had acquired jurisdiction over the case by virtue of
the presidential certification; and in that same order Judge Bautista ordered the
strikers to return to work and the University to take them back under the last terms and
conditions existing before the dispute arose; and enjoined the University from
dismissing any employee or laborer without previous authority from the court. On April
1, 1963, the University filed a motion for reconsideration of the order of March 30,
1963 by the CIR en banc. That motion for reconsideration was pending action by the
CIR en banc when the petition for certiorari and prohibition with preliminary injunction
in Case G.R. No. L-21278 was filed on May 10, 1963. As we have already stated, this
Court in said case G.R. No. L-21278, issued a writ of preliminary injunction on May 10,
1963 ordering respondent Judge Jose S. Bautista, until further order from this Court, to
desist and refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183MC and V-30 of the Court of Industrial Relations).

CASE G.R. NO. L-21462


This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated
Case No. 1183-MC relates to a petition for certification election filed by the Faculty
Club as a labor union, praying that it be certified as the sole and exclusive bargaining
representative of all employees of the University. This petition was opposed by the
University, and at the same time it filed a motion to dismiss said petition. But before
Judge Baltazar Villanueva could act on the petition for certification election and the
motion to dismiss the same, Faculty Club filed a motion to withdraw said petition upon
the ground that the issue raised in Case No. 1183-MC were absorbed by Case No. 41IPA which was certified by the President of the Philippines. Judge Baltazar Villanueva,

On July 2, 1963, the University received a copy of the resolution of the CIR en banc,
dated May 7, 1963 but actually received and stamped at the Office of the Clerk of the
CIR on June 28, 1963, denying the motion for reconsideration of the order dated
March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari, by way
of an appeal from the resolution of the Court of Industrial Relations en banc dated May
7, 1963 (but actually received by said petitioner on July 2, 1963) denying the motion
for reconsideration of the order of March 30, 1963 in Case No. 41-IPA. This petition
was docketed as G.R. No. L-21500. In its petition for certiorari the University alleges

(1) that the resolution of the CIR en banc, dated May 7, 1963 but filed with the Clerk of
the CIR on June 28, 1963, in Case No. 41-IPA, is null and void because it was issued
in violation of the writ of preliminary injunction issued by this Court in G.R. No. L21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take
cognizance of Case No. 41-IPA and the order of March 30, 1963 and the resolution
dated May 7, 1963 issued therein are null and void; (3) that the certification made by
the President of the Philippines is not authorized by Section 10 of Republic Act 875,
but is violative thereof; (4) that the Faculty Club has no right to unionize or organize as
a labor union for collective bargaining purposes and to be certified as a collective
bargaining agent within the purview of the Industrial Peace Act, and consequently it
has no right to strike and picket on the ground of petitioner's alleged refusal to bargain
collectively where such duty does not exist in law and is not enforceable against an
educational institution; and (5) that the return-to-work order of March 30, 1963 is
improper and illegal. The petition prayed that the proceedings in Case No. 41-IPA be
annulled, that the order dated March 30, 1963 and the resolution dated May 7, 1963
be revoked, and that the lower court be ordered to dismiss Case 41-IPA on the ground
of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss
the petition for certiorari on the ground that the petition being filed by way of an appeal
from the orders of the Court of Industrial Relations denying the motion to dismiss in
Case No. 41-IPA, the petition for certiorari is not proper because the orders appealed
from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these three cases (G.R.
Nos. L-21278, L-21462 and L-21500) be considered together and the motion to
dismiss in Case G.R. No. L-21500 be taken up when the cases are decided on the
merits after the hearing.
Brushing aside certain technical questions raised by the parties in their pleadings, We
proceed to decide these three cases on the merits of the issues raised.
The University has raised several issues in the present cases, the pivotal one being its
claim that the Court of Industrial Relations has no jurisdiction over the parties and the
subject matter in CIR Cases 41-IPA, 1183-MC and V-30, brought before it, upon the
ground that Republic Act No. 875 is not applicable to the University because it is an
educational institution and not an industrial establishment and hence not an
"employer" in contemplation of said Act; and neither is Republic Act No. 875 applicable
to the members of the Faculty Club because the latter are independent contractors
and, therefore, not employees within the purview of the said Act.
In support of the contention that being an educational institution it is beyond the scope
of Republic Act No. 875, the University cites cases decided by this Court: Boy Scouts
of the Philippines vs. Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin
vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine
Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College,
et al. vs. CIR, et al., L-13282, April 22, 1960; University of the Philippines, et al. vs.
CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L-17620, August 31,
1962. We have reviewed these cases, and also related cases subsequent thereto, and
We find that they do not sustain the contention of the University. It is true that this
Court has ruled that certain educational institutions, like the University of Santo
Tomas, University of San Agustin, La Consolacion College, and other juridical entities,
like the Boy Scouts of the Philippines and Manila Sanitarium, are beyond the purview
of Republic Act No. 875 in the sense that the Court of Industrial Relations has no
jurisdiction to take cognizance of charges of unfair labor practice filed against them,
but it is nonetheless true that the principal reason of this Court in ruling in those cases
that those institutions are excluded from the operation of Republic Act 875 is that
those entities are not organized, maintained and operated for profit and do not declare
dividends to stockholders. The decision in the case of University of San Agustin vs.
Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We
quote a portion of the decision:
It appears that the University of San Agustin, petitioner herein, is an
educational institution conducted and managed by a "religious non-stock
corporation duly organized and existing under the laws of the Philippines."
It was organized not for profit or gain or division of the dividends among its
stockholders, but solely for religious and educational purposes. It likewise
appears that the Philippine Association of College and University
Professors, respondent herein, is a non-stock association composed of
professors and teachers in different colleges and universities and that
since its organization two years ago, the university has adopted a hostile
attitude to its formation and has tried to discriminate, harass and
intimidate its members for which reason the association and the members
affected filed the unfair labor practice complaint which initiated this
proceeding. To the complaint of unfair labor practice, petitioner filed an

answer wherein it disputed the jurisdiction of the Court of Industrial


Relations over the controversy on the following grounds:
"(a) That complainants therein being college and/or university
professors were not "industrial" laborers or employees, and
the Philippine Association of College and University
Professors being composed of persons engaged in the
teaching profession, is not and cannot be a legitimate labor
organization within the meaning of the laws creating the Court
of Industrial Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein,
is not an institution established for the purpose of gain or
division of profits, and consequently, it is not an "industrial"
enterprise and the members of its teaching staff are not
engaged in "industrial" employment (U.S.T. Hospital
Employees Association vs. Sto. Tomas University Hospital,
G.R. No. L-6988, 24 May 1954; and San Beda College vs.
Court of Industrial Relations and National Labor Union, G.R.
No. L-7649, 29 October 1955; 51 O.G. (Nov. 1955) 56365640);
"(c) That, as a necessary consequence, alleged controversy
between therein complainants and respondent is not an
"industrial" dispute, and the Court of Industrial Relations has
no jurisdiction, notonly on the parties but also over the subject
matter of the complaint."
The issue now before us is: Since the University of San Agustin is not an
institution established for profit or gain, nor an industrial enterprise, but
one established exclusively for educational purposes, can it be said that
its relation with its professors is one of employer and employee that
comes under the jurisdiction of the Court of Industrial Relations? In other
words, do the provisions of the Magna Carta on unfair labor practice apply
to the relation between petitioner and members of respondent
association?
The issue is not new. Thus, in the case of Boy Scouts of the Philippines v.
Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958,
this Court, speaking thru Mr. Justice Montemayor, answered the query in
the negative in the following wise:
"The main issue involved in the present case is whether or
not a charitable institution or one organized not for profit but
for more elevated purposes, charitable, humanitarian, etc.,
like the Boy Scouts of the Philippines, is included in the
definition of "employer" contained in Republic Act 875, and
whether the employees of said institution fall under the
definition of "employee" also contained in the same Republic
Act. If they are included, then any act which may be
considered unfair labor practice, within the meaning of said
Republic Act, would come under the jurisdiction of the Court
of Industrial Relations; but if they do not fall within the scope
of said Republic Act, particularly, its definitions of employer
and employee, then the Industrial Court would have no
jurisdiction at all.
xxx

xxx

xxx

"On the basis of the foregoing considerations, there is every


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

"In conclusion, we find and hold that Republic Act No. 875,
particularly, that portion thereof regarding labor disputes and
unfair labor practice, does not apply to the Boy Scouts of the
Philippines, and consequently, the Court of Industrial
Relations had no jurisdiction to entertain and decide the
action or petition filed by respondent Araos. Wherefore, the
appealed decision and resolution of the CIR are hereby set
aside, with costs against respondent."
There being a close analogy between the relation and facts involved in the
two cases, we cannot but conclude that the Court of Industrial Relations
has no jurisdiction to entertain the complaint for unfair labor practice
lodged by respondent association against petitioner and, therefore, we
hereby set aside the order and resolution subject to the present petition,
with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon.
Baltazar Villanueva, et al.,G.R. No. L-13748, October 30, 1959, where this Court ruled
that:
In the present case, the record reveals that the petitioner University of
Santo Tomas is not an industry organized for profit but an institution of
learning devoted exclusively to the education of the youth. The Court of
First Instance of Manila in its decision in Civil Case No. 28870, which has
long become final and consequently the settled law in the case, found as
established by the evidence adduced by the parties therein (herein
petitioner and respondent labor union) that while the University collects
fees from its students, all its income is used for the improvement and
enlargement of the institution. The University declares no dividend, and
the members of the corporation who founded it, as ordained in its articles
of incorporation, receive no material compensation for the time and
sacrifice they render to the University and its students. The respondent
union itself in a case before the Industrial Court (Case No. 314-MC) has
averred that "the University of Santo Tomas, like the San Beda College, is
an educational institution operated not for profit but for the sole purpose of
educating young men." (See Annex "B" to petitioner's motion to dismiss.).
It is apparent, therefore, that on the face of the record the University of
Santo Tomas is not a corporation created for profit but an educational
institution and therefore not an industrial or business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April
22, 1960, this Court repeated the same ruling when it said:
The main issue in this appeal by petitioner is that the industry trial court
committed an error in holding that it has jurisdiction to act in this case
even if it involves unfair labor practice considering that the La Consolacion
College is not a business enterprise but an educational institution not
organized for profit.
If the claim that petitioner is an educational institution not operated for
profit is true, which apparently is the case, because the very court a
quo found that it has no stockholder, nor capital . . . then we are of the
opinion that the same does not come under the jurisdiction of the Court of
Industrial Relations in view of the ruling in the case of Boy Scouts of the
Philippines v. Juliana V. Araos, G.R. No. L-10091, decided on January 29,
1958.
It is noteworthy that the cases of the University of San Agustin, the University of Santo
Tomas, and La Consolacion College, cited above, all involve charges of unfair labor
practice under Republic Act No. 875, and the uniform rulings of this Court are that the
Court of Industrial Relations has no jurisdiction over the charges because said Act
does not apply to educational institutions that are not operated or maintained for profit
and do not declare dividends. On the other hand, in the cases of Far Eastern
University v. CIR, et al., G.R. No. L-17620, August 31, 1962, this Court upheld the
decision of the Court of Industrial Relations finding the Far Eastern University, also an
educational institution, guilty of unfair labor practice. Among the findings of fact in said
case was that the Far Eastern University made profits from the school year 1952-1953
to 1958-1959. In affirming the decision of the lower court, this Court had thereby
ratified the ruling of the Court of Industrial Relations which applied the Industrial Peace
Act to educational institutions that are organized, operated and maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the
Philippines, the University of San Agustin, the University of Sto. Tomas, and La
Consolacion College, this Court was not unanimous in the view that the Industrial

Peace Act (Republic Act No. 875) is not applicable to charitable, eleemosynary or nonprofit organizations which include educational institutions not operated for profit.
There are members of this Court who hold the view that the Industrial Peace Act would
apply also to non-profit organizations or entities the only exception being the
Government, including any political subdivision or instrumentality thereof, in so far as
governmental functions are concerned. However, in the Far Eastern University case
this Court is unanimous in supporting the view that an educational institution that is
operated for profit comes within the scope of the Industrial Peace Act. We consider it a
settled doctrine of this Court, therefore, that the Industrial Peace Act is applicable to
any organization or entity whatever may be its purpose when it was created that
is operated for profit or gain.
Does the University operate as an educational institution for profit? Does it declare
dividends for its stockholders? If it does not, it must be declared beyond the purview of
Republic Act No. 875; but if it does, Republic Act No. 875 must apply to it. The
University itself admits that it has declared dividends.3 The CIR in its order dated
March 30, 1963 in CIR Case No. 41-IPA which order was issued after evidence was
heard also found that the University is not for strictly educational purposes and that
"It realizes profits and parts of such earning is distributed as dividends to private
stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)"4 Under this
circumstance, and in consonance with the rulings in the decisions of this Court, above
cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner Feati
University.
But the University claims that it is not an employer within the contemplation of Republic
Act No. 875, because it is not an industrial establishment. At most, it says, it is only a
lessee of the services of its professors and/or instructors pursuant to a contract of
services entered into between them. We find no merit in this claim. Let us clarify who is
an "employer" under the Act. Section 2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an
employer, directly or indirectly, but shall not include any labor organization
(otherwise than when acting as an employer) or any one acting in the
capacity or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the word "includes",
which it also used in defining "employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)];
and not the word "means" which the Act uses in defining the terms "court" [Sec. 2(a)],
"labor organization" [Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company
union" [Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike"
[Sec. 2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in terminology is manifest.
This variation and distinction in terminology and phraseology cannot be presumed to
have been the inconsequential product of an oversight; rather, it must have been the
result of a deliberate and purposeful act, more so when we consider that as legislative
records show, Republic Act No. 875 had been meticulously and painstakingly drafted
and deliberated upon. In using the word "includes" and not "means", Congress did not
intend to give a complete definition of "employer", but rather that such definition should
be complementary to what is commonly understood as employer. Congress intended
the term to be understood in a broad meaning because, firstly, the statutory definition
includes not only "a principal employer but also a person acting in the interest of the
employer"; and, secondly, the Act itself specifically enumerated those who are not
included in the term "employer", namely: (1) a labor organization (otherwise than when
acting as an employer), (2) anyone acting in the capacity of officer or agent of such
labor organization [Sec. 2(c)], and (3) the Government and any political subdivision or
instrumentality thereof insofar as the right to strike for the purpose of securing changes
or modifications in the terms and conditions of employment is concerned (Section 11).
Among these statutory exemptions, educational institutions are not included; hence,
they can be included in the term "employer". This Court, however, has ruled that those
educational institutions that are not operated for profit are not within the purview of
Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive but only a
complementary definition of the term "employer". The term encompasses those that
are in ordinary parlance "employers." What is commonly meant by "employer"? The
term "employer" has been given several acceptations. The lexical definition is "one
who employs; one who uses; one who engages or keeps in service;" and "to employ"
is "to provide work and pay for; to engage one's service; to hire." (Webster's New
Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The Workmen's Compensation
Act defines employer as including "every person or association of persons,
incorporated or not, public or private, and the legal representative of the deceased
employer" and "includes the owner or lessee of a factory or establishment or place of
work or any other person who is virtually the owner or manager of the business carried
on in the establishment or place of work but who, for reason that there is an

independent contractor in the same, or for any other reason, is not the direct employer
of laborers employed there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage Law
states that "employer includes any person acting directly or indirectly in the interest of
the employer in relation to an employee and shall include the Government and the
government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social Security Act
defines employer as "any person, natural or juridical, domestic or foreign, who carries
in the Philippines any trade, business, industry, undertaking, or activity of any kind and
uses the services of another person who is under his orders as regards the
employment, except the Government and any of its political subdivisions, branches or
instrumentalities, including corporations owned or controlled by the Government."
(Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River
Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944, December 28, 1957,
which cases involve unfair labor practices and hence within the purview of Republic
Act No. 875, defined the term employer as follows:

meaning so as to cover all enterprises which are operated for profit and which engage
the services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor
relations in industry, cover labor conditions in any field of employment
where the objective is earning a livelihood on the one side and gaining of
a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations
Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases,
Permanent Edition, Vol. 21, 1960 edition p. 510).
The University urges that even if it were an employer, still there would be no employeremployee relationship between it and the striking members of the Faculty Club
because the latter are not employees within the purview of Sec. 2(d) of Republic Act
No. 875 but are independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:

An employer is one who employs the services of others; one for whom
employees work and who pays their wages or salaries (Black Law
Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer,
directly or indirectly (Sec. 2-c, Rep. Act 875).
Under none of the above definitions may the University be excluded, especially so if it
is considered that every professor, instructor or teacher in the teaching staff of the
University, as per allegation of the University itself, has a contract with the latter for
teaching services, albeit for one semester only. The University engaged the services
of the professors, provided them work, and paid them compensation or salary for their
services. Even if the University may be considered as a lessee of services under a
contract between it and the members of its Faculty, still it is included in the term
"employer". "Running through the word `employ' is the thought that there has been an
agreement on the part of one person to perform a certain service in return for
compensation to be paid by an employer. When you ask how a man is employed, or
what is his employment, the thought that he is under agreement to perform some
service or services for another is predominant and paramount." (Ballentine Law
Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v.
Walker, 157 Ga. 548, 35 A. L. R. 557, 560, 122 S.E. Rep. 202).
To bolster its claim of exception from the application of Republic Act No. 875, the
University contends that it is not state that the employers included in the definition of 2
(c) of the Act. This contention can not be sustained. In the first place, Sec. 2 (c) of
Republic Act No. 875 does not state that the employers included in the definition of the
term "employer" are only and exclusively "industrial establishments"; on the contrary,
as stated above, the term "employer" encompasses all employers except those
specifically excluded by the Act. In the second place, even the Act itself does not refer
exclusively to industrial establishments and does not confine its application thereto.
This is patent inasmuch as several provisions of the Act are applicable to nonindustrial workers, such as Sec. 3, which deals with "employees' right to selforganization"; Sections 4 and 5 which enumerate unfair labor practices; Section 8
which nullifies private contracts contravening employee's rights; Section 9 which
relates to injunctions in any case involving a labor dispute; Section 11 which prohibits
strikes in the government; Section 12 which provides for the exclusive collective
bargaining representation for labor organizations; Section 14 which deals with the
procedure for collective bargaining; Section 17 which treats of the rights and
conditions of membership in labor organizations; Sections 18, 19, 20 and 21 which
provide respectively for the establishment of conciliation service, compilation of
collective bargaining contracts, advisory labor-management relations; Section 22
which empowers the Secretary of Labor to make a study of labor relations; and
Section 24 which enumerates the rights of labor organizations. (See Dissenting
Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R.
No. L-10091, January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion
to state that the Industrial Peace Act "refers only to organizations and entities created
and operated for profits, engaged in a profitable trade, occupation or industry". It
cannot be denied that running a university engages time and attention; that it is an
occupation or a business from which the one engaged in it may derive profit or gain.
The University is not an industrial establishment in the sense that an industrial
establishment is one that is engaged in manufacture or trade where raw materials are
changed or fashioned into finished products for use. But for the purposes of the
Industrial Peace Act the University is an industrial establishment because it is
operated for profit and it employs persons who work to earn a living. The term
"industry", for the purposes of the application of our labor laws should be given a broad

(d) The term "employee" shall include any employee and shall not be
limited to the employee of a particular employer unless the act explicitly
states otherwise and shall include any individual whose work has ceased
as a consequence of, or in connection with, any current labor dispute or
because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use
of the term "include", complementary. It embraces not only those who are usually and
ordinarily considered employees, but also those who have ceased as employees as a
consequence of a labor dispute. The term "employee", furthermore, is not limited to
those of a particular employer. As already stated, this Court in the cases of The Angat
River Irrigation System, et al. v. Angat River Workers' Union (PLUM), et al., supra, has
defined the term "employer" as "one who employs the services of others; one for
whom employees work and who pays their wages or salaries. "Correlatively, an
employee must be one who is engaged in the service of another; who performs
services for another; who works for salary or wages. It is admitted by the University
that the striking professors and/or instructors are under contract to teach particular
courses and that they are paid for their services. They are, therefore, employees of the
University.
In support of its claim that the members of the Faculty Club are not employees of the
University, the latter cites as authority Francisco's Labor Laws, 2nd ed., p. 3, which
states:
While the term "workers" as used in a particular statute, has been
regarded as limited to those performing physical labor, it has been held to
embrace stenographers and bookkeepers. Teachers are not included,
however.
It is evident from the above-quoted authority that "teachers" are not to be included
among those who perform "physical labor", but it does not mean that they are not
employees. We have checked the source of the authority, which is 31 Am. Jur., Sec. 3,
p. 835, and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas
1917 D 676. A reading of the last case confirms Our view.
That teachers are "employees' has been held in a number of cases (Aebli v. Board of
Education of City and County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706;
Lowe & Campbell Sporting Goods Co. v. Tangipahoa Parish School Board, La. App.,
15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195
Minn. 357, cited in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This
Court in the Far Eastern University case, supra, considered university instructors as
employees and declared Republic Act No. 875 applicable to them in their employment
relations with their school. The professors and/or instructors of the University neither
ceased to be employees when they struck, for Section 2 of Rep. Act 875 includes
among employees any individual whose work has ceased as consequence of, or in
connection with a current labor dispute. Striking employees maintain their status as
employees of the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F2d 855,
858).
The contention of the University that the professors and/or instructors are independent
contractors, because the University does not exercise control over their work, is
likewise untenable. This Court takes judicial notice that a university controls the work
of the members of its faculty; that a university prescribes the courses or subjects that
professors teach, and when and where to teach; that the professors' work is
characterized by regularity and continuity for a fixed duration; that professors are

compensated for their services by wages and salaries, rather than by profits; that the
professors and/or instructors cannot substitute others to do their work without the
consent of the university; and that the professors can be laid off if their work is found
not satisfactory. All these indicate that the university has control over their work; and
professors are, therefore, employees and not independent contractors. There are
authorities in support of this view.
The principal consideration in determining whether a workman is an
employee or an independent contractor is the right to control the manner
of doing the work, and it is not the actual exercise of the right by
interfering with the work, but the right to control, which constitutes the test.
(Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259, 261, 300
Ill. 487, quoted in Words and Phrases, Permanent ed., Vol. 14, p. 576).
Where, under Employers' Liability Act, A was instructed when and where
to work . . . he is an employee, and not a contractor, though paid specified
sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in
Words and Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by
wages rather than by profits. (People vs. Distributors Division, Smoked
Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in
Words and Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a
contractor, are usually characterized by regularity and continuity of work
for a fixed period or one of indefinite duration, as contrasted with
employment to do a single act or a series of isolated acts; by
compensation on a fixed salary rather than one regulated by value or
amount of work; . . . (Underwood v. Commissioner of Internal Revenue,
C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish
contemplated result without consent of contractee, while "employee"
cannot substitute another in his place without consent of his employer.
(Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82
Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent contractors, still
they would be covered by Rep. Act No. 875. In the case of the Boy Scouts of the
Philippines v. Juliana Araos, supra, this Court observed that Republic Act No. 875 was
modelled after the Wagner Act, or the National Labor Relations Act, of the United
States, and this Act did not exclude "independent contractors" from the orbit of
"employees". It was in the subsequent legislation the Labor Management Relation
Act (Taft-Harley
Act) that "independent contractors" together with agricultural laborers, individuals in
domestic service of the home, supervisors, and others were excluded. (See
Rothenberg on Labor Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees, it follows
that they have a right to unionize in accordance with the provisions of Section 3 of the
Magna Carta of Labor (Republic Act No. 875) which provides as follows:
Sec. 3. Employees' right to self-organization.Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and other mutual aid or
protection. . . .
We agree with the statement of the lower court, in its order of March 30, 1963 which is
sought to be set aside in the instant case, that the right of employees to selforganization is guaranteed by the Constitution, that said right would exist even if
Republic Act No. 875 is repealed, and that regardless of whether their employers are
engaged in commerce or not. Indeed, it is Our considered view that the members of
the faculty or teaching staff of private universities, colleges, and schools in the
Philippines, regardless of whether the university, college or school is run for profit or
not, are included in the term "employees" as contemplated in Republic Act No. 875
and as such they may organize themselves pursuant to the above-quoted provision of
Section 3 of said Act. Certainly, professors, instructors or teachers of private
educational institutions who teach to earn a living are entitled to the protection of our
labor laws and one such law is Republic Act No. 875.

The contention of the University in the instant case that the members of the Faculty
Club can not unionize and the Faculty Club can not exist as a valid labor organization
is, therefore, without merit. The record shows that the Faculty Club is a duly registered
labor organization and this fact is admitted by counsel for the University.5a
The other issue raised by the University is the validity of the Presidential certification.
The University contends that under Section 10 of Republic Act No. 875 the power of
the President of the Philippines to certify is subject to the following conditions, namely:
(1) that here is a labor dispute, and (2) that said labor dispute exists in an industry that
is vital to the national interest. The University maintains that those conditions do not
obtain in the instant case. This contention has also no merit.
We have previously stated that the University is an establishment or enterprise that is
included in the term "industry" and is covered by the provisions of Republic Act No.
875. Now, was there a labor dispute between the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms,
tenure or conditions of employment, or concerning the association or
representation of persons in negotiating, fixing, maintaining, changing, or
seeking to arrange terms or conditions of employment regardless of
whether the disputants stand in proximate relation of employer and
employees.
The test of whether a controversy comes within the definition of "labor dispute"
depends on whether the controversy involves or concerns "terms, tenure or condition
of employment" or "representation." It is admitted by the University, in the instant case,
that on January 14, 1963 the President of the Faculty Club wrote to the President of
the University a letter informing the latter of the organization of the Faculty Club as a
labor union, duly registered with the Bureau of Labor Relations; that again on January
22, 1963 another letter was sent, to which was attached a list of demands consisting of
26 items, and asking the President of the University to answer within ten days from
date of receipt thereof; that the University questioned the right of the Faculty Club to
be the exclusive representative of the majority of the employees and asked proof that
the Faculty Club had been designated or selected as exclusive representative by the
vote of the majority of said employees; that on February 1, 1963 the Faculty Club filed
with the Bureau of Labor Relations a notice of strike alleging as reason therefor the
refusal of the University to bargain collectively with the representative of the faculty
members; that on February 18, 1963 the members of the Faculty Club went on strike
and established picket lines in the premises of the University, thereby disrupting the
schedule of classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP
for unfair labor practice against the University, but which was later dismissed (on April
2, 1963 after Case 41-IPA was certified to the CIR); and that on March 7, 1963 a
petition for certification election, Case No. 1183-MC, was filed by the Faculty Club in
the CIR.6 All these admitted facts show that the controversy between the University
and the Faculty Club involved terms and conditions of employment, and the question
of representation. Hence, there was a labor dispute between the University and the
Faculty Club, as contemplated by Republic Act No. 875. It having been shown that the
University is an institution operated for profit, that is an employer, and that there is an
employer-employee relationship, between the University and the members of the
Faculty Club, and it having been shown that a labor dispute existed between the
University and the Faculty Club, the contention of the University, that the certification
made by the President is not only not authorized by Section 10 of Republic Act 875 but
is violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a labor
dispute in an industry indispensable to the national interest and when
such labor dispute is certified by the President to the Court of Industrial
Relations, said Court may cause to be issued a restraining order
forbidding the employees to strike or the employer to lockout the
employees, and if no other solution to the dispute is found, the Court may
issue an order fixing the terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted provision of
Section 10 of Republic Act No. 875. In the case of Pampanga Sugar Development Co.
v. CIR, et al., G.R. No. L-13178, March 24, 1961, it was held:
It thus appears that when in the opinion of the President a labor dispute
exists in an industry indispensable to national interest and he certifies it to
the Court of Industrial Relations the latter acquires jurisdiction to act

thereon in the manner provided by law. Thus the court may take either of
the following courses: it may issue an order forbidding the employees to
strike or the employer to lockout its employees, or, failing in this, it may
issue an order fixing the terms and conditions of employment. It has no
other alternative. It can not throw the case out in the assumption that the
certification was erroneous.
xxx

xxx

xxx

. . . The fact, however, is that because of the strike declared by the


members of the minority union which threatens a major industry the
President deemed it wise to certify the controversy to the Court of
Industrial Relations for adjudication. This is the power that the law gives to
the President the propriety of its exercise being a matter that only
devolves upon him. The same is not the concern of the industrial court.
What matters is that by virtue of the certification made by the President
the case was placed under the jurisdiction of said court. (Emphasis
supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law,
and this Court will not interfere in, much less curtail, the exercise of that prerogative.
The jurisdiction of the CIR in a certified case is exclusive (Rizal Cement Co., Inc. v.
Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747, July 30, 1960). Once
the jurisdiction is acquired pursuant to the presidential certification, the CIR may
exercise its broad powers as provided in Commonwealth Act 103. All phases of the
labor dispute and the employer-employee relationship may be threshed out before the
CIR, and the CIR may issue such order or orders as may be necessary to make
effective the exercise of its jurisdiction. The parties involved in the case may appeal to
the Supreme Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the
University "has some 18,000 students and employed approximately 500 faculty
members", that `the continued disruption in the operation of the University will
necessarily prejudice the thousand of students", and that "the dispute affects the
national interest",7and certified the dispute to the CIR, it is not for the CIR nor this
Court to pass upon the correctness of the reasons of the President in certifying the
labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality of the
return-to-work order (of March 30, 1963 in Case 41-IPA) and the order implementing
the same (of April 6, 1963). It alleges that the orders are illegal upon the grounds: (1)
that Republic Act No. 875, supplementing Commonwealth Act No. 103, has withdrawn
from the CIR the power to issue a return-to-work order; (2) that the only power granted
by Section 10 of Republic Act No. 875 to the CIR is to issue an order forbidding the
employees to strike or forbidding the employer to lockout the employees, as the case
may be, before either contingency had become a fait accompli; (3) that the taking in by
the University of replacement professors was valid, and the return-to-work order of
March 30, 1963 constituted impairment of the obligation of contracts; and (4) the CIR
could not issue said order without having previously determined the legality or illegality
of the strike.
The contention of the University that Republic Act No. 875 has withdrawn the power of
the Court of Industrial Relations to issue a return-to-work order exercised by it under
Commonwealth Act No. 103 can not be sustained. When a case is certified by the
President to the Court of Industrial Relations, the case thereby comes under the
operation of Commonwealth Act No. 103, and the Court may exercise the broad
powers and jurisdiction granted to it by said Act. Section 10 of Republic Act No. 875
empowers the Court of Industrial Relations to issue an order "fixing the terms of
employment." This clause is broad enough to authorize the Court to order the strikers
to return to work and the employer to readmit them. This Court, in the cases of
the Philippine Marine Officers Association vs. The Court of Industrial Relations,
Compania Maritima, et al.; and Compaia Martima, et al. vs. Philippine Marine Radio
Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31,
1957, declared:
We cannot subscribe to the above contention. We agree with counsel for
the Philippine Radio Officers' Association that upon certification by the
President under Section 10 of Republic Act 875, the case comes under
the operation of Commonwealth Act 103, which enforces compulsory
arbitration in cases of labor disputes in industries indispensable to the
national interest when the President certifies the case to the Court of
Industrial Relations. The evident intention of the law is to empower the
Court of Industrial Relations to act in such cases, not only in the manner
prescribed under Commonwealth Act 103, but with the same broad

powers and jurisdiction granted by that act. If the Court of Industrial


Relations is granted authority to find a solution to an industrial dispute and
such solution consists in the ordering of employees to return back to work,
it cannot be contended that the Court of Industrial Relations does not have
the power or jurisdiction to carry that solution into effect. And of what use
is its power of conciliation and arbitration if it does not have the power and
jurisdiction to carry into effect the solution it has adopted? Lastly, if the
said court has the power to fix the terms and conditions of employment, it
certainly can order the return of the workers with or without backpay as a
term or condition of employment.
The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR,
et al., G.R. No. L-13364, July 26, 1960.
When a case is certified to the CIR by the President of the Philippines pursuant to
Section 10 of Republic Act No. 875, the CIR is granted authority to find a solution to
the industrial dispute; and the solution which the CIR has found under the authority of
the presidential certification and conformable thereto cannot be questioned (Radio
Operators Association of the Philippines vs. Philippine Marine Radio Officers
Association, et al., L-10112, Nov. 29, 1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a return-to-work
order after strike has been declared, it being contended that under Section 10 of
Republic Act No. 875 the CIR can only prevent a strike or a lockout when either of
this situation had not yet occurred. But in the case of Bisaya Land Transportation Co.,
Inc. vs. Court of Industrial Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518,
this Court declared:
There is no reason or ground for the contention that Presidential
certification of labor dispute to the CIR is limited to the prevention of
strikes and lockouts. Even after a strike has been declared where the
President believes that public interest demands arbitration and
conciliation, the President may certify the ease for that purpose. The
practice has been for the Court of Industrial Relations to order the strikers
to work, pending the determination of the union demands that impelled the
strike. There is nothing in the law to indicate that this practice is
abolished." (Emphasis supplied)
Likewise untenable is the contention of the University that the taking in by it of
replacements was valid and the return-to-work order would be an impairment of its
contract with the replacements. As stated by the CIR in its order of March 30, 1963, it
was agreed before the hearing of Case 41-IPA on March 23, 1963 that the strikers
would return to work under the status quo arrangement and the University would
readmit them, and the return-to-work order was a confirmation of that agreement. This
is a declaration of fact by the CIR which we cannot disregard. The faculty members, by
striking, have not abandoned their employment but, rather, they have only ceased
from their labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty
members have not lost their right to go back to their positions, because the declaration
of a strike is not a renunciation of their employment and their employee relationship
with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The
employment of replacements was not authorized by the CIR. At most, that was a
temporary expedient resorted to by the University, which was subject to the power of
the CIR to allow to continue or not. The employment of replacements by the University
prior to the issuance of the order of March 30, 1963 did not vest in the replacements a
permanent right to the positions they held. Neither could such temporary employment
bind the University to retain permanently the replacements.
Striking employees maintained their status as employees of the employer
(Western Castridge Co. v. National Labor Relations Board, C.C.A. 139 F.
2d 855, 858) ; that employees who took the place of strikers do not
displace them as `employees." ' (National Labor Relations Board v. A.
Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)
It is clear from what has been said that the return-to-work order cannot be considered
as an impairment of the contract entered into by petitioner with the replacements.
Besides, labor contracts must yield to the common good and such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and similar
subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of Industrial
Relations could not issue the return-to-work order without having resolved previously
the issue of the legality or illegality of the strike, citing as authority therefor the case
of Philippine Can Company v. Court of Industrial Relations, G.R. No. L-3021, July 13,
1950. The ruling in said case is not applicable to the case at bar, the facts and

circumstances being very different. The Philippine Can Company case, unlike the
instant case, did not involve the national interest and it was not certified by the
President. In that case the company no longer needed the services of the strikers, nor
did it need substitutes for the strikers, because the company was losing, and it was
imperative that it lay off such laborers as were not necessary for its operation in order
to save the company from bankruptcy. This was the reason of this Court in ruling, in
that case, that the legality or illegality of the strike should have been decided first
before the issuance of the return-to-work order. The University, in the case before Us,
does not claim that it no longer needs the services of professors and/or instructors;
neither does it claim that it was imperative for it to lay off the striking professors and
instructors because of impending bankruptcy. On the contrary, it was imperative for the
University to hire replacements for the strikers. Therefore, the ruling in the Philippine
Can case that the legality of the strike should be decided first before the issuance of
the return-to-work order does not apply to the case at bar. Besides, as We have
adverted to, the return-to-work order of March 30, 1963, now in question, was a
confirmation of an agreement between the University and the Faculty Club during a
prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of the
members of the Faculty Club to return to their work, as their individual contracts for
teaching had expired on March 25 or 31, 1963, as the case may be, and consequently,
there was also no basis for the return-to-work order of the CIR because the contractual
relationships having ceased there were no positions to which the members of the
Faculty Club could return to. This contention is not well taken. This argument loses
sight of the fact that when the professors and instructors struck on February 18, 1963,
they continued to be employees of the University for the purposes of the labor
controversy notwithstanding the subsequent termination of their teaching contracts, for
Section 2(d) of the Industrial Peace Act includes among employees "any individual
whose work has ceased a consequence of, or in connection with, any current labor
dispute or of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment."
The question raised by the University was resolved in a similar case in the United
States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read:
On May 9, 1939 the striking employees, eighty-four in number, offered to
the company to return to their employment. The company believing it had
not committed any unfair labor practice, refused the employees' offer and
claimed the right to employ others to take the place of the strikers, as it
might see fit. This constituted discrimination in the hiring and tenure of the
striking employees. When the employees went out on a strike because of
the unfair labor practice of the company, their status as employees for the
purpose of any controversy growing out of that unfair labor practice was
fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor
Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R.
1217.
For the purpose of such controversy they remained employees of the
company. The company contended that they could not be their employees
in any event since the "contract of their employment expired by its own
terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just
pointed out, that the status of the employees on strike became fixed under
Sec. 2 (3) of the Act because of the unfair labor practice of the company
which caused the strike.
The University, furthermore, claims that the information for indirect contempt filed
against the officers of the University (Case No. V-30) as well as the order of April 29,
1963 for their arrest were improper, irregular and illegal because (1) the officers of the
University had complied in good faith with the return-to-work order and in those cases
that they did not, it was due to circumstance beyond their control; (2) the return-towork order and the order implementing the same were illegal; and (3) even assuming
that the order was legal, the same was not Yet final because there was a motion to
reconsider it.
Again We find no merit in this claim of Petitioner. We have already ruled that the CIR
had jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the
return-to-work provision of that order is valid and legal. Necessarily the order of April 6,
1963 implementing that order of March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of
any Judge thereof to punish direct and indirect contempts as provided in Rule 64 (now
Rule 71) of the Rules of Court, under the same procedure and penalties provided

therein. Section 3 of Rule 71 enumerates the acts which would constitute indirect
contempt, among which is "disobedience or resistance to lawful writ, process, order,
judgment, or command of a court," and the person guilty thereof can be punished after
a written charge has been filed and the accused has been given an opportunity to be
heard. The last paragraph of said section provides:
But nothing in this section shall be so construed as to prevent the court
from issuing process to bring the accused party into court, or from holding
him in custody pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged contemner
(Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this,
apparently, is the provision upon which respondent Judge Bautista relied when he
issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted. The
return-to-work order allegedly violated was within the court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought before the
Court of Industrial Relations under Section 4 of the Act (referring to strikes and
lockouts) the appeal to the Supreme Court from any award, order or decision shall not
stay the execution of said award, order or decision sought to be reviewed unless for
special reason the court shall order that execution be stayed. Any award, order or
decision that is appealed is necessarily not final. Yet under Section 14 of
Commonwealth Act No. 103 that award, order or decision, even if not yet final, is
executory, and the stay of execution is discretionary with the Court of Industrial
Relations. In other words, the Court of Industrial Relations, in cases involving strikes
and lockouts, may compel compliance or obedience of its award, order or decision
even if the award, order or decision is not yet final because it is appealed, and it
follows that any disobedience or non-compliance of the award, order or decision would
constitute contempt against the Court of Industrial Relations which the court may
punish as provided in the Rules of Court. This power of the Court of Industrial
Relations to punish for contempt an act of non-compliance or disobedience of an
award, order or decision, even if not yet final, is a special one and is exercised only in
cases involving strikes and lockouts. And there is reason for this special power of the
industrial court because in the exercise of its jurisdiction over cases involving strikes
and lockouts the court has to issue orders or make decisions that are necessary to
effect a prompt solution of the labor dispute that caused the strike or the lockout, or to
effect the prompt creation of a situation that would be most beneficial to the
management and the employees, and also to the public even if the solution may be
temporary, pending the final determination of the case. Otherwise, if the effectiveness
of any order, award, or decision of the industrial court in cases involving strikes and
lockouts would be suspended pending appeal then it can happen that the coercive
powers of the industrial court in the settlement of the labor disputes in those cases
would be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which provides that
"Any violation of any order, award, or decision of the Court of Industrial Relations shall
after such order, award or decision has become final, conclusive
and executory constitute contempt of court," and contends that only the disobedience
of orders that are final (meaning one that is not appealed) may be the subject of
contempt proceedings. We believe that there is no inconsistency between the abovequoted provision of Section 6 and the provision of Section 14 of Commonwealth Act
No. 103. It will be noted that Section 6 speaks of order, award or decision that
is executory. By the provision of Section 14 an order, award or decision of the Court of
Industrial Relations in cases involving strikes and lockouts are immediately executory,
so that a violation of that order would constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is
also authorized under Section 19 of Commonwealth Act No. 103 which provides as
follows:
SEC. 19. Implied condition in every contract of employment.In every
contract of employment whether verbal or written, it is an implied condition
that when any dispute between the employer and the employee or laborer
has been submitted to the Court of Industrial Relations for settlement or
arbitration pursuant to the provisions of this Act . . . and pending award, or
decision by the Court of such dispute . . . the employee or laborer shall not
strike or walk out of his employment when so enjoined by the Court after
hearing and when public interest so requires, and if he has already done
so, that he shall forthwith return to it, upon order of the Court, which shall
be issued only after hearing when public interest so requires or when the
dispute cannot, in its opinion, be promptly decided or settled; and if the
employees or laborers fail to return to work, the Court may authorize the

employer to accept other employees or laborers. A condition shall further


be implied that while such dispute . . . is pending, the employer shall
refrain from accepting other employees or laborers, unless with the
express authority of the Court, and shall permit the continuation in the
service of his employees or laborers under the last terms and conditions
existing before the dispute arose. . . . A violation by the employer or by the
employee or laborer of such an order or the implied contractual condition
set forth in this section shall constitute contempt of the Court of Industrial
Relations and shall be punished by the Court itself in the same manner
with the same penalties as in the case of contempt of a Court of First
Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest of the
officers of the University upon a complaint for indirect contempt filed by the Acting
Special Prosecutor of the CIR in CIR Case V-30, and that order was valid. Besides
those ordered arrested were not yet being punished for contempt; but, having been
charged, they were simply ordered arrested to be brought before the Judge to be dealt
with according to law. Whether they are guilty of the charge or not is yet to be
determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being
questioned in Case G.R. No. L-21278 before this Court in a special civil action
for certiorari. The University did not appeal from that order. In other words, the only
question to be resolved in connection with that order in CIR Case V-30 is whether the
CIR had jurisdiction, or had abused its discretion, in issuing that order. We hold that
the CIR had jurisdiction to issue that order, and neither did it abuse its discretion when
it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva
of the CIR in Case No. 1183-MC, dated April 6, 1963, granting the motion of the
Faculty Club to withdraw its petition for certification election, and from the resolution of
the CIR en banc, dated June 5, 1963, denying the motion to reconsider said order of
April 6, 1963. The ground of the Faculty Club in asking for the withdrawal of that
petition for certification election was because the issues involved in that petition were
absorbed by the issues in Case 41-IPA. The University opposed the petition for
withdrawal, but at the same time it moved for the dismissal of the petition for
certification election.
It is contended by the University before this Court, in G.R. L-21462, that the issues of
employer-employee relationship between the University and the Faculty Club, the
alleged status of the Faculty Club as a labor union, its majority representation and
designation as bargaining representative in an appropriate unit of the Faculty Club
should have been resolved first in Case No. 1183-MC prior to the determination of the
issues in Case No. 41-IPA, and, therefore, the motion to withdraw the petition for
certification election should not have been granted upon the ground that the issues in
the first case were absorbed in the second case.
We believe that these contentions of the University in Case G.R. No. L-21462 have
been sufficiently covered by the discussion in this decision of the main issues raised in
the principal case, which is Case G.R. No. L-21278. After all, the University wanted
CIR Case 1183-MC dismissed, and the withdrawal of the petition for certification
election had in a way produced the situation desired by the University. After
considering the arguments adduced by the University in support of its petition
for certiorari by way of appeal in Case G.R. No. L-21278, We hold that the CIR did not
commit any error when it granted the withdrawal of the petition for certification election
in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all
the questions relating to the labor disputes between the University and the Faculty
Club may be threshed out, and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR of March
30, 1963, issued by Judge Bautista, and from the resolution of the CIR en
banc promulgated on June 28, 1963, denying the motion for the reconsideration of that
order of March 30, 1963, in CIR Case No. 41-IPA. We have already ruled that the CIR
has jurisdiction to issue that order of March 30, 1963, and that order is valid, and We,
therefore, hold that the CIR did not err in issuing that order of March 30, 1963 and in
issuing the resolution promulgated on June 28, 1963 (although dated May 7, 1963)
denying the motion to reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with
preliminary injunction in Case G.R. No. L-21278 is dismissed and the writs prayed for
therein are denied. The writ of preliminary injunction issued in Case G.R. No. L-21278
is dissolved. The orders and resolutions appealed from, in Cases Nos. L-21462 and L21500, are affirmed, with costs in these three cases against the petitioner-appellant
Feati University. It is so ordered.

Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro,
JJ., concur.
Reyes, J.B.L., J., concurs but reserves his vote on the teacher's right to strike.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21212

September 23, 1966

CITIZENS' LEAGUE OF FREEWORKERS AND/OR BALBINO EPIS, NICOLAS


ROJO, ET AL., petitioners,
vs.
HON. MACAPANTON ABBAS, Judge of the Court of First Instance of Davao and
TEOFILO GERONIMO and EMERITA MENDEZ, respondents.
Carlos Dominguez, Jr. for petitioners.
C. S. Nitorreda for respondents.
DIZON, J.:
Petition for certiorari with a prayer for the issuance of a writ of preliminary injunction
filed by the Citizens' League of Freeworkers, a legitimate labor organization,
hereinafter referred to as the Union and its members against the spouses Teofilo
Geronimo and Emerita Mendez, and the Hon. Macapanton Abbas, as judge of the
Court of First Instance of Davao. Its purpose is to set aside the writ of preliminary
injunction issued by the latter in Civil Case No. 3966 and restrain him from proceeding
with the case, on the ground that the controversy involves a labor dispute and is,
therefore, within the exclusive jurisdiction of the Court of Industrial Relations.
It appears that on March 11, 1963, respondents-spouses owners and operators of
auto-calesas in Davao City, filed a complaint with the Court of First Instance of Davao
(Civil Case No. 3966) to restrain the Union and its members, who were drivers of the
spouses in said business, from interfering with its operation, from committing certain
acts complained of in connection therewith, and to recover damages. The complaint
alleged that the defendants named therein used to lease the auto-calesas of the
spouses on a daily rental basis; that, unable to get the spouses to recognize said
defendants as employees instead of lessees and to bargain with it on that basis, the
Union declared a strike on February 20, 1963 and since then had paralyzed plaintiffs'
business operations through threats, intimidation and violence. The complaint also
prayed for the issuance of a writ of preliminary injunction ex-parte restraining
defendants therein from committing said acts of violence and intimidation during the
pendency of the case.
On March 11, 1963 the respondent judge granted the writ prayed for, while deferring
action on petitioners' motion to dissolve said writ to March 20 of the same year.
Meanwhile, on March 12, 1963, petitioners filed a complaint for unfair labor practice
against the respondents-spouses with the Court of Industrial Relations on the ground,
among others, of the latter's refusal to bargain with them. 1awphl.nt
On March 18, 1963, petitioners filed a motion to declare the writ of preliminary
injunction void on the ground that the same had expired by virtue of Section 9 (d) of
Republic Act 875. In his order of March 21, 1963, however, the respondent judge
denied said motion on the ground that there was no employer-employee relationship
between respondents-spouses and the individual petitioners herein and that,
consequently, the Rules of Court and not Republic Act No. 875 applied to the matter of
injunction. Thereupon the petition under consideration was filed.
In the case of Isabelo Doce vs. Workmen's Compensation Commission, et al. (G.R.
No. L-9417, December 22, 1958), upon a similar if not an altogether identical set of
facts, We held:
This case falls squarely within our ruling in National Labor Union v.
Dinglasan, 52 O.G., No. 4, 1933, wherein this Court held that a driver of a
jeep who operates the same under the boundary system is considered an
employee within the meaning of the law and as such the case comes
under the jurisdiction of the Court of Industrial Relations. In that case,

Benedicto Dinglasan was the owner and operator of TPU jeepneys which
were driven by petitioner under verbal contracts that they will pay P7.50
for 10 hours use under the so called "boundary system." The drivers did
not receive salaries or wages from the owner. Their day's earnings were
the excess over the P7.50 they paid for the use of the jeepneys. In the
event that they did not earn more, the owner did not have to pay them
anything. In holding that the employer-employee relationship existed
between the owner of the jeepneys and the drivers even if the latter
worked under the boundary system, this Court said:
"The only features that would make the relationship of lessor
and lessee between the respondent, owner of the jeeps, and
the drivers, members of the petitioner union, are the fact that
he does not pay them any fixed wage but their compensation
is the excess of the total amount of fares earned or collected
by them over and above the amount of P7.50 which they
agreed to pay to the respondent, and the fact that the
gasoline burned by the jeeps is for the account of the drivers.
These two features are not, however, sufficient to withdraw
the relationship, between them from that of employeremployee, because the estimated earnings for fares must be
over and above the amount they agreed to pay to the
respondent for a ten-hour shift or ten-hour a day operation of
the jeeps. Not having any interest in the business because
they did not invest anything in the acquisition of the jeeps and
did not participate in the management thereof, their service as
drivers of the jeeps being their only contribution to the
business, the relationship of lessor and lessee cannot be
sustained."
Even assuming, arguendo, that the respondent court had jurisdiction to issue the
abovementioned writ of preliminary injunction in Civil Case No. 3966 at the time it was
issued, We are of the opinion, and so hold, that it erred in denying petitioners' motion
to set aside said writ upon expiration of the period of thirty days from its issuance,
upon the wrong ground that there was no labor dispute between the parties and that,
therefore, the provisions of Republic Act No. 875 did not apply to the case. As stated
heretofore, there was a labor dispute between the parties from the beginning.
Moreover, upon the filing of the unfair labor practice case on March 12, 1963, the
Court of Industrial Relations acquired complete jurisdiction over the labor dispute and
the least that could be done in Civil Case No. 3966 is either to dismiss it or suspend
proceedings therein until the final resolution of the former.
Wherefore, judgment is hereby rendered setting aside the writ of preliminary injunction
issued by the respondent judge in Civil Case No. 3966 of the Court of First Instance of
Davao, with costs.

CALLEJO, SR., J.:


Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of
Court assailing the Decision[1] and Resolution[2] of the Court of Appeals (CA) in CAG.R. SP No. 78720 which set aside the Resolution [3] of the National Labor Relations
Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision[4] of
the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole
proprietorship engaged in assembling passenger jeepneys with a public utility
franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped
assembling jeepneys and retained only nine, four of which he operated by employing
drivers on a boundary basis. One of those drivers was respondent Bustamante who
drove the jeepney with Plate No. PVU-660. Bustamante remittedP450.00 a day to
Villamaria as boundary and kept the residue of his daily earnings as compensation for
driving the vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to
Bustamante under the boundary-hulog scheme, where Bustamante would remit to
Villarama P550.00 a day for a period of four years; Bustamante would then become
the owner of the vehicle and continue to drive the same under Villamarias franchise. It
was also agreed that Bustamante would make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled Kasunduan ng
Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog[5] over the passenger
jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL26647. The parties agreed that if Bustamante failed to pay the boundary-hulogfor three
days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears,
including a penalty of P50.00 a day; in case Bustamante failed to remit the daily
boundary-hulog for a period of one week, the Kasunduan would cease to have legal
effect and Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle
without prior authority from Villamaria Motors. Thus, Bustamante was authorized to
operate the vehicle to transport passengers only and not for other purposes. He was
also required to display an identification card in front of the windshield of the vehicle; in
case of failure to do so, any fine that may be imposed by government authorities would
be charged against his account. Bustamante further obliged himself to pay for the cost
of replacing any parts of the vehicle that would be lost or damaged due to his
negligence. In case the vehicle sustained serious damage, Bustamante was obliged to
notify Villamaria Motors before commencing repairs. Bustamante was not allowed to
wear slippers, short pants or undershirts while driving. He was required to be polite
and respectful towards the passengers. He was also obliged to notify Villamaria
Motors in case the vehicle was leased for two or more days and was required to attend
any meetings which may be called from time to time. Aside from the boundary-hulog,
Bustamante was also obliged to pay for the annual registration fees of the vehicle and
the premium for the vehicles comprehensive insurance. Bustamante promised to
strictly comply with the rules and regulations imposed by Villamaria for the upkeep and
maintenance of the jeepney.

Concepcion, C.J., Reyes, J.B.L., Barrera, Makalintal, Bengzon, J.P., Zaldivar, Sanchez
and Castro, JJ., concur.
Regala, J., took no part.

Bustamante continued driving the jeepney under the supervision and control of
Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of the
purchase price of the vehicle. Bustamante failed to pay for the annual registration fees
of the vehicle, but Villamaria allowed him to continue driving the jeepney.

FIRST DIVISION

In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective boundary-hulog. This
prompted Villamaria to serve a Paalala,[6] reminding them that under the Kasunduan,
failure to pay the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned the drivers that
the Kasunduan would henceforth be strictly enforced and urged them to comply with
their obligation to avoid litigation.

OSCAR VILLAMARIA, JR. G.R. No. 165881


Petitioner,
Present:
PANGANIBAN, C.J.,
Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ.
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante
and barred the latter from driving the vehicle.

COURT OF APPEALS and Promulgated:


JERRY V. BUSTAMANTE,
Respondents. April 19, 2006
x-----------------------------------------------------------------------------------------x
DECISION

On August 15, 2000, Bustamante filed a Complaint[7] for Illegal Dismissal


against Villamaria and his wife Teresita. In his Position Paper,[8] Bustamante alleged
that he was employed by Villamaria in July 1996 under the boundary system, where
he was required to remit P450.00 a day. After one year of continuously working for
them, the spouses Villamaria presented the Kasunduan for his signature, with the
assurance that he (Bustamante) would own the jeepney by March 2001 after
paying P550.00 in daily installments and that he would thereafter continue driving the
vehicle along the same route under the same franchise. He further narrated that in
July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney
needed to be replaced, and was assured that it would be done.However, he was later
arrested and his drivers license was confiscated because apparently, the replacement
engine that was installed was taken from a stolen vehicle.Due to negotiations with the

apprehending authorities, the jeepney was not impounded. The Villamaria spouses
took the jeepney from him on July 24, 2000, and he was no longer allowed to drive the
vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is
most respectfully prayed that judgment be rendered ordering
the respondents, jointly and severally, the following:
1. Reinstate complainant to his former position
without loss of seniority rights and execute a Deed of Sale in
favor of the complainant relative to the PUJ with Plate No.
PVU-660;
2. Ordering the respondents to pay backwages in
the amount of P400.00 a day and other benefits computed
from July 24, 2000 up to the time of his actual reinstatement;
3. Ordering respondents to return the amount
of P10,000.00 and P180,000.00 for the expenses incurred by
the complainant in the repair and maintenance of the subject
jeep;
4. Ordering the respondents to refund the
amount of One Hundred (P100.00) Pesos per day counted
from August 7, 1997 up to June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not
less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the
monetary award.
Other just and equitable reliefs under the
premises are also being prayed for.[9]
In their Position Paper,[10] the spouses Villamaria admitted the existence of
the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00
downpayment and the vehicles annual registration fees. They further alleged that
Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a day,
which prompted them to issue the Paalaala. Instead of complying with his obligations,
Bustamante stopped making his remittances despite his daily trips and even brought
the jeepney to the province without permission. Worse, the jeepney figured in an
accident and its license plate was confiscated; Bustamante even abandoned the
vehicle in a gasoline station in Sucat, Paraaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved and Teresita
Villamaria asked Bustamante for the keys, Bustamante told her: Di kunin ninyo. When
the vehicle was finally retrieved, the tires were worn, the alternator was gone, and the
battery was no longer working.
Citing the cases of Cathedral School of Technology v.
NLRC[11] and Canlubang Security Agency Corporation v. NLRC,[12] the spouses
Villamaria argued that Bustamante was not illegally dismissed since
the Kasunduan executed on August 7, 1997 transformed the employer-employee
relationship into that of vendor-vendee. Hence, the spouses concluded, there was no
legal basis to hold them liable for illegal dismissal. They prayed that the case be
dismissed for lack of jurisdiction and patent lack of merit.
In his Reply,[13] Bustamante claimed that Villamaria exercised control and
supervision over the conduct of his employment. He maintained that the rulings of the
Court in National Labor Union v. Dinglasan,[14] Magboo v. Bernardo,[15] and Citizen's
League of Free Workers v. Abbas[16] are germane to the issue as they define the
nature of the owner/operator-driver relationship under the boundary system. He further
reiterated that it was the Villamaria spouses who presented theKasunduan to him and
that he conformed thereto only upon their representation that he would own the vehicle
after four years. Moreover, it appeared that the Paalalawas duly received by him, as
he, together with other drivers, was made to affix his signature on a blank piece of
paper purporting to be an attendance sheet.
On March 15, 2002, the Labor Arbiter rendered judgment[17] in favor of the spouses
Villamaria and ordered the complaint dismissed on the following ratiocination:
Respondents presented the contract of
Boundary-Hulog, as well as the PAALALA, to prove their
claim that complainant violated the terms of their contract and
afterwards abandoned the vehicle assigned to him. As

against the foregoing, [the] complaints (sic) mere allegations


to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not
entitled to damages and attorney's fees.[18]
Bustamante appealed the decision to the NLRC,[19] insisting that
the Kasunduan did not extinguish the employer-employee relationship between him
and Villamaria. While he did not receive fixed wages, he kept only the excess of the
boundary-hulog which he was required to remit daily to Villamaria under the
agreement. Bustamante maintained that he remained an employee because he was
engaged to perform activities which were necessary or desirable to Villamarias trade
or business.
The NLRC rendered judgment[20] dismissing the appeal for lack of merit,
thus:
WHEREFORE,
premises
considered,
complainant's appeal is hereby DISMISSED for reasons not
stated in the Labor Arbiter's decision but mainly on a
jurisdictional issue, there being none over the subject matter
of the controversy.[21]
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee, hence, the Labor
Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for
Reconsideration, which the NLRC resolved to deny on May 30, 2003.[22]
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred
IN DISMISSING PETITIONERS APPEAL FOR REASON
NOT STATED IN THE LABOR ARBITERS DECISION, BUT
MAINLY ON JURISDICTIONAL ISSUE;

II
IN DISREGARDING THE LAW AND PREVAILING
JURISPRUDENCE WHEN IT DECLARED THAT THE
RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS
DEFINITELY A MATTER WHICH IS BEYOND THE
PROTECTIVE MANTLE OF OUR LABOR LAWS.[23]
Bustamante insisted that despite the Kasunduan, the relationship between him and
Villamaria continued to be that of employer-employee and as such, the Labor Arbiter
had jurisdiction over his complaint. He further alleged that it is common knowledge that
operators of passenger jeepneys (including taxis) pay their drivers not on a regular
monthly basis but on commission or boundary basis, or even the boundaryhulog system. Bustamante asserted that he was dismissed from employment without
any lawful or just cause and without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of
their employer-employee relationship. He further pointed out that the Dinglasan case
pertains to the boundary system and not the boundary-hulog system, hence
inapplicable in the instant case. He argued that upon the execution of the Kasunduan,
the juridical tie between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and sale of jeepneys and
not in the business of transporting passengers for consideration, Villamaria contended
that the daily fees which Bustmante paid were actually periodic installments for the the
vehicle and were not the same fees as understood in the boundary system. He added
that the boundary-hulog plan was basically a scheme to help the driver-buyer earn
money and eventually pay for the unit in full, and for the owner to profit not from the
daily earnings of the driver-buyer but from the purchase price of the unit
sold. Villamaria further asserted that the apparently restrictive conditions in
the Kasunduan did not mean that the means and method of driver-buyers conduct was
controlled, but were mere ways to preserve the vehicle for the benefit of both parties:
Villamaria would be able to collect the agreed purchase price, while Bustamante would
be assured that the vehicle would still be in good running condition even after four
years. Moreover, the right of vendor to impose certain conditions on the buyer should
be respected until full ownership of the property is vested on the latter. Villamaria
insisted that the parallel circumstances obtaining in Singer Sewing Machine Company
v. Drilon[24] has analogous application to the instant issue.
In its Decision[25] dated August 30, 2004, the CA reversed and set aside
the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE,
THUS, the impugned resolutions of the NLRC must be, as

they are hereby are, REVERSED AND SET ASIDE, and


judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante separation pay computed from the
time of his employment up to the time of termination based on
the prevailing minimum wage at the time of termination; and,
2. Condemning private
respondent Oscar Villamaria, Jr. to
pay petitioner Jerry Bustamante back
wages computed from the time of his
dismissal up to March 2001 based on
the prevailing minimum wage at the
time of his dismissal.
Without Costs.
SO ORDERED.[26]
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamantes complaint. Under the Kasunduan, the relationship between him and
Villamaria was dual: that of vendor-vendee and employer-employee. The CA
ratiocinated that Villamarias exercise of control over Bustamantes conduct in operating
the jeepney is inconsistent with the formers claim that he was not engaged in the
transportation business. There was no evidence that petitioner was allowed to let
some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned in
the Kasunduan, it did not mean that Villamaria could not exercise it. It explained that
the existence of an employment relationship did not depend on how the worker was
paid but on the presence or absence of control over the means and method of the
employees work. In this case, Villamarias directives (to drive carefully, wear an
identification card, don decent attire, park the vehicle in his garage, and to inform him
about provincial trips, etc.) was a means to control the way in which Bustamante was
to go about his work. In view of Villamarias supervision and control as employer, the
fact that the boundary represented installment payments of the purchase price on the
jeepney did not remove the parties employer-employee relationship.
While the appellate court recognized that a weeks default in paying the
boundary-hulog constituted an additional cause for terminating Bustamantes
employment, it held that the latter was illegally dismissed. According to the CA,
assuming that Bustamante failed to make the required payments as claimed by
Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither submitted any
police report to support his claim that the vehicle figured in a mishap nor presented the
affidavit of the gas station guard to substantiate the claim that Bustamante abandoned
the unit.
Villamaria received a copy of the decision on September 8, 2004, and
filed, on September 17, 2004, a motion for reconsideration thereof. The CA denied the
motion in a Resolution[27] dated November 2, 2004, and Villamaria received a copy
thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review
on certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave
abuse of its discretion amounting to excess or lack of jurisdiction in reversing the
decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that
the juridical relationship between him and respondent under the Kasunduan was a
combination of employer-employee and vendor-vendee relationships.The terms and
conditions of the Kasunduan clearly state that he and respondent Bustamante had
entered into a conditional deed of sale over the jeepney; as such, their employeremployee relationship had been transformed into that of vendor-vendee. Petitioner
insists that he had the right to reserve his title on the jeepney until after the purchase
price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate remedy of
petitioner was an appeal via a petition for review on certiorari under Rule 45 of the
Rules of Court and not a special civil action of certiorari under Rule 65. He argues that
petitioner failed to establish that the CA committed grave abuse of its discretion
amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord
with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a devious circumvention
of the Labor Code of the Philippines. Respondent insists that his juridical relationship
with petitioner is that of employer-employee because he was engaged to perform

activities which were necessary or desirable in the usual business of petitioner, his
employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally construed
in his favor; hence, it behooves the Court to resolve the merits of his petition.
We agree with respondents contention that the remedy of petitioner from the CA
decision was to file a petition for review on certiorari under Rule 45 of the Rules of
Court and not the independent action of certiorari under Rule 65. Petitioner had 15
days from receipt of the CA resolution denying his motion for the reconsideration within
which to file the petition under Rule 45.[28] But instead of doing so, he filed a petition
for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend
the running of the 15-day reglementary period; consequently, the CA decision became
final and executory upon the lapse of the reglementary period for appeal. Thus, on this
procedural lapse, the instant petition stands to be dismissed.[29]
It must be stressed that the recourse to a special civil action under Rule 65 of the
Rules of Court is proscribed by the remedy of appeal under Rule 45. As the Court
elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals:[30]
We agree that the remedy of the aggrieved party from a
decision or final resolution of the CA is to file a petition for
review on certiorari under Rule 45 of the Rules of Court, as
amended, on questions of facts or issues of law within fifteen
days from notice of the said resolution. Otherwise, the
decision of the CA shall become final and executory. The
remedy under Rule 45 of the Rules of Court is a mode of
appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A
review is not a matter of right but is a matter of judicial
discretion. The aggrieved party may, however, assail the
decision of the CA via a petition for certiorari under Rule 65 of
the Rules of Court within sixty days from notice of the
decision of the CA or its resolution denying the motion for
reconsideration of the same. This is based on the premise
that in issuing the assailed decision and resolution, the CA
acted with grave abuse of discretion, amounting to excess or
lack of jurisdiction and there is no plain, speedy and adequate
remedy in the ordinary course of law. A remedy is considered
plain, speedy and adequate if it will promptly relieve the
petitioner from the injurious effect of the judgment and the
acts of the lower court.
The aggrieved party is proscribed from filing a petition
for certiorari if appeal is available, for the remedies of appeal
and certiorari are mutually exclusive and not alternative or
successive. The aggrieved party is, likewise, barred from
filing a petition for certiorari if the remedy of appeal is lost
through his negligence. A petition for certiorari is an original
action and does not interrupt the course of the principal case
unless a temporary restraining order or a writ of preliminary
injunction has been issued against the public respondent from
further proceeding. A petition for certiorari must be based on
jurisdictional grounds because, as long as the respondent
court acted within its jurisdiction, any error committed by it will
amount to nothing more than an error of judgment which may
be corrected or reviewed only by appeal.[31]
However, we have also ruled that a petition for certiorari under Rule 65
may be considered as filed under Rule 45, conformably with the principle that rules of
procedure are to be construed liberally, provided that the petition is filed within the
reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid
and compelling circumstances warrant that the petition be resolved on its merits.[32] In
this case, the petition was filed within the reglementary period and petitioner has
raised an issue of substance: whether the existence of a boundary-hulog agreement
negates the employer-employee relationship between the vendor and vendee, and, as
a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof, as
well as, which court or agency of the government has jurisdiction over the same, are
determined by the material allegations of the complaint in relation to the law involved
and the character of the reliefs prayed for, whether or not the complainant/plaintiff is
entitled to any or all of such reliefs.[33] A prayer or demand for relief is not part of the
petition of the cause of action; nor does it enlarge the cause of action stated or change
the legal effect of what is alleged.[34] In determining which body has jurisdiction over a

case, the better policy is to consider not only the status or relationship of the parties
but also the nature of the action that is the subject of their controversy.[35]
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:
x x x (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
violation of Article 264 of this
Code,
including
questions
involving the legality of strikes and
lockouts; and
6. Excepclaims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relationship, including
those of persons in domestic or household service, involving
an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement.

The boundary system is a scheme by an owner/operator engaged in


transporting passengers as a common carrier to primarily govern the compensation of
the driver, that is, the latters daily earnings are remitted to the owner/operator less the
excess of the boundary which represents the drivers compensation. Under this
system, the owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control over the chattel
leased but the lessee is still ultimately responsible for the consequences of its use.
The management of the business is still in the hands of the owner/operator, who,
being the holder of the certificate of public convenience, must see to it that the driver
follows the route prescribed by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations. The fact that the driver does not
receive fixed wages but only the excess of the boundary given to the owner/operator is
not sufficient to change the relationship between them. Indubitably, the driver performs
activities which are usually necessary or desirable in the usual business or trade of the
owner/operator.[46]
Under the Kasunduan, respondent was required to remit P550.00 daily to
petitioner, an amount which represented the boundary of petitioner as well as
respondents partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his
daily wage. Thus, the daily remittances also had a dual purpose: that of petitioners
boundary and respondents partial payment (hulog) for the vehicle. This dual purpose
was expressly stated in the Kasunduan. The well-settled rule is that an obligation is
not novated by an instrument that expressly recognizes the old one, changes only the
terms of payment, and adds other obligations not incompatible with the old provisions
or where the new contract merely supplements the previous one. [47] The two
obligations of the respondent to remit to petitioner the boundary-hulog can stand
together.
In resolving an issue based on contract, this Court must first examine the
contract itself, keeping in mind that when the terms of the agreement are clear and
leave no doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall prevail.[48] The intention of the contracting parties should be
ascertained by looking at the words used to project their intention, that is, all the
words, not just a particular word or two or more words standing alone. The various
stipulations of a contract shall be interpreted together, attributing to the doubtful ones
that sense which may result from all of them taken jointly.[49] The parts and clauses
must be interpreted in relation to one another to give effect to the whole. The legal
effect of a contract is to be determined from the whole read together.[50]

(b) The Commission shall have exclusive


appellate jurisdiction over all cases decided by Labor Arbiters.

Under the Kasunduan, petitioner retained supervision and control over the
conduct of the respondent as driver of the jeepney, thus:

(c) Cases arising from the interpretation or


implementation of collective bargaining agreements, and
those arising from the interpretation or enforcement of
company personnel policies shall be disposed of by the Labor
Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements.

Ang mga patakaran, kaugnay ng bilihang ito sa


pamamagitan ng boundary hulog ay ang mga sumusunod:

In the foregoing cases, an employer-employee relationship is an


indispensable jurisdictional requisite.[36] The jurisdiction of Labor Arbiters and the
NLRC under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be resolved by reference to the Labor
Code, other labor statutes or their collective bargaining agreement.[37] Not every
dispute between an employer and employee involves matters that only the Labor
Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. Actions between employers and employees where the employer-employee
relationship is merely incidental is within the exclusive original jurisdiction of the
regular courts.[38] When the principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case falls within the exclusive jurisdiction of the
Labor Arbiter and the NLRC even though a claim for damages might be asserted as
an incident to such claim.[39]

2. Na ang sasakyan nabanggit ay gagamitin


lamang ng TAUHAN NG IKALAWANG PANIG sa
paghahanapbuhay bilang pampasada o pangangalakal sa
malinis at maayos na pamamaraan.

We agree with the ruling of the CA that, under the boundaryhulog scheme incorporated in the Kasunduan, a dual juridical relationship was created
between petitioner and respondent: that of employer-employee and vendorvendee. The Kasunduan did not extinguish the employer-employee relationship of the
parties extant before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v.
Dinglasan[40] that the jeepney owner/operator-driver relationship under the boundary
system is that of employer-employee and not lessor-lessee. This doctrine was
affirmed, under similar factual settings, in Magboo v. Bernardo[41] and Lantaco, Sr. v.
Llamas,[42] and was analogously applied to govern the relationships between autocalesa owner/operator and driver,[43] bus owner/operator and conductor,[44] and taxi
owner/operator and driver.[45]

1. Pangangalagaan at pag-iingatan ng
TAUHAN NG IKALAWANG PANIG ang sasakyan
ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

3. Na ang sasakyan nabanggit ay hindi


gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga
bagay na makapagdudulot ng kahihiyan, kasiraan o
pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi
awtorisado ng opisina ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG
ay kinakailangang maglagay ng ID Card sa harap ng
windshield upang sa pamamagitan nito ay madaliang
malaman kung ang nagmamaneho ay awtorisado ng
VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG
PANIG ang [halaga ng] multa kung sakaling mahuli ang
sasakyang ito na hindi nakakabit ang ID card sa wastong
lugar o anuman kasalanan o kapabayaan.

7. Na sasagutin din ng TAUHAN NG


IKALAWANG PANIG ang materyales o piyesa na papalitan
ng nasira o nawala ito dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin
ang garahe habang hinuhulugan pa rin ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan
ang sasakyang ipinagkaloob ng TAUHAN NG UNANG
PANIG, ang TAUHAN NG IKALAWANG PANIG ay
obligadong itawag ito muna sa VILLAMARIA MOTORS
bago ipagawa sa alin mang Motor Shop na awtorisado ng
VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG
IKALAWANG PANIG sa panahon ng pamamasada na ang
nagmamaneho ay naka-tsinelas, naka short pants at
nakasando lamang. Dapat ang nagmamaneho ay laging
nasa maayos ang kasuotan upang igalang ng mga
pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG
o ang awtorisado niyang driver ay magpapakita ng
magandang asal sa mga pasaheros at hindi dapat
magsasalita ng masama kung sakali man may pasaherong
pilosopo upang maiwasan ang anumang kaguluhan na
maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng
BOUNDARY HULOG ang TAUHAN NG IKALAWANG
PANIG sa loob ng tatlong (3) araw ay ang opisina ng
VILLAMARIA MOTORS ang may karapatang mangasiwa ng
nasabing sasakyan hanggang matugunan ang lahat
ng responsibilidad. Ang halagang dapat bayaran sa opisina
ay may karagdagang multa ng P50.00 sa araw-araw na ito
ay nasa pangangasiwa ng VILLAMARIA MOTORS.

20. Na ang TAUHAN NG IKALAWANG PANIG


ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan
upang maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG
PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS
mabuti man or masama ay iparating agad ito sa
kinauukulan at iwasan na iparating ito kung [kani-kanino]
lamang upang maiwasan ang anumang usapin. Magsadya
agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay
buong galang at puso kong sinasang-ayunan at buong
sikap na pangangalagaan ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa.[51]
The parties expressly agreed that petitioner, as vendor, and respondent,
as vendee, entered into a contract to sell the jeepney on a daily installment basis
ofP550.00 payable in four years and that petitioner would thereafter become its
owner. A contract is one of conditional sale, oftentimes referred to as contract to sell, if
the
ownership
or
title
over
the
property sold is retained by the vendor, and is not passed to the vendee unless and
until there is full payment of the purchase price and/or upon faithful compliance with
the other terms and conditions that may lawfully be stipulated.[52] Such payment or
satisfaction of other preconditions, as the case may be, is a positive suspensive
condition, the failure of which is not a breach of contract, casual or serious, but simply
an event that would prevent the obligation of the vendor to convey title from acquiring
binding force.[53] Stated differently, the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain
event so that if the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed.[54] The vendor may extrajudicially
terminate the operation of the contract, refuse conveyance, and retain the sums or
installments already received, where such rights are expressly provided for.[55]

13. Na kung ang TAUHAN NG IKALAWANG


PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa
loob ng isang linggo ay nangangahulugan na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng
TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan
sa TAUHAN NG UNANG PANIG.

Under the boundary-hulog scheme, petitioner retained ownership of the


jeepney although its material possession was vested in respondent as its driver. In
case respondent failed to make his P550.00 daily installment payment for a week, the
agreement would be of no force and effect and respondent would have to return the
jeepney to petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue driving the jeepney on
a boundary basis of P550.00 daily despite the termination of their vendor-vendee
relationship.

14. Sasagutin ng TAUHAN NG IKALAWANG


PANIG ang bayad sa rehistro, comprehensive insurance
taon-taon at kahit anong uri ng aksidente habang ito ay
hinuhulugan pa sa TAUHAN NG UNANG PANIG.

The juridical relationship of employer-employee between petitioner and


respondent was not negated by the foregoing stipulation in the Kasunduan,
considering that petitioner retained control of respondents conduct as driver of the
vehicle. As correctly ruled by the CA:

15. Na ang TAUHAN NG IKALAWANG PANIG


ay obligadong dumalo sa pangkalahatang pagpupulong ng
VILLAMARIA MOTORS sa tuwing tatawag ang mga
tagapangasiwa nito upang maipaabot ang anumang
mungkahi sa ikasusulong ng samahan.

The exercise of control by private respondent


over petitioners conduct in operating the jeepney he was
driving is inconsistent with private respondents claim that he
is, or was, not engaged in the transportation business; that,
even if petitioner was allowed to let some other person drive
the unit, it was not shown that he did so; that the existence of
an employment relation is not dependent on how the worker
is paid but on the presence or absence of control over the
means and method of the work; that the amount earned in
excess of the boundary hulog is equivalent to wages; and that
the fact that the power of dismissal was not mentioned in
the Kasunduan did not mean that private respondent never
exercised such power, or could not exercise such power.

16. Na ang TAUHAN NG IKALAWANG PANIG


ay makikiisa sa lahat ng mga patakaran na magkakaroon ng
pagbabago o karagdagan sa mga darating na panahon at
hindi magiging hadlang sa lahat ng mga balakin ng
VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at
ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG
ay hindi magiging buwaya sa pasahero upang hindi kainisan
ng kapwa driver at maiwasan ang pagkakasangkot sa
anumang gulo.
18. Ang nasabing sasakyan ay hindi
kalilimutang siyasatin ang kalagayan lalo na sa umaga bago
pumasada, at sa hapon o gabi naman ay sisikapin
mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan
ay maaarkila at aabutin ng dalawa o higit pang araw sa
lalawigan ay dapat lamang na ipagbigay alam muna ito sa
VILLAMARIA MOTORS upang maiwasan ang mga
anumang suliranin.

Moreover, requiring petitioner to drive the unit for


commercial use, or to wear an identification card, or to don a
decent attire, or to park the vehicle in Villamaria Motors
garage, or to inform Villamaria Motors about the fact that the
unit would be going out to the province for two days of more,
or to drive the unit carefully, etc. necessarily related to control
over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing
Machine but National Labor Union since the latter case
involved jeepney owners/operators and jeepney drivers, and
that the fact that the boundary here represented installment
payment of the purchase price on the jeepney did not
withdraw the relationship from that of employer-employee, in

view of the overt presence of supervision and control by the


employer.[56]
Neither is such juridical relationship negated by petitioners claim that the
terms and conditions in the Kasunduan relative to respondents behavior and
deportment as driver was for his and respondents benefit: to insure that respondent
would be able to pay the requisite daily installment of P550.00, and that the vehicle
would still be in good condition despite the lapse of four years. What is primordial is
that petitioner retained control over the conduct of the respondent as driver of the
jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the respondent, by
seeing to it that the route provided in his franchise, and the rules and regulations of the
Land Transportation Regulatory Board are duly complied with. Moreover, in a business
establishment, an identification card is usually provided not just as a security measure
but to mainly identify the holder thereof as a bona fide employee of the firm who issues
it.[57]
As respondents employer, it was the burden of petitioner to prove that
respondents termination from employment was for a lawful or just cause, or, at the
very least, that respondent failed to make his daily remittances of P550.00 as
boundary. However, petitioner failed to do so. As correctly ruled by the appellate court:
It is basic of course that termination of
employment must be effected in accordance with law. The
just and authorized causes for termination of employment are
enumerated under Articles 282, 283 and 284 of the Labor
Code.
Parenthetically, given the peculiarity of the
situation of the parties here, the default in the remittance of
the boundary hulog for one week or longer may be
considered an additional cause for termination of
employment. The reason is because the Kasunduan would be
of no force and effect in the event that the purchaser failed to
remit the boundaryhulog for one week. The Kasunduan in this
case pertinently stipulates:
13. Na kung ang TAUHAN NG
IKALAWANG PANIG ay hindi makapagbigay
ng BOUNDARY HULOG sa loob ng isang
linggo ay NANGANGAHULUGAN na ang
kasunduang ito ay wala ng bisa at kusang
ibabalik ng TAUHAN NG IKALAWANG PANIG
ang nasabing sasakyan sa TAUHAN NG
UNANG PANIG na wala ng paghahabol pa.

kung hindi kayo makapagbigay ng Boundary Hulog sa loob


ng isang linggo ay kusa ninyong ibabalik and nasabing
sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.
Mula po sa araw ng inyong pagkatanggap ng Paalala na ito
ay akin na pong ipatutupad ang nasabing Kasunduan kayat
aking pinaaalala sa inyong lahat na tuparin natin ang
nakalagay sa kasunduan upang maiwasan natin ito.
Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito
upang hindi na tayo makaabot pa sa korte kung sakaling hindi
ninyo isasauli ang inyong sasakyan na hinuhulugan na ang
mga magagastos ay kayo pa ang magbabayad sapagkat ang
hindi ninyo pagtupad sa kasunduan ang naging dahilan ng
pagsampa ng kaso.
Sumasainyo
Attendance: 8/27/99
(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR.
If it were true that petitioner did not remit the
boundary hulog for one week or more, why did private
respondent not forthwith take steps to recover the unit, and
why did he have to wait for petitioner to abandon it?
On another point, private respondent did not submit any
police report to support his claim that petitioner really figured
in a vehicular mishap. Neither did he present the affidavit of
the guard from the gas station to substantiate his claim that
petitioner abandoned the unit there.[58]
Petitioners claim that he opted not to terminate the employment of
respondent because of magnanimity is negated by his (petitioners) own evidence that
he took the jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The
decision of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs
against petitioner.
SO ORDERED.
SECOND DIVISION

Moreover, well-settled is the rule that, the employer has the


burden of proving that the dismissal of an employee is for a
just cause. The failure of the employer to discharge this
burden means that the dismissal is not justified and that the
employee is entitled to reinstatement and back wages.
In the case at bench, private respondent in his
position paper before the Labor Arbiter, alleged that petitioner
failed to pay the miscellaneous fee of P10,000.00 and the
yearly registration of the unit; that petitioner also stopped
remitting the boundary hulog, prompting him (private
respondent) to issue a Paalala, which petitioner however
ignored; that petitioner even brought the unit to his
(petitioners) province without informing him (private
respondent) about it; and that petitioner eventually
abandoned the vehicle at a gasoline station after figuring in
an accident. But private respondent failed to substantiate
these allegations with solid, sufficient proof. Notably, private
respondents allegation viz, that he retrieved the vehicle from
the gas station, where petitioner abandoned it, contradicted
his statement in the Paalala that he would enforce the
provision (in the Kasunduan) to the effect that default in the
remittance of the boundary hulog for one week would result in
the forfeiture of the unit. The Paalala reads as follows:
Sa lahat ng mga kumukuha ng sasakyan
Sa pamamagitan ng BOUNDARY HULOG
Nais ko pong ipaalala sa inyo ang Kasunduan na inyong
pinirmahan particular na ang paragrapo 13 na nagsasaad na

[G.R. No. 142293. February 27, 2003]

VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and


SBT[1] TRUCKING CORPORATION, petitioners, vs. HON. COURT OF
APPEALS and JAIME SAHOT, respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision[2] of the Court of
Appeals dated February 29, 2000, in CA-G.R. SP No. 52671, affirming with
modification the decision[3] of the National Labor Relations Commission promulgated
on June 20, 1996 in NLRC NCR CA No. 010526-96. Petitioners also pray for the
reinstatement of the decision[4] of the Labor Arbiter in NLRC NCR Case No. 00-0906717-94.
Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck
helper for petitioners family-owned trucking business named Vicente Sy Trucking. In
1965, he became a truck driver of the same family business, renamed T. Paulino
Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as

SBT Trucking Corporation since 1994. Throughout all these changes in names and for
36 years, private respondent continuously served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences
as he was suffering from various ailments. Particularly causing him pain was his left
thigh, which greatly affected the performance of his task as a driver. He inquired about
his medical and retirement benefits with the Social Security System (SSS) on April 25,
1994, but discovered that his premium payments had not been remitted by his
employer.
Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was
medically examined and treated for EOR, presleyopia, hypertensive retinopathy G II
(Annexes G-5 and G-3, pp. 48, 104, respectively),[6] HPM, UTI, Osteoarthritis (Annex
G-4, p. 105),[7] and heart enlargement (Annex G, p. 107).[8] On said grounds, Belen
Paulino of the SBT Trucking Service management told him to file a formal request for
extension of his leave. At the end of his week-long absence, Sahot applied for
extension of his leave for the whole month of June, 1994. It was at this time when
petitioners allegedly threatened to terminate his employment should he refuse to go
back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he
refused to work, But he could not retire on pension because petitioners never paid his
correct SSS premiums. The fact remained he could no longer work as his left thigh
hurt abominably. Petitioners ended his dilemma. They carried out their threat and
dismissed him from work, effective June 30, 1994. He ended up sick, jobless and
penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a
complaint for illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He
prayed for the recovery of separation pay and attorneys fees against Vicente Sy and
Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service,
6Bs Trucking and SBT Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking business in the 1950s
but denied employing helpers and drivers. They contend that private respondent was
not illegally dismissed as a driver because he was in fact petitioners industrial
partner. They add that it was not until the year 1994, when SBT Trucking Corporation
was established, and only then did respondent Sahot become an employee of the
company, with a monthly salary that reached P4,160.00 at the time of his separation.

SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as


and for his separation pay.[10]
Hence, the instant petition anchored on the following contentions:
I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED]
DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL
LABOR RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND
PUT AT NAUGHT ARTICLE 402 OF THE CIVIL CODE.[11]
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING
THAT THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE
FACTUAL FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A
BETTER POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE
WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE
PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305 SCRA 233).[12]
III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT
TRUCKING CORPORATION.[13]
Three issues are to be resolved: (1) Whether or not an employer-employee
relationship existed between petitioners and respondent Sahot; (2) Whether or not
there was valid dismissal; and (3) Whether or not respondent Sahot is entitled to
separation pay.
Crucial to the resolution of this case is the determination of the first issue.
Before a case for illegal dismissal can prosper, an employer-employee relationship
must first be established.[14]

Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on
leave and was not able to report for work for almost seven days. On June 1, 1994,
Sahot asked permission to extend his leave of absence until June 30, 1994. It
appeared that from the expiration of his leave, private respondent never reported back
to work nor did he file an extension of his leave. Instead, he filed the complaint for
illegal dismissal against the trucking company and its owners.

Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos
which found that respondent Sahot was not an employee but was in fact, petitioners
industrial partner.[15] It is contended that it was the Labor Arbiter who heard the case
and had the opportunity to observe the demeanor and deportment of the parties. The
same conclusion, aver petitioners, is supported by substantial evidence.[16] Moreover, it
is argued that the findings of fact of the Labor Arbiter was wrongly overturned by the
NLRC when the latter made the following pronouncement:

Petitioners add that due to Sahots refusal to work after the expiration of his
authorized leave of absence, he should be deemed to have voluntarily resigned from
his work.They contended that Sahot had all the time to extend his leave or at least
inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE-499776, entitledManuelito Jimenez et al. vs. T. Paulino Trucking Service, as a defense in
view of the alleged similarity in the factual milieu and issues of said case to that of
Sahots, hence they are in pari material and Sahots complaint ought also to be
dismissed.

We agree with complainant that there was error committed by the Labor Arbiter when
he concluded that complainant was an industrial partner prior to 1994. A computation
of the age of complainant shows that he was only twenty-three (23) years when he
started working with respondent as truck helper. How can we entertain in our mind that
a twenty-three (23) year old man, working as a truck helper, be considered an
industrial partner. Hence we rule that complainant was only an employee, not a partner
of respondents from the time complainant started working for respondent.[17]

The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente
Santos, ruled that there was no illegal dismissal in Sahots case. Private respondent
had failed to report to work. Moreover, said the Labor Arbiter, petitioners and private
respondent were industrial partners before January 1994. The Labor Arbiter concluded
by ordering petitioners to pay financial assistance of P15,000 to Sahot for having
served the company as a regular employee since January 1994 only.
On appeal, the National Labor Relations Commission modified the judgment of
the Labor Arbiter. It declared that private respondent was an employee, not an
industrial partner, since the start. Private respondent Sahot did not abandon his job but
his employment was terminated on account of his illness, pursuant to Article 284 [9] of
the Labor Code. Accordingly, the NLRC ordered petitioners to pay private respondent
separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for 29
years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In
its decision dated February 29, 2000, the appellate court affirmed with modification the
judgment of the NLRC. It held that private respondent was indeed an employee of
petitioners since 1958. It also increased the amount of separation pay awarded to
private respondent to P74,880, computed at the rate of P2,080 per year for 36 years of
service from 1958 to 1994. It decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB
Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of

Because the Court of Appeals also found that an employer-employee


relationship existed, petitioners aver that the appellate courts decision gives an
imprimatur to the illegal finding and conclusion of the NLRC.
Private respondent, for his part, denies that he was ever an industrial partner of
petitioners. There was no written agreement, no proof that he received a share in
petitioners profits, nor was there anything to show he had any participation with
respect to the running of the business.[18]
The elements to determine the existence of an employment relationship are:
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employers power to control the employees conduct.
The most important element is the employers control of the employees conduct, not
only as to the result of the work to be done, but also as to the means and methods to
accomplish it.[19]
As found by the appellate court, petitioners owned and operated a trucking
business since the 1950s and by their own allegations, they determined private
respondents wages and rest day.[20] Records of the case show that private respondent
actually engaged in work as an employee. During the entire course of his employment
he did not have the freedom to determine where he would go, what he would do, and
how he would do it. He merely followed instructions of petitioners and was content to
do so, as long as he was paid his wages. Indeed, said the CA, private respondent had

worked as a truck helper and driver of petitioners not for his own pleasure but under
the latters control.

valid, (a) the dismissal must be for a valid cause and (b) the employee must be
afforded due process.[30]

Article 1767[21] of the Civil Code states that in a contract of partnership two or
more persons bind themselves to contribute money, property or industry to a common
fund, with the intention of dividing the profits among themselves.[22] Not one of these
circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is no
proof that he was receiving a share in the profits as a matter of course, during the
period when the trucking business was under operation. Neither is there any proof that
he had actively participated in the management, administration and adoption of
policies of the business. Thus, the NLRC and the CA did not err in reversing the
finding of the Labor Arbiter that private respondent was an industrial partner from 1958
to 1994.

Article 284 of the Labor Code authorizes an employer to terminate an


employee on the ground of disease, viz:

On this point, we affirm the findings of the appellate court and the NLRC.
Private respondent Jaime Sahot was not an industrial partner but an employee of
petitioners from 1958 to 1994. The existence of an employer-employee relationship is
ultimately a question of fact[23] and the findings thereon by the NLRC, as affirmed by
the Court of Appeals, deserve not only respect but finality when supported by
substantial evidence. Substantial evidence is such amount of relevant evidence which
a reasonable mind might accept as adequate to justify a conclusion.[24]

Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to his health or to the
health of his co-employees, the employer shall not terminate his employment unless
there is a certification by competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period of six (6) months even
with proper medical treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the employee to take a
leave. The employer shall reinstate such employee to his former position immediately
upon the restoration of his normal health. (Italics supplied).

Time and again this Court has said that if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter.[25] Here, we entertain no doubt. Private respondent since the
beginning was an employee of, not an industrial partner in, the trucking business.
Coming now to the second issue, was private respondent validly dismissed by
petitioners?
Petitioners contend that it was private respondent who refused to go back to
work. The decision of the Labor Arbiter pointed out that during the conciliation
proceedings, petitioners requested respondent Sahot to report back for work.
However, in the same proceedings, Sahot stated that he was no longer fit to continue
working, and instead he demanded separation pay. Petitioners then retorted that if
Sahot did not like to work as a driver anymore, then he could be given a job that was
less strenuous, such as working as a checker. However, Sahot declined that
suggestion. Based on the foregoing recitals, petitioners assert that it is clear that Sahot
was not dismissed but it was of his own volition that he did not report for work
anymore.
In his decision, the Labor Arbiter concluded that:
While it may be true that respondents insisted that complainant continue working with
respondents despite his alleged illness, there is no direct evidence that will prove that
complainants illness prevents or incapacitates him from performing the function of a
driver. The fact remains that complainant suddenly stopped working due to boredom
or otherwise when he refused to work as a checker which certainly is a much less
strenuous job than a driver.[26]
But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in
by the Court of Appeals, held that:
While it was very obvious that complainant did not have any intention to report back to
work due to his illness which incapacitated him to perform his job, such intention
cannot be construed to be an abandonment. Instead, the same should have been
considered as one of those falling under the just causes of terminating an
employment. The insistence of respondent in making complainant work did not change
the scenario.
It is worthy to note that respondent is engaged in the trucking business where physical
strength is of utmost requirement (sic). Complainant started working with respondent
as truck helper at age twenty-three (23), then as truck driver since 1965. Complainant
was already fifty-nine (59) when the complaint was filed and suffering from various
illness triggered by his work and age.
x x x[27]
In termination cases, the burden is upon the employer to show by substantial
evidence that the termination was for lawful cause and validly made.[28] Article 277(b)
of the Labor Code puts the burden of proving that the dismissal of an employee was
for a valid or authorized cause on the employer, without distinction whether the
employer admits or does not admit the dismissal.[29] For an employees dismissal to be

Art. 284. Disease as a ground for termination- An employer may terminate the services
of an employee who has been found to be suffering from any disease and whose
continued employment is prohibited by law or prejudicial to his health as well as the
health of his co-employees: xxx
However, in order to validly terminate employment on this ground, Book VI,
Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires:

As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC,[31] the
requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination
by the employer of the gravity or extent of the employees illness and thus defeat the
public policy in the protection of labor.
In the case at bar, the employer clearly did not comply with the medical
certificate requirement before Sahots dismissal was effected. In the same case
of Sevillana vs. I.T. (International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the
employer, the latter should likewise bear the burden of showing that the requisites for
a valid dismissal due to a disease have been complied with. In the absence of the
required certification by a competent public health authority, this Court has ruled
against the validity of the employees dismissal. It is therefore incumbent upon the
private respondents to prove by the quantum of evidence required by law that
petitioner was not dismissed, or if dismissed, that the dismissal was not illegal;
otherwise, the dismissal would be unjustified. This Court will not sanction a dismissal
premised on mere conjectures and suspicions, the evidence must be substantial and
not arbitrary and must be founded on clearly established facts sufficient to warrant his
separation from work.[32]
In addition, we must likewise determine if the procedural aspect of due process
had been complied with by the employer.
From the records, it clearly appears that procedural due process was not
observed in the separation of private respondent by the management of the trucking
company. The employer is required to furnish an employee with two written notices
before the latter is dismissed: (1) the notice to apprise the employee of the particular
acts or omissions for which his dismissal is sought, which is the equivalent of a charge;
and (2) the notice informing the employee of his dismissal, to be issued after the
employee has been given reasonable opportunity to answer and to be heard on his
defense.[33] These, the petitioners failed to do, even only for record purposes. What
management did was to threaten the employee with dismissal, then actually implement
the threat when the occasion presented itself because of private respondents painful
left thigh.
All told, both the substantive and procedural aspects of due process were
violated. Clearly, therefore, Sahots dismissal is tainted with invalidity.
On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is
entitled to separation pay. The law is clear on the matter. An employee who is
terminated because of disease is entitled to separation pay equivalent to at least one
month salary or to one-half month salary for every year of service, whichever is greater
xxx.[34]Following the formula set in Art. 284 of the Labor Code, his separation pay was
computed by the appellate court at P2,080 times 36 years (1958 to 1994) or P74,880.
We agree with the computation, after noting that his last monthly salary was P4,160.00
so that one-half thereof is P2,080.00. Finding no reversible error nor grave abuse of
discretion on the part of appellate court, we are constrained to sustain its decision. To
avoid further delay in the payment due the separated worker, whose claim was filed
way back in 1994, this decision is immediately executory. Otherwise, six percent (6%)

interest per annum should be charged thereon, for any delay, pursuant to provisions of
the Civil Code.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
dated February 29, 2000 is AFFIRMED. Petitioners must pay private respondent
Jaime Sahot his separation pay for 36 years of service at the rate of one-half monthly
pay for every year of service, amounting to P74,880.00, with interest of six per centum
(6%) per annum from finality of this decision until fully paid.
Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro
Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery, an open
package which was discovered to contain a "jusi" barong tagalog. When confronted,
Pelobello replied that the same was ordered by respondent Casimiro Zapata for his
customer. Zapata allegedly admitted that he copied the design of petitioner
Haberdashery. But in the afternoon, when again questioned about said barong,
Pelobello and Zapata denied ownership of the same. Consequently a memorandum
was issued to each of them to explain on or before February 4, 1985 why no action
should be taken against them for accepting a job order which is prejudicial and in
direct competition with the business of the company. 2 Both respondents allegedly did
not submit their explanation and did not report for work. 3 Hence, they were dismissed
by petitioners on February 4, 1985. They countered by filing a complaint for illegal
dismissal docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the
dispositive portion of which reads:

THIRD DIVISION

WHEREFORE, judgment is hereby rendered in NLRC NCR


Case No. 2-428-85 finding respondents guilty of illegal
dismissal and ordering them to reinstate Dioscoro Pelobello
and Casimiro Zapata to their respective or similar positions
without loss of seniority rights, with full backwages from July
4, 1985 up to actual reinstatement. The charge of unfair labor
practice is dismissed for lack of merit.

G.R. Nos. 83380-81 November 15, 1989


MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.
INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor
Arbiter, Department of Labor and Employment, National Capital Region),
SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its
members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO,
ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A.
ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA
MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET
SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.

In NLRC NCR Case No. 7-26030-84, the complainants'


claims for underpayment re violation of the minimum wage
law is hereby ordered dismissed for lack of merit.
Respondents are hereby found to have violated the decrees
on the cost of living allowance, service incentive leave pay
and the 13th Month Pay. In view thereof, the economic
analyst of the Commission is directed to compute the
monetary awards due each complainant based on the
available records of the respondents retroactive as of three
years prior to the filing of the instant case.

Ledesma, Saludo & Associates for petitioners.


Pablo S. Bernardo for private respondents.

SO ORDERED. 5
FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private respondents
against herein petitioners assails the decision of respondent National Labor Relations
Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang
Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers
Makati, et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang
Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the decision
of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a)
petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed
workers and (b) the existence of employer-employee relationship and granting
respondent workers by reason thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner
Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and
"plantsadoras". They are paid on a piece-rate basis except Maria Angeles and Leonila
Serafina who are paid on a monthly basis. In addition to their piece-rate, they are
given a daily allowance of three (P 3.00) pesos provided they report for work before
9:30 a.m. everyday.

From the foregoing decision, petitioners appealed to the NLRC. The latter on March
30, 1988 affirmed said decision but limited the backwages awarded the Dioscoro
Pelobello and Casimiro Zapata to only one (1) year. 6
After their motion for reconsideration was denied, petitioners filed the instant petition
raising the following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYEREMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY
AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS
WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT
THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III

Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00
p.m. from Monday to Saturday and during peak periods even on Sundays and
holidays.

THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS


PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of


the respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-260384 for (a) underpayment of the basic wage; (b) underpayment of living allowance; (c)
non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of
service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage
Orders Nos. 1, 2, 3, 4 and 5. 1

The first issue which is the pivotal issue in this case is resolved in favor of private
respondents. We have repeatedly held in countless decisions that the test of
employer-employee relationship is four-fold: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct. It is the so called "control test" that is the most
important element. 8 This simply means the determination of whether the employer
controls or has reserved the right to control the employee not only as to the result of

the work but also as to the means and method by which the same is to be
accomplished. 9

been established by the Secretary of Labor. ..." 12No such rate has been established in
this case.

The facts at bar indubitably reveal that the most important requisite of control is
present. As gleaned from the operations of petitioner, when a customer enters into a
contract with the haberdashery or its proprietor, the latter directs an employee who
may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's
measurements, and to sew the pants, coat or shirt as specified by the customer.
Supervision is actively manifested in all these aspects the manner and quality of
cutting, sewing and ironing.

But all these notwithstanding, the question as to whether or not there is in fact an
underpayment of minimum wages to private respondents has already been resolved in
the decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient
evidence to support the claims of the complainants for alleged violation of the
minimum wage, their claims for underpayment re violation of the Minimum Wage Law
under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13

Furthermore, the presence of control is immediately evident in this memorandum


issued by Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed
to Topper's Makati Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the
undersigned Roger Valderama, Ruben Delos Reyes and Ofel
Bautista. Other than this person (sic) must ask permission to
the above mentioned before giving orders or instructions to
the tailors.
B. Before accepting the job orders tailors must check the
materials, job orders, due dates and other things to maximize
the efficiency of our production. The materials should be
checked (sic) if it is matched (sic) with the sample, together
with the number of the job order.
C. Effective immediately all job orders must be finished one
day before the due date. This can be done by proper
scheduling of job order and if you will cooperate with your
supervisors. If you have many due dates for certain day,
advise Ruben or Ofel at once so that they can make
necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending on
customs (sic) must ask first or must advise the tailors
regarding the due dates so that we can eliminate what we call
'Bitin'.
E. If there is any problem regarding supervisors or co-tailor
inside our shop, consult with me at once settle the problem.
Fighting inside the shop is strictly prohibited. Any tailor
violating this memorandum will be subject to disciplinary
action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved the right to
control its employees not only as to the result but also the means and methods by
which the same are to be accomplished. That private respondents are regular
employees is further proven by the fact that they have to report for work regularly from
9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P 3.00 daily if
they report for work before 9:30 a.m. and which is forfeited when they arrive at or after
9:30 a.m. 11
Since private respondents are regular employees, necessarily the argument that they
are independent contractors must fail. As established in the preceding paragraphs,
private respondents did not exercise independence in their own methods, but on the
contrary were subject to the control of petitioners from the beginning of their tasks to
their completion. Unlike independent contractors who generally rely on their own
resources, the equipment, tools, accessories, and paraphernalia used by private
respondents are supplied and owned by petitioners. Private respondents are totally
dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are
entitled to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No.
829, Rules Implementing Presidential Decree No. 1614 and reiterated in Section 3(f),
Rules Implementing Presidential Decree 1713 which explicitly states that, "All
employees paid by the result shall receive not less than the applicable new minimum
wage rates for eight (8) hours work a day, except where a payment by result rate has

The records show that private respondents did not appeal the above ruling of the
Labor Arbiter to the NLRC; neither did they file any petition raising that issue in the
Supreme Court. Accordingly, insofar as this case is concerned, that issue has been
laid to rest. As to private respondents, the judgment may be said to have attained
finality. For it is a well-settled rule in this jurisdiction that "an appellee who has not
himself appealed cannot obtain from the appellate court-, any affirmative relief other
than the ones granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the petitioners, they can
claim cost of living allowance. This is apparent from the provision defining the
employees entitled to said allowance, thus: "... All workers in the private sector,
regardless of their position, designation or status, and irrespective of the method by
which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e)
of the Rules and Regulations Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree shall apply to
all employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission,
boundary, or task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of the time
consumed in the performance thereof, except where the
workers are paid on piece-rate basis in which case the
employer shall be covered by this issuance insofar as such
workers are concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA
and 13th Month Pay, they are not entitled to service incentive leave pay because as
piece-rate workers being paid at a fixed amount for performing work irrespective of
time consumed in the performance thereof, they fall under one of the exceptions
stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For
the same reason private respondents cannot also claim holiday pay (Section 1(e),
Rule IV, Implementing Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have misread the
evidence, for it does show that a violation of the employer's rules has been committed
and the evidence of such transgression, the copied barong tagalog, was in the
possession of Pelobello who pointed to Zapata as the owner. When required by their
employer to explain in a memorandum issued to each of them, they not only failed to
do so but instead went on AWOL (absence without official leave), waited for the period
to explain to expire and for petitioner to dismiss them. They thereafter filed an action
for illegal dismissal on the far-fetched ground that they were dismissed because of
union activities. Assuming that such acts do not constitute abandonment of their jobs
as insisted by private respondents, their blatant disregard of their employer's
memorandum is undoubtedly an open defiance to the lawful orders of the latter, a
justifiable ground for termination of employment by the employer expressly provided
for in Article 283(a) of the Labor Code as well as a clear indication of guilt for the
commission of acts inimical to the interests of the employer, another justifiable ground
for dismissal under the same Article of the Labor Code, paragraph (c). Well
established in our jurisprudence is the right of an employer to dismiss an employee
whose continuance in the service is inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private respondents was
submitted gave no credence to their version and found their excuses that said barong
tagalog was the one they got from the embroiderer for the Assistant Manager who was
investigating them, unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said


employees. Thus, We have ruled that:
No employer may rationally be expected to continue in
employment a person whose lack of morals, respect and
loyalty to his employer, regard for his employer's rules, and
appreciation of the dignity and responsibility of his office, has
so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for
the rights and welfare of the working class, is meet and
proper. That in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writings should be resolved
in the former's favor, is not an unreasonable or unfair rule. But
that disregard of the employer's own rights and interests can
be justified by that concern and solicitude is unjust and
unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157
SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor selfdestruction of the employer.17 More importantly, while the Constitution is committed to
the policy of social justice and the protection of the working class, it should not be
supposed that every labor dispute will automatically be decided in favor of labor. 18

DECISION
PANGANIBAN, J.:
The Court reiterates some fundamental labor doctrines: (1) this Court may
review factual determinations where the findings of the med-arbiter conflict with those
of the undersecretary of labor; (2) an employer-employee relationship may be
established by substantial evidence; (3) procedural due process is satisfied by the
grant of an opportunity to be heard and an actual adversarial-type trial is not required;
(4) the NLRC commits grave abuse of discretion when it remands a case to the labor
arbiter in spite of ample pieces of evidence on record which are sufficient to decide the
case directly; and (5) where illegal dismissal is proven, the workers are entitled to back
wages and other similar benefits without deductions or conditions.

Statement of the Case

These doctrines are used by the Court in resolving these consolidated petitions
for certiorari under Rule 65, challenging the resolutions of Undersecretary Bienvenido
Laguesma and the National Labor Relations Commission.

First Case
Finally, it has been established that the right to dismiss or otherwise impose
discriplinary sanctions upon an employee for just and valid cause, pertains in the first
place to the employer, as well as the authority to determine the existence of said
cause in accordance with the norms of due process. 19
There is no evidence that the employer violated said norms. On the contrary, private
respondents who vigorously insist on the existence of employer-employee relationship,
because of the supervision and control of their employer over them, were the very
ones who exhibited their lack of respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds
to terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated March
30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby modified. The
complaint filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR
Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of service
incentive leave pay to private respondents is deleted.
SO ORDERED.
FIRST DIVISION

In G.R. No. 113542, hereafter referred to as the First Case, Petitioner


Caurdanetaan Piece Workers Union/Association (CPWU) prays for the nullification and
reversal of Undersecretary Laguesmas Order dated January 4, 1994 in OS-MA-A-8119-93 (RO100-9207-RU-001), which granted Respondent Corfarms motion for
reconsideration and dismissed petitioners prayer for certification election. The
dispositive portion of the assailed Order reads as follows:[1]
WHEREFORE, the questioned Order is hereby set aside and a new
one issued dismissing the petition for certification election for lack of
merit.
In his earlier Order dated September 7, 1993, Laguesma affirmed Med-Arbiter
Sinamar E. Limos order of March 18, 1993 which disposed as follows:[2]
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the aboveentitled petition is hereby granted. Consequently, the motion to dismiss
filed by Corfarm Grains, Inc. is denied.
Let a certification election be conducted among the rank-and-file
employees of Corfarm Grains, Inc., within ten (10) days from receipt
hereof, with the following choices:
1. Caurdanetaan Piece Workers Union;
2. No Union

[G.R. No. 113542. February 24, 1998]

CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO P.


COSTALES, JR. in his capacity as union president, petitioner,
vs.UNDERSECRETARY BIENVENIDO E. LAGUESMA and CORFARM
GRAINS, INC., respondents.

A pre-election conference is hereby set on March 29, 1993 at 2:00 o


clock in the afternoon at the DOLE, Dagupan District Office, Mayombo
District, Dagupan City to thresh out the mechanics of the Certification
Election. Employer Corfarm Grains, Inc. is hereby directed to present its
employment records for the period covering January to June 1992
evidencing payment of salaries of its employees.
Let the parties be notified accordingly.
Aggrieved by Respondent Laguesmas subsequent Order dated January 27,
1994[3] denying its motion for reconsideration, petitioner filed this recourse before this
Court.

[G.R. No. 114911. February 24, 1998]


Second Case
CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by JUANITO
P. COSTALES, JR., president, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, CORFARM GRAINS, INC. and/or TEODY
C. RAPISORA and HERMINIO RABANG, respondents.

In G.R. No. 114911, hereafter referred to as the Second Case, petitioner


assails the Resolution promulgated on February 16, 1994 in NLRC CA No. L001109[4] by the National Labor Relations Commission (Respondent NLRC),[5] the
dispositive portion of which reads:[6]

WHEREFORE, the Decision of the Labor Arbiter dated 14 September


1993 is hereby SET ASIDE. Let the records of the case be REMANDED
to the Arbitration Branch of origin for immediate appropriate
proceedings.
The labor arbiters decision that was reversed by Respondent NLRC disposed
as follows:[7]
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring individual complainants dismissal illegal;
2. Declaring respondent guilty of unfair labor practice;
3. Ordering respondent to pay the 92[8] complainants the
following:
a) 13th month pay limited to three years in the amount of
P4,788.00 each;
b) service incentive leave pay in the amount of P855.00
each for three years;
c) underpaid wages covering the period June 1989 to
June 1992 which amount to P47,040.00 each;
d) backwages reckoned from June 1992, the date of
dismissal[,] to September 1993, the date of
promulgation of the decision or a period of 14
months, in the amount of P22,344.00 each;

On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case


No. Sub-Rab 01-117-0184-92, directed the parties to submit position
paper on or before December 14, 1992, and to appear for hearing on
the said date. Only the complainant petitioner submitted its position
paper on December 3, 1992.
Likewise in the scheduled hearing on December 14, 1992, private
respondent did not appear[;] thus Labor Arbiter Olairez allowed the
president of petitioner union Juanito Costales to testify and present its
evidence ex-parte.
On December 16 1992, another notice was sent to the parties to appear
on [the] January 7, 1993 hearing by Labor Arbiter Emiliano de Asis.
Before the scheduled hearing on January 7, 1993, complainant
petitioner filed a motion to amend complaint and to admit amended
complaint. It also filed the following:
1. Affidavit of Juanito Costales, Jr., dated November 24,
1992;
2. Joint affidavit of Ricardo Aban, Armando Casing,
Benjamin Corpuz, Danny Margadejas, Fidel
Fortunato, Henry de los Reyes, Anthony de
Luna, Warlito Arguilles, Dominador Aguda,
Marcelino Cayuda, Jr., Jaime Costales and
Juanito Mendenilla dated December 30, 1992;
3. Joint affidavit of Juanito Costales and Armando Casing
dated January 7, 1993;
4. Affidavit signed by individual union members.

e) refund of P12.00/day deduction limited to three years


which amounts to P12,096 each; and
f) to pay the complainants P1,000.00 each as damages.
4. To reinstate the complainants to their former position[s] immediately.
All other claims are hereby dismissed for lack of merit.
In a Resolution promulgated on March 28, 1994, Respondent NLRC denied
petitioners motion for reconsideration.[9]

The Facts

In his Consolidated Memorandum, the solicitor general recited the following


pertinent facts, which we find amply supported by the records:[10]
Petitioner union has ninety-two (92) members who worked as cargador
at the warehouse and ricemills of private respondent [referring to
Respondent Corfarm] at Umingan, Pangasinan since 1982. As
cargadores, they loaded, unloaded and piled sacks of palay from the
warehouse to the cargo trucks and those brought by cargo trucks for
delivery to different places. They were paid by private respondent on a
piece rate basis. When private respondent denied some benefits to
these cargadores, the latter organized petitioner union. Upon learning of
its formation, private respondent barred its members from working with
them and replaced [them] with non-members of the union sometime in
the middle of 1992.

On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order


granting the petition for certification election earlier filed.
Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal
case issued the May 20, 1993 Order, the dispositive portion [of] which
reads:
WHEREFORE, respondents are hereby ordered to
submit their position paper, together with their
documentary evidence, if any, within TEN (10) days from
receipt of the order, otherwise we will be constrained to
resolve this case based on available evidence on record.
On September 7, 1993, public respondent Laguesma issued a
Resolution denying the appeal filed by private respondent against the
order of Med-Arbiter Limos granting the petition for certification election.
Acting on said denial, private respondent filed a motion for
reconsideration which was granted in an Order dated January 4, 1994
by public respondent Laguesma dismissing the petition for certification
election for lack of employer-employee relationship.
Petitioner in turn filed a motion for reconsideration of the January 4,
1994, Order but it was denied by public respondent Laguesma in his
January 27, 1994 Order which reaffirmed the dismissal of petition for
certification election.
Thus, the union filed its first petition for certiorari assailing the Orders of
January 4 and 27, 1994 of public respondent Laguesma dismissing the
petition for certification election. The said petition is captioned as
Caurdanetaan Piece Workers Union, petitioner, vs. Hon. Bienvenido
Laguesma, et al., respondents, docketed as G.R. No. 113542 and
raffled to the Second Division of this Honorable Court.

On July 9, 1992, petitioner filed [a petition] for certification election


before the Regional Office No. I of the Department of Labor and
Employment, San Fernando, La Union docketed as RO100-9207-RU001.

On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his decision
finding the dismissal of petitioners members illegal. On appeal by both parties,
Respondent NLRC -- as earlier stated -- set aside the appealed decision and
remanded the case to the labor arbiter for further proceedings. Petitioners motion for
reconsideration was later denied.

While this petition for certification election was pending, petitioner also
filed on November 16, 1992, a complaint for illegal dismissal, unfair
labor practice, refund of illegal deductions, payment of wage
differentials, various pecuniary benefits provided by laws, damages,
legal interest, reinstatement and attorneys fees, against private
respondent before the Regional Arbitration Branch No. 1 of Dagupan
City, docketed as NLRC RAB Case No. 01-117-0184-92.

The solicitor general, who was supposed to represent both public respondents,
joined petitioner and filed a Manifestation and Motion (In Lieu of Comment) dated July
25, 1994, praying that the petition in the First Case be granted and that judgment be
rendered annulling[11] the assailed Orders of Respondent Laguesma. The Republics
counsel likewise filed another Manifestation and Motion (In Lieu of Comment) dated
October 4, 1994 in the Second Case, praying that judgment be rendered annulling the
resolution of Public Respondent NLRC dated February 16, 1994 and March 28, 1994

and order[ing] public respondent to proceed with the case instead of remanding the
same to the labor arbiter of origin.[12]

Corefarm [sic] Grains (Narrative Report dated August 4, 1992, p. 10


Records).

In a Resolution dated March 29, 1995,[13] this Court ordered the consolidation
of the two cases.[14]

Another reason why subject case should be remanded to the Labor


Arbiter below is the fact that the personality of complainant union has
been raised in issue before the proper forum and adverse decision on
the matter will definitely affect the whole proceedings.

Public Respondents Rulings

Furthermore, records show that an Amended Complaint was filed on


December 23, 1992. This amended complaint made no mention of the
affidavits of Juanito Costales, Jr. and the 92 other workers which
documents were filed in January 1993. Likewise, the amended
complaint contains but a general statement that the 92 workers of
Corefarm [sic] Grains have been employed since 1982 which was
adopted by the Labor Arbiter below in his decision notwithstanding the
fact that a number of these workers started working with respondent
after 1982. Some of whom worked with the company in 1990 (Joint
Affidavit dated 7 January 1993, pp. 96-98, Records). Notwithstanding
this fact, the Labor Arbiter in the decision under consideration allowed
refund of alleged deduction for a period of three years. In the same
manner, payment of salary differential was also granted.

In the First Case

Public Respondent Laguesma premised the dismissal of the petition for


certification election on the absence of an employer-employee relationship between
petitioners members and private respondent. Professing reliance on the control test in
determining employer-employee relationship, his Order dated January 4,
1994[15] explained:
It is settled in this jurisdiction that the most important factor in
determining the existence of employer-employee relationship is the
control test or the question of whether or not the supposed employer
exercises control over the means and methods by which the work is to
be done. In the instant case, it is not disputed that movant does not
exercise any degree of control over how the loading or unloading of
cavans of palays to or from the trucks, to or from the rice mills. Movants
only concern is that said cavans of palay are loaded/unloaded. Absent
therefore, the power to control not only the end to be achieved but also
the means to be used in reaching such end, no employer-employee
relationship could be said to have been established. We also noted that
some of petitioners members including its president, Juanito Costales,
Jr., admitted in separate sworn statements that they offer and actually
perform loading and unloading work for various rice mills in Pangasinan
and that the performance of said work depends on the availability of
work in said mills. They also categorically stated that there is no
employer-employee relationship between petitioner and movant. To our
mind, said declarations being made against interest deserve much
evidentiary weight. Considering therefore, the foregoing, we have no
alternative but to dismiss the petition for lack of employer-employee
relationship.

In the Second Case

On the other hand, Respondent NLRC ordered the remand of the case to the
arbitration branch for further proceedings because the issues at hand need further
threshing out. Stressing the principle that allegations must be proved by competent
and credible evidence, it held:[16]
There is no question that under the Rules of the Commission,
complaints may be resolved on the basis of the Position Papers
submitted by the parties and that the parties may be deemed to have
waived their right to present evidence after they have been given an
opportunity to do so. These procedural rules, however should be read in
conjunction with the time[-]honored principle that allegations must be
proved and established by competent and credible evidence. In other
words, mere allegations would not suffice despite the absence of
evidence to the contrary.
In subject case, complainants-appellants allegations that they are
laborers of respondents-appellants receiving P45.00 per days work of
eight hours (p. 2, Amended Position Paper dated December 14, 1992,
p. 31 Records; p. 2 Amended Complaint dated 16 December 1992, p.
70, Records) appears to be in conflict with their earlier assertions that
they are paid on the basis of the number of cavans of palay moved,
piled, hauled and unloaded from trucks or haulers multiplied by P0.12
[per] sack or cavan. And for the days earning respondents used to be
obliged to pay P57.00 per days earning -- (p. 2, Position Paper dated 24
November 1992; p. 17, Records).
Similarly attached to the records is a narrative report of [the] DOLE
inspector where it was mentioned that Juanito Costales, Jr., is the
owner of Carcado Contracting Services and is not an employee of

Indeed the issues at hand need further threshing out. Under the Rules,
the Labor Arbiter is authorized to thresh out issues (sec. 4, Rule V). As
it is, we are not convinced by the conclusions of the Labor Arbiter.
The ends of justice would better be served if all parties are granted
further opportunity to ventilate their respective positions.

The Issues

In its Consolidated Memorandum dated September 19, 1995 filed before us,
petitioner raises the following grounds in support of its petition:[17]
1. Grave abuse of discretion or acting in excess of jurisdiction,
which is equivalent to lack of jurisdiction on the part of
public respondent in setting aside the labor arbiters
decision and in remanding this case to the office of
origin for further proceedings is not necessary when in
fact the mandatory requirements of due process have
been observed by the labor arbiter in rendering
decision on the case;
2. Remand of the case to office of origin for further proceedings
on matters already passed upon properly by the labor
arbiter is contrary to the rule of speedy labor justice
and the [sic] social justice and to afford protection to
labor policy of the Philippine Constitution, which is a
command that should not be disregarded by the courts
in resolving labor cases;
3. Remand of the case to the labor arbiter would only prolong
social unrest and the suffering of injurious effects of
illegal dismissal by the 92 illegally dismissed workers[;]
hence, said remand of the case without justification
constitutes an oppressive act committed by public
respondent.
Simply put, the issues are as follows:
1. Whether Respondent Laguesma acted with grave abuse of discretion
in ordering the dismissal of the petition for certification election
2 Whether Respondent NLRC acted with grave abuse of discretion in
remanding the illegal dismissal case to the labor arbiter for further
proceedings.
The present controversy hinges on whether an employer-employee relationship
between the CPWU members and Respondent Corfarm has been established by
substantial evidence.

The Courts Ruling

The two petitions are meritorious.

Main Issue: Employer-Employee Relationship


First Case: Certification Election

Petitioner contends that Respondent Laguesma committed grave abuse of


discretion in dismissing the petition for certification election by relying on private
respondents bare allegation, in its motion for reconsideration, of lack of employeremployee relationship.[18] According to petitioner, Respondent Laguesma cannot
reverse his Decision in the absence of a concomitant change in his factual
findings.[19] Petitioner insists that all its members were employees of private
respondent, viz.:[20]
The 92 workers, who are all union members of petitioner herein, have
been rendering actual manual services as cargadores in the warehouse
and rice mills of private respondent, performing activities usually related
to or desirable by [sic] the business or trade of private respondent who
is engaged in the buy and sell of palay as well as warehousing of said
commodity and milling the same for sale to customers in the form of
milled rice. The 92 workers have performed their activities for the last
ten (10) years prior to their having been illegally dismissed from
employment on June 18, 1992 or thereabouts.
Petitioner adds that many of its members received Christmas bonuses from
private respondent.[21]
as

On the other hand, Respondent Corfarm describes the contentions of petitioner


off-tangent, if not irrelevant. -First, the authority of the DOLE Secretary to decide appeals in
representation cases is undeniable (see e.g., Sections 9 and 10 of Rule
V, Book V, of the Implementing Rules and Regulations of the Labor
Code; also Art. 259, appeal from certification election orders, labor
code). Second, petitioner completely misses the point that thegranting
and denial of a motion for reconsideration involves the exercise of
discretion. As submitted by the Public Respondent in its Comment,
among the ends to which a Motion for Reconsideration is addressed,
one is precisely to convince the court that its ruling is erroneous and
improper, contrary to law or the evidence, x x x (Emphasis found in the
original.)

Corfarm insists that the challenged Order of Respondent Laguesma dated


January 4, 1994 rests on solid findings of fact which should be accorded respect and
finality.[22] It attacks the petitioners allegation -- that it has 92 workers who worked as
cargador at its warehouses -- as gratuitous and not supported by any evidence x x x
[because] as late as this time of day in the litigation of this case, who exactly are those
92 workers cannot be known from the records.[23] (Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs.
NLRC,[24] cited by the solicitor general, has a factual situation different from the case at
bar. Waiting time, unlike that in RJL Martinez Fishing Corp., does not obtain
here.[25] Likewise allegedly inapplicable are the rulings in Villavilla vs. Court of
Appeals[26] and in Brotherhood Labor Unity Movement vs. Zamora.[27]
Respondent Corfarm denies that it had the power of control, rationalizing that
petitioners members were street-hired workers engaged from time to time to do
loading and unloading work x x x[;] [t]here [was] no superintendent-in-charge x x x to
give orders x x x[;] [and] there [were] no gate passes issued, nor tools, equipment and
paraphernalia issued by Corfarm for loading/unloading x x x.[28] It attributes error to the
solicitor generals reliance on Article 280[29] of the Labor Code. Citing Brent School, Inc.
vs. Zamora,[30]private respondent asserts that a literal application of such article will
result in absurdity, where petitioners members will be regular employees not only of
respondents but also of several other rice mills, where they were allegedly also under
service. Finally, Corfarm submits that the OSGs position is negated by the fact that
petitioners members contracted for loading and unloading services with respondent
company when such work was available and when they felt like it x x x.[31]
We rule for petitioners. Section 5, Rule 133 of the Rules of Court mandates
that in cases filed before administrative or quasi-judicial bodies, like the Department of
Labor, a fact may be established by substantial evidence, i.e. that amount of evidence
which a reasonable mind might accept as adequate to justify a conclusion.[32] Also
fundamental is the rule granting not only respect but even finality to factual findings of

the Department of Labor, if supported by substantial evidence. Such findings are


binding upon this Court, unless petitioner is able to show that the secretary of labor (or
the undersecretary acting in his place) has arbitrarily disregarded or misapprehended
evidence before him to such an extent as to compel a contrary conclusion if such
evidence were properly appreciated. This is rooted in the principle that this Court is not
a trier of facts, and that the determinations made by administrative bodies on matters
falling within their respective fields of specialization or expertise are accorded
respect.[33] Also well-settled is the doctrine that the existence of an employer-employee
relationship is ultimately a question of fact and that the findings thereon by the labor
authorities shall be accorded not only respect but even finality when supported by
substantial evidence.[34] Finally, in certiorari proceedings under Rule 65, this Court
does not, as a rule, evaluate the sufficiency of evidence upon which the labor officials
based their determinations. The inquiry is essentially limited to whether they acted
without or in excess of jurisdiction or with grave abuse of discretion.[35] However, this
doctrine is not absolute. Where the labor officers findings are contrary to those of the
med-arbiter, the Court -- in the exercise of its equity jurisdiction -- may wade into and
reevaluate such findings,[36] which we now embark on in this case.[37]
To determine the existence of an employer-employee relation, this Court has
consistently applied the four-fold test which has the following elements: (1) the power
to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to
control -- the last being the most important element.[38]
Our examination of the case records indubitably shows the presence of an
employer-employee relationship. Relying on the evidence adduced by the petitioners,
Respondent Laguesma himself affirmed the presence of such connection. Thus, in his
Order dated September 7, 1993, he astutely held:[39]
Anent the first issue, we find the annexes submitted by the respondent
company not enough to prove that herein petitioner is indeed an
independent contractor. The existence of an independent contractor
relationship is generally established by the following criteria. 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 a specified piece of
work; the control and supervision over the workers; payment of the
contractors workers; the control and the supervision over the workers;
the control of the premises; the duty to supply the premises, tools,
appliances, materials and laborers, and the mode, manner and terms of
payment. [Brotherhood Labor Unity Movement of the Philippines vs.
Zamora, 147 SCRA 49 (198) [sic] ].
None of the above criteria exists in the case at bar. The absence of a
written contract which specifies the performance of a specified piece of
work, the nature and extent of the work and the term and duration of the
relationship between herein petitioner and respondent company belies
the latters [sic] allegation that the former is indeed and [sic] independent
contractor.
Also, respondent failed to show by clear and convincing proof that
herein respondent has the substantial capital or investment to qualify as
an independent contractor under the law. The premises, tools,
equipments [sic] and paraphernalia are all supplied by respondent
company. It is only the manpower or labor force which the alleged
contractor supplies, suggesting the existence of a labor only contracting
scheme which is prohibited by law. Further, if herein petitioner is indeed
an independent contractor, it should have offered its services to other
companies and not to work [sic] exclusively for the respondent
company. It is therefore, clear that the alleged J.P. Costales, Jr.
Cargador Services cannot be considered as an independent contractor
as defined by law.
In his subsequent order, Respondent Laguesma inexplicably reversed his
above ruling and held that there was no employer-employee relationship on the
ground that Respondent Corfarm exercised no power of control over the alleged
employees.
It may be asked, why the sudden change of mind on the part of Respondent
Laguesma? No additional pieces of evidence were adduced and no existing ones were
identified by Laguesma to support such strange reversal. The unblemished fact is that
private respondent was the recruiter and employer of petitioners members.
Shoppers Gain Supermart vs. NLRC[40] provides the standard to determine
whether a worker is an independent contractor:
The applicable law is not Article 280 of the Labor Code which is cited by
petitioners, but Art. 106, which provides:
Art. 106. Contractor or subcontractor. -- Whenever an
employer enters into a 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.
xxxxxxxxx
xxxxxxxxx
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 accordance with the above provision, petitioner corporation is deemed the direct
employer of the private respondents and thus liable for all benefits to which such
workers are entitled, like wages, separation benefits and so forth. There is no denying
the fact that private respondents work as merchandisers, cashiers, baggers, check-out
personnel, sales ladies, warehousemen and so forth were directly related, necessary
and vital to the day-to-day operations of the supermarket; their jobs involved normal
and regular functions in the ordinary business of the petitioner corporation. Given the
nature of their functions and responsibilities, it is improbable that petitioner did not
exercise direct control over their work. Moreover, there is no evidence--as in fact,
petitioners do not even allege--that aside from supplying the manpower, the labor
agencies have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others.
It is undeniable that petitioners members worked as cargadores for private
respondent. They loaded, unloaded and piled sacks of palay from the warehouses to
the cargo trucks and from the cargo trucks to the buyers. This work is directly related,
necessary and vital to the operations of Corfarm. Moreover, Corfarm did not even
allege, much less prove, that petitioners members have substantial capital or
investment in the form of tools, equipment, machineries, [and] work premises, among
others. Furthermore, said respondent did not contradict petitioners allegation that it
paid wages directly to these workers without the intervention of any third-party
independent contractor. It also wielded the power of dismissal over petitioners; in fact,
its exercise of this power was the progenitor of the Second Case. Clearly, the workers
are not independent contractors.
Applying Article 280[41] of the Labor Code, we hold that the CPWU members
were regular employees of private respondent. Their tasks were essential in the usual
business of private respondent.
As we have ruled in an earlier case, the question of whether an employeremployee relationship exists in a certain situation has bedevilled the
courts. Businessmen, with the aid of lawyers, have tried to avoid or sidestep such
relationship, because that juridical vinculum engenders obligations connected with
workmens compensation, social security, medicare, minimum wage, termination pay
and unionism.[42] All too familiarly, Respondent Corfarm sought refuge from these
obligations. However, the records of this case clearly support the existence of the
juridical vinculum.
RJL Martinez Fishing Corporation,[43] cited by the solicitor general, is relevant
because petitioners members were also made to wait for loading and unloading of
cavans ofpalay to and from the storage areas and to and from the milling areas.[44] This
waiting time does not denigrate the regular employment of petitioners members. As
ruled in that case:[45]
x x x Besides, the continuity of employment is not the determining
factor, but rather whether the work of the laborer is part of the regular
business or occupation of the employer.(fn: Article 281, Labor Code, as
amended; Philippine Fishing Boat Officers and Engineer[s] Union vs.
Court of Industrial Relations, 112 SCRA 159 (1982). We are thus in
accord with the findings of respondent NLRC in this regard.
Although it may be that private respondents alternated their
employment on different vessels when they were not assigned to
petitioners boats, that did not affect their employee status. The
evidence also establishes that petitioners had a fleet of fishing vessels
with about 65 ship captains, and as private respondents contended,
when they finished with one vessel they were instructed to wait for the
next. As respondent NLRC had found:

We further find that the employer-employee relationship


between the parties herein is not co-terminous with each
loading and unloading job. As earlier shown, respondents
are engaged in the business of fishing. For this purpose,
they have a fleet of fishing vessels. Under this situation,
respondents activity of catching fish is a continuous
process and could hardly be considered as seasonal in
nature. So that the activities performed by herein
complainants, i.e. unloading the catch of tuna fish from
respondents vessels and then loading the same to
refrigerated vans, are necessary or desirable in the
business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense
that it does not depend on any specific project or
seasonal activity. (fn: NLRC Decision, p. 94, Rollo.)
Alleged Admission of Lack of
Employer-Employee Relationship

Respondent Corfarm argues that some of petitioners members including its


president, Juanito P. Costales, Jr.[,] admitted that they work for various rice mills in
Pangasinan and that there is no employer-employee relations between them and
private respondents. It adds that the solicitor general, by arguing that there was an
employer-employee relationship, attempts to substitute [his] judgment [with] that of
public respondent undersecretary x x x who found such admissions against selfinterest on the part of petitioners members x x x.[46]
These arguments are negligible. The alleged admissions cannot be taken
against petitioners cause. First, the contents of the admissions are highly suspect. The
records reveal that the admissions of Juanito Costales, Jr.,[47] Carlito Costales[48] and
Juanito Medenilla[49] were in the form of affidavits[50] of adhesion which were identical in
content, differentiated only by the typewritten names and the signatures of the
workers. Second, only three of the workers executed such affidavits. Clearly, the
admissions in such affidavits cannot work against petitioner unions cause. Such pro
forma and identical affidavits do not prove lack of employer-employee relationship
against all members of petitioner. Third, the employer-employee relationship is clearly
proven by substantial evidence. Corfarm sorely failed to show that petitioners
members were independent contractors. We rule that no particular form of proof is
required to prove the existence of an employer-employee relationship. Any competent
and relevant evidence may show the relationship. If only documentary evidence would
be required to demonstrate that relationship, no scheming employer would ever be
brought before the bar of justice.[51]Fourth, and in any event, the alleged admissions of
the three workers that they worked with other rice mills do not work against
them. Assuming arguendo that they did work with other rice mills, this was required by
the imperative of meeting their basic needs.[52]
The employer-employee relationship having been duly established, the holding
of a certification election necessarily follows. It bears stressing that there should be no
unnecessary obstacle to the holding of such election,[53] for it is a statutory policy that
should not be circumvented.[54] We have held that, in the absence of a legal
impediment, the holding of a certification election is the most democratic method of
determining the employees choice of their bargaining representative. It is the best
means to settle controversies and disputes involving union representation. Indeed, it is
the keystone of industrial democracy.[55]

Second Case: Illegal Dismissal

Petitioner assails the NLRC for setting aside the labor arbiters decision and
remanding the case for further proceedings. Petitioner argues that the order of remand
will only prolong the agony of the 92 union members and their families for living or
existing without jobs and earnings to give them support. Further, petitioner
contends:[56]
The Labor Arbiter had rendered a decision (Annex D, Petition) on
September 14, 1993 in favor of petitioner based on the available
records of the case after giving more than ample opportunities to private
respondents herein to submit their position paper and other pleadings
alleging their evidences [sic] against the causes of action of petitioner
alleged in the complaint for illegal dismissal, unfair labor practice, nonpayment of various benefits granted by existing laws during their
employment, illegal deductions or diminution of their underpaid daily
wages, non-payment of wage increases and other causes of action
pleaded by the complainant or herein petitioner.

In short, Labor Arbiter Rolando Gambito rendered his decision based


on the records of the case including evidence available on record and
after observing due process of law.
To support his opposition against the remand of the case, petitioner recites the
chronological events of the case, viz::[57]
In the case at bar, private respondents were notified earlier in the latter
part of 1992 regarding the pendency of the complaint for illegal
dismissal, unfair labor practice, damages, etc., but said respondents did
not appear during the initial hearing of the case [before] Labor Arbiter
Ricardo Olairez, then the Arbiter handling the case. The case was reset for hearing at some other dates. On April 22, 1993, Atty. Alfonso C.
Bince, Jr. appeared as counsel for respondents at Dagupan City. Atty.
Bince committed to the Labor Arbiter that the former will file the position
paper for his clients (Corfarm Grains, Inc., et al.) within ten (10) days
from April 22, 1993, but still private respondents Position Paper was not
filed.
On May 20, 1993, Labor Arbiter Rolando Gambito, who took over the
case for illegal dismissal, etc. filed by petitioner, issued an order to
private respondents directing the latter (respondents) to submit their
Position Paper together with THEIR DOCUMENTARY EXHIBITS, if
any, within 10 days from receipt of the order. Still, private respondents
counsel failed to submit private respondents Position Paper relative to
the petitioners complaint for illegal dismissal, unfair labor practice, etc.
which is involved in G.R. No. 114911 pending action by this Honorable
Court.
Thus, the Labor Arbiter rendered his decision on the case in favor of
petitioner and/or the 92 illegally dismissed workers based on the
position paper filed by the latter and available records of the
case. (Emphasis in original.)
On the other hand, Respondent Corfarm submits that the labor arbiters
decision should be set aside not only for lack of competent and credible evidence but
also for lack of procedural due process. Corfarm further contends that in spite of the
pendency of its motions to cross-examine petitioners witnesses and to suspend
proceedings, the labor arbiter ordered the submission of its position paper and
documentary evidence within ten (10) days.[58] Respondent Corfarm insists:[59]
Indeed, although proceedings before a Labor Arbiter are supposed to
be non-litigious and the technicalities in the courts of law need not be
strictly applied, the proceedings should nevertheless be subject to the
requirements of due process as provided in Section 7, Rule 7 of the
NLRC Rules of Procedure. (See also Phil. Telegraph and Telephone
Corp. vs. NLRC, 183 SCRA 451).
We agree with petitioner. Private respondent was not denied procedural due
process, and the labor arbiters decision was based on competent, credible and
substantial evidence.

Procedural Due Process Observed

Private respondent had been duly informed of the pendency of the illegal
dismissal case, but it chose not to participate therein without any known justifiable
cause. The labor arbiter sent notices of hearing or arbitration to the parties, requiring
them to submit position papers at 1:30 p.m. on November 14, 1992.[60] Respondent
Corfarm did not attend the hearing. According to Respondent NLRC, there was no
proof that Respondent Corfarm received such notice. In any case, petitioner filed a
Motion to Admit Amended Complaint on December 23, 1992. Again, another notice for
hearing or arbitration on January 7, 1993 was sent to the parties.[61] This was received
by petitioners counsel as evidenced by the registry return receipt duly signed by
private respondents counsel, Atty. Alfonso Bince, Jr. It was only on January 28, 1993,
however, that Atty. Bince entered his appearance as counsel for Respondent
Corfarm.[62] On May 10, 1993, Corfarm was again given a new period of ten (10) days
within which to submit its position paper and documentary evidence; otherwise, [the
labor arbiter] will be constrained to resolve this case based on available evidence on
record.[63] As evidenced by a registry return receipt, a copy of said directive was
received by respondents counsel on May 25, 1993. Still and all, Corfarm failed to file
its position paper. Clearly, private respondent was given an opportunity to present its
evidence, but it failed or refused to avail itself of this opportunity without any legal
reason. Due process is not violated where a person is given the opportunity to be
heard, but chooses not to give his side of the case.[64]

Labor Arbiters Decision Based


on Credible, Competent and Substantial Evidence

Contrary to the conclusions of the NLRC and the arguments of private


respondent, the findings of the labor arbiter on the question of illegal dismissal were
based on credible, competent and substantial evidence.
It is to be borne in mind that proceedings before labor agencies merely require
the parties to submit their respective affidavits and position papers. Adversarial trial is
addressed to the sound discretion of the labor arbiter. To establish a cause of action,
only substantial evidence is necessary, i.e., such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise.[65] As ruled in Manalo vs. RoldanConfesor:[66]
Clear and convincing proof is x x x more than mere preponderance, but
not to extent of such certainty as is required beyond reasonable doubt
as in criminal cases x x x (fn: Blacks Law Dictionary, 5th Ed., p. 227,
citing Fred C. Walker Agency, Inc. v. Lucas, 215 Va. 535, 211 S.E. 2d
88, 92) while substantial evidence x x x consists of more than a mere
scintilla of evidence but may be somewhat less than a preponderance x
x x x (fn: Ibid., p. 1281, citing Marker v. Finch, D.C. Del., 322 F. Supp.
905, 910) Consequently, in the hierarchy of evidentiary values, We find
proof beyond reasonable doubt at the highest level, followed by clear
and convincing evidence, preponderance of evidence, and substantial
evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor arbiter
relied upon, was available to Respondent NLRC. These pieces of evidence are in the
case records, as aptly pointed out by the solicitor general:[67]
[Regarding] the quoted second sentence of public respondent NLRCs
Resolution that allegations must be proved and established by
competent evidence, and that mere allegations would not suffice
despite the absence of evidence to the contrary, suffice it to say that
there is ample evidence on record to support the Labor Arbiters
decision, to wit: 1) Narrative report of DOLE inspector Crisanto Rey
Dingle noting some violation of underpayment of minimum wage and
underpayment of 13th month pay (page 10, record); 2) affidavit of union
officers and individual union members, stating their various claims
(page 80-195, Record). Despite such evidence and an opportunity
afforded to private respondent to present its evidence and position
paper as borne out by the notice of hearing issued by Labor Arbiter
Olairez dated November 14, 1992, with advice to the parties to submit
their position paper (p. 14 Record) and the Order issued by Labor
Arbiter Gambito dated May 20, 1993; requiring private respondents to
submit their position paper, together with their documentary evidence
(p. 247, record), private respondent failed to submit its position paper
and countervailing evidence which should have met squarely the
allegations and evidence adduced by the petitioner. Thus, in the
absence of private respondents position paper and countervailing
evidence, the Labor Arbiter cannot be faulted in deciding the case
based on the available evidence on record.
It must be stressed that labor laws mandate the speedy administration of
justice, with least attention to technicalities but without sacrificing the fundamental
requisites of due process. In this light, the NLRC, like the labor arbiter, is authorized to
decide cases based on the position papers and other documents submitted, without
resorting to the technical rules of evidence.[68] Verily, Respondent NLRC noted several
documentary evidence sufficient to arrive at a just decision. Indeed, the evidence on
record clearly supports the conclusion of the labor arbiter that the petitioners were
employees of respondent, and that they were illegally dismissed.[69]
The NLRC points to conflicts and inconsistencies in the evidence on
record. We are not convinced. These alleged inconsistencies are too flimsy and too
tenuous to preclude a just decision. The finding that Juanito Costales, Jr. was an
employee of respondent was allegedly inconsistent with his admission that he was the
owner of Carcado Contracting Services. As earlier observed, the inconsistency is
irrelevant. Juan Costales, Jr. was an employee of Corfarm. Owning this alleged outfit
is not inconsistent with such employment. The NLRC also questioned the amount of
the employees compensation. In one instance, the workers stated that they were
receiving P45.00 per days work of eight hours. In another, they claimed that they were
paid P0.12 per sack or cavan. These allegedly differ from their allegation that Corfarm
used to be obliged to pay P57.00 per days earning. The alleged inconsistencies are
more apparent than real. Records reveal that the P57 was the promised
compensation; however, there was an unauthorized deduction of P12; thus, the
amount of P45 per day.[70] The claim of P0.12 per sack or cavan is the basic
computation of how workers or haulers earn their wage for the day.[71]In any event, the

alleged inconsistencies do not affect or diminish the established fact that petitioners
members were regular employees who were illegally dismissed.
Why Respondent NLRC refused to rule directly on the appeal escapes us. The
remand of a case or an issue to the labor arbiter for further proceedings is
unnecessary, considering that the NLRC was in a position to resolve the dispute
based on the records before it and particularly where the ends of justice would be
served thereby.[72]Remanding the case would needlessly delay the resolution of the
case which has been pending since 1992.[73] As already observed, the evidence on
record clearly supports the findings of the labor arbiter.
Pursuant to the doctrine that this Court has a duty to settle, whenever
possible, the entire controversy in a single proceeding, leaving no root or branch to
bear the seeds of future litigation, we now resolve all issues.[74]
It is axiomatic that in illegal dismissal cases, the employer always has the
burden of proof,[75] and his failure to discharge this duty results in a finding that the
dismissal was unjustified.[76] Having defaulted from filing its position paper,
Respondent Corfarm is deemed to have waived its right to present evidence and
counter the allegations of petitioners members.
In the same light, we sustain the labor arbiters holding in respect of unfair labor
practice.[77] As ruled by Labor Arbiter Rolando D. Gambito:[78]
The last issue: Instead of sitting down with the individual complainants
or the union officers to discuss their demands, respondents resorted to
mass lay-off of all the members of the union and replaced them with
outsiders. This is clearly a case of union busting which Art. 248 of the
Labor Code prohibits. Art. 248 provides that It shall be unlawful for an
employer to commit any of the following unfair labor practice (a) To
interfere with, restrain or coerce employees in the exercise of their right
to self-organization; (b) x x x (c) To contract out service or functions
being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their rights to selforganization.
In view of recent jurisprudence,[79] we are correcting some items in the labor
arbiters decision. The thirteenth month pay awarded should be computed for each
year of service from the time each employee was hired up to the date of his actual
reinstatement. The same computation applies to the award of the service incentive
leave[80] and underpaid wages. Each employee is to be paid the remaining underpaid
wages from the date of his or her hiring in accordance with the then prevailing wage
legislations.Likewise, a refund of P12 shall be computed for each day of service of
each employee, to be reckoned from the date such employee was hired. The damages
awarded should be sustained because the employer acted in bad faith.[81] Back wages
are to be computed from the date of dismissal up to the date of actual reinstatement
without any deductions or conditions. This is in consonance with Fernandez, et al. vs.
National Labor Relations Commission:[82]
x x x Accordingly, the award to petitioners of backwages for three years
should be modified in accordance with Article 279 of the Labor Code, as
amended by R.A. 6715, by giving them full backwages without
conditions and limitations, the dismissals having occurred after the
effectivity of the amendatory law on March 21, 1989.Thus, the Court
held in Bustamante:
The clear legislative intent of the amendment in Rep. Act
No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drugrule or the
deduction of earnings elsewhere rule. Thus, a closer
adherence to the legislative policy behind Rep. Act No.
6715 points to full backwages as meaning exactly that,
i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the
period of his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542, Respondent
Laguesmas Orders dated January 4, 1994 and January 27, 1994
are REVERSED and SET ASIDE; whereas his Order dated September 7, 1993
is REINSTATED. In G.R. No. 114911, Respondent NLRCs Resolutions promulgated
on February 16, 1994 and March 28, 1994 are likewise REVERSED AND SET
ASIDE. The Labor Arbiters decision dated September 14, 1993 is reinstated
with MODIFICATIONS as set out in this Decision.Respondent NLRC
is ORDERED to COMPUTE the monetary benefits awarded in accordance with this
Decision and to submit its compliance thereon within thirty days from notice of this
Decision.
SO ORDERED.
FIRST DIVISION

[G.R. No. 120969. January 22, 1998]

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,


vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION) composed of Presiding Commissioner RAUL T. AQUINO,
Commissioner ROGELIO I. RAYALA and Commissioner
VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA
FILMS, respondents.
DECISION
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of
Court, petitioners seek to annul the 10 February 1995 Decision[1] of the National Labor
Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution[2] denying the
motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision
reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private
respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per
week. About four months later, he was designated Assistant Electrician with a weekly
salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he
was promoted to the rank of Electrician with a weekly salary of P475.00, which was
increased to P593.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed
him in June 1990 as a member of the shooting crew with a weekly salary of P375.00,
which was increased to P425.00 in May 1991, then to P475.00 on 21 December
1991.[3]
Petitioners tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning the
equipment to Viva Films warehouse, assisting in the fixing of the lighting system, and
performing other tasks that the cameraman and/or director may assign.[4]
Sometime in May 1992, petitioners sought the assistance of their supervisor,
Mrs. Alejandria Cesario, to facilitate their request that private respondents adjust their
salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed
petitioners that Mr. Vic del Rosario would agree to increase their salary only if they
signed a blank employment contract. As petitioners refused to sign, private
respondents forced Enero to go on leave in June 1992, then refused to take him back
when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from
the company payroll from 8 to 21 June 1992, but was returned on 22 June 1992. He
was again asked to sign a blank employment contract, and when he still refused,
private respondents terminated his services on 20 July 1992.[5] Petitioners thus sued
for illegal dismissal[6] before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA)
is the trade name of Viva Productions, Inc., and that it is primarily engaged in the
distribution and exhibition of movies -- but not in the business of making movies; in the
same vein, private respondent Vic del Rosario is merely an executive producer, i.e.,
the financier who invests a certain sum of money for the production of movies
distributed and exhibited by VIVA.[7]
Private respondents assert that they contract persons called producers -- also
referred to as associate producers[8] -- to produce or make movies for private
respondents; and contend that petitioners are project employees of the associate
producers who, in turn, act as independent contractors. As such, there is no employeremployee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the
film Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie shot from 2 July
up to 22 July 1992, and it was only then that Maraguinot was released upon payment
of his last salary, as his services were no longer needed. Anent petitioner Enero, he
was hired for the movie entitled Sigaw ng Puso, later re-titled Narito ang Puso. He
went on vacation on 8 June 1992, and by the time he reported for work on 20 July
1992, shooting for the movie had already been completed.[9]
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent contractor but
should be considered only as a labor-only contractor and as such, acts as a mere

agent of the real employer, the herein respondents. Respondents even failed to name
and specify who are the producers. Also, it is an admitted fact that the complainants
received their salaries from the respondents. The case cited by the respondents,
Rosario Brothers, Inc. vs.Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are necessary and
essential to the business of the respondents, that of movie-making. Complainant
Maraguinot worked as an electrician while complainant Enero worked as a crew
[member].[10]
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as
follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally
dismissed.
Respondents are hereby ordered to reinstate complainants to their former positions
without loss [of] seniority rights and pay their backwages starting July 21, 1992 to
December 31, 1993 temporarily computed in the amount of P38,000.00 for
complainant Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr.
and thereafter until actually reinstated.
Respondents are ordered to pay also attorneys fees equivalent to ten (10%)
and/or P8,400.00 on top of the award.[11]
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No.
006195-94). In its decision[12] of 10 February 1995, the NLRC found the following
circumstances of petitioners work clearly established:
1. Complainants [petitioners herein] were hired for specific movie projects and their
employment was co-terminus with each movie project the completion/termination of
which are pre-determined, such fact being made known to complainants at the time of
their engagement.
xxx

in: (1) finding that petitioners were project employees; (2) ruling that petitioners were
not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of
private respondents, petitioners cited their performance of activities that were
necessary or desirable in the usual trade or business of private respondents and
added that their work was continuous, i.e., after one project was completed they were
assigned to another project. Petitioners thus considered themselves part of a work
pool from which private respondents drew workers for assignment to different
projects. Petitioners lamented that there was no basis for the NLRCs conclusion that
they were project employees, while the associate producers were independent
contractors; and thus reasoned that as regular employees, their dismissal was illegal
since the same was premised on a false cause, namely, the completion of a project,
which was not among the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their
evidence supports the view that petitioners are project employees; point to petitioners
irregular work load and work schedule; emphasize the NLRCs finding that petitioners
never controverted the allegation that they were not prohibited from working with other
movie companies; and ask that the facts be viewed in the context of the peculiar
characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is
improper since petitioners raise questions of fact, particularly, the NLRCs finding that
petitioners were project employees, a finding supported by substantial evidence; and
submits that petitioners reliance on Article 280 of the Labor Code to support their
contention that they should be deemed regular employees is misplaced, as said
section merely distinguishes between two types of employees, i.e., regular employees
and casual employees, for purposes of determining the right of an employee to certain
benefits.
The OSG likewise rejects petitioners contention that since they were hired not
for one project, but for a series of projects, they should be deemed regular
employees. CitingMamansag v. NLRC,[14] the OSG asserts that what matters is that
there was a time-frame for each movie project made known to petitioners at the time of
their hiring. In closing, the OSG disagrees with petitioners claim that the NLRCs
classification of the movie producers as independent contractors had no basis in fact
and in law, since, on the contrary, the NLRC took pains in explaining its basis for its
decision.

2. Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous in
nature but depends on the availability of movie projects.

As regards the propriety of this action, which the Office of the Solicitor General
takes issue with, we rule that a special civil action for certiorari under Rule 65 of the
Rules of Court is the proper remedy for one who complains that the NLRC acted in
total disregard of evidence material to or decisive of the controversy.[15] In the instant
case, petitioners allege that the NLRCs conclusions have no basis in fact and in law,
hence the petition may not be dismissed on procedural or jurisdictional grounds.

3. As a consequence of the non-continuous work of the shooting units, the total


working hours logged by complainants in a month show extreme variations... For
instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but logged
a total of 183.25 hours in January 1992. Complainant Enero logged a total of
only 31.57 hours in September 1991 but worked for 183.35 hours the next month,
October 1991.

The judicious resolution of this case hinges upon, first, the determination of
whether an employer-employee relationship existed between petitioners and private
respondents or any one of private respondents. If there was none, then this petition
has no merit; conversely, if the relationship existed, then petitioners could have been
unjustly dismissed.

4. Further shown by respondents is the irregular work schedule of complainants on a


daily basis. Complainant Maraguinot was supposed to report on 05 August 1991 but
reported only on 30 August 1991, or a gap of 25 days. Complainant Enero worked on
10 September 1991 and his next scheduled working day was 28 September 1991, a
gap of 18 days.

A related question is whether private respondents are engaged in the business


of making motion pictures. Del Rosario is necessarily engaged in such business as he
finances the production of movies. VIVA, on the other hand, alleges that it does not
make movies, but merely distributes and exhibits motion pictures. There being no
further proof to this effect, we cannot rely on this self-serving denial. At any rate, and
as will be discussed below, private respondents evidence even supports the view that
VIVA is engaged in the business of making movies.

5. The extremely irregular working days and hours of complainants work explain the
lump sum payment for complainants services for each movie project. Hence,
complainants were paid a standard weekly salary regardless of the number of working
days and hours they logged in. Otherwise, if the principle of no work no pay was
strictly applied, complainants earnings for certain weeks would be very negligible.

We now turn to the critical issues. Private respondents insist that petitioners
are project employees of associate producers who, in turn, act as independent
contractors. It is settled that the contracting out of labor is allowed only in case of job
contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code describes permissible job contracting in this wise:

6. Respondents also alleged that complainants were not prohibited from working with
such movie companies like Regal, Seiko and FPJ Productions whenever they are not
working for the independent movie producers engaged by respondents... This
allegation was never rebutted by complainants and should be deemed admitted.

Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the
following conditions are met:

The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein petitioners) were
project employees.
After their motion for reconsideration was denied by the NLRC in its
Resolution[13] of 6 April 1995, petitioners filed the instant petition, claiming that the
NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction

(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.
Assuming that the associate producers are job contractors, they must then be
engaged in the business of making motion pictures. As such, and to be a job
contractor under the preceding description, associate producers must have tools,
equipment, machinery, work premises, and other materials necessary to make motion
pictures.However, the associate producers here have none of these. Private
respondents evidence reveals that the movie-making equipment are supplied to the
producers and owned by VIVA. These include generators,[16] cables and wooden
platforms,[17] cameras and shooting equipment;[18] in fact, VIVA likewise owns the
trucks used to transport the equipment.[19] It is thus clear that the associate producer
merely leases the equipment from VIVA.[20] Indeed, private respondents Formal Offer
of Documentary Evidence stated one of the purposes of Exhibit 148 as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva
to finish their films.[21]
While the purpose of Exhibits 149, 149-A and 149-B was:
[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget and timeframe of at least 30 shooting days or 45 days whichever comes first.[22]
Private respondents further narrated that VIVAs generators broke down during
petitioners last movie project, which forced the associate producer concerned to rent
generators, equipment and crew from another company.[23] This only shows that the
associate producer did not have substantial capital nor investment in the form of tools,
equipment and other materials necessary for making a movie. Private respondents in
effect admit that their producers, especially petitioners last producer, are not engaged
in permissible job contracting.
If private respondents insist that their associate producers are labor
contractors, then these producers can only be labor-only contractors, defined by the
Labor Code as follows:
Art. 106. Contractor or subcontractor.-- x x x
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.
A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. -- (a) 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 workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and
the person acting as contractor shall be considered merely as
an agent or intermediary 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.
(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the
circumstances of each case and after considering the

operating needs of the employer and the rights of the workers


involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the
workers.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But even by
the preceding standards, the associate producers of VIVA cannot be considered laboronly contractors as they did not supply, recruit nor hire the workers. In the instant
case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who
recruited crew members from an available group of free-lance workers which includes
the complainants Maraguinot and Enero.[24] And in their Memorandum, private
respondents declared that the associate producer hires the services of... 6) camera
crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d)
generator man and electrician; (e) clapper; etc....[25] This clearly showed that the
associate producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers
seems to be that of agency,[26] as the latter make movies on behalf of VIVA, whose
business is to make movies. As such, the employment relationship between petitioners
and producers is actually one between petitioners and VIVA, with the latter being the
direct employer.
The employer-employee relationship between petitioners and VIVA can further
be established by the control test. While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct, the most
important element is the employers control of the employees conduct, not only as to
the result of the work to be done but also as to the means and methods to accomplish
the same.[27] These four elements are present here. In their position paper submitted to
the Labor Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the company...
To ensure that quality films are produced by the PRODUCER who is an independent
contractor, the company likewise employs a Supervising PRODUCER, a Project
accountant and a Shooting unit supervisor. The Companys Supervising PRODUCER
is Mr. Eric Cuatico, the Project accountant varies from time to time, and the Shooting
Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the
Executive Producer to monitor the progress of the PRODUCERs work
accomplishment. He is there usually in the field doing the rounds of inspection to see if
there is any problem that the PRODUCER is encountering and to assist in threshing
out the same so that the film project will be finished on schedule. He supervises about
3 to 7 movie projects simultaneously [at] any given time by coordinating with each film
PRODUCER. The Project Accountant on the other hand assists the PRODUCER in
monitoring the actual expenses incurred because the company wants to insure that
any additional budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the company
on how a certain scene must be presented to make the film more interesting and more
commercially viable. (emphasis ours)
VIVAs control is evident in its mandate that the end result must be a quality film
acceptable to the company. The means and methods to accomplish the result are
likewise controlled by VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be justified; certain
scenes are subject to change to suit the taste of the company; and the Supervising
Producer, the eyes and ears of VIVA and del Rosario, intervenes in the movie-making
process by assisting the associate producer in solving problems encountered in
making the film.
It may not be validly argued then that petitioners are actually subject to the
movie directors control, and not VIVAs direction. The director merely instructs
petitioners on how to better comply with VIVAs requirements to ensure that a quality
film is completed within schedule and without exceeding the budget. At bottom, the
director is akin to a supervisor who merely oversees the activities of rank-and-file
employees with control ultimately resting on the employer.
Moreover, appointment slips [28] issued to all crew members state:
During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.

The words superiors and Top Management can only refer to the superiors and
Top Management of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVAs control
over petitioners.
Aside from control, the element of selection and engagement is likewise
present in the instant case and exercised by VIVA. A sample appointment slip offered
by private respondents to prove that members of the shooting crew except the driver
are project employees of the Independent Producers[29] reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992
__________________

1) There is a continuous rehiring of project employees even after cessation of a


project;[32] and
2) The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.[33]
However, the length of time during which the employee was continuously rehired is not controlling, but merely serves as a badge of regular employment.[34]
In the instant case, the evidence on record shows that petitioner Enero was
employed for a total of two (2) years and engaged in at least eighteen (18) projects,
while petitioner Maraguinot was employed for some three (3) years and worked on at
least twenty-three (23) projects.[35] Moreover, as petitioners tasks involved, among
other chores, the loading, unloading and arranging of movie equipment in the shooting
area as instructed by the cameramen, returning the equipment to the Viva Films
warehouse, and assisting in the fixing of the lighting system, it may not be gainsaid
that these tasks were vital, necessary and indispensable to the usual business or trade
of the employer.As regards the underscored phrase, it has been held that this is
ascertained by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety.[36]

APPOINTMENT SLIP

A recent pronouncement of this Court anent project or work pool employees


who had attained the status of regular employees proves most instructive:

You are hereby appointed as SOUNDMAN for the film project entitled
MANAMBIT. This appointment shall be effective upon the commencement of the said
project and shall continue to be effective until the completion of the same.

The denial by petitioners of the existence of a work pool in the company because their
projects were not continuous is amply belied by petitioners themselves who admit that:
xxx

For your services you shall receive the daily/weekly/monthly compensation of P812.50.

A work pool may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business, provided that
the worker shall be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it prevents the unjust situation of
coddling labor at the expense of capital and at the same time enables the workers to
attain the status of regular employees. Clearly, the continuous rehiring of the same set
of employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from which
petitioners drew its workers for its various projects.

During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)
CONFORME:
___________________
Name of appointee

In a final attempt to convince the Court that private respondents were indeed project
employees, petitioners point out that the workers were not regularly maintained in the
payroll and were free to offer their services to other companies when there were no
on-going projects. This argument however cannot defeat the workers status of
regularity.We apply by analogy the case of Industrial-Commercial-Agricultural Workers
Organization v. CIR [16 SCRA 562, 567-68 (1966)] which deals with regular seasonal
employees.There we held: xxx

Signed in the presence of:


_____________________
Notably, nowhere in the appointment slip does it appear that it was the
producer or associate producer who hired the crew members; moreover, it is VIVAs
corporate name which appears on the heading of the appointment slip. What likewise
tells against VIVA is that it paid petitioners salaries as evidenced by vouchers,
containing VIVAs letterhead, for that purpose.[30]
All the circumstances indicate an employment relationship between petitioners
and VIVA alone, thus the inevitable conclusion is that petitioners are employees only
of VIVA.
The next issue is whether petitioners were illegally dismissed. Private
respondents contend that petitioners were project employees whose employment was
automatically terminated with the completion of their respective projects. Petitioners
assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted
that petitioners were part of a work pool;[31] and, while petitioners were initially hired
possibly as project employees, they had attained the status of regular employees in
view of VIVAs conduct.
A project employee or a member of a work pool may acquire the status of a
regular employee when the following concur:

Truly, the cessation of construction activities at the end of every project is a


foreseeable suspension of work. Of course, no compensation can be demanded from
the employer because the stoppage of operations at the end of a project and before
the start of a new one is regular and expected by both parties to the labor
relations. Similar to the case of regular seasonal employees, the employment relation
is not severed by merely being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA
186 (1963)] The employees are, strictly speaking, not separated from services but
merely on leave of absence without pay until they are reemployed. Thus we cannot
affirm the argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project employment.[37] (underscoring
supplied)
While Lao admittedly involved the construction industry, to which Policy
Instruction No. 20/Department Order No. 19[38] regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles to
industries other than the construction industry.[39] Neither may it be argued that a
substantial distinction exists between the projects undertaken in the construction
industry and the motion picture industry. On the contrary, the raison d' etre of both
industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an
employer by imposing a duty to re-hire a project employee even after completion of the
project for which he was hired. The import of this decision is not to impose a positive
and sweeping obligation upon the employer to re-hire project employees. What this
decision merely accomplishes is a judicial recognition of the employment status of a
project or work pool employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool employees who perform

tasks necessary or desirable to the employers usual business or trade. Let it not be
said that this decision coddles labor, for as Lao has ruled, project or work pool
employees who have gained the status of regular employees are subject to the no
work-no pay principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business, provided that
the worker shall be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it prevents the unjust situation of
coddling labor at the expense of capital and at the same time enables the workers to
attain the status of regular employees.
The Courts ruling here is meant precisely to give life to the constitutional policy
of strengthening the labor sector,[40] but, we stress, not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply because
an employee is a project or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee. All that we hold today is that
once a project or work pool employee has been: (1) continuously, as opposed to
intermittently, re-hired by the same employer for the same tasks or nature of tasks;
and (2) these tasks are vital, necessary and indispensable to the usual business or
trade of the employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would
allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, hence allowing the prevention of
acquisition of tenurial security by project or work pool employees who have already
gained the status of regular employees by the employers conduct.
In closing then, as petitioners had already gained the status of regular
employees, their dismissal was unwarranted, for the cause invoked by private
respondents for petitioners dismissal, viz., completion of project, was not, as to them,
a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners
are now entitled to back wages and reinstatement, without loss of seniority rights and
other benefits that may have accrued.[41] Nevertheless, following the principles of
suspension of work and no pay between the end of one project and the start of a new
one, in computing petitioners back wages, the amounts corresponding to what could
have been earned during the periods from the date petitioners were dismissed until
their reinstatement when petitioners respective Shooting Units were not undertaking
any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No.
6715 was already in effect. Pursuant to Section 34 thereof which amended Section
279 of the Labor Code of the Philippines and Bustamante v. NLRC,[42] petitioners are
entitled to receive full back wages from the date of their dismissal up to the time of
their reinstatement, without deducting whatever earnings derived elsewhere during the
period of illegal dismissal, subject, however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the
National Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 10
February 1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED
and SET ASIDE for having been rendered with grave abuse of discretion, and the
decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is
REINSTATED, subject, however, to the modification above mentioned in the
computation of back wages.
No pronouncement as to costs.
SO ORDERED.
THIRD DIVISION

[G.R. No. 129076. November 25, 1998]

ORLANDO FARM GROWERS ASSOCIATION/GLICERIO AOVER, petitioner,


vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
(FIFTH DIVISION), ANTONIO PAQUIT, ESTHER BONGGOT,
FRANCISCO BAUG, LEOCADIO ORDONO, REBECCA MOREN,
MARCELINA HONTIVEROS, MARTIN ORDONO, TITO ORDONO, FE
ORDONO, ERNIE COLON, EUSTIQUIO GELDO, DANNY SAM, JOEL
PIAMONTE, FEDERICO PASTOLERO, VIRGINIA BUSANO, EDILMIRO

ALDION,
EUGENIO
OPERIO, respondents.

BETICAN,

JR.

and

BERNARDO

DECISION
ROMERO, J.:
It is a settled doctrine that an employer-employee relationship can be deduced
from the existence of the following elements: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct.
The principal issue to be resolved in the instant petition is whether or not an
unregistered association may be an employer independent of the respective members
it represents.
The evidence reveals the ensuing facts:
Petitioner Orlando Farms Growers Association, with co-petitioner Glicerio
Aover as its President, is an association of landowners engaged in the production of
export quality bananas located in Kinamayan, Sto. Tomas, Davao del Norte,
established for the sole purpose of dealing collectively with Stanfilco on matters
concerning technical services, canal maintenance, irrigation and pest control, among
others. Respondents, on the other hand, were hired as farm workers by several
member-landowners but, nonetheless, were made to perform functions as packers and
harvesters in the plantation of petitioner association.
After respondents were dismissed on various dates from January 8, 1993 to
July 30, 1994, several complaints were filed against petitioner for illegal dismissal and
monetary benefits. Based on similar grounds, the same were consolidated in the office
of Labor Arbiter Newton R. Sancho who, in a decision dated September 6, 1995,
ordered their reinstatement, viz:
"WHEREFORE, judgment is hereby rendered declaring the dismissal of the 20 abovenamed complainants ILLEGAL, and ordering respondents Orlando Farms Growers
Association/Glicerio Anover to REINSTATE them immediately to their former or
equivalent positions, and to PAY individual complainants their respective backwages
and other benefits (wage differentials, 13th month pay and holiday pay) appearing
opposite their names above set forth, including moral damages and attorney's fees, in
the total amount of P1,047,720.92 only.
All other claims are dismissed for lack of merit.
As becoming a collective association, respondents liabilities to complainants are joint
and solidary, with its responsible officers.
The case of Loran Paquit and Lovilla Dorlones[1] is dropped for having been amicably
settled.
In case of appeal, backwages and other benefits shall accrue but in no case
exceeding 3 years, without any qualification or deduction.
SO ORDERED."[2]
On appeal, the National Labor Relations Commission (NLRC) affirmed the
same in toto in a decision dated December 26, 1996. Its motion for reconsideration
having been denied on February 25, 1997, petitioner filed the instant petition
for cetiorari.
Petitioner alleged that the NLRC erred in finding that respondents were its
employees and not of the individual landownners which fact can easily be deduced
from the payments made by the latter of respondent's Social Security System (SSS)
contributions. Moreover, it could have never exercised the power of control over them
with regard to the manner and method by which the work was to be accomplished,
which authority remain vested with the landowners despite becoming members
thereof.
The arguments adduced before us do not warrant the nullification of the
findings made by the Labor Arbiter and the NLRC as the determination of the
existence of an employer-employee relationship between the party-litigants, being a
question of fact, is amply supported by substantial evidence, as can be gathered from
a perfunctory reading, not only of the pleadings submitted, but from the assailed
decision, as well. Thus, the authority of this Court to review the findings of the NLRC is
limited to allegations of lack of jurisdiction or grave abuse of discretion.

The contention that petitioner, being an unregistered association and having


been formed solely to serve as an effective medium for dealing collectively with
Stanfilco, does not exist in law and, therefore, cannot be considered an employer, is
misleading. This assertion can easily be dismissed by reference to Article 212(e) of the
Labor Code, as amended, which defines an employer as any person acting in the
interest of an employer, directly or indirectly. Following a careful scrutiny of the said
provision, the Court concludes that the law does not require an employer to be
registered before he may come within the purview of the Labor Code, consistent with
the established rule in statutory construction that when the law does not distinguish,
we should not distinguish. To do otherwise would bring about a situation whereby
employees are denied, not only redress of their grievances, but, more importantly, the
protection and benefits accorded to them by law if their employer happens to be an
unregistered association.
To reiterate, as held in the case of Filipinas Broacasting Network, Inc. v.
NLRC,[3] the following are generally considered in the determination of the existence of
an employer-employee relationship: (1) the manner of selection and engagement; (2)
the payment of wages; (3) the presence or absence of the power of dismissal; and (4)
the presence or absence of the power of control; of these four, the last one being the
most important.
In the instant case, the following circumstances which support the existence of
employer-employee relations cannot be denied. During the subsistence of the
association, several circulars and memoranda were issued concerning, among other
things, absences without formal request, loitering in the work area and disciplinary
measures with which every worker is enjoined to comply. Furthermore, the employees
were issued identification cards which the Court, in the case of Domasig v.
NLRC,[4] construed, not only as a security measure but mainly to identify the holder as
a bonafide employee of the firm. However, what makes the relationship explicit is the
power of the petitioner to enter into compromise agreements involving money claims
filed by three employees, namely: Lorna Paquit, Lovella Dorlones and Jasmine
Espanola. If petitioner's disclaimer were to believed, what benefit would accrue to it in
settling an employer-employee dispute to which it allegedly lay no claim?
In spite of the overwhelming evidence sufficient to justify a conclusion that
respondents were indeed employees of petitioner, the latter, nevertheless, maintain
the preposterous claim that the ID card, circulars and memoranda were issued merely
to facilitate the efficient use of common resources, as well as to promote uniform rules
in the work establishment. On this score, we defer to the observations made by the
NLRC when it ruled that, while the original purpose of the formation of the association
was merely to provide the landowners a unified voice in dealing with Stanfilco,
petitioner however exceeded its avowed intentions when its subsequent actions
reenforced only too clearly its admitted role of employer. As reiterated all too often,
factual findings of the NLRC, particularly when they coincide with those of the Labor
Arbiter, are accorded respect, even finality, and will not be disturbed for as long as
such findings are supported by substantial evidence.[5]
Prescinding from the foregoing, we now address the issue of whether or not
petitioner had a valid ground to dismiss respondents from their respective
employment.
It is settled that in termination disputes, the employer bears the burden of
proving that the dismissal is for just cause, failing which it would mean that the
dismissal is not justified and the employer is entitled to reinstatement.[6] The dismissal
of employees must be made within the parameters of the law and pursuant to the
basic tenets of equity, justice and fair play.[7] In Brahm Industries, Inc. v. NLRC,[8] the
Court explained that there are two (2) facets of valid termination of employment: (a)
the legality of the act of dismissal, i.e., the dismissal must be under any of the just
causes provided under Art. 282[9] of the Labor Code; and (b) the legality of the manner
of dismissal, which means that there must be observance of the requirements of due
process, otherwise known as the two-notice rule. Thus, "the employer is required to
furnish the employee with a written notice containing a statement of the cause for
termination and to afford said employee ample opportunity to be heard and to defend
himself with the assistance of his representative, if he so desires. The employer is also
required to notify the worker in writing of the decision to dismiss him, stating clearly the
reasons therefore."[10]
In the instant case, petitioner severed employment relations when it
whimsically dismissed the respondents in utter disregard of the safeguards
underscored in the Constitution, as well as in the Labor Code. Petitioner failed to
controvert the allegation that it was responsible for the dismissal of the
employees. Instead of denying the same or otherwise imputing liability on its memberlandowner by naming the employees allegedly in his employ, petitioner was silent on
the issue and harped on the non-existence of employer-employee relationship
between the parties, which contention we find to be tangential. However related the
issue might seem, it would have been more relevant for the petitioner to have
presented ample evidence before the NLRC and this Court to justify its exoneration
from liability. Having failed in this respect, we deem it fatal to its defense.

For having been dismissed without a valid cause and for non-observance of
the due process requirement, respondents, consistent with recent jurisprudence laid
down in the case ofBustamante v. NLRC,[11] are entitled to receive full backwages from
the date of their dismissal up to the time of their reinstatement. The order, therefore, of
the labor arbiter limiting backwages to a period of three (3) years in the event of an
appeal, is erroneous.
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and
the decision of the National Labor Relations Commission dated September 6, 1995 is
AFFIRMED subject to the deletion of the award of moral damages and attorney's
fees. The Court, however, is remanding this case to Labor Arbiter Newton R. Sancho
to specify in the dispositive portion of his decision the names of the respondents and
the amount that each is entitled to.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 101761. March 24, 1993.


NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP,
respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.
Zoilo V. de la Cruz for private respondent.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether
supervisory employees, as defined in Article 212 (m), Book V of the Labor Code,
should be considered as officers or members of the managerial staff under Article 82,
Book III of the same Code, and hence are not entitled to overtime rest day and holiday
pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which
is fully owned and controlled by the Government, operates three (3) sugar refineries
located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on
April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union represents
the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the
Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse
Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift
Operations Chemist, Shift Electrical Supervisor, General Services Supervisor,
Instrumentation Supervisor, Community Development Officer, Employment and
Training Supervisor, Assistant Safety and Security Officer, Head and Personnel
Services, Head Nurse, Property Warehouse Supervisor, Head of Inventory Control
Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
employees, from rank-and-file to department heads. The JE Program was designed to
rationalized the duties and functions of all positions, reestablish levels of responsibility,
and recognize both wage and operational structures. Jobs were ranked according to
effort, responsibility, training and working conditions and relative worth of the job. As a
result, all positions were re-evaluated, and all employees including the members of
respondent union were granted salary adjustments and increases in benefits
commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the
members of respondent union were treated in the same manner as rank-and file
employees. As such, they used to be paid overtime, rest day and holiday pay pursuant
to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the
implementation of the JE Program, the following adjustments were made: (1) the
members of respondent union were re-classified under levels S-5 to S-8 which are
considered managerial staff for purposes of compensation and benefits; (2) there was
an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in
basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was
increased on top of alignment adjustments; (4) they were entitled to increased
company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for
rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which
was organized pursuant to Republic Act NO. 6715 allowing supervisory employees to
form their own unions, as the bargaining representative of all the supervisory
employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990,
the members of herein respondent union filed a complainant with the executive labor
arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of
Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2
disposing as follows:
"WHEREFORE, premises considered, respondent National Sugar refineries
Corporation is hereby directed to
1. pay the individual members of complainant union the usual overtime pay, rest day
pay and holiday pay enjoyed by them instead of the P100.00 special allowance which
was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value
between the P100.00 special allowance and the overtime pay, rest day pay and
holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along
span of time during which the benefits were being paid to the supervisors has accused
the payment thereof to ripen into contractual obligation; at the complainants cannot be
estopped from questioning the validity of the new compensation package despite the
fact that they have been receiving the benefits therefrom, considering that respondent
union was formed only a year after the implementation of the Job Evaluation Program,
hence there was no way for the individual supervisors to express their collective
response thereto prior to the formation of the union; and the comparative computations
presented by the private respondent union showed that the P100.00 special allowance
given NASUREFCO fell short of what the supervisors ought to receive had the
overtime pay rest day pay and holiday pay not been discontinued, which arrangement,
therefore, amounted to a diminution of benefits.

making petitioner assume the "double burden" of giving the benefits due to rank-andfile employees together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari shall
accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent
union are entitled to overtime, rest day and holiday pay. Before this can be resolved,
however it must of necessity be ascertained first whether or not the union members, as
supervisory employees, are to be considered as officers or members of the managerial
staff who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as
defined employees, as defined under Article 212(m), Book V of the Labor Code on
Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharged, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer effectively recommend such managerial actions if
the exercise of such authority is not merely routinary or clerical in nature but requires
the use of independent judgment. All employees not falling within any of those above
definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest
day and holiday pay, and in ruling that the latter are not managerial employees,
adopted the definition stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the
members of respondent union are entitled to overtime, rest day and holiday pay, said
employees should be considered as "officers or members of the managerial staff" as
defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest
Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the
Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of
the management of the establishment in which they are employed or of a department
or subdivision thereof, and to other officers or members of the managerial staff."
(Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:
xxx xxx xxx

On appeal, in a decision promulgated on July 19, 1991 by its Third Division,


respondent National Labor Relations Commission (NLRC) affirmed the decision of the
labor arbiter on the ground that the members of respondent union are not managerial
employees, as defined under Article 212 (m) of the Labor Code and, therefore, they
are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that
these supervisory employees are merely exercising recommendatory powers subject
to the evaluation, review and final action by their department heads; their
responsibilities do not require the exercise of discretion and independent judgment;
they do not participate in the formulation of management policies nor in the hiring or
firing of employees; and their main function is to carry out the ready policies and plans
of the corporation. 3 Reconsideration of said decision was denied in a resolution of
public respondent dated August 30, 1991. 4

(b) Managerial employees, if they meet all of the following conditions, namely:

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public
respondent commission committed a grave abuse of discretion in refusing to
recognized the fact that the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and holiday pay; and in

(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:

(1) Their primary duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion
or any other change of status of other employees are given particular weight.

(1) The primary duty consists of the performance of work directly related to
management policies of their employer;

e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;

(2) Customarily and regularly exercise discretion and independent judgment;


(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work along
specialized or technical lines requiring special training, experience, or knowledge; or
(iii) execute under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as
supervisors, may not be occupying managerial positions, they are clearly officers or
members of the managerial staff because they meet all the conditions prescribed by
law and, hence, they are not entitled to overtime, rest day and supervisory employees
under Article 212 (m) should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial employee and of the officers or
members of the managerial staff, as contemplated under Article 82 of the Code and
Section 2, Rule I Book III of the implementing rules. In other words, for purposes of
forming and joining unions, certification elections, collective bargaining, and so forth,
the union members are supervisory employees. In terms of working conditions and
rest periods and entitlement to the questioned benefits, however, they are officers or
members of the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of
its concern for those with less privileges in life, this Court has inclined more often than
not toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the
employer.
The question whether a given employee is exempt from the benefits of the law is a
factual one dependent on the circumstances of the particular case, In determining
whether an employee is within the terms of the statutes, the criterion is the character
of the work performed, rather than the title of the employee's position. 6
Consequently, while generally this Court is not supposed to review the factual findings
of respondent commission, substantial justice and the peculiar circumstances
obtaining herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members
will readily show that these supervisory employees are under the direct supervision of
their respective department superintendents and that generally they assist the latter in
planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and efficient operation of their
respective departments. More specifically, their duties and functions include, among
others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes
employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;

2) observes, follows and implements company policies at all times and recommends
disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more
productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends
necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by
the former;
6) coordinates and communicates with other inter and intra department supervisors
when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality
of service and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and
followed by all NASUREFCO employees, recommends revisions or modifications to
said rules when deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions
to subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of the
managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to
Implement the Labor Code, viz.: (1) their primary duty consists of the performance of
work directly related to management policies of their employer; (2) they customarily
and regularly exercise discretion and independent judgment; (3) they regularly and
directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4)
they execute, under general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they do not devote more than
20% of their hours worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that
the union members should be considered as officers and members of the managerial
staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not
entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union
members are managerial employees, to determine the latter's entitlement to the
questioned benefits, is misplaced and inappropriate. It is admitted that these union
members are supervisory employees and this is one instance where the
nomenclatures or titles of their jobs conform with the nature of their functions. Hence,
to distinguish them from a managerial employee, as defined either under Articles 82 or
212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually
involved here seeks a determination of whether or not these supervisory employees
ought to be considered as officers or members of the managerial staff. The distinction,
therefore, should have been made along that line and its corresponding conceptual
criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of
the questioned benefits to the union members has ripened into a contractual
obligation.

A. Prior to the JE Program, the union members, while being supervisors, received
benefits similar to the rank-and-file employees such as overtime, rest day and holiday
pay, simply because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as those of the latter,
aside from the fact that their specific functions and duties then as supervisors had not
been properly defined and delineated from those of the rank-and-file. Such fact is
apparent from the clarification made by petitioner in its motion for reconsideration 8
filed with respondent commission in NLRC Case No. CA No. I-000058, dated August
16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE
Program. Those positions formerly classified as 'supervisory' and found after the JE
Program to be rank-and-file were classified correctly and continue to receive overtime,
holiday and restday pay. As to them, the practice subsists.

". . . it is the prerogative of the management to regulate, according to its discretion and
judgment, all aspects of employment. This flows from the established rule that labor
law does not authorize the substitution of the judgment of the employer in the conduct
of its business. Such management prerogative may be availed of without fear of any
liability so long as it is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating on circumventing the rights of employees
under special laws or valid agreement and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor
Relations Commission promulgated on July 19, 1991 and August 30, 1991,
respectively, are hereby ANNULLED and SET ASIDE for having been rendered and
adopted with grave abuse of discretion, and the basic complaint of private respondent
union is DISMISSED.

"However, those whose duties confirmed them to be supervisory, were re-evaluated,


their duties re-defined and in most cases their organizational positions re-designated
to confirm their superior rank and duties. Thus, after the JE program, complainants
cannot be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted nor controverted by
respondent union in any of its pleadings filed before herein public respondent or with
this Court. Hence, it can be safely concluded therefrom that the members of
respondent union were paid the questioned benefits for the reason that, at that time,
they were rightfully entitled thereto. Prior to the JE Program, they could not be
categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the
payment thereof could not be construed as constitutive of voluntary employer practice,
which cannot be now be unilaterally withdrawn by petitioner. To be considered as
such, it should have been practiced over a long period of time, and must be shown to
have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that
the employer agreed to continue giving the benefits knowingly fully well that said
employees are not covered by the law requiring payment thereof. 11 In the case at
bar, respondent union failed to sufficiently establish that petitioner has been motivated
or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of
private respondent union were re-classified under levels S-5 S-8 which were
considered under the program as managerial staff purposes of compensation and
benefits, that they occupied re-evaluated positions, and that their basic pay was
increased by an average of 50% of their basic salary prior to the JE Program. In other
words, after the JE Program there was an ascent in position, rank and salary. This in
essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and
usually accompanied by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled
to the benefits which attach and pertain exclusively to their positions. Entitlement to
the benefits provided for by law requires prior compliance with the conditions set forth
therein. With the promotion of the members of respondent union, they occupied
positions which no longer met the requirements imposed by law. Their assumption of
these positions removed them from the coverage of the law, ergo, their exemption
therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue
receiving the benefits which attach to their former positions, there was nothing to
prevent them from refusing to accept their promotions and their corresponding
benefits. As the sating goes by, they cannot have their cake and eat it too or, as
petitioner suggests, they could not, as a simple matter of law and fairness, get the best
of both worlds at the expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive
prerogatives of management, provided it is done in good faith. In the case at bar,
private respondent union has miserably failed to convince this Court that the petitioner
acted implementing the JE Program. There is no showing that the JE Program was
intended to circumvent the law and deprive the members of respondent union of the
benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-18353

July 31, 1963

SAN MIGUEL BREWERY, INC., petitioner,


vs.
DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.
Paredes, Poblador, Cruz and Nazareno for petitioner.
Delfin N. Mercader for respondents.
BAUTISTA ANGELO, J.:
On January 27, 1955, the Democratic Labor Association filed complaint against the
San Miguel Brewery, Inc. embodying 12 demands for the betterment of the conditions
of employment of its members. The company filed its answer to the complaint
specifically denying its material averments and answering the demands point by point.
The company asked for the dismissal of the complaint.
At the hearing held sometime in September, 1955, the union manifested its desire to
confine its claim to its demands for overtime, night-shift differential pay, and attorney's
fees, although it was allowed to present evidence on service rendered during Sundays
and holidays, or on its claim for additional separation pay and sick and vacation leave
compensation.1wph1.t
After the case had been submitted for decision, Presiding Judge Jose S. Bautista, who
was commissioned to receive the evidence, rendered decision expressing his
disposition with regard to the points embodied in the complaint on which evidence was
presented. Specifically, the disposition insofar as those points covered by this petition
for review are concerned, is as follows:
1. With regard to overtime compensation, Judge Bautista held that the
provisions of the Eight-Hour Labor Law apply to the employees concerned
for those working in the field or engaged in the sale of the company's
products outside its premises and consequently they should be paid the
extra compensation accorded them by said law in addition to the monthly
salary and commission earned by them, regardless of the meal allowance
given to employees who work up to late at night.
2. As to employees who work at night, Judge Bautista decreed that they
be paid their corresponding salary differentials for work done at night prior
to January 1, 1949 with the present qualification: 25% on the basis of their
salary to those who work from 6:00 to 12:00 p.m., and 75% to those who
work from 12:01 to 6:00 in the morning.
3. With regard to work done during Sundays and holidays, Judge Bautista
also decreed that the employees concerned be paid an additional
compensation of 25% as provided for in Commonwealth Act No. 444 even
if they had been paid a compensation on monthly salary basis.
The demands for the application of the Minimum Wage Law to workers paid on
"pakiao" basis, payment of accumulated vacation and sick leave and attorney's fees,

as well as the award of additional separation pay, were either dismissed, denied, or
set aside.
Its motion for reconsideration having been denied by the industrial court en banc,
which affirmed the decision of the court a quo with few exceptions, the San Miguel
Brewery, Inc. interposed the present petition for review.
Anent the finding of the court a quo, as affirmed by the Court of Industrial Relations, to
the effect that outside or field sales personnel are entitled to the benefits of the EightHour Labor Law, the pertinent facts are as follows:
After the morning roll call, the employees leave the plant of the company to go on their
respective sales routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for beer
trucks. They do not have a daily time record. The company never require them to start
their work as outside sales personnel earlier than the above schedule.
The sales routes are so planned that they can be completed within 8 hours at most, or
that the employees could make their sales on their routes within such number of hours
variable in the sense that sometimes they can be completed in less than 8 hours,
sometimes 6 to 7 hours, or more. The moment these outside or field employees leave
the plant and while in their sales routes they are on their own, and often times when
the sales are completed, or when making short trip deliveries only, they go back to the
plant, load again, and make another round of sales. These employees receive monthly
salaries and sales commissions in variable amounts. The amount of compensation
they receive is uncertain depending upon their individual efforts or industry. Besides
the monthly salary, they are paid sales commission that range from P30, P40,
sometimes P60, P70, to sometimes P90, P100 and P109 a month, at the rate of P0.01
to P0.01- per case.
It is contended that since the employees concerned are paid a commission on the
sales they make outside of the required 8 hours besides the fixed salary that is paid to
them, the Court of Industrial Relations erred in ordering that they be paid an overtime
compensation as required by the Eight-Hour Labor Law for the reason that the
commission they are paid already takes the place of such overtime compensation.
Indeed, it is claimed, overtime compensation is an additional pay for work or services
rendered in excess of 8 hours a day by an employee, and if the employee is already
given extra compensation for labor performed in excess of 8 hours a day, he is not
covered by the law. His situation, the company contends, can be likened to an
employee who is paid on piece-work, "pakiao", or commission basis, which is
expressly excluded from the operation of the Eight-Hour Labor Law.1
We are in accord with this view, for in our opinion the Eight-Hour Labor Law only has
application where an employee or laborer is paid on a monthly or daily basis, or is paid
a monthly or daily compensation, in which case, if he is made to work beyond the
requisite period of 8 hours, he should be paid the additional compensation prescribed
by law. This law has no application when the employee or laborer is paid on a piecework, "pakiao", or commission basis, regardless of the time employed. The philosophy
behind this exemption is that his earnings in the form of commission based on the
gross receipts of the day. His participation depends upon his industry so that the more
hours he employs in the work the greater are his gross returns and the higher his
commission. This philosophy is better explained in Jewel Tea Co. v. Williams, C.C.A.
Okla., 118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly apparent. Such
salesman, to a greater extent, works individually. There are no restrictions
respecting the time he shall work and he can earn as much or as little,
within the range of his ability, as his ambition dictates. In lieu of overtime
he ordinarily receives commissions as extra compensation. He works
away from his employer's place of business, is not subject to the personal
supervision of his employer, and his employer has no way of knowing the
number of hours he works per day.
True it is that the employees concerned are paid a fixed salary for their month of
service, such as Benjamin Sevilla, a salesman, P215; Mariano Ruedas, a truck driver,
P155; Alberto Alpaza and Alejandro Empleo, truck helpers, P125 each, and
sometimes they work in excess of the required 8-hour period of work, but for their extra
work they are paid a commission which is in lieu of the extra compensation to which
they are entitled. The record shows that these employees during the period of their
employment were paid sales commission ranging from P30, P40, sometimes P60,
P70, to sometimes P90, P100 and P109 a month depending on the volume of their
sales and their rate of commission per case. And so, insofar is the extra work they
perform, they can be considered as employees paid on piece work, "pakiao", or
commission basis. The Department of Labor, called upon to implement, the Eight-Hour
Labor Law, is of this opinion when on December 9, 1957 it made the ruling on a query

submitted to it, thru the Director of the Bureau of Labor Standards, to the effect that
field sales personnel receiving regular monthly salaries, plus commission, are not
subject to the Eight-Hour Labor Law. Thus, on this point, said official stated:
. . . Moreover, when a fieldman receives a regular monthly salary plus
commission on percentage basis of his sales, it is also the established
policy of the Office to consider his commission as payment for the extra
time he renders in excess of eight hours, thereby classifying him as if he
were on piecework basis, and therefore, technically speaking, he is not
subject to the Eight-Hour Labor Law.
We are, therefore, of the opinion that the industrial court erred in holding that the
Eight-Hour Labor Law applies to the employees composing the outside service force
and in ordering that they be paid the corresponding additional compensation.
With regard to the claim for night salary differentials, the industrial court found that
claimants Magno Johnson and Jose Sanchez worked with the respondent company
during the period specified by them in their testimony and that watchmen Zoilo Illiga,
Inocentes Prescillas and Daniel Cayuca rendered night duties once every three weeks
continuously during the period of the employment and that they were never given any
additional compensation aside from their monthly regular salaries. The court found that
the company started paying night differentials only in January, 1949 but never before
that time. And so it ordered that the employees concerned be paid 25% additional
compensation for those who worked from 6:00 to 12:00 p.m. and 75% additional
compensation for those who worked from 12:01 to 6: 00 in the morning. It is now
contended that this ruling is erroneous because an award for night shift differentials
cannot be given retroactive effect but can only be entertained from the date of demand
which was on January 27, 1953, citing in support thereof our ruling in Earnshaws
Docks & Honolulu Iron Works v. The Court of Industrial Relations, et al., L-8896,
January 25, 1957.
This ruling, however, has no application here for it appears that before the filing of the
petition concerning this claim a similar one had already been filed long ago which had
been the subject of negotiations between the union and the company which
culminated in a strike in 1952. Unfortunately, however, the strike fizzled out and the
strikers were ordered to return to work with the understanding that the claim for night
salary differentials should be settled in court. It is perhaps for this reason that the
court a quo granted this claim in spite of the objection of the company to the contrary.
The remaining point to be determined refers to the claim for pay for Sundays and
holidays for service performed by some claimants who were watchmen or security
guards. It is contended that these employees are not entitled to extra pay for work
done during these days because they are paid on a monthly basis and are given one
day off which may take the place of the work they may perform either on Sunday or
any holiday.
We disagree with this claim because it runs counter to law. Section 4 of
Commonwealth Act No. 444 expressly provides that no person, firm or corporation
may compel an employee or laborer to work during Sundays and legal holidays unless
he is paid an additional sum of 25% of his regular compensation. This proviso is
mandatory, regardless of the nature of compensation. The only exception is with
regard to public utilities who perform some public service.
WHEREFORE, the decision of the industrial court is hereby modified as follows: the
award with regard to extra work performed by those employed in the outside or field
sales force is set aside. The rest of the decision insofar as work performed on
Sundays and holidays covering watchmen and security guards, as well as the award
for night salary differentials, is affirmed. No costs.
Bengzon, C.J., Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala
and Makalintal, JJ., concur.
Padilla, J., took no part.
SECOND DIVISION

[G.R. No. 156367. May 16, 2005]

AUTO

BUS TRANSPORT SYSTEMS,


BAUTISTA, respondent.

INC.,

petitioner,

vs. ANTONIO

DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision[1] and
Resolution[2] of the Court of Appeals affirming the Decision[3] of the National Labor
Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor
Arbiter (finding respondent entitled to the award of 13 th month pay and service
incentive leave pay) by deleting the award of 13th month pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by


petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel
routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and ManilaTabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of
the total gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta.
Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of
Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without
giving any warning.
Respondent averred that the accident happened because he was compelled by
the management to go back to Roxas, Isabela, although he had not slept for almost
twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the
amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the
damaged buses and that despite respondents pleas for reconsideration, the same was
ignored by management. After a month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal
Dismissal with Money Claims for nonpayment of 13th month pay and service incentive
leave pay against Autobus.
Petitioner, on the other hand, maintained that respondents employment was
replete with offenses involving reckless imprudence, gross negligence, and
dishonesty. To support its claim, petitioner presented copies of letters, memos,
irregularity reports, and warrants of arrest pertaining to several incidents wherein
respondent was involved.
Furthermore, petitioner avers that in the exercise of its management
prerogative, respondents employment was terminated only after the latter was
provided with an opportunity to explain his side regarding the accident on 03 January
2000.
On 29 September 2000, based on the pleadings and supporting evidence
presented by the parties, Labor Arbiter Monroe C. Tabingan promulgated a
Decision,[4] the dispositive portion of which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal
Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby
DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to
the complainant the following:
a. his 13th month pay from the date of his hiring to the date of his
dismissal, presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been
in service with the respondent, presently computed at
P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of
merit.[5]

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the
decision to the NLRC which rendered its decision on 28 September 2001, the decretal
portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly
Sec. 3 provides:
Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis,
performing a specific work, irrespective of the time consumed in the performance
thereof. xxx.
Records show that complainant, in his position paper, admitted that he was paid on a
commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision
by deleting the award of 13th month pay to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the
award of 13th month pay. The other findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was maintained.
Petitioner thus sought a reconsideration of this aspect, which was subsequently
denied in a Resolution by the NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner
sought the review of said decision with the Court of Appeals which was subsequently
denied by the appellate court in a Decision dated 06 May 2002, the dispositive portion
of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and
the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000
is hereby AFFIRMED in toto. No costs.[7]
Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;


2. Whether or not the three (3)-year prescriptive period provided under Article
291 of the Labor Code, as amended, is applicable to respondents claim
of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of
Article 95 of the Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing
Rules and Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall
be entitled to a yearly service incentive leave of five days with
pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is


unsupervised by the employer including those who are engaged
on task or contract basis, purely commission basis, or those who
are paid in a fixed amount for performing work irrespective of the
time consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the
grant of service incentive leave has been delimited by the Implementing Rules and
Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as field personnel. The phrase
other employees whose performance is unsupervised by the employer must not be
understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those whose actual hours of work
in the field cannot be determined with reasonable certainty.[8]
The same is true with respect to the phrase those who are engaged on task or
contract basis, purely commission basis. Said phrase should be related with field
personnel, applying the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow.[9] Hence, employees
engaged on task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave, unless, they fall
under the classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of
service incentive leave just because he was paid on purely commission basis is
misplaced. What must be ascertained in order to resolve the issue of propriety of the
grant of service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to nonagricultural employees who regularly perform their duties away from the principal place
of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty. This definition is further
elaborated in theBureau of Working Conditions (BWC), Advisory Opinion to Philippine
Technical-Clerical Commercial Employees Association[10] which states that:
As a general rule, [field personnel] are those whose performance of their job/service is
not supervised by the employer or his representative, the workplace being away from
the principal office and whose hours and days of work cannot be determined with
reasonable certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field personnel despite the
fact that they are performing work away from the principal office of the
employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under
said advisory opinion, no employee would ever be considered a field personnel
because every employer, in one way or another, exercises control over his employees.
Petitioner further argues that the only criterion that should be considered is the nature
of work of the employee in that, if the employees job requires that he works away from
the principal office like that of a messenger or a bus driver, then he is inevitably a field
personnel.
We are not persuaded. At this point, it is necessary to stress that the definition
of a field personnel is not merely concerned with the location where the employee
regularly performs his duties but also with the fact that the employees performance is
unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an inquiry must be
made as to whether or not the employees time and performance are constantly
supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there
are its inspectors assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductors reports. There is also the
mandatory once-a-week car barn or shop day, where the bus is regularly checked as
to its mechanical, electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at specific place
as [sic] specified time, as they generally observe prompt departure and arrival from
their point of origin to their point of destination. In each and every depot, there is
always the Dispatcher whose function is precisely to see to it that the bus and its crew

leave the premises at specific times and arrive at the estimated proper time. These,
are present in the case at bar. The driver, the complainant herein, was therefore under
constant supervision while in the performance of this work. He cannot be considered a
field personnel.[11]
We agree in the above disquisition. Therefore, as correctly concluded by the
appellate court, respondent is not a field personnel but a regular employee who
performs tasks usually necessary and desirable to the usual trade of petitioners
business. Accordingly, respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service
incentive leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of
whether or not the three (3)-year prescriptive period under Article 291 of the Labor
Code is applicable to respondents claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from
employer-employee relationship shall be filed within three (3) years from the time the
cause of action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be
answered is when does the cause of action for money claims accrue in order to
determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1)
a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to respect or not to
violate such right; and (3) an act or omission on the part of such defendant violative of
the right of the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff.[12]
To properly construe Article 291 of the Labor Code, it is essential to ascertain
the time when the third element of a cause of action transpired. Stated differently, in
the computation of the three-year prescriptive period, a determination must be made
as to the period when the act constituting a violation of the workers right to the benefits
being claimed was committed. For if the cause of action accrued more than three (3)
years before the filing of the money claim, said cause of action has already prescribed
in accordance with Article 291.[13]
Consequently, in cases of nonpayment of allowances and other monetary
benefits, if it is established that the benefits being claimed have been withheld from the
employee for a period longer than three (3) years, the amount pertaining to the period
beyond the three-year prescriptive period is therefore barred by prescription. The
amount that can only be demanded by the aggrieved employee shall be limited to the
amount of the benefits withheld within three (3) years before the filing of the
complaint.[14]
It is essential at this point, however, to recognize that the service incentive
leave is a curious animal in relation to other benefits granted by the law to every
employee. In the case of service incentive leave, the employee may choose to either
use his leave credits or commute it to its monetary equivalent if not exhausted at the
end of the year.[15]Furthermore, if the employee entitled to service incentive leave does
not use or commute the same, he is entitled upon his resignation or separation from
work to the commutation of his accrued service incentive leave. As enunciated by the
Court in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive leave pay to workers in
all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that [e]very employee who has
rendered at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay. Service incentive leave is a right which accrues to every
employee who has served within 12 months, whether continuous or broken reckoned
from the date the employee started working, including authorized absences and paid
regular holidays unless the working days in the establishment as a matter of practice
or policy, or that provided in the employment contracts, is less than 12 months, in
which case said period shall be considered as one year. It is also commutable to its
money equivalent if not used or exhausted at the end of the year. In other words, an
employee who has served for one year is entitled to it. He may use it as leave days or
he may collect its monetary value. To limit the award to three years, as the solicitor
general recommends, is to unduly restrict such right.[17] [Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of
an entitled employee to claim his service incentive leave pay accrues from the moment
the employer refuses to remunerate its monetary equivalent if the employee did not
make use of said leave credits but instead chose to avail of its commutation.
Accordingly, if the employee wishes to accumulate his leave credits and opts for its
commutation upon his resignation or separation from employment, his cause of action

to claim the whole amount of his accumulated service incentive leave shall arise when
the employer fails to pay such amount at the time of his resignation or separation from
employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time when the employer
refuses to pay its monetary equivalent after demand of commutation or upon
termination of the employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is
in keeping with the rudimentary principle that in the implementation and interpretation
of the provisions of the Labor Code and its implementing regulations, the workingmans
welfare should be the primordial and paramount consideration.[18] The policy is to
extend the applicability of the decree to a greater number of employees who can avail
of the benefits under the law, which is in consonance with the avowed policy of the
State to give maximum aid and protection to labor.[19]
In the case at bar, respondent had not made use of his service incentive leave
nor demanded for its commutation until his employment was terminated by petitioner.
Neither did petitioner compensate his accumulated service incentive leave pay at the
time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His cause of action to claim
the payment of his accumulated service incentive leave thus accrued from the time
when his employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive
leave pay only commenced from the time the employer failed to compensate his
accumulated service incentive leave pay at the time of his dismissal. Since respondent
had filed his money claim after only one month from the time of his dismissal,
necessarily, his money claim was filed within the prescriptive period provided for by
Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED.
The assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby
AFFIRMED. No Costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. Nos. 64821-23 January 29, 1993


UNIVERSITY OF PANGASINAN FACULTY UNION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and UNIVERSITY OF
PANGASINAN, respondents.
Tanopo & Serafica for petitioner.
Hermogenes S. Decano for private respondents.

ROMERO, J.:
In the instant petition for mandamus and certiorari, petitioner union seeks to enjoin the
respondent National Labor Relations Commission (NLRC) to resolve, or direct the
Labor Arbiter to hear and decide, the merits of three of petitioner's unresolved
complaints, and to annul and set aside the resolution of the NLRC affirming the
decision of the Executive Labor Arbiter dismissing the petitioner's complaints for
violation of certain labor standards laws but requiring respondent university to
integrate the cost of living allowance into the basic pay of the covered employees and
reminding it to pay its employees at intervals not exceeding sixteen (16) days.

The uncontroverted facts show that on various dates, petitioner filed the following
complaints against the University of Pangasinan (University for brevity) before the
Arbitration Branch of the NLRC in Dagupan City:
1. October 14, 1980: for nonpayment of benefits under P.D.
No. 1713 and emergency cost of living allowance (ecola) to
part-time teachers, and for prompt and accurate computation
of benefits under P.D. No. 451 and the payment of ecolas;
2. November 7, 1980: for nonpayment of all ecolas to
instructors from October 18-31, 1980;
3. November 20, 1980: for nonpayment of ecolas under P.D.
Nos. 525, 1123, 1614, 1634, 1678 and 1713 for November 115, 1980, and extra loads during typhoons "Nitang" and
"Osang" on July 21 and 25, 1980, respectively;
4. April 13, 1981: for violation of P.D. No. 1751 and
nonpayment of extra loads on February 12-13, 1980
(Anniversary celebration);
5. April 27, 1981: for nonpayment of all ecolas for April 1-15,
1981 to faculty members who were also members of the
union;
6. May 21, 1981: for violation of Wage Order No. 1 and
delayed payment of salaries; and
7. June 17, 1981: for nonpayment of salary differentials for
summer under P.D. No. 451. 1
The Regional Director in San Fernando, La Union certified six (6) of these complaints
to Labor Arbiter Pedro Fernandez of the Dagupan City District Office of the then
Ministry of Labor and Employment for compulsory arbitration. 2 According to the
petitioner, it was made to understand by Fernandez that the seventh complaint should
also be discussed in its position paper. Accordingly, petitioner filed a position paper
discussing the merits of all the seven complaints. On the other hand, the University
limited its discussion to only four: the complaints filed on April 13, 1981, April 27, 1981,
May 21, 1981 and June 17, 1981. Petitioner was of the view that Executive Labor
Arbiter Sotero L. Tumang adopted the stand of the University on the four complaints
and accordingly dismissed them in his decision of January 25, 1982. 3
Observing that in its position paper, the petitioner included matters which were
"beyond the scope of the issues alleged in the complaints," said Labor Arbiter
discussed the four complaints individually. On the April 13, 1981 complaint, he ruled
that because at the time P.D. No. 1123 took effect on May 1, 1977, the University had
not increased its tuition fees, there was of "nothing to integrate." 4 However, from June
16, 1979 when the University increased its tuition fees, it was obligated to cause the
integration of the across-the-board increase of P60.00 in emergency allowance into
the basic pay as mandated by P.D. Nos. 1123 and 1751.
On the alleged nonpayment of extra loads handled by the employees on February 12
and 13, 1981 when classes were suspended, Tumang stated that Consuelo Abad, the
petitioner's president, had no cause to complain because her salary was fully paid and
that, since there were "no complainants for the alleged nonpayment of extra loads for
two days," the issue had become academic.
With respect to the April 27, 1981 complaint, Tumang said that since the salary paid to
Consuelo Abad and other faculty members for the April 1-15, 1981 period had been
earned "as part of their salary for the ten-month period," she was no longer entitled to
an emergency cost of living allowance. He added that "payment of emergency cost of
living allowance is based on actual work performed except when they (employees) are
on leave with pay." Hence, because classes ended in March 1981, the teachers who
did not report for work could not be considered on leave with pay and, therefore, they
were not entitled to an emergency cost of living allowance.
As regards the May 21, 1981 complaint alleging violation of Wage Order No. 1,
Tumang found that the University had actually implemented the additional living
allowance of P2.00 a day required therein. On the alleged delay in the payment of
salaries of the employees, he rationalized that delays could not be avoided but he
reminded the University to pay its employees on time.

The June 17, 1981 complaint was also resolved in favor of the University. Stating that
P.D. No. 451 which mandates salary increases is dependent on enrollment and
allowable deductions, Tumang ruled that, again, Consuelo Abad had no cause to
complain as she had been paid out of the allowable 12.74% for distribution which was
a "substantial compliance with P.D. No. 451." 5 The dispositive portion of the decision
states:
IN THE LIGHT OF THE FOREGOING CONSIDERATION, the
above-entitled cases are dismissed for lack of merit.
Respondent however, is required to integrate the allowance
of P60.00 under P.D. 1123 into the basic pay of the covered
employees if the same has not as yet been complied with.
Respondent is also reminded to pay the employees at
intervals not exceeding sixteen (16) days pursuant to Article
102 of the Labor Code.
SO ORDERED.
The petitioner appealed the said decision to the NLRC. In its resolution of June 20,
1993, the NLRC affirmed the decision of Executive Labor Article Tumang. Hence, the
instant petition for mandamus and certiorari with the following prayer:
WHEREFORE, the foregoing premises considered, it is
respectfully prayed that this petition be given due course and
that judgment issue:
1. Declaring petitioner as possessed with capacity to
represent its members in the complaints it filed thru its
president, Miss Consuelo Abad, against private respondent,
and the complaints are pertaining to the members who are
entitled under the law to the claims sought herein, not to Miss
Abad alone;
2. Annulling and setting aside the appealed resolution insofar
as the issues of nonpayment of Ecola for April 1-15, 1981 and
nonpayment of salary differentials for summer of 1981 under
P.D. No. 451 are concerned;
3. Ordering private respondent to pay covered members of
petitioner their Ecola for April 1-15, 1981 and their salary
differentials for summer of 1981 pursuant to the mandate of
P.D. 451;
4. Enjoining public respondent to resolve on the merits the
issues of nonpayment of extra loads of February 12-13, 1980
and violation of Wage Order No. 1 which were properly
brought on appeal to said office;
5. Enjoining public respondent to resolve on the merits the
issues or grievances alleged in the complaints filed on
October 14, November 7 and November 20, all in 1980, which
were not resolved by the labor arbiter but nonetheless
appealed to public respondents, or
6. Enjoining public respondent to order or direct the labor
arbiter to resolve on the merits the said issues or grievances
alleged in the complaints mentioned in the next preceding
paragraph;
7. Attorney's fee in such amount as this Honorable Tribunal
may deem just and reasonable in the premises;
8. Ordering private respondent to pay costs of suit, including
this appeal.
Petitioner further prays for safeguards and/or measures to
insure the correct computation of the amount of claims herein
sought due to each covered member of petitioner, and for
such other reliefs just and equitable in the premises. 6

We shall first deal with the propriety of the special civil action of mandamus. In this
regard, petitioner contends that the NLRC should have, in the exercise of its appellate
jurisdiction, resolved the issues raised in the three (3) complaints filed on October 14,
November 7 and November 20, 1980 or, in the alternative, ordered the Labor Arbiter to
hear and decide the aforementioned three (3) complaints, it having the power of
supervision over Labor Arbiters.
Sec. 3, Rule 65 of the Rules of Court provides:
Sec. 3. Petition for Mandamus. When any tribunal,
corporation, board, or person unlawfully neglects the
performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station, or unlawfully
excludes another from the use and enjoyment of a right or
office to which such other is entitled, and there is no other
plain, speedy and adequate remedy in the ordinary course of
law, the person aggrieved thereby may file a verified petition
in the proper court alleging the facts with certainty and
praying that judgment be rendered commanding the
defendant, immediately or at some other specified time, to do
the act required to be done to protect the rights of the
petitioner, and to pay the damages sustained by the petitioner
by reason of the wrongful acts of the defendant.
As succinctly provided in this section, anyone who wishes to avail of the remedy
of mandamus must state in a verified petition "the facts with certainty." On account of
this requirement, mandamus is never issued in doubtful cases and showing of a clear
and certain right on the part of the petitioner is required. 7 Indeed, while the labor
arbiter is duty bound to resolve all complaints referred to him for arbitration and,
therefore, he may be compelled bymandamus to decide them (although not in any
particular way or in favor of anyone), 8 we find that the peculiar circumstances in this
case do not merit the issuance of the writ of mandamus.
Petitioner admits that only six of the complaints were certified to Labor Arbiter
Fernandez for compulsory arbitration. It failed, however, to allege why this was the
case or whether it had exerted any effort to include the remaining complaint in the
certification. What it stresses is the alleged assurance of Labor Arbiter Fernandez that
the seventh complaint may be discussed in its position paper. It turned out, however,
that, according to the unrebutted allegation of the Solicitor General, Labor Arbiter
Fernandez inhibited himself from handling the cases referred to him as he was
teaching at the University. Hence, Labor Arbiter Fernandez forwarded the complaints
to the Assistant Director for Arbitration in Regional Office No. 1 in San Fernando, La
Union for appropriate action. He should have forwarded all of the complaints to the
said Assistant Director, but it appears that Fernandez turned over only four of them. In
turn, the Assistant Director referred only complaints Nos. 5, 6 and 7, which had been
docketed as RBI-C-24-81, LS-42-81 and LS-43-81, to Executive Labor Arbiter Sotero
L. Tumang for compulsory arbitration. However, while only these three docket
numbers appear on the caption of the decision, the same actually resolved four
complaints, as earlier mentioned. 9
From these facts, one may infer that there must have been a mishandling of the
complaints and/or the records of the cases. However, the petitioner failed to
substantiate by evidence such negligence on the part of the public respondents as to
warrant the issuance of a writ of mandamus. 10 Its officials even neglected the simple
act of verifying from the MOLE office in Dagupan City whether the records of all the
cases filed had been forwarded to the proper official who should resolve
them. 11 Infact, nowhere in its pleadings 12 is there an allegation to that effect.
On the contrary, the petitioner took Fernandez' words seriously and allowed the
proceedings to reach its inevitable conclusion. When it received a copy of the decision,
the petitioner should have taken note of Executive Labor Arbiter Tumang's observation
therein that it had discussed matters "beyond the scope of the issues alleged in the
complaints." In its memorandum of appeal, it should have prayed for the inclusion of
the three complaints inasmuch as in labor cases, an appeal may be treated as a
motion for reconsideration or
vice-versa. 13 The fact that three complaints had been omitted did not escape the
attention of the NLRC which stated in its resolution that "since those cases were not
consolidated it is now too late to consolidate them" with the four decided cases.14 We
agree with the NLRC that the said complaints should proceed separately as long as
their resolution would not conflict with the resolved
cases. 15 It should be added that under Art. 217(b) of the Labor Code, the NLRC has
"exclusive appellate jurisdiction over all cases decided by the Labor Arbiters."
Needless to say, the NLRC could not have acted on matters outside of the cases
appealed to it.

Petitioner's contention that the cases filed by Consuelo Abad as its president should
affect, not only herself, but all the other union members similarly situated as she was,
is well taken. The uncontroverted allegation of the petitioner is that it is the holder of
Registration Certificate No. 9865-C, having been registered with the then Ministry of
Labor and Employment on February 16, 1978. As such, petitioner possessed the legal
personality to sue and be sued under its registered name. 16 Corollarily, its president,
Consuelo Abad, correctly filed the complaints even if some of them involved rights and
interest purely or exclusively appertaining to individual employees, it appearing that
she signed the complaints "for and in behalf of the University of Pangasinan Faculty
Union." 17
The University's contention that petitioner had no legal personality to institute and
prosecute money claims must, therefore, fail. To quote then Associate Justice
Teehankee in Heirs of Teodelo M. Cruz v. CIR, 18 "[w]hat should be borne in mind is
that the interest of the individual worker can be better protected on the whole by a
strong union aware of its moral and legal obligations to represent the rank and file
faithfully and secure for them the best wages and working terms and conditions. . . .
Although this was stated within the context of collective bargaining, it applies equally
well to cases, such as the present wherein the union, through its president, presented
its individual members' grievances through proper proceedings. While the complaints
might not
have disclosed the identities of the individual employees claiming monetary
benefits, 19 such technical defect should not be taken against the claimants, especially
because the University appears to have failed to demand a bill of particulars during the
proceedings before the Labor Arbiter.
On the merits of the petition, the NLRC did not abuse its discretion in resolving the
appeal from the decision of Executive Labor Arbiter Tumang except for the
disallowance of the emergency cost of living allowance to members of the petitioner.
The Rules Implementing P.D. No. 1713 which took effect on August 18, 1980 provide:
Sec. 6. Allowances of full-time and part-time employees.
Employees shall be paid in full the monthly allowance on the
basis of the scales provided in Section 3 hereof, regardless of
the number of their regular working days if they incur no
absences during the month. If they incur absences without
pay, the amounts corresponding to the absences may be
deducted from the monthly allowance provided that in
determining the equivalent daily allowance of such deduction,
the applicable monthly allowance shall be divided by thirty
(30) days.
xxx xxx xxx
(Emphasis supplied).
This Section, which is a virtual reproduction of Section 12 of the old Rules
Implementing P.D. No. 1123, has been interpreted by this Court as requiring that the
full amount of the cost of living allowance mandated by law should be given monthly to
each employee if the latter has worked continuously for each month, regardless of the
number of the regular working days. 20 But more apropos is the ruling of this Court
in University of Pangasinan Faculty Union v. University of Pangasinan and NLRC, 21 a
case involving the same parties as in the instant petition and dealing with a complaint
filed by the petitioner on December 18, 1981 seeking, among others, the payment of
emergency cost of living allowances for November 7 to December 5, 1981, a
semestral break. The Court held therein:
. . . The "No work, no pay" principle does not apply in the
instant case. The petitioner's members received their regular
salaries during this period. It is clear from the . . . law that it
contemplates a "no work" situation where the employees
voluntarily absent themselves. Petitioners, in the case at bar,
certainly do not, ad voluntatem absent themselves during
semestral breaks. Rather, they are constrained to take
mandatory leave from work. For this, they cannot be faulted
nor can they be begrudged that which is due them under the
law. To a certain extent, the private respondent can specify
dates when no classes would be held. Surely, it was not the
intention of the framers of the law to allow employers to
withhold employee benefits by the simple expedient of
unilaterally imposing "no work" days and consequently
avoiding compliance with the mandate of the law for those
days.

As interpreted and emphasized in the same case, the law granting emergency cost of
living allowances was designed to augment the income of the employees to enable
them to cope with the rising cost of living and inflation. Clearly, it was enacted in
pursuance of the State's duty to protect labor and to alleviate the plight of the workers.
To uphold private respondent's interpretation of the law would be running counter to
the intent of the law and the Constitution.
WHEREFORE, the petition for mandamus is hereby DISMISSED. The decision of the
NLRC is AFFIRMED subject to the MODIFICATION that private respondent University
of Pangasinan shall pay its regular and fulltime teachers and employees emergency
cost of living allowance for the period April 1-15, 1981. Costs against private
respondent.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15422

November 30, 1962

NATIONAL DEVELOPMENT COMPANY, petitioner,


vs.
COURT OF INDUSTRIAL RELATIONS and NATIONAL TEXTILE WORKERS
UNION, respondents.
Government Corporate Counsel Simeon M. Gopengco and Lorenzo R. Mosqueda for
petitioner.
Eulogio R. Lerum for respondent National Textile Workers Union.
Mariano B. Tuason for respondent Court of Industrial Relations.
REGALA, J.:
This is a case for review from the Court of Industrial Relations. The pertinent facts are
the following:
At the National Development Co., a government-owned and controlled corporation,
there were four shifts of work. One shift was from 8 a.m. to 4 p.m., while the three
other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10 p.m. and, finally, from 10
p.m. to 6 a.m. In each shift, there was a one-hour mealtime period, to wit: From (1) 11
a.m. to 12 noon for those working between 6 a.m. and 2 p.m. and from (2) 7 p.m. to 8
p.m. for those working between 2 p.m. and 10 p.m.
The records disclose that although there was a one-hour mealtime, petitioner
nevertheless credited the workers with eight hours of work for each shift and paid them
for the same number of hours. However, since 1953, whenever workers in one shift
were required to continue working until the next shift, petitioner instead of crediting
them with eight hours of overtime work, has been paying them for six hours only,
petitioner that the two hours corresponding to the mealtime periods should not be
included in computing compensation. On the other hand, respondent National Textile
Workers Union whose members are employed at the NDC, maintained the opposite
view and asked the Court of Industrial Relations to order the payment of additional
overtime pay corresponding to the mealtime periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March 19,
1959, holding that mealtime should be counted in the determination of overtime work
and accordingly ordered petitioner to pay P101,407.96 by way of overtime
compensation. Petitioner filed a motion for reconsideration but the same was
dismissed by the CIR en banc on the ground that petitioner failed to furnish the union a
copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first, that the CIR has no
jurisdiction over claims for overtime compensation and, secondary that the CIR did not
make "a correct appraisal of the facts, in the light of the evidence" in holding that
mealtime periods should be included in overtime work because workers could not
leave their places of work and rest completely during those hours.
In support of its contention that the CIR lost its jurisdiction over claims for overtime pay
upon the enactment of the Industrial Peace Act (Republic Act No. 875), petitioner cites

a number of decisions of this Court. On May 23, 1960, however, We ruled in Price
Stabilization Corp. v. Court of Industrial Relations, et al., G.R. No. L-13206, that
Analyzing these cases, the underlying principle, it will be noted in all of
them, though not stated in express terms, is that where the employeremployee relationship is still existing or is sought to be reestablished
because of its wrongful severance, (as where the employee seeks
reinstatement) the Court of Industrial Relations has jurisdiction over all
claims arising out of, or in connection with the employment, such as those
related to the Minimum Wage Law and the Eight-Hour Labor Law. After
the termination of their relationship and no reinstatement is sought, such
claims become mere money claims, and come within the jurisdiction of the
regular courts,
We are aware that in 2 cases, some statements implying a different view
have been made, but we now hold and declare the principle set forth in
the next preceding paragraph as the one governing all cases of this
nature.
This has been the constant doctrine of this Court since May 23, 1960.1
A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v.
Manila Railroad Co., et al., G.R. No. L-17905, May 25, 1962, in which We held that, for
such jurisdiction to come into play, the following requisites must be complied with: (a)
there must exist between the parties an employer-employee relationship or the
claimant must seek his reinstatement; and (b) the controversy must relate to a case
certified by the President to the CIR as one involving national interest, or must arise
either under the Eight-Hour Labor Law, or under the Minimum Wage Law. In default of
any of these circumstances, the claim becomes a mere money claim that comes under
the jurisdiction of the regular courts. Here, petitioner does not deny the existence of an
employer-employee relationship between it and the members of the union. Neither is
there any question that the claim is based on the Eight-Hour Labor Law (Com. Act No.
444, as amended). We therefore rule in favor of the jurisdiction of the CIR over the
present claim.
The other issue raised in the appeal is whether or not, on the basis of the evidence,
the mealtime breaks should be considered working time under the following provision
of the law;
The legal working day for any person employed by another shall be of not
more than eight hours daily.When the work is not continuous, the time
during which the laborer is not working and can leave his working place
and can rest completely shall not be counted. (Sec. 1, Com. Act No. 444,
as amended. Emphasis ours.)
It will be noted that, under the law, the idle time that an employee may spend for
resting and during which he may leave the spot or place of work though not the
premises2 of his employer, is not counted as working time only where the work is
broken or is not continuous.
The determination as to whether work is continuous or not is mainly one of fact which
We shall not review as long as the same is supported by evidence. (Sec. 15, Com. Act
No. 103, as amended, Philippine Newspaper Guild v. Evening News, Inc., 86 Phil.
303).
That is why We brushed aside petitioner's contention in one case that workers who
worked under a 6 a.m. to 6 p.m. schedule had enough "free time" and therefore should
not be credited with four hours of overtime and held that the finding of the CIR "that
claimants herein rendered services to the Company from 6:00 a.m. to 6:00 p.m.
including Sundays and holidays, . . . implies either that they were not allowed to leave
the spot of their working place, or that they could not rest completely" (Luzon
Stevedoring Co., Inc. v. Luzon Marine Department Union, et al., G.R. No. L-9265, April
29, 1957).
Indeed, it has been said that no general rule can be laid down is to what constitutes
compensable work, rather the question is one of fact depending upon particular
circumstances, to be determined by the controverted in cases. (31 Am. Jurisdiction
Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner company was continuous and
did not permit employees and laborers to rest completely is not without basis in

evidence and following our earlier rulings, shall not disturb the same. Thus, the CIR
found:
While it may be correct to say that it is well-high impossible for an
employee to work while he is eating, yet under Section 1 of Com. Act No.
444 such a time for eating can be segregated or deducted from his work, if
the same is continuous and the employee can leave his working place rest
completely. The time cards show that the work was continuous and
without interruption. There is also the evidence adduced by the petitioner
that the pertinent employees can freely leave their working place nor rest
completely. There is furthermore the aspect that during the period covered
the computation the work was on a 24-hour basis and previously stated
divided into shifts.
From these facts, the CIR correctly concluded that work in petitioner company was
continuous and therefore the mealtime breaks should be counted as working time for
purposes of overtime compensation.
Petitioner gives an eight-hour credit to its employees who work a single shift say from
6 a.m. to 2 p.m. Why cannot it credit them sixteen hours should they work in two
shifts?
There is another reason why this appeal should dismissed and that is that there is no
decision by the CIR en bancfrom which petitioner can appeal to this Court. As already
indicated above, the records show that petitioner's motion for reconsideration of the
order of March 19, 1959 was dismissed by the CIR en banc because of petitioner's
failure to serve a copy of the same on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act No.
103, states:
The movant shall file the motion (for reconsideration), in six copies within
five (5) days from the date on which he receives notice of the order or
decision, object of the motion for reconsideration, the same to be verified
under oath with respect to the correctness of the allegations of fact,
and serving a copy thereof personally or by registered mail, on the
adverse party. The latter may file an answer, in six (6) copies, duly verified
under oath. (Emphasis ours.)
In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955), We
sustained the dismissal of a motion for reconsideration filed outside of the period
provided in the rules of the CIR. A motion for reconsideration, a copy of which has not
been served on the adverse party as required by the rules, stands on the same
footing. For "in the very nature of things, a motion for reconsideration against a ruling
or decision by one Judge is in effect an appeal to the Court of Industrial Relations, en
banc," the purpose being "to substitute the decision or order of a collegiate court for
the ruling or decision of any judge." The provision in Commonwealth Act No. 103
authorizing the presentation of a motion for reconsideration of a decision or order of
the judge to the CIR,en banc and not direct appeal therefore to this Court, is also in
accord with the principal of exhaustion of administrative remedies before resort can be
made to this Court. (Broce, et al., v. The Court of Industrial Relations, et al., G.R. No.
L-12367, October 29, 1959).
Petitioner's motion for reconsideration having been dismissed for its failure to serve a
copy of the same on the union, there is no decision of the CIR en banc that petitioner
can bring to this Court for review.
WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959 are
hereby affirmed and the appeal is dismissed, without pronouncement as to costs.
Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes,
Dizon and Makalintal concur.
Bengzon, C.J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30452 September 30, 1982

MERCURY DRUG CO., INC., petitioner,


vs.
NARDO DAYAO, ET AL., respondents,

counting backward the three (3) year prescriptive period from


the date of the filing of the instant petition - March 20, 1964 all-of petitioners' claims have not yet prescribed.'

Caparas & Ilagan for petitioner.

5. In so far as respondent union's motion is concerned, the


Court held that 'petitioners' cause of action against the
respondent Association should be dismissed without
prejudice to the refiling of the same as an unfair labor practice
case.'

Gerardo P. Cabo Chan and Elias Banzali for respondents.

GUTIERREZ, JR., J.:


This is a petition for review on certiorari of the decision of the Court of Industrial
Relations dated March 30, 1968 in Case No. 1926-V and the Resolution of the Court
en banc dated July 6, 1968 denying two separate motions for reconsideration filed by
petitioners and respondents.
The factual background of Case No. 1926-V is summarized by the respondent Court of
Industrial Relations as follows:
This is a verified petition dated March 17, 1964 which was
subsequently amended on July 31, 1964 filed by Nardo
Dayao and 70 others against Mercury Drug Co., Inc., and/or
Mariano Que, President & General Manager, and Mercury
Drug Co., Inc., Employees Association praying, with respect
to respondent corporation and its president and general
manager: 1) payment of their unpaid back wages for work
done on Sundays and legal holidays plus 25c/c additional
compensation from date of their employment up to June 30,
1962; 2) payment of extra compensation on work done at
night; 3) reinstatement of Januario Referente and Oscar
Echalar to their former positions with back salaries; and, as
against the respondent union, for its disestablishment and the
refund of all monies it had collected from petitioners.
In separate motions, respondent management and
respondent union move to dismiss, the first on the ground
that:

Only the respondent management moved to reconsider the


Order of March 24, 1965 but the same was denied by the
Court en banc in a resolution dated August 26, 1965.
Respondent submitted an answer to the amended petition
which was subsequently amended on January 6, 1966,
containing some admissions and some denials of the material
averments of the amended petition. By way of affirmative and
special defenses,, respondents alleged that petitioners have
no cause of action against Mariano Que because their
employer respondent Mercury Drug Company, Inc., an
existing corporation which has a separate and distinct
personality from its incorporators stockholders and/or officer,
that the company being a service enterprise is excluded from
the coverage of the Eight Hour Labor Law, as amended; that
no court has the power to set wages, rates of pay, hours of
employment, or other conditions of employment to the extent
of disregarding an agreement thereon between the
respondent company and the petitioners, and of fixing night
differential wages; that the petitioners were fully paid for
services rendered under the terms and conditions of the
individual contracts of employment; that the petition having
been verified by only three of the petitioners without showing
that the others authorized the inclusion of their names as
petitioners does not confer jurisdiction to this Court; that there
is no employer-employee relationship between management
and petitioner Nardo Dayao and that his claim has been
released and/or barred by another action and that petitioners'
claims accuring before March 20, 1961 have prescribed."
(Annex "P", pp. 110-112, rollo).
After hearing on the merits, the respondent court rendered its decision. The dispositive
portion of the March 30, 1968 decision reads:

I. The petition states no cause of action.


II. This Court has no jurisdiction over the subject of the claims
of petitioners Januario Referente and Oscar Echalar.
III. There is another action pending between the same
parties, namely, Mercury Drug Co., Inc., and/or Mariano Que
and Nardo Dayao.
while on the other hand, the second alleges that this Court has no jurisdiction over the
acts complained of against the respondent union.
For reasons stated in the Order dated March 24, 1965, two
Court resolved the motions to dismiss, as follows:
1. Ground No. 1 of management's motion to dismiss was
denied for lack of merit.
2. Its second ground was found meritorious and, accordingly
Januario Referente and Oscar Echalar were dropped as party
petitioners in this case.
3. The third ground was denied, holding that there still exists
the employer- employee relationship between Nardo Dayao
and the management.
4. With respect to the fourth ground, the Court held that on
the basis of section 7-A of C.A. No. 444, as amended by R.A.
No. 1993, 'it can be safely said that,

IN VIEW OF THE FOREGOING, the Court hereby resolves


that:
1. The claim of the petitioners for payment of back wages
correspoding to the first four hours work rendered on every
other Sunday and first four hours on legal holidays should be
denied for lack of merit.
2. Respondent Mercury Drug Company, Inc.. is hereby
ordered to pay the sixty- nine (69) petitioners:
(a) An additional sum equivalent to
25% of their respective basic or
regular salaries for services
rendered on Sundays and legal
holidays during the period from
March 20. 1961 up to June 30, 1962;
and
(b) Another additional sum or
premium equivalent to 25% of their
respective basic or regular salaries
for nighttime services rendered from
March 20, 1961 up to June 30, 1962.
3. Petitioners' petition to convert them to monthly employees
should be, as it is hereby, denied for lack of merit.
4. Respondent Mariano Que, being an officer and acted only
as an agent in behalf of the respondent corporation, should

be absolved from the money claims of herein petitioners


whose employer, according to the pleadings and evidence, is
the Mercury Drug Company,, Inc.

HOWEVER, That this prohibition


shall not apply to public utilities
performing some public service such
as supplying gas, electricity, power,
water, or providing means of
transportation or communication.
(Section 4, C. A. No. 444) (Emphasis
supplied)

To expedite the computation of the money award, the Chief


Court Examiner or his authorized representative is hereby
directed to proceed to the office of the respondent corporation
at Bambang Street, Sta. Cruz, Manila, the latter to make
available to said employee its records, like time records,
payrolls and other pertinent papers, and compute the money
claims awarded in this decision and, upon the completion
thereof, to submit his report as soon as possible for further
disposition of the Court.

Although a service enterprise, respondent company's


employees are within the coverage of C. A. No. 444, as
amended known as the Eight Hour Labor Law, for they do not
fall within the category or class of employees or laborers
excluded from its provisions. (Section 2, Ibid.)

Not satisfied with the decision, the respondents filed a motion for its reconsideration.
The motion for reconsideration, was however, denied by the Court en banc in its
Resolution dated July 6, 1968.

The Court is not impressed by the argument that under the


contracts of employment the petitioners are not entitled to
such claim for the reason that the same are contrary to law.
Payment of extra or additional pay for services rendered
during Sundays and legal holidays is mandated by law. Even
assuming that the petitioners had agreed to work on Sundays
and legal holidays without any further consideration than their
monthly salaries, they are not barred nevertheless from
claiming what is due them, because such agreement is
contrary to public policy and is declared nun and void by law.

Petitioner Mercury Drug Company, Inc., assigned the following errors in this petition:
I
RESPONDENT CIR ERRED IN DECLARING THE
CONTRACTS OF EMPLOYMENT, EXHIBITS "A" AND "B",
NULL AND VOID AS BEING CONTRARY TO PUBLIC
POLICY AND IN SUSTAINING, ACCORDINGLY, PRIVATE
RESPONDENTS' CLAIMS FOR 25% SUNDAY AND LEGAL
HOLIDAY PREMIUMS BECAUSE SUCH DECLARATION
AND AWARD ARE NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE, THUS INFRINGING UPON THE CARDINAL
RIGHTS OF THE PETITIONER; AND ALSO BECAUSE THE
VALIDITY OF SAID t CONTRACTS OF EMPLOYMENT HAS
NOT BEEN RAISED.

Any agreement or contract between employer and the laborer


or employee contrary to the provisions of this Act shall be null
and void ab initio.
Under the cited statutory provision, the petitioners are justified
to receive additional amount equivalent to 25% of their
respective basic or regular salaries for work done on Sundays
and legal holidays for the period from March 20, 1961 to June
30, 1962. (Decision, pp. 119-120, rollo)

II
RESPONDENT CIR ERRED IN SUSTAINING PRIVATE
RESPONDENTS' CLAIMS FOR NIGHTTIME WORK
PREMIUMS NOT ONLY BECAUSE OF THE DECLARED
POLICY ON COLLECTIVE BARGAINING FREEDOM EX.
PRESSED IN REPUBLIC ACT 875 AND THE EXPRESS
PROHIBITION IN SECTION 7 OF SAID STATUTE, BUT
ALSO BECAUSE OF THE WAIVER OF SAID CLAIMS AND
THE TOTAL ABSENCE OF EVIDENCE THEREON.

From a perusal of the foregoing statements of the respondent court, it can be seen
readily that the petitioner-company based its arguments in its first assignment of error
on the wrong premise. The contracts of employment signed by the private respondents
are on a standard form, an example of which is that of private respondent Nardo
Dayao quoted hereunder:
Mercury Drug Co., Inc. 1580 Bambang, Manila
October 30, 1959
Mr. Nardo Dayao
1015 Sta. Catalina
Rizal Ave., Exten.

III
RESPONDENT CIR ERRED IN MAKING AWARDS IN
FAVOR OF THE PRIVATE RESPONDENTS WHO NEITHER
GAVE EVIDENCE NOR EVEN APPEARED TO SHOW
THEIR INTEREST.
Three issues are discussed by the petitioner in its first assignment of error. The first
issue refers to its allegation that the respondent Court erred in declaring the contracts
of employment null and void and contrary to law. This allegation is premised upon the
following finding of the respondent court:
But the Court finds merit in the claim for the payment of
additional compensation for work done on Sundays and
holidays. While an employer may compel his employees to
perform service on such days, the law nevertheless imposes
upon him the obligation to pay his employees at least 25%
additional of their basic or regular salaries.
No person, firm or corporation,
business establishment or place of
center of labor shall compel an
employee or laborer to work during
Sundays and legal holidays unless
he is paid an additional sum of at
least twenty-five per centum of his
regular remuneration: PROVIDED,

Dear Mr. Dayao:


You are hereby appointed as Checker, in the Checking
Department of MERCURY DRUG CO., INC., effective July 1,
1959 and you shall receive an annual compensation the
amount of Two Thousand four hundred pesos only
(P2,400.00), that includes the additional compensation for
work on Sundays and legal holidays.
Your firm being a Service Enterprise, you will be required to
perform work every day in a year as follows:
8 Hours work on regular days and-all special Holidays that
may be declared but with the 25% additional compensation;
4 Hours work on every other Sundays of the month;
For any work performed in excess of the hours as above mentioned, you shall be paid
25 % additional compensation per hour.
This appointment may be terminated without notice for cause and without cause upon
thirty days written notice.

This supersedes your appointment of July 1, 1959.


Very truly yours,
MERCURY DRUG CO., INC.
(Sgd.) MARIANO QUE General Manager
ACCEPTED WITH FULL CONFORMITY:
(Sgd.) NARDO DAYAO
(EXH. "A" and "l ")
(Decision, pp. 114-115, rollo)
These contracts were not declared by the respondent court null and void in their
entirety. The respondent court, on the basis of the conflicting evidence presented by
the parties, in effect: 1) rejected the theory of the petitioner company that the 25%
additional compensation claimed by the private respondents for the four-hour work
they rendered during Sundays and legal holidays provided in their contracts of
employment were covered by the private respondents' respective monthly salaries; 2)
gave credence to private respondents', (Nardo Dayao, Ernesto Talampas and Josias
Federico) testimonies that the 25% additional compensation was not included in the
private respondents' respective monthly salaries and 3) ruled that any agreement in a
contract of employment which would exclude the 25% additional compensation for
work done during Sundays and holidays is null and void as mandated by law.
On the second issue, the petitioner-company reiterated its stand that under the,respective contracts of employment of the private respondents, the subject 25 %
additional compensation had already been included in the latter's respective monthly
salaries. This contention is based on the testimony of its lone witness, Mr. Jacinto
Concepcion and pertinent exhibits. Thus:
Exhibit A shows that for the period of October 30, 1960, the
annual compensation of private respondent Nardo Dayao,
including the additional compensation for the work he renders
during the first four (4) hours on every other Sunday and on
the eight (8) Legal Holidays at the time was P2,400.00 or
P200.00 per month. These amounts did not represent basic
salary only, but they represented the basic daily wage of
Nardo Dayao considered to be in the amount of P7.36 x 305
ordinary working days at the time or in the total amount of
P2,144.80. So plus the amount of P156.40 which is the
equivalent of the Sunday and Legal Holiday rate at P9.20
basic rate of P7.36 plus 25% thereof or P1.84) x 17, the latter
figure representing 13 Sundays and 4 Legal Holidays of 8
hours each. ...
xxx xxx xxx
That the required minimum 25% Sunday and Legal Holiday
additional compensation was paid to and received by the
employees for the work they rendered on every other Sunday
and on the eight Legal Holidays for the period October, 1959
to June 30, 1962 is further corroborated by Exhibits 5, 6, 8, 9
and 9-A and the testimony of Mr. Jacinto Concepcion
thereon. (Brief for the Petitioner, pp. 24, 27).
The aforesaid computations were not given credence by the respondent court. In fact
the same computations were not even mentioned in the court's decision which shows
that the court found such computations incredible. The computations, supposedly
patterned after the WAS Interpretative Bulletin No. 2 of the Department Labor
demonstrated in Exhibits "6", "7", "8", "9", and "9-A", miserably failed to show the exact
and correct annual salary as stated in the respective contracts of employment of the
respondent employees. The figures arrived at in each case did not tally with the annual
salaries on to the employees' contracts of employment, the difference varying from
P1.20 to as much as P14.40 always against the interest of the employees. The
petitioner's defense consists of mathematical computations made after the filing of the
case in order to explain a clear attempt to make its employees work without the extra
compensation provided by law on Sundays and legal holidays.
In not giving weight to the evidence of the petitioner company, the respondent court
sustained the private respondents' evidence to the effect that their 25% additional

compensation for work done on Sundays and Legal Holidays were not included in their
respective monthly salaries. The private respondents presented evidence through the
testimonies of Nardo Dayao, Ernesto Talampas, and Josias Federico who are
themselves among the employees who filed the case for unfair labor practice in the
respondent court and are private respondents herein. The petitioner- company's
contention that the respondent court's conclusion on the issue of the 25% additional
compensation for work done on Sundays and legal holidays during the first four hours
that the private respondents had to work under their respective contracts of
employment was not supported by substantial evidence is, therefore, unfounded.
Much less do We find any grave abuse of discretion on the part of the respondent
court in its interpretation of the employment contract's provision on salaries. In view of
the controlling doctrine that a grave abuse of discretion must be shown in order to
warrant our disturbing the findings of the respondent court, the reversal of the court's
endings on this matter is unwarranted. (Sanchez vs. Court of Industrial Relations, 27
SCRA 490).
The last issue raised in the first assignment of error refers to a procedural matter. The
petitioner-company contends that ,-the question as to whether or not the contracts of
employment were null and void was not put in issue, hence, the respondent court
pursuant to the Rules of Court should have refrained from ruling that such contracts of
employment were null and void. In this connection We restate our finding that the
respondent court did not declare the contracts of employment null and void in their
entirety. Only the objectionable features violative of law were nullified. But even
granting that the Court of Industrial Relations declared the contracts of employment
wholly void, it could do so notwithstanding the procedural objection. In Sanchez u.
Court of Industrial Relations, supra, this Court speaking through then Justice, now
Chief Justice Enrique M. Fernando, stated:
xxx xxx xxx
Moreover, petitioners appear to be oblivious of the statutory
mandate that respondent Court in the hearing, investigation
and determination of any question or controversy and in the
exercise of any of its duties or power is to act 'according to
justice and equity and substantial merits of the case, without
regard to technicalities or legal forms and shall not be bound
by any technical rules of legal evidence' informing its mind 'in
such manner as it may deem just and equitable.' Again, this
Court has invariably accorded the most hospitable scope to
the breadth and amplitude with which such provision is
couched. So it has been from the earliest case decided in
1939 to a 1967 decision.
Two issues are raised in the second assignment of error by
the petitioner-company. The first hinges on the jurisdiction of
the respondent court to award additional compensation for
nighttime work. Petitioner wants Us to re- examine Our
rulings on the question of nighttime work. It contends that the
respondent court has no jurisdiction to award additional
compensation for nighttime work because of the declared
policy on freedom of collective bargaining expressed in
Republic Act 875 and the express prohibition in Section 7 of
the said statute. A re- examination of the decisions on
nighttime pay differential was the focus of attention in Rheem
of the Philippines, Inc. et al., v. Ferrer, et al (19 SCRA 130).
The earliest cases cited by the petitioner-company, Naric v.
Naric Workers Union L-12075, - May 29, 1959 and Philippine
Engineers' Syndicate u. Bautista, L-16440, February 29,
196.4, were discussed lengthily. Thus xxx xxx xxx
2. On the claim for night differentials, no extended discussion
is necessary. To be read as controlling here is Philippine
Engineers' Syndicate, Inc. vs. Hon. Jose S. Bautista, et al., L16440, February 29, 1964, where this Court, speaking thru
Mr. Chief Justice Cesar Bengzon, declared
Only one issue is raised: whether or not upon the enactment of
Republic Act 875, the CIR lost its
jurisdiction over claims for additional
compensation for regular night work.
Petitioner says that this Act reduced
the jurisdiction of respondent court

and limited it to specific cases which


this Court has defined as: ... (1)
when the labor dispute affects an
industry which is indispensable to
the national interest and is so
certified by the President to the
industrial court (Sec. 10, Republic
Act 875); (2) when the controversy
refers to minimum wage under the
Minimum Wage Law (Republic Act
602); (3) when it involves hours of
employment under the Eight-Hour
Labor Law (Commonwealth Act 444)
and (4) when it involves an unfair
labor practice [Sec. 5(a), Republic
Act 8751', [Paflu, et al. vs. Tan, et
al., 52 Off. Gaz, No. 13, 5836].
Petitioner insists that respondents' case falls in none of these
categories because as held in two
previous cases, night work is not
overtime but regular work; and that
respondent court's authority to try
the case cannot be implied from its
general jurisdiction and broad
powers' under Commonwealth Act
103 because Republic Act 875
precisely curbed such powers
limiting them to certain specific
litigations, beyond which it is not
permitted to act.
We believe petitioner to be in error. Its position collides with our ruling in the Naric case
[National Rice & Corn Corp. (NARIC) vs. NARIC Workers'
Union, et al., G.R. No. L-12075, May 29, 1959] where we
held;
While it is true that this Court made the above comment in the
aforementioned case, it does not
intend to convey the Idea that work
done at night cannot also be an
overtime work. The comment only
served to emphasize that the
demand which the Shell Company
made upon its laborers is not merely
overtime work but night work and so
there was need to differentiate night
work from daytime work. In fact, the
company contended that there was
no law that required the payment of
additional compensation for night
work unlike an overtime work which
is covered by Commonwealth Act
No. 444 (Eight Hour Labor Law). And
this Court in that case said that while
there was no law actually requiring
payment of additional compensation
for night work, the industrial court
has the power to determine the
wages that night workers should
receive under Commonwealth Act
No. 103, and so it justified the
additional compensation in the Shell
case for 'hygienic, medical, moral,
cultural and sociological reasons.
xxx xxx xxx
True, in Paflu, et al. vs. Tan, et al., supra, and in a series of cases thereafter, We held
that the broad powers conferred by Commonwealth Act 103 on the CIR may have
been curtailed by Republic Act 875 which limited them to the four categories therein
expressed in line with the public policy of allowing settlement of industrial disputes via
the collective bargaining process; but We find no cogent reason for concluding that a
suit of this nature for extra compensation for night work falls outside the domain of the

industrial court. Withal, the record does not show that the employer-employee relation
between the 64 respondents and the petitioner had ceased.
After the passage of Republic Act 875, this Court has not only upheld the industrial
court's assumption of jurisdiction over cases for salary differentials and overtime pay
[Chua Workers Union (NLU) vs. City Automotive Co., et al., G.R. No. L- 11655, April
29, 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23, 1960] or for payment of
additional compensation for work rendered on Sundays and holidays and for night
work [Nassco vs. Almin, et al., G.R. No. L9055, November 28, 1958; Detective &
Protective Bureau, Inc. vs. Felipe Guevara, et al., G.R. No. L-8738, May 31, 1957] but
has also supported such court's ruling that work performed at night should be paid
more than work done at daytime, and that if that work is done beyond the worker's
regular hours of duty, he should also be paid additional compensation for overtime
work. [Naric vs. Naric Workers' Union. et al., G. R No. L-12075, May 29, 1959, citing
Shell Co. vs. National Labor Union, 81 Phil. 315]. Besides, to hold that this case for
extra compensation now falls beyond the powers of the industrial court to decide,
would amount to a further curtailment of the jurisdiction of said court to an extent which
may defeat the purpose of the Magna Carta to the prejudice of labor.' [Luis Recato Dy,
et al v-9. CIR, G.R. No. L-17788, May 25,1962]"
The petitioner-company's arguments on the respondent court's alleged lack of
jurisdiction over additional compensation for work done at night by the respondents is
without merit.
The other issue raised in the second assignment of error is premised on the petitionercompany's contention that the respondent court's ruling on the additional
compensation for nighttime work is not supported by substantial evidence.
This contention is untenable. Pertinent portions of the respondent court's decision
read:
xxx xxx xxx
There is no serious disagreement between the petitioners and
respondent management on the facts recited above. The
variance in the evidence is only with respect to the money
claims. Witnesses for petitioners declared they worked on
regular days and on every other Sunday and also during all
holidays; that for services rendered on Sundays and holidays
they were not paid for the first four (4) hours and what they
only received was the overtime compensation corresponding
to the number of hours after or in excess of the first four
hours; and that such payment is being indicated in the
overtime pay for work done in excess of eight hours on
regular working days. It is also claimed that their nighttime
services could well be seen on their respective daily time
records. .. (Emphasis supplied) (p.116, rollo)
The respondent court's ruling on additional compensation for work done at night is,
therefore, not without evidence. Moreover, the petitioner-company did not deny that
the private respondents rendered nighttime work. In fact, no additional evidence was
necessary to prove that the private respondents were entitled to additional
compensation for whether or not they were entitled to the same is a question of law
which the respondent court answered correctly. The "waiver rule" is not applicable in
the case at bar. Additional compensation for nighttime work is founded on public
policy, hence the same cannot be waived. (Article 6, Civil Code). On this matter, We
believe that the respondent court acted according to justice and equity and the
substantial merits of the case, without regard to technicalities or legal forms and
should be sustained.
The third assignment of error is likewise without merit. The fact that only three of the
private respondents testified in court does not adversely affect the interests of the
other respondents in the case. The ruling in Dimayuga V. Court of Industrial
Relations (G.R. No. L-0213, May 27, 1957) has been abandoned in later rulings of this
Court.In Philippine Land Air-Sea Labor Union (PLASLU) vs. Sy Indong Company Rice
And Corn Mill (11 SCRA 277) We had occasion to re-examine the ruling
in Dimayuga We stated:
The latter reversed the decision of the trial Judge as regards
the reinstatement with backwages of ... upon the theory that
this is not a class suit; that, consequently, it is necessary and
imperative that they should personally testify and prove the
charges in the complaint', and that, having failed to do so, the

decision of the trial Judge in their favor is untenable under the


rule laid down in Dimayuga vs. Court of Industrial Relations,
G.R. No. L-0213 (May 27,1957).
We do not share the view taken in the resolution appealed
from. As the trial Judge correctly said, in Ms dissent from said
resolution,:

Present:

- versus -

CORONA, C.J., Chairperson,


LEONARDO-DE CASTRO,
DEL CASTILLO,

xxx xxx xxx

ABAD, and
In the case of Sanchez v. Court of Industrial Relations, supra, this Court stated:
To the reproach against the challenged order in the brief of
petitioners in view of only two of the seven claimants
testifying, a statement by this Court in Ormoc Sugar Co., Inc.
vs. OSCO Workers Fraternity Labor Union would suffice by
way of refutation. Thus: "This Court fully agrees with the
respondent that quality and not quantity of witnesses should
be the primordial consideration in the appraisal of evidence.'
Barely eight days later, in another decision, the above
statement was given concrete expression. Thus: 'The bases
of the awards were not only the respective affidavits of the
claimants but the testimonies of 24 witnesses (because 6
were not given credence by the court below) who Identified
the said 239 claimants. The contention of petitions on this
point is therefore unfounded Moveover in Philippine Land-AirSea Labor Union (PLASLU) v. Sy Indong company Rice &
Corn Mill, this Court, through the present Chief Justice
rejected as untenable the theory of the Court of Industrial
Relations concerning the imperative needs of all the
claimants to testify personality and prove their charges in the
complaint. As tersely put: 'We do not share the view taken in
the resolution appealed from.
The petitioner's contention that its employees fully understood what they signed when
they entered into the contracts of employment and that they should be bound by their
voluntary commitments is anachronistic in this time and age.
The Mercury Drug Co., Inc., maintains a chain of drugstores that are open every day of
the week and, for some stores, up to very late at night because of the nature of the
pharmaceutical retail business. The respondents knew that they had to work Sundays
and holidays and at night, not as exceptions to the rule but as part of the regular
course of employment. Presented with contracts setting their compensation on an
annual basis with an express waiver of extra compensation for work on Sundays and
holidays, the workers did not have much choice. The private respondents were at a
disadvantage insofar as the contractual relationship was concerned. Workers in our
country do not have the luxury or freedom of declining job openings or filing
resignations even when some terms and conditions of employment are not only
onerous and inequitous but illegal. It is precisely because of this situation that the
framers of the Constitution embodied the provisions on social justice (Section 6, Article
11) and protection to labor (Section 9, Article I I) in the Declaration of Principles And
State Policies.
It is pursuant to these constitutional mandates that the courts are ever vigilant to
protect the rights of workers who are placed in contractually disadvantageous
positions and who sign waivers or provisions contrary to law and public policy.

SECURITY and CREDIT


INVESTIGATION, INC. and/or
RENE AMBY REYES ,
Respondents.

VILLARAMA, JR., JJ.


Promulgated:
January 16, 2012

x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
It is not for an employee to prove non-payment of benefits to which he is entitled by law. Rather, it is
on the employer that the burden of proving payment of these claims rests.
This Petition for Review on Certiorari[1] assails the February 24, 2006 Decision[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 85515, which granted the petition forcertiorari filed
therewith, set aside the March 23, 2004[3] and June 14, 2004[4] Resolutions of the National Labor
Relations Commission (NLRC), and dismissed the complaint filed by Oliver R. Canoy (Canoy) and
petitioner Abduljuahid R. Pigcaulan (Pigcaulan) against respondent Security and Credit
Investigation, Inc. (SCII) and its General Manager, respondent Rene Amby Reyes. Likewise
assailed is the June 28, 2006 Resolution[5] denying Canoys and Pigcaulans Motion for
Reconsideration.[6]
Factual Antecedents
Canoy and Pigcaulan were both employed by SCII as security guards and were assigned to SCIIs
different clients. Subsequently, however, Canoy and Pigcaulan filed with the Labor Arbiter separate
complaints[7] for underpayment of salaries and non-payment of overtime, holiday, rest day, service
incentive leave and 13th month pays. These complaints were later on consolidated as they involved
the same causes of action.
Canoy and Pigcaulan, in support of their claim, submitted their respective daily time records
reflecting the number of hours served and their wages for the same. They likewise presented
itemized lists of their claims for the corresponding periods served.
Respondents, however, maintained that Canoy and Pigcaulan were paid their just
salaries and other benefits under the law; that the salaries they received were above the statutory
minimum wage and the rates provided by the Philippine Association of Detective and Protective
Agency Operators (PADPAO) for security guards; that their holiday pay were already included in the
computation of their monthly salaries; that they were paid additional premium of 30% in addition to
their basic salary whenever they were required to work on Sundays and 200% of their salary for
work done on holidays; and, that Canoy and Pigcaulan were paid the corresponding 13th month pay
for the years 1998 and 1999. In support thereof, copies of payroll listings[8] and lists of employees
who received their 13th month pay for the periods December 1997 to November 1998 and
December 1998 to November 1999[9] were presented. In addition, respondents contended that
Canoys and Pigcaulans monetary claims should only be limited to the past three years of
employment pursuant to the rule on prescription of claims.
Ruling of the Labor Arbiter

WHEREFORE, the petition is hereby dismissed. The decision and resolution appealed
from are affirmed with costs against the petitioner.
SO ORDERED.

Republic of the Philippines


Supreme Court
Manila
FIRST DIVISION
ABDULJUAHID R. PIGCAULAN,
Petitioner,

G.R. No. 173648

Giving credence to the itemized computations and representative daily time records submitted by
Canoy and Pigcaulan, Labor Arbiter Manuel P. Asuncion awarded them their monetary claims in his
Decision[10] dated June 6, 2002. The Labor Arbiter held that the payroll listings presented by the
respondents did not prove that Canoy and Pigcaulan were duly paid as same were not signed by
the latter or by any SCII officer. The 13th month payroll was, however, acknowledged as sufficient
proof of payment, for it bears Canoys and Pigcaulans signatures. Thus, without indicating any
detailed computation of the judgment award, the Labor Arbiter ordered the payment of overtime pay,
holiday pay, service incentive leave pay and proportionate 13th month pay for the year 2000 in favor
of Canoy and Pigcaulan, viz:
WHEREFORE, the respondents are hereby ordered to
pay the complainants: 1) their salary differentials in the amount
of P166,849.60 for Oliver Canoy and P121,765.44 for Abduljuahid
Pigcaulan; 2) the sum of P3,075.20 for Canoy and P2,449.71 for
Pigcaulan for service incentive leave pay and; [3]) the sum of P1,481.85
for Canoy and P1,065.35 for Pigcaulan as proportionate 13th month pay

for the year 2000. The rest of the claims are dismissed for lack of
sufficient basis to make an award.
SO ORDERED.[11]

considering that they have complied with all needful acts required to
support their claims.
III. The Honorable Court of Appeals erred when it
dismissed the complaint allegedly due to absence of legal and factual
[bases] despite attendance of substantial evidence in the records.[20]

Ruling of the National Labor Relations Commission


Respondents appealed to the NLRC. They alleged that there was no basis
for the awards made because aside from the self-serving itemized computations, no representative
daily time record was presented by Canoy and Pigcaulan. On the contrary, respondents asserted
that the payroll listings they submitted should have been given more probative value. To strengthen
their cause, they attached to their Memorandum on Appeal payrolls[12] bearing the individual
signatures of Canoy and Pigcaulan to show that the latter have received their salaries, as well as
copies of transmittal letters[13] to the bank to show that the salaries reflected in the payrolls were
directly deposited to the ATM accounts of SCIIs employees.
The NLRC, however, in a Resolution[14] dated March 23, 2004, dismissed the appeal
and held that the evidence show underpayment of salaries as well as non-payment of service
incentive leave benefit. Accordingly, the Labor Arbiters Decision was sustained. The motion for
reconsideration thereto was likewise dismissed by the NLRC in a Resolution[15] dated June 14, 2004.
Ruling of the Court of Appeals
In respondents petition for certiorari with prayer for the issuance of a temporary restraining order and
preliminary injunction[16] before the CA, they attributed grave abuse of discretion on the part of the
NLRC in finding that Canoy and Pigcaulan are entitled to salary differentials, service incentive leave
pay and proportionate 13th month pay and in arriving at amounts without providing sufficient bases
therefor.
The CA, in its Decision[17] dated February 24, 2006, set aside the rulings of
both the Labor Arbiter and the NLRC after noting that there were no factual and legal bases
mentioned in the questioned rulings to support the conclusions made. Consequently, it dismissed all
the monetary claims of Canoy and Pigcaulan on the following rationale:
First. The Labor Arbiter disregarded the NLRC rule that, in cases
involving money awards and at all events, as far as practicable, the
decision shall embody the detailed and full amount awarded.
Second. The Labor Arbiter found that the payrolls submitted by SCII
have no probative value for being unsigned by Canoy, when, in fact,
said payrolls, particularly the payrolls from 1998 to 1999 indicate the
individual signatures of Canoy.
Third. The Labor Arbiter did not state in his decision the substance of
the evidence adduced by Pigcaulan and Canoy as well as the laws or
jurisprudence that would show that the two are indeed entitled to the
salary differential and incentive leave pays.
Fourth. The Labor Arbiter held Reyes liable together with SCII for the
payment of the claimed salaries and benefits despite the absence of
proof that Reyes deliberately or maliciously designed to evade SCIIs
alleged financial obligation; hence the Labor Arbiter ignored that SCII
has a corporate personality separate and distinct from Reyes. To justify
solidary liability, there must be an allegation and showing that the
officers of the corporation deliberately or maliciously designed to evade
the financial obligation of the corporation.[18]
Canoy and Pigcaulan filed a Motion for Reconsideration, but same was denied by the CA in a
Resolution[19] dated June 28, 2006.
Hence, the present Petition for Review on Certiorari.
Issues
The petition ascribes upon the CA the following errors:
I. The Honorable Court of Appeals erred when it
dismissed the complaint on mere alleged failure of the Labor Arbiter
and the NLRC to observe the prescribed form of decision, instead of
remanding the case for reformation of the decision to include the
desired detailed computation.
II. The Honorable Court of Appeals erred when it [made]
complainants suffer the consequences of the alleged non-observance
by the Labor Arbiter and NLRC of the prescribed forms of decisions

It is well to note that while the caption of the petition reflects both the names of Canoy
and Pigcaulan as petitioners, it appears from its body that it is being filed solely by Pigcaulan. In fact,
the Verification and Certification of Non-Forum Shopping was executed by Pigcaulan alone.
In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC are not strictly
bound by the rules. And even so, the rules do not mandate that a detailed computation of how the
amount awarded was arrived at should be embodied in the decision. Instead, a statement of the
nature or a description of the amount awarded and the specific figure of the same will
suffice. Besides, his and Canoys claims were supported by substantial evidence in the form of the
handwritten detailed computations which the Labor Arbiter termed as representative daily time
records, showing that they were not properly compensated for work rendered. Thus, the CA should
have remanded the case instead of outrightly dismissing it.
In their Comment,[21] respondents point out that since it was only Pigcaulan who filed
the petition, the CA Decision has already become final and binding upon Canoy. As to Pigcaulans
arguments, respondents submit that they were able to present sufficient evidence to prove payment
of just salaries and benefits, which bits of evidence were unfortunately ignored by the Labor Arbiter
and the NLRC. Fittingly, the CA reconsidered these pieces of evidence and properly appreciated
them. Hence, it was correct in dismissing the claims for failure of Canoy and Pigcaulan to discharge
their burden to disprove payment.
Pigcaulan, this time joined by Canoy, asserts in his Reply[22] that his filing of the
present petition redounds likewise to Canoys benefit since their complaints were consolidated
below. As such, they maintain that any kind of disposition made in favor or against either of them
would inevitably apply to the other. Hence, the institution of the petition solely by Pigcaulan does not
render the assailed Decision final as to Canoy. Nonetheless, in said reply they appended Canoys
affidavit[23] where he verified under oath the contents and allegations of the petition filed by Pigcaulan
and also attested to the authenticity of its annexes. Canoy, however, failed to certify that he had not
filed any action or claim in another court or tribunal involving the same issues. He likewise explains in
said affidavit that his absence during the preparation and filing of the petition was caused by severe
financial distress and his failure to inform anyone of his whereabouts.
Our Ruling
The assailed
CA Decision
is considered
final as to
Canoy.
We have examined the petition and find that same was filed by Pigcaulan solely on his own
behalf. This is very clear from the petitions prefatory which is phrased as follows:
COMES NOW Petitioner Abduljuahid R. Pigcaulan,
by counsel, unto this Honorable Court x x x. (Emphasis supplied.)
Also, under the heading Parties, only Pigcaulan is mentioned as petitioner and consistent with this,
the body of the petition refers only to a petitioner and never in its plural form petitioners. Aside from
the fact that the Verification and Certification of Non-Forum Shopping attached to the petition was
executed by Pigcaulan alone, it was plainly and particularly indicated under the name of the lawyer
who prepared the same, Atty. Josefel P. Grageda, that he is the Counsel for Petitioner Adbuljuahid
Pigcaulan only. In view of these, there is therefore, no doubt, that the petition was brought only on
behalf of Pigcaulan. Since no appeal from the CA Decision was brought by Canoy, same has
already become final and executory as to him.
Canoy cannot now simply incorporate in his affidavit a verification of the contents and allegations of
the petition as he is not one of the petitioners therein. Suffice it to state that it would have been
different had the said petition been filed in behalf of both Canoy and Pigcaulan. In such a case,
subsequent submission of a verification may be allowed as non-compliance therewith or a defect
therein does not necessarily render the pleading, or the petition as in this case, fatally
defective.[24] The court may order its submission or correction, or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be dispensed with in order that the
ends of justice may be served thereby. Further, a verification is deemed substantially complied with
when one who has ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have been made in good faith
or are true and correct.[25] However, even if it were so, we note that Canoy still failed to submit or at
least incorporate in his affidavit a certificate of non-forum shopping.

The filing of a certificate of non-forum shopping is mandatory so much so


that non-compliance could only be tolerated by special circumstances and compelling
reasons.[26] This Court has held that when there are several petitioners, all of them must execute and
sign the certification against forum shopping; otherwise, those who did not sign will be dropped as
parties to the case.[27] True, we held that in some cases, execution by only one of the petitioners on
behalf of the other petitioners constitutes substantial compliance with the rule on the filing of a
certificate of non-forum shopping on the ground of common interest or common cause of action or
defense.[28] We, however, find that common interest is not present in the instant petition. To recall,
Canoys and Pigcaulans complaints were consolidated because they both sought the same reliefs
against the same respondents. This does not, however, mean that they share a common interest or
defense.The evidence required to substantiate their claims may not be the same. A particular
evidence which could sustain Canoys action may not effectively serve as sufficient to support
Pigcaulans claim.
Besides, assuming that the petition is also filed on his behalf, Canoy failed to show
any reasonable cause for his failure to join Pigcaulan to personally sign the Certification of NonForum Shopping. It is his duty, as a litigant, to be prudent in pursuing his claims against SCII,
especially so, if he was indeed suffering from financial distress. However, Canoy failed to advance
any justifiable reason why he did not inform anyone of his whereabouts when he knows that he has
a pending case against his former employer. Sadly, his lack of prudence and diligence cannot merit
the courts consideration or sympathy. It must be emphasized at this point that procedural rules
should not be ignored simply because their non-observance may result in prejudice to a partys
substantial rights. The Rules of Court should be followed except only for the most persuasive of
reasons.[29]
Having declared the present petition as solely filed by Pigcaulan, this Court shall
consider the subsequent pleadings, although apparently filed under his and Canoys name, as solely
filed by the former.
There was no substantial evidence to support the grant
of overtime pay.
The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive leave pay
and 13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor Arbiter relied
heavily on the itemized computations they submitted which he considered as representative daily
time records to substantiate the award of salary differentials.The NLRC then sustained the award on
the ground that there was substantial evidence of underpayment of salaries and benefits.
We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten itemized
computations are self-serving, unreliable and unsubstantial evidence to sustain the grant of salary
differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way of
verifying the truth of the handwritten entries stated therein.Written only in pieces of paper and solely
prepared by Canoy and Pigcaulan, these representative daily time records, as termed by the Labor
Arbiter, can hardly be considered as competent evidence to be used as basis to prove that the two
were underpaid of their salaries. We find nothing in the records which could substantially support
Pigcaulans contention that he had rendered service beyond eight hours to entitle him to overtime
pay and during Sundays to entitle him to restday pay. Hence, in the absence of any concrete proof
that additional service beyond the normal working hours and days had indeed been rendered, we
cannot affirm the grant of overtime pay to Pigcaulan.

for he rendered service for more than a year already. Furthermore, under Presidential Decree No.
851,[31] he should be paid his 13th month pay. As employer, SCII has the burden of proving that it has
paid these benefits to its employees.[32]
SCII presented payroll listings and transmittal letters to the bank to show that Canoy
and Pigcaulan received their salaries as well as benefits which it claimed are already integrated in
the employees monthly salaries. However, the documents presented do not prove SCIIs
allegation. SCII failed to show any other concrete proof by means of records, pertinent files or similar
documents reflecting that the specific claims have been paid. With respect to 13th month pay, SCII
presented proof that this benefit was paid but only for the years 1998 and 1999. To repeat, the
burden of proving payment of these monetary claims rests on SCII, being the employer. It is a rule
that one who pleads payment has the burden of proving it. Even when the plaintiff alleges nonpayment, still the general rule is that the burden rests on the defendant to prove payment, rather
than on the plaintiff to prove non-payment.[33] Since SCII failed to provide convincing proof that it has
already settled the claims, Pigcaulan should be paid his holiday pay, service incentive leave benefits
and proportionate 13th month pay for the year 2000.
The CA erred in dismissing the claims instead of remanding the case to the
Labor Arbiter for a detailed computation of the judgment award.
Indeed, the Labor Arbiter failed to provide sufficient basis for the monetary
awards granted. Such failure, however, should not result in prejudice to the substantial rights of the
party. While we disallow the grant of overtime pay and restday pay in favor of Pigcaulan, he is
nevertheless entitled, as a matter of right, to his holiday pay, service incentive leave pay and
13th month pay for year 2000. Hence, the CA is not correct in dismissing Pigcaulans claims in its
entirety.
Consistent with the rule that all money claims arising from an employer-employee relationship shall
be filed within three years from the time the cause of action accrued,[34]Pigcaulan can only demand
the amounts due him for the period within three years preceding the filing of the complaint in
2000. Furthermore, since the records are insufficient to use as bases to properly compute
Pigcaulans claims, the case should be remanded to the Labor Arbiter for a detailed computation of
the monetary benefits due to him.
WHEREFORE, the petition is GRANTED. The Decision dated
February 24, 2006 and Resolution dated June 28, 2006 of the Court of Appeals in CA-G.R. SP No.
85515 are REVERSED and SET ASIDE. Petitioner Abduljuahid R. Pigcaulan is hereby
declared ENTITLED to holiday pay and service incentive leave pay for the years 1997-2000 and
proportionate 13th month pay for the year 2000.
The case is REMANDED to the Labor Arbiter for further proceedings to determine the exact amount
and to make a detailed computation of the monetary benefits due Abduljuahid R. Pigcaulan which
Security and Credit Investigation Inc. should pay without delay.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

Pigcaulan is entitled to holiday pay, service incentive leave pay and


proportionate 13th month pay for year 2000.
However, with respect to the award for holiday pay, service incentive leave
pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits.
Article 94 of the Labor Code provides that:
ART. 94. RIGHT TO HOLIDAY PAY. (a) Every worker
shall be paid his regular daily wage during regular holidays, except in
retail and service establishments regularly employing less than ten (10)
workers;

FIRST DIVISION
G.R. No. L-39387 June 29, 1982
PAMPANGA SUGAR DEVELOPMENT CO., INC., petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS AND SUGAR WORKERS ASSOCIATION,
respondents.

xxxx
While Article 95 of the Labor Code provides:

MAKASIAR, J.:

ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. (a)


Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive of five days with pay.

Petitioner Pampanga Sugar Development Company, Inc. seeks the reversal of the
order dated June 6, 1974 of respondent Court of Industrial Relations awarding to
respondent Sugar Workers Association's (Union) counsel attorney's fees equivalent to
20% of the judgment in CIR Case No. 4264- ULP and ordering the lower court's
Examining Division to compute the wage and fringe benefits differentials due the 28
individual workers who did not execute quitclaims as well as attorney's fees
corresponding to 20% of the benefits due to 53 workers who entered into agreements
waiving their rights and benefits under the decision dated December 4, 1972 in the
aforecited case; also, the setting aside of the CIR resolution of September 3, 1974

xxxx
Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he
does not work.[30] Likewise, express provision of the law entitles him to service incentive leave benefit

denying petitioner's motion for reconsideration of the questioned order (pp. 15 & 57,
rec.).

or settlement is made thereunder; because, aside from being inequitable, exorbitant,


excessive and unconscionable, the same is without legal basis.

For a better appreciation of this case, certain prefatory facts must be recalled.
Sometime in February, 1956, the workers' affiliates of respondent Union staged a
strike against petitioner company. This labor dispute was certified by the President to
the Court of Industrial Relations which was docketed as Case No. 13-IPA. After six
years, the said Court issued an order on November 8, 1962 directing petitioner
company to reinstate the members of respondent union. On March 12, 1963 some 88
union members were thus reinstated by petitioner. However, petitioner discriminated
against the reemployed workers with respect to wage rates, off-season pay, cost of
living allowance, milling bonus and Christmas bonus by depriving them of aforesaid
benefits or by granting to some members benefits lesser than those given to members
of the Pasudeco Workers Union, another labor group in the service of petitioner. By
reason of such denial and/or grant of lower benefits to respondent's members because
of their union affiliation and union activities, respondent filed with the CIR a complaint
dated September 10, 1964 for unfair labor practice against petitioner which case was
docketed as Case No. 4264-ULP.

2. The Court of Industrial Relations erred in ordering the Chief of its examining division
or his duly authorized representative to examine the payrolls, vouchers, books of
account and other pertinent documents of petitioner, and to compute the wage and
fringe-benefits differentials allegedly due the members of respondent Union because
such examination and computation have become academic.

On December 4, 1972, the CIR handed down a decision adjudging herein petitioner
guilty of unfair labor practice acts as charged and finding the same to have been
committed, and thereby directing petitioner to cease and desist from further committing
the said unfair labor practice acts and directing petitioner to pay wage differentials to
certain workers and fringe benefits as would be found due and payable to them and to
readmitted seasonal and casual members of respondent union totalling 88 with the
exception of 7 workers.
In a resolution dated May 28, 1973, the CIR denied petitioner's motion for
reconsideration of aforesaid decision filed on December 14, 1972. Petitioner appealed
the above decision and resolution to this Court on June 15, 1973 praying in its petition
for the nullification of said decision and motion for being contrary to law, and for the
rendition of a new judgment dismissing CIR Case No. 4264-ULP.
This Court, in its resolution of July 31, 1973, denied the said petition for review
(docketed as G.R. No. L-36994) for lack of merit. Petitioner then moved for
reconsideration of aforesaid denial which was denied on October 4, 1973 for lack of
merit. Said resolution denying the motion for reconsideration thus became final and
executory on October 12, 1973.
With the finality of the December 4, 1972 decision having been settled, respondent
Union filed with the CIR a motion for computation of final judgment and a petition for
attorney's lien both dated October 17, 1973 (pp. 47 & 50, rec.).
Petitioner company filed its answer to motion for computation of final judgment and the
petition for attorney's lien under date of November 20, 1973 (p. 52, rec.).
The CIR, acting on the aforesaid motions of respondent Union, issued its order of June
6, 1974 approving and granting to respondent's counsel, Atty. Ignacio Lacsina,
attorney's fees equivalent to 20% of the total amount of final judgment or whatever
recovery or settlement is made and directing its Examining Division to compute the
wage and fringe benefits differentials due the 28 individual workers who did not waive
or quitclaim their rights established by the decision of December 4, 1972 as well as the
attorney's fees equivalent to 20% of the total wage and fringe benefits differentials due
the fifty-three (53) individual workers who executed agreements with the company
waiving and quitclaiming their rights, benefits and privileges under the aforesaid
decision (pp. 15 & 57, rec.).
Petitioner moved for reconsideration of aforecited order on June 26, 1974 and on July
5, 1974, the arguments supporting said motion for reconsideration followed (pp. 63 &
65, rec.).
Respondent Union then filed its motion to strike out the motion for reconsideration
dated July 23, 1974 (p. 72, rec.). In a resolution of September 3, 1974, respondent
lower court denied petitioner's motion for reconsideration.
Thus, this appeal from the subject order and resolution of the CIR.
Petitioner alleges the following assignment of errors:
1. The Court of Industrial Relations erred in awarding attorney's fees to the union's
counsel equivalent to 20% of the total amount of final judgment or whatever recovery

3. The Court of Industrial Relations erred in not denying or dismissing the two motions
filed by respondent union on October 18, 1973 praying therein that the union's counsel
be awarded attorney's fees and that an order be issued directing the examining
division of the court to compute the wage and fringe benefits differentials allegedly due
the members of the union under the decision of December 4, 1972.
Respondents, however, contend that
1. The issue of quitclaims is now res judicata;
2. The CIR finding that 81 members of respondent union are
entitled to adjudged benefits is no longer alterable after
decision has become final;
3. The CIR power to adjust unfair labor practices is unaffected
by individual settlements;
4. The rights of labor are unwaivable; quitclaims null and void;
and
5. The question regarding alleged unreasonableness of
award of attorney's fees, not raised before Court a quo, is
barred on appeal.
After a careful evaluation of the petitioners' and respondents' pleadings, this Court,
finds the allegations of petitioner to be without merit.
On the first assignment of error, paragraph (a), the petitioner failed to raise the issue
before the trial court. This Court notes that petitioner's answer to the motion for
computation of final judgment and to petition for attorney's lien filed by the respondent
in the trial court did not raise the foregoing issue. It is a well-settled doctrine in this
jurisdiction that issues not raised in the trial court may not be raised on appeal.
Otherwise, there will be no end to litigations thus defeating the ends of justice.
Nevertheless, this Court finds the allegations to be devoid of merit. Petitioner's
contention that there is no basis for respondent's petition for attorney's lien filed with
the trial court containing allegations relative to attorney's fees as agreed upon between
him and his client, the complainant Sugar Workers' Association, is untenable. The
written conformity of the President of said Sugar Workers Association on behalf
thereof confirms the existence of such an agreement on attorney's fees and
constitutes an irrefutable evidence of such agreement. The trial court, therefore, had
sufficient evidence upon which it based its decision. The petitioner did not contest the
allegations contained in the respondent's petition for attorney's lien before the trial
court. This constitutes an implied admission thereof. Moreover, it is evident from the
tenor of the trial court's order issued on June 6, 1974 that the said court carefully
evaluated the respondent's petition for attorney's lien and even reduced the
percentage from 25 IC to 20 %.
On the first assignment of error, paragraph (b), this Court likewise finds the same to be
without merit. This issue has already been resolved by this Court when the petitioner
filed its first petition for certiorari (G.R. No. L- 36994) seeking nullification of the trial
court's judgment on the same issue. Petitioner's allegations were rejected by this Court
in said case. It may not now be repeated and raised on appeal before this Court, the
same being res judicata.
Be that as it may, the allegations of petitioner to the effect that by reason of the
quitclaims there is nothing upon which the attorney's lien attaches, is not valid. This
Court finds the quitclaims not valid. Firstly, said quitclaims were secured on December
27, 1972 by petitioner after it lost its case in the lower court when the latter
promulgated its decision on the case on December 4, 1972. Obviously in its desire to
deny what is due the sugar workers concerned and frustrate the decision of the lower
court awarding benefits to them, it used its moral ascendancy as employer over said

workers to secure said quitclaims. Predicated on said quitclaims, petitioner filed a


petition for certiorari before this Court but the same was denied by the Court on July
31, 1973 and October 4, 1973. Petitioner now has the audacity to return before this
Court still invoking said quitclaims, which We again reject.
Secondly, while rights may be waived, the same must not be contrary to law, public
order, public policy, morals or good customs or prejudicial to a third person with a right
recognized by law (Art. 6, New Civil Code). The quitclaim agreements contain the
following provisions in paragraph I 1, No. 3, thereof:
3. Nothing herein stipulated shall be construed as an
admission and/or recognition by the Party of The Second Part
of its failure refusal and/or omission as employer, to faithfully
comply with the pertinent laws, rules and regulations and/or
agreements, nor its liability therefor and thereunder.
Needless to state, the foregoing provisions are contrary to law, It exempts the
petitioner from any legal liability. The above- quoted provision renders the quitclaim
agreements void ab initio in their entirety since they obligated the workers concerned
to forego their benefits, while at the same time, exempted the petitioner from any
liability that it may choose to reject. This runs counter to Article 22 of the New Civil
Code which provides that no one shall be unjustly enriched at the expense of another.
Thirdly, the alleged quitclaim agreements are contrary to public policy. Once a civil
action is filed in court, the cause of action may not be the subject of compromise
unless the same is by leave of the court concerned. Otherwise, this will render the
entire judicial system irrelevant to the prejudice of the national interest. Parties to
litigations cannot be allowed to trifle with the judicial system by coming to court and
later on agreeing to a compromise without the knowledge and approval of the court.
This converts the judiciary into a mere tool of party-litigants who act according to their
whims and caprices. This is more so when the court has already rendered its decision
on the issues submitted.
In the case at bar, the lower court has already rendered a decision on the issues
presented before the alleged quitclaims agreements were made. The quitclaim
agreements were secured by petitioner while it filed a petition for certiorari before this
Court for a review of the lower court's decision. The quiclaim agreements taken
together with the petitioner's petition for certiorari of the trial court's decision clearly
and unmistakably shows the bad faith of the petitioner and its outright refusal to
comply with its legal obligations. And now it has the temerity to attempt to use this
Court as its instrument for the purpose.
This Court rejects the contention of petitioner to the effect that the lien of an attorney
on the judgment or decree for the payment of money and the preference thereof which
he has secured in favor of his client takes legal effect only from and after, but not
before notice of said lien has been entered in the record and served on the adverse
party, citing the cases of Menzi and Co. vs. Bastida (63 Phil. 16) and Macondray & Co.
vs. Jose (66 Phil. 590) in support thereof.
This Court finds the petitioner's contentions and citations applicable only when the
case has already been decided with finality. In the case at bar, the original case was
decided with finality only after this Court denied the petitioner's motion for
reconsideration of this Court's denial of its petition for certiorari on the lower court's
decision.
This Court is appalled by the attempt of petitioner to mislead it by alleging that the
lower court recognized the validity and effectivity of the 53 individual agreements when
it declared allegedly that "rights may be waived. " The records show that the lower
court qualified its statement to the effect that the waiver must not be contrary to law,
public order, public policy, morals or good customs, or prejudicial to a third person with
a right recognized by law citing Article 6 of the New Civil Code. This attempt by
petitioner casts a serious doubt on the integrity and good faith not only of the petitioner
but also of its counsel.
This Court rejects the allegation of petitioner to the effect that the 53 agreements gave
substance to the policy of the Industrial Peace Act of encouraging the parties to make
all reasonable efforts to settle their differences by mutual agreement, citing the case of
Filomena Dionela, et al. vs. CIR, et al. (L-18334, August 31, 1963).

who was representing them before the lower court. This subterfuge is tantamount to a
sabotage of the interest of respondent association. Needless to say, the means
employed by petitioner in dealing with the workers individually, instead of collectively
through respondent and its counsel, violates good morals as they undermine the unity
of respondent union and fuels industrial disputes, contrary to the declared policy in the
Industrial Peace Act.
This Court likewise rejects petitioner's allegation that the 53 quitclaim agreements
were in the nature of a compromise citing the case of Republic vs. Estenzo, et al., (L24656, September 25, 1968, 25 SCRA 122) and Articles 2028 and 2040 of the New
Civil Code.
Petitioner's allegations and citations apply only to compromises between the partylitigants done in good faith. In the case at bar, there was no compromise between the
petitioner and the respondent Sugar Workers Association. In respect of the 53
quitclaims, these are not compromise agreements between the petitioner and
respondent union. They are separate documents of renunciation of individual rights.
Compromise involves the mutual renunciation of rights by both parties on a parity
basis. The quitclaims, however, bind the workers to renounce their rights while the
petitioner not only does not renounce anything but also acquires exemption from any
legal liability in connection therewith.
On the First Assignment of Error, Paragraph (c), the petitioner anchors his allegations
on the technical procedural requirements of Section 37, Rule 138 of the New Rules of
Court. This Court, however, finds petitioner's allegation without merit. Said provision of
the Rules of Court is meant to protect the interest of an attorney's client and the
adverse party by seeing to it that they are given the opportunity to contest the creation
of the attorney's lien. It will be noted from the records that the client Sugar Workers
Union was not only notified but also affixed its conformity to the respondents' motion
for attorney's lien. With respect to the adverse party, the petitioner in this case, said
adverse party's interest was amply protected by the lower court when the latter
admitted petitioner's answer to respondent's motion for computation of final judgment
and to respondent's counsel's petition for attorney's lien. Petitioner did not raise the
aforesaid technicality in its answer before the lower court. It cannot now raise it for the
first time on appeal.
On the First Assignment of Error, Paragraph (d), this Court finds petitioner's
allegations to the effect that the attorney's fees awarded are inequitable, exorbitant,
excessive and unconscionable, citing in the process the case of Meralco Workers'
Union vs. Gaerlan (32 SCRA 419), completely without basis nor merit.
Again, petitioner did not raise this issue in the lower court. It cannot now raise said
issue for the first time on appeal before this Court. Nevertheless, petitioner has failed
to prove any of its allegations. Hence, this Court finds the same worthless. The
Meralco case does not apply in this case for the reason that the facts and
circusmtances are entirely different.
On the Second Assignment of Error, this Court finds petitioner's allegation to the effect
that the lower court erred in ordering the computation of judgment on the ground that
by reason of the quitclaim agreements the computation of judgment has become
academic, to be without merit and grossly inane.
The allegations of petitioner are premised on its previous allegations regarding the
quitclaims. This Court has earlier stated that the quitclaim agreements are void ab
initio. The lower court was correct in directing the computation of judgment, there
being a basis therefor.
On the Third Assignment of Error, this Court likewise finds petitioner's allegations
which are based on its allegations in support of the first and second assignments of
errors, without merit, as heretofore discussed.
WHEREFORE, THE PETITION IS HEREBY DISMISSED AND RESPONDENT CIR
(NOW THE NLRC) IS HEREBY DIRECTED TO IMPLEMENT ITS ORDER DATED
JUNE 6,1974.
COSTS AGAINST PETITIONER.
SO ORDERED.

Petitioner's contention and the case cited in support thereof apply only where there is
good faith on the part of the party litigants. In the case at bar, petitioner acted with
evident bad faith and malice. Petitioner secured the 53 quitclaim agreements
individually with the 53 sugar workers without the intervention of respondent's lawyer