1. AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO

BUSTAMANTE, respondents. [G.R. No. 102199. January 28,
1997]

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

PANGANIBAN, J.:
The determination of the proper forum is crucial because the filing
of the petition or complaint in the wrong court or tribunal is fatal, even
for a patently meritorious claim. More specifically, labor arbiters and the
National Labor Relations Commission have no jurisdiction to entertain
and rule on money claims where no employer-employee relations is
involved. Thus, any such award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to
annul the Resolution of the National Labor Relations Commission,
promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-0119690, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association,
Inc.," affirming the decision of the labor arbiter which ordered payment
of the amount of P319,796.00 as insurance commissions to private
respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had
been an insurance underwriter of petitioner AFP Mutual Benefit
Association, Inc. since 1975. The Sales Agent's Agreement between
them provided:

C. Commission
1. The SALES AGENT shall be entitled to the commission due for all
premiums actually due and received by AFPMBAI out of life insurance
policies solicited and obtained by the SALES AGENT at the rates set forth
in the applicant's commission schedules hereto attached.
xxxxxxxxx
D. General Provisions
1. There shall be no employer-employee relationship between the
parties, the SALES AGENT being hereby deemed an independent
contractor." (Can this stipulate?)
As compensation, he received commissions based on the following
percentages of the premiums paid:
"30% of premium paid within the first year;
10% of premium paid with the second year;

"B. Duties and Obligations:

5% of the premium paid during the third year;

1. During the lifetime of this Agreement, the SALES AGENT (private

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

3% of the premium paid during the fourth year; and

1% of the premium paid during the fifth year up-to the tenth year.

On July 5, 1989, petitioner dismissed private respondent for

misrepresentation and for simultaneously selling insurance for another
life insurance company in violation of said agreement.
At the time of his dismissal, private respondent was entitled to
accrued commissions equivalent to twenty four (24) months per the
Sales Agent Agreement and as stated in the account summary dated
July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president
of petitioner-company. Said summary showed that private respondent
had a total commission receivable of P438,835.00, of which
onlyP78,039.89 had been paid to him.
Private respondent wrote petitioner seeking the release of his
commissions for said 24 months. Petitioner, through Marketing Manager
Juan Concepcion, replied that he was entitled to only P75,000.00
toP100,000.00. Hence, believing Concepcion's computations, private
respondent signed a quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that
his check was ready for release. In collecting his check, he discovered
from a document (account summary) attached to said check that his
total commissions for the 24 months actually amounted to P354,796.09.
Said document stated
"6. The total receivable for Mr. Bustamante out of the renewals and old
business generated since 1983 grosses P438,835.00 less his outstanding
obligation in the amount of P78,039.89 as of June 30, 1989, total
expected commission would amount to P354,796.09. From that figure at
a 15% compromise settlement this would mean P53,219.41 due him to
settle his claim."
Private respondent,
of P35,000.00.

however,

was

paid

only

the

amount

On November 23, 1989, private respondent filed a complaint with

the Office of the Insurance Commissioner praying for the payment of the
correct amount of his commission. Atty. German C. Alejandria, Chief of
the Public Assistance and Information Division, Office of the Insurance

Commissioner, advised private respondent that it was the Department

of Labor and Employment that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with
the Department of Labor claiming: (1) commission for 2 years from
termination of employment equivalent to 30% of premiums remitted
during employment; (2) P354,796.00 as commission earned from
renewals and old business generated since 1983; (3) P100,000.00 as
moral damages; and (4) P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera
rendered his decision, dated August 24, 1990, the dispositive portion of
which reads:
"WHEREFORE, all the foregoing premises being considered, judgment is
hereby rendered declaring the dismissal of the complainant as just and
valid, and consequently, his claim for separation pay is denied. On his
money claim, the respondent company is hereby ordered to pay
complainant the sum of P319,796.00 plus attorney's fees in the amount
of P31,976.60.
All other claims of the complainant are dismissed for want of merit."
The labor arbiter relied on the Sales Agent's Agreement proviso that
petitioner could assign private respondent a specific area of
responsibility and a production quota, and read it as signaling the
existence of employer-employee relationship between petitioner and
private respondent.
On appeal, the Second Division of the respondent Commission
affirmed the decision of the Labor Arbiter. In the assailed Resolution,
respondent Commission found no reason to disturb said ruling of the
labor arbiter and ruled:
"WHEREFORE, in view of the foregoing considerations, the subject
appeal should be as it is hereby, denied and the decision appealed from
affirmed.

SO ORDERED."
Hence, this petition.
The Issue
Petitioner contends that respondent Commission committed grave
abuse of discretion in ruling that the labor arbiter had jurisdiction over
this case. At the heart of the controversy is the issue of whether there
existed an employer-employee relationship between petitioner and
private respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales
Agent's Agreement, there is no employer-employee relationship
between private respondent and itself. Hence, respondent commission
gravely abused its discretion when it held that the labor arbiter had
jurisdiction over the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled is the doctrine that the existence of an employeremployee relationship is ultimately a question of fact and that the
findings thereon by the labor arbiter and the National Labor Relations
Commission shall be accorded not only respect but even finality when
supported by substantial evidence. The determinative factor in such
finality is the presence of substantial evidence to support said finding,
otherwise, such factual findings cannot bind this Court.
Respondent Commission concurred with the labor arbiter's findings
that:
"x x x The complainant's job as sales insurance agent is usually
necessary and desirable in the usual business of the respondent
company. Under the Sales Agents Agreement, the complainant was

required to solicit exclusively for the respondent company, 'and he was

bound by the company policies, memo circulars, rules and regulations
which were issued from time to time. By such requirement to follow
strictly management policies, orders, circulars, rules and regulations, it
only shows that the respondent had control or reserved the right to
control the complainant's work as solicitor. Complainant was not an
independent contractor as he did not carry on an independent business
other than that of the company's x x x."
To this, respondent Commission added that the Sales Agent's
Agreement specifically provided that petitioner may assign private
respondent a specific area of responsibility and a production quota. From
there, it concluded that apparently there is that exercise of control by
the employer which is the most important element in determining
employer-employee relationship.[10]
We hold, however, that respondent Commission misappreciated the
facts of the case. Time and again, the Court has applied the "four-fold"
test
in
determining
the
existence
of
employer-employee
relationship. This test considers the following elements: (1) the power to
hire; (2) the payment of wages; (3) the power to dismiss; and (4) the
power to control, the last being the most important element. [11]
The difficulty lies in correctly assessing if certain factors or elements
properly indicate the presence of control. Anent the issue of exclusivity
in the case at bar, the fact that private respondent was required to
solicit business exclusively for petitioner could hardly be considered as
control in labor jurisprudence. Under Memo Circulars No. 2-81 [12] and 285, dated December 17, 1981 and August 7, 1985, respectively, issued
by the Insurance Commissioner, insurance agents are barred from
serving more than one insurance company, in order to protect the public
and to enable insurance companies to exercise exclusive supervision
over their agents in their solicitation work. Thus, the exclusivity
restriction clearly springs from a regulation issued by the Insurance
Commission, and not from an intention by petitioner to establish control
over the method and manner by which private respondent shall
accomplish his work. This feature is not meant to change the nature of
the relationship between the parties, nor does it necessarily imbue such
relationship with the quality of control envisioned by the law.

So too, the fact that private respondent was bound by company

policies, memo/circulars, rules and regulations issued from time to time
is also not indicative of control. In its Reply to Complainant's Position
Paper. petitioner alleges that the policies, memo/circulars, and rules and
regulations referred to in provision B(1) of the Sales Agent's Agreement
are only those pertaining to payment of agents' accountabilities,
availment by sales agents of cash advances for sorties, circulars on
incentives and awards to be given based on production, and other
matters concerning the selling of insurance, in accordance with the rules
promulgated by the Insurance Commission. According to the petitioner,
insurance solicitors are never affected or covered by the rules and
regulations concerning employee conduct and penalties for violations
thereof, work standards, performance appraisals, merit increases,
promotions, absenteeism/attendance, leaves of absence, managementunion matters, employee benefits and the like. Since private respondent
failed to rebut these allegations, the same are deemed admitted, or at
least proven, thereby leaving nothing to support the respondent
Commission's conclusion that the foregoing elements signified an
employment relationship between the parties.
In regard to the territorial assignments given to sales agents, this
too cannot be held as indicative of the exercise of control over an
employee. First of all, the place of work in the business of soliciting
insurance does not figure prominently in the equation. And more
significantly, private respondent failed to rebut petitioner's allegation
that it had never issued him any territorial assignment at all. Obviously,
this Court cannot draw the same inference from this feature as did the
respondent Commission.
To restate, the significant factor in determining the relationship of
the parties is the presence or absence of supervisory authority to control
the method and the details of performance of the service being
rendered, and the degree to which the principal may intervene to
exercise such control. The presence of such power of control is indicative
of an employment relationship, while absence thereof is indicative of
independent contractorship. In other words, the test to determine the
existence of independent contractorship is whether one claiming to be
an independent contractor has contracted to do the work according to
his own methods and without being subject to the control of the

employer except only as to the result of the work. Such is exactly the
nature of the relationship between petitioner and private respondent.
Further, not every form of control that a party reserves to himself
over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employeremployee relationship. The facts of this case fall squarely with the case
of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
"Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve
it. The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of insurance,
and is on that account subject to regulation by the State with respect,
not only to the relations between insurer and insured but also to the
internal affairs of the insurance company. Rules and regulations
governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual
and expected for an insurance company to promulgate a set of rules to
guide its commission agents in selling its policies that they may not run
afoul of the law and what it requires or prohibits. xxxx None of these
really invades the agent's contractual prerogative to adopt his own
selling methods or to sell insurance at his own time and convenience,
hence cannot justifiably be said to establish an employer-employee
relationship between him and the company."
Private respondent's contention that he was petitioner's employee is
belied by the fact that he was free to sell insurance at any time as he
was not subject to definite hours or conditions of work and in turn was
compensated according to the result of his efforts. By the nature of the
business of soliciting insurance, agents are normally left free to devise
ways and means of persuading people to take out insurance. There is no
prohibition, as contended by petitioner, for private respondent to work

for as long as he does not violate the Insurance Code. As petitioner

explains:
"(Private respondent) was free to solicit life insurance anywhere he
wanted and he had free and unfettered time to pursue his business. He
did not have to punch in and punch out the bundy clock as he was not
required to report to the (petitioner's) office regularly. He was not
covered by any employee policies or regulations and not subject to the
disciplinary action of management on the basis of the Employee Code of
Conduct. He could go out and sell insurance at his own chosen time. He
was entirely left to his own choices of areas or territories, with no
definite, much less supervised, time schedule.
(Private respondent) had complete control over his occupation and
(petitioner) did not exercise any right of Control and Supervision over his
performance except as to the payment of commission the amount of
which entirely depends on the sole efforts of (private respondent). He
was free to engage in other occupation or practice other profession for
as long as he did not commit any violation of the ethical standards
prescribed in the Sales Agent's Agreement."
Although petitioner could have, theoretically, disapproved any of
private respondent's transactions, what could be disapproved was only
the result of the work, and not the means by which it was accomplished.
The "control" which the above factors indicate did not sum up to the
power to control private respondent's conduct in and mode of soliciting
insurance. On the contrary, they clearly indicate that the juridical
element of control had been absent in this situation. Thus, the Court is
constrained to rule that no employment relationship had ever existed
between the parties.

Second Issue: Jurisdiction of Respondent Commission & Labor

Arbiter

Under the contract invoked, private respondent had never been

petitioner's employee, but only its commission agent. As an independent
contractor, his claim for unpaid commission should have been litigated
in an ordinary civil action. The jurisdiction of labor arbiters and
respondent Commission is set forth in Article 217 of the Labor Code. The
unifying element running through paragraphs (1) - (6) of said provision is
the consistent reference to cases or disputes arising out of or in
connection with an employer-employee relationship. Prior to its
amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was
clear as the article included "all other cases arising from employeremployee relation unless expressly excluded by this Code. Without this
critical element of employment relationship, the labor arbiter and
respondent Commission can never acquire jurisdiction over a dispute. As
in the case at bar. It was serious error on the part of the labor arbiter to
have assumed jurisdiction and adjudicated the claim. Likewise, the
respondent Commission's affirmance thereof.
Such lack of jurisdiction of a court or tribunal may be raised at any
stage
of
the
proceedings,
even
on
appeal. The
doctrine
of estoppel cannot be properly invoked by respondent Commission to
cure this fatal defect as it cannot confer jurisdiction upon a tribunal that
to begin with, was bereft of jurisdiction over a cause of action. It remains
a basic fact in law that the choice of the proper forum is crucial as the
decision of a court or tribunal without jurisdiction is a total nullity. A void
judgment for want of jurisdiction is no judgment at all. It cannot be the
source of any right nor the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal effect.
Hence, it can never become final. "x x x (I)t may be said to be a lawless
thing which can be treated as an outlaw and slain at sight, or ignored
wherever and whenever it exhibits its head." The way things stand, it
becomes unnecessary to consider the merits of private respondent's
claim for unpaid commission. Be that as it may, this ruling is without
prejudice to private respondent's right to file a suit for collection of
unpaid commissions against petitioner with the proper forum and within
the proper period.
WHEREFORE, the petition is hereby GRANTED, and the assailed
Resolution is hereby SET ASIDE.

SO ORDERED.
Narvasa,
JJ., concur.

C.J.,

(Chairman),

Davide,

Jr.,

Melo, and Francisco,

2. NORTH
DAVAO
MINING
CORPORATION
and
ASSET
PRIVATIZATION TRUST, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, LABOR ARBITER ANTONIO M.
VILLANUEVA and WILFREDO GUILLEMA, respondents. [G.R.
No. 112546. March 13, 1996]
DECISION
PANGANIBAN, J.:
Is a company which is forced by huge business losses to close its
business, legally required to pay separation benefits to its employees at
the time of its closure in an amount equivalent to the separation pay
paid to those who were separated when the company was still a going
concern? This is the main question brought before this Court in this
petition for certiorari under Rule 65 of the Revised Rules of Court, which
seeks to reverse and set aside the Resolutions dated July 29, 1993 and
September 27, 1993 (NLRC) in NLRC-CA No. M-001395-93.
The Resolution dated July 29, 1993 affirmed in toto the decision of
the Labor Arbiter in RAB-1 1-08-00672-92 and RAB- 11-08-00713-92
ordering petitioners to pay the complainants therein certain monetary
claims.
The Resolution dated September 27, 1993 denied the motion for
reconsideration of the said July 29, 1993 Resolution.
The Facts

Petitioner North Davao Mining Corporation (North Davao) was

incorporated in 1974 as a 100% privately-owned company. Later, the
Philippine National Bank (PNB) became part owner thereof as a result of
a conversion into equity of a portion of loans obtained by North Davao
from said bank. On June 30, 1986, PNB transferred all its loans to and
equity in North Davao in favor of the national government which, by
virtue of Proclamation No. 50 dated December 8, 1986, later turned
them over to petitioner Asset Privatization Trust (APT). As of December
31, 1990 the national government held 81.8% of the common stock and
100% of the preferred stock of said company.
Respondent Wilfredo Guillema is one among several employees of
North Davao who were separated by reason of the companys closure on
May 31, 1992, and who were the complainants in the cases before the
respondent labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased
operations due to serious business reverses. From 1988 until its closure
in 1992, North Davao suffered net losses averaging three billion pesos
(P3,000,000,000.00) per year, for each of the five years prior to its
closure. All told, as of December 31, 1991, or five months prior to its
closure, its total liabilities had exceeded its assets by 20.392 billion
pesos, as shown by its financial statements audited by the Commission
on Audit. When it ceased operations, its remaining employees were
separated and given the equivalent of 12.5 days pay for every year of
service, computed on their basic monthly pay, in addition to the
commutation to cash of their unused vacation and sick leaves. However,
it appears that, during the life of the petitioner corporation, from the
beginning of its operations in 1981 until its closure in 1992, it had been
giving separation pay equivalent to thirty (30) days pay for every year of
service. Moreover, inasmuch as the region where North Davao operated
was plagued by insurgency and other peace and order problems, the
employees had to collect their salaries at a bank in Tagum, Davao del
Norte, some 58 kilometers from their workplace and about 2 hours
travel time by public transportation; this arrangement lasted from 1981
up to 1990.
Subsequently, a complaint was filed with respondent labor arbiter
by respondent Wilfredo Guillema and 271 other seperated employees

for: (1) additional separation pay of 17.5 days for every year of service;
(2) back wages equivalent to two days a month; (3) transportation
allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7)
post-employment medical clearance; and (8) future medical allowance,
all of which amounted to P58,022,878.31 as computed by private
respondent.[5]
On May 6, 1993, respondent Labor Arbiter rendered a decision
ordering petitioner North Davao to pay the complainants the following:
(a) Additional separation pay of 17.5 days for every year of service;
(b) Backwages equivalent to two (2) days a month times the number of
years of service but not to exceed three (3) years;
(c) Transportation allowance at P80 a month times the number of years
of service but not to exceed three (3) years.
The benefits awarded by respondent Labor Arbiter amounted to
P10,240,517.75. Attorneys fees equivalent to ten percent (10%) thereof
were also granted.
On appeal, respondent NLRC affirmed the decision in toto. Petitioner
North Davaos motion for reconsideration was likewise denied. Hence,
this petition.
The Parties Submissions and the Issues
In affirming the Labor Arbiters decision, respondent NLRC ruled that
since (North Davao) has been paying its employees separation pay
equivalent to thirty (30) days pay for every year of service, knowing fully
well that the law provides for a lesser separation pay, then such
company policy has ripened into an obligation, and therefore, depriving
now the herein private respondent and others similarly situated of the
same benefits would be discriminatory it said that petitioners may not
pay separation benefits unequally for such discrimination breeds
resentment and ill-will among those who have been treated less
generously than others. It also cited Abella vs. NLRC, as authority for

saying that Art. 283 of the Labor Code protects workers in case of the
closure of the establishment.
To justify the award of two days a month in backwages and P80 per
month of transportation allowance, respondent Commission ruled:
As to the appellants claim that complainants-appeallees time spent in
collecting their wages at Tagum, Davao is not compensable allegedly
because it was on official time can not be given credence. No iota of
evidence has been presented to back up said contention. The same is
true with appellants assertion that the claim for transportation expenses
is without basis since they were incurred by the
complainants. Appellants should have submitted the payrolls to prove
that complainants-appellees were not the ones who personally collected
their wages and/or the bus/jeep trip tickets or vouchers to show that the
complainants-appellees were provided with free transportation as
claimed.
Petitioner, through the Government Corporate Counsel, raised the
following grounds for the allowance of the petition:
1. The NLRC acted with grave abuse of discretion in affirming without
legal basis the award of additional separation pay to private
respondents who were separated due to serious business losses on the
part of petitioner.
2. The NLRC acted with grave abuse of discretion in affirming without
sufficient factual basis the award of backwages and transportation
expenses to private respondents.
3. There is no appeal, nor any plain, speedy and adequate remedy in the
ordinary course of the law.
and the following issues:
1. Whether or not an employer whose business operations ceased due to
serious business losses or financial reverses is obliged to pay separation
pay to its employees separated by reason of such closure.

2. Whether or not time spent in collecting wages in a place other than

the place of employment is compensable notwithstanding that the same
is done during official time.
3. Whether or not private respondents are entitled to transportation
expenses in the absence of evidence that these expenses were incurred.
The First Issue: Separation Pay
To resolve this issue, it is necessary to revisit the provision of law
adverted to by the parties in their submissions, namely Art. 283 of the
Labor Code, which reads as follows:
Art. 283. Closure of establishment and reduction of personnel. - The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the
establishment or under-taking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half () month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (italics supplied)
The underscored portion of Art. 283 governs the grant of seperation
benefits in case of closures or cessation of operation of business
establishments NOT due to serious business losses or financial reverses
x x x. Where, however, the closure was due to business losses - as in the
instant case, in which the aggregate losses amounted to over P20 billion
- the Labor Code does not impose any obligation upon the employer to
pay separation benefits, for obvious reasons. There is no need to

belabor this point. Even the public respondents, in their Comment filed
by the Solicitor General, impliedly concede this point.
However, respondents tenaciously insist on the award of separation
pay, anchoring their claim solely on petitioner North Davaos longstanding policy of giving separation pay benefits equivalent to 30- days
pay, which policy had been in force in the years prior to its closure.
Respondents contend that, by denying the same separation benefits to
private respondent and the others similarly situated, petitioners
discriminated against them. They rely on this Courts ruling
in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC,
(supra). In said case, petitioner BISSI, after experiencing financial
reverses, decided as a retrenchment measure to lay-off some employees
on May 16, 1988 and gave them separation pay equivalent to one-half ()
month pay for every year of service. BISSI retained some employees in
an attempt to rehabilitate its business as a trading company. However,
barely two and a half months later, these remaining employees were
likewise discharged because the company decided to cease business
operations altogether. Unlike the earlier terminated employees, the
second batch received separation pay equivalent to a full months salary
for every year of service, plus a mid-year bonus. This Court ruled that
there was impermissible discrimination against the private respondents
in the payment of their separation benefits. The law requires an
employer to extend equal treatment to its employees. It may not, in the
guise of exercising management prerogatives, grant greater benefits to
some and less to others. x x x
In resolving the present case, it bears keeping in mind at the outset
that the factual circumstances of BISSI are quite different from the
current case. The Court noted that BISSI continued to suffer losses even
after the retrenchment of the first batch of employees; clearly, business
did not improve despite such drastic measure. That notwithstanding,
when BISSI finally shut down, it could well afford to (and actually did)
pay off its remaining employees with MORE separation benefits as
compared with those earlier laid off; obviously, then, there was no
reason for BISSI to skimp on separation pay for the first batch of
discharged employees. That it was able to pay one-month separation
benefit for employees at the time of closure of its business meant that it
must have been also in a position to pay the same amount to those who

were separated prior to closure. That it did not do so was a wrongful

exercise of management prerogatives. That is why the Court correctly
faulted it with impermissible discrimination. Clearly, it exercised its
management prerogatives contrary to general principles of fair play and
justice.

generous when it is no longer in a position to do so would certainly be

unduly oppressive, unfair and most revolting to the conscience. As this
Court held in Manila Trading & Supply Co. vs. Zulueta, (t)he law, in
protecting the rights of the laborer, authorizes neither oppression nor
self-destruction of the employer.

In the instant case however, the companys practice of giving one

months pay for every year of service could no longer be continued
precisely because the company could not afford it anymore. It was
forced to close down on account of accumulated losses of over P20
billion. This could not be said of BISSI. In the case of North Davao, it
gave 30-days separation pay to its employees when it was still a going
concern even if it was already losing heavily. As a going concern, its
cash flow could still have sustained the payment of such separation
benefits. But when a business enterprise completely ceases operations,
i.e., upon its death as a going business concern, its vital lifeblood -its
cashflow - literally dries up. Therefore, the fact that less separation
benefits were granted when the company finally met its business death
cannot be characterized as discrimination. Such action was dictated not
by a discriminatory management option but by its complete inability to
continue its business life due to accumulated losses. Indeed, one cannot
squeeze blood out of a dry stone. Nor water out of parched land.

At this juncture, we note that the Solicitor General in his Comment

challenges the petitioners assertion that North Davao, having closed
down, no longer has the means to pay for the benefits. The Solicitor
General stresses that North Davao was among the assets transferred by
PNB to the national government, and that by virtue of Proclamation No.
50 dated December 8, 1986, the APT was constituted trustee of this
government asset. He then concludes that (i)t would, therefore, be
incongruous to declare that the National Government, which should
always be presumed to be solvent, could not pay now private
respondents money claims. Such argumentation is completely
misplaced. Even if the national government owned or controlled 81.8%
of the common stock and 100% of the preferred stock of North Davao, it
remains only a stockholder thereof, and under existing laws and
prevailing jurisprudence, a stockholder as a rule is not directly,
individually and/or personally liable for the indebtedness of the
corporation. The obligation of North Davao cannot be considered the
obligation of the national government, hence, whether the latter be
solvent or not is not material to the instant case. The respondents have
not shown that this case constitutes one of the instances where the
corporate veil may be pierced. From another angle, the national
government is not the employer of private respondent and his cocomplainants, so there is no reason to expect any kind of bailout by the
national government under existing law and jurisprudence.

As already stated, Art. 283 of the Labor Code does not obligate an
employer to pay separation benefits when the closure is due to losses. In
the case before us, the basis for the claim of the additional separation
benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of
employees, which is proscribed as an unfair labor practice by Art. 248
(e) of said Code. Under the facts and circumstances of the present case,
the grant of a lesser amount of separation pay to private respondent
was done, not by reason of discrimination, but rather, out of sheer
financial bankruptcy - a fact that is not controlled by management
prerogatives. Stated differently, the total cessation of operation due to
mind-boggling losses was a supervening fact that prevented the
company from continuing to grant the more generous amount of
separation pay. The fact that North Davao at the point of its forced
closure voluntarily paid any separation benefits at all - although not
required by law - and 12.5-days worth at that, should have elicited
admiration instead of condemnation. But to require it to continue being

The Second and Third Issues:

Back Wages and Transportation Allowance
Anent the award of back wages and transportation allowance, the
issues raised in connection therewith are factual, the determination of
which is best left to the respondent NLRC. It is well settled that this
Court is bound by the findings of fact of the NLRC, so long as said
findings are supported by substantial evidence.

As the Solicitor General pointed out in his comment:

It is undisputed that because of security reasons, from the time of its
operations, petitioner NDMC maintained its policy of paying its workers
at a bank in Tagum, Davao del Norte, which usually took the workers
about two and a half (2 1/2) hours of travel from the place of work and
such travel time is not official.
Records also show that on February 12,1992, when an inspection was
conducted by the Department of Labor and Employment at the premises
of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out
that petitioners had violated labor standards law, one of which is the
place of payment of wages (p.109, Vol. 1, Record).
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code provides that:
Section 4. Place of payment. - (a) As a general rule, the place of
payment shall be at or near the place of undertaking. Payment in a
place other than the workplace shall be permissible only under the
following circumstances:
(1) When payment cannot be effected at or near the place of work by
reason of the deterioration of peace and order conditions, or by reason
of actual or impending emergencies caused by fire, flood, epidemic or
other calamity rendering payment thereat impossible;
(2) When the employer provides free transportation to the employees
back and forth; and
(3) Under any analogous circumstances; provided that the time spent by
the employees in collecting their wages shall be considered as
compensable hours worked.
(b) xxx xxx xxx.
(Italics supplied)

Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1,
Record), the Regional Director, Regional Office No. XI, Department of
Labor and Employment, Davao City, ordered petitioner NDMC, among
others, as follows:
WHEREFORE, x x x. Respondent is further ordered to pay its workers
salaries at the plantsite at Amacan, New Leyte, Maco, Davao del Norte
or whenever not possible, through the bank in Tagum, Davao del Norte
as already been practiced subject, however to the provisions of Section
4 of Rule VIII, Book III of the rules implementing the Labor Code as
amended.
Thus, public respondent Labor Arbiter Antonio M. Villanueva
correctly held that:
From the evidence on record, we find that the hours spent by
complainants in collecting salaries at a bank in Tagum, Davao del Norte
shall be considered compensable hours worked. Considering further the
distance between Amacan, Maco to Tagum which is 2 hours by travel
and the risks in commuting all the time in collecting complainants
salaries, would justify the granting of backwages equivalent to two (2)
days in a month as prayed for.
Corollary to the above findings, and for equitable reasons, we likewise
hold respondents liable for the transportation expenses incurred by
complainants at P40.00 round trip fare during pay days.
(p. 10, Decision; p. 207, Vol. 1, Record)
On the contrary, it will be petitioners burden or duty to present
evidence of compliance of the law on labor standards, rather than for
private respondents to prove that they were not paid/provided by
petitioners of their backwages and transportation expenses.
Other than the bare denials of petitioners, the above findings stands
uncontradicted. Indeed we are not at liberty to set aside findings of facts
of the NLRC, absent any capriciousness, arbitrariness, or abuse or

complete lack of basis. In Maya Farms Employees Organizations vs.

NLRC, we held:
This Court has consistently ruled that findings of fact of administrative
agencies and quasi-judicial bodies which have acquired expertise
because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality and are binding upon this
Court unless there is a showing of grave abuse of discretion, or where it
is clearly shown that they were arrived at arbitrarily or in disregard of
the evidence on record.
WHEREFORE, judgment is hereby rendered MODIFYING the
assailed Resolution by SETTING ASIDE and deleting the award for
additional separation pay of 17.5 days for every year of service, and
AFFIRMING it in all other aspects. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
Puno, Vitug, Kapunan, Mendoza, Francisco, and Hermosisima, JJ., concur.

3. DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES,

EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO,
AMARO BONA, FERDINAND CRUZ, FEDERICO A. BELITA,
ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER
TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY
ESTEBAN and LYDIA ORTEGA, vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA
A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and
HON. EMERSON C. TUMANON, respondents. G.R. No. L-80680
January 26, 1989
SARMIENTO, J.:

On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners
petitioned the National Labor Relations Commission for reinstatement
and payment of various benefits, including minimum wage, overtime
pay, holiday pay, thirteen-month pay, and emergency cost of living
allowance pay, against the respondent, the California Manufacturing
Company. 1
On October 7, 1986, after the cases had been consolidated, the
California Manufacturing Company (California) filed a motion to dismiss
as well as a position paper denying the existence of an employeremployee relation between the petitioners and the company and,
consequently, any liability for payment of money claims. 2 On motion of
the petitioners, Livi Manpower Services, Inc. was impleaded as a partyrespondent.
It appears that the petitioners were, prior to their stint with California,
employees of Livi Manpower Services, Inc. (Livi), which subsequently
assigned them to work as "promotional merchandisers" 3 for the former
firm pursuant to a manpower supply agreement. Among other things,
the agreement provided that California "has no control or supervisions
whatsoever over [Livi's] workers with respect to how they accomplish
their work or perform [Californias] obligation"; 4 the Livi "is an
independent contractor and nothing herein contained shall be construed
as creating between [California] and [Livi] . . . the relationship of
principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed
that it is the sole responsibility of [Livi] to comply with all existing as well
as future laws, rules and regulations pertinent to employment of
labor" 6 and that "[California] is free and harmless from any liability
arising from such laws or from any accident that may befall workers and
employees of [Livi] while in the performance of their duties for
[California]. 7
It was further expressly stipulated that the assignment of workers to
California shall be on a "seasonal and contractual basis"; that "[c]ost of
living allowance and the 10 legal holidays will be charged directly to
[California] at cost "; and that "[p]ayroll for the preceeding [sic] week
[shall] be delivered by [Livi] at [California's] premises." 8

The petitioners were then made to sign employment contracts with

durations of six months, upon the expiration of which they signed new
agreements with the same period, and so on. Unlike regular California
employees, who received not less than P2,823.00 a month in addition to
a host of fringe benefits and bonuses, they received P38.56 plus P15.00
in allowance daily.

had absolved the latter from any liability as an employer, will not erase
either party's obligations as an employer, if an employer-employee
relation otherwise exists between the workers and either firm. At any
rate, since the agreement was between Livi and California, they alone
are bound by it, and the petitioners cannot be made to suffer from its
adverse consequences.

The petitioners now allege that they had become regular California
employees and demand, as a consequence whereof, similar benefits.
They likewise claim that pending further proceedings below, they were
notified by California that they would not be rehired. As a result, they
filed an amended complaint charging California with illegal dismissal.

This Court has consistently ruled that the determination of whether or

not there is an employer-employee relation depends upon four
standards: (1) the manner of selection and engagement of the putative
employee; (2) the mode of payment of wages; (3) the presence or
absence of a power of dismissal; and (4) the presence or absence of a
power to control the putative employee's conduct. 14 Of the four, the
right-of-control test has been held to be the decisive factor. 15

California admits having refused to accept the petitioners back to work

but deny liability therefor for the reason that it is not, to begin with, the
petitioners' employer and that the "retrenchment" had been forced by
business losses as well as expiration of contracts. 9 It appears that
thereafter, Livi re-absorbed them into its labor pool on a "wait-in or
standby" status. 10
Amid these factual antecedents, the Court finds the single most
important issue to be: Whether the petitioners are California's or Livi's
employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled
against the existence of any employer-employee relation between the
petitioners and California ostensibly in the light of the manpower supply
contract, supra, and consequently, against the latter's liability as and for
the money claims demanded. In the same breath, however, the labor
arbiter absolved Livi from any obligation because the "retrenchment" in
question was allegedly "beyond its control ." 13 He assessed against the
firm, nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law
and being such, it cannot be made the subject of agreement. Hence, the
fact that the manpower supply agreement between Livi and California
had specifically designated the former as the petitioners' employer and

On the other hand, we have likewise held, based on Article 106 of the
Labor Code, hereinbelow reproduced:
ART. 106. Contractor or sub-contractor. Whenever an
employee enters into a contract with another person for
the performance of the former's work, the employees of
the contractor and of the latter's sub-contractor, if any,
shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or sub-contractor fails to
pay wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his
contractor or sub-contractor to such employees to the
extent of the work performed under the contract, in the
same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect
the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these types

of contracting and determine who among the parties

involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of
any provisions of this Code.
There is 'labor-only' contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter
were directly employed by him.
that notwithstanding the absence of a direct employer-employee
relationship between the employer in whose favor work had been
contracted out by a "labor-only" contractor, and the employees, the
former has the responsibility, together with the "labor-only" contractor,
for any valid labor claims, 16 by operation of law. The reason, so we held,
is that the "labor-only" contractor is considered "merely an agent of the
employer," 17 and liability must be shouldered by either one or shared by
both. 18
There is no doubt that in the case at bar, Livi performs "manpower
services", 19 meaning to say, it contracts out labor in favor of clients. We
hold that it is one notwithstanding its vehement claims to the contrary,
and notwithstanding the provision of the contract that it is "an
independent contractor." 20 The nature of one's business is not
determined by self-serving appellations one attaches thereto but by the
tests provided by statute and prevailing case law. 21 The bare fact that
Livi maintains a separate line of business does not extinguish the equal
fact that it has provided California with workers to pursue the latter's
own business. In this connection, we do not agree that the petitioners
had been made to perform activities 'which are not directly related to
the general business of manufacturing," 22 California's purported
"principal operation activity. " 23 The petitioner's had been charged with

"merchandizing [sic] promotion or sale of the products of [California] in

the different sales outlets in Metro Manila including task and occational
[sic] price tagging," 24 an activity that is doubtless, an integral part of
the manufacturing business. It is not, then, as if Livi had served as its
(California's) promotions or sales arm or agent, or otherwise, rendered a
piece of work it (California) could not have itself done; Livi, as a
placement agency, had simply supplied it with the manpower necessary
to carry out its (California's) merchandising activities, using its
(California's) premises and equipment. 25
Neither Livi nor California can therefore escape liability, that is,
assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct
employees" 26 in their complaints is nothing conclusive. For one thing,
the fact that the petitioners were (are), will not absolve California since
liability has been imposed by legal operation. For another, and as we
indicated, the relations of parties must be judged from case to case and
the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or
seasonal" basis merely is no argument either. As we held in Philippine
Bank of Communications v. NLRC, 27 a temporary or casual employee,
under Article 218 of the Labor Code, becomes regular after service of
one year, unless he has been contracted for a specific project. And we
cannot say that merchandising is a specific project for the obvious
reason that it is an activity related to the day-to-day operations of
California.
It would have been different, we believe, had Livi been discretely a
promotions firm, and that California had hired it to perform the latter's
merchandising activities. For then, Livi would have been truly the
employer of its employees, and California, its client. The client, in that
case, would have been a mere patron, and not an employer. The
employees would not in that event be unlike waiters, who, although at
the service of customers, are not the latter's employees, but of the
restaurant. As we pointed out in the Philippine Bank of
Communicationscase:

xxx xxx xxx

... The undertaking given by CESI in favor of the bank was
not the performance of a specific job for instance, the
carriage and delivery of documents and parcels to the
addresses thereof. There appear to be many companies
today which perform this discrete service, companies with
their own personnel who pick up documents and packages
from the offices of a client or customer, and who deliver
such materials utilizing their own delivery vans or
motorcycles to the addressees. In the present case, the
undertaking of CESI was to provide its client the bank with
a certain number of persons able to carry out the work of
messengers. Such undertaking of CESI was complied with
when the requisite number of persons were assigned or
seconded to the petitioner bank. Orpiada utilized the
premises and office equipment of the bank and not those
of CESI. Messengerial work the delivery of documents to
designated persons whether within or without the bank
premises-is of course directly related to the day-to-day
operations of the bank. Section 9(2) quoted above does
not require for its applicability that the petitioner must be
engaged in the delivery of items as a distinct and
separate line of business.
Succinctly put, CESI is not a parcel delivery company: as
its name indicates, it is a recruitment and placement
corporation placing bodies, as it were, in different client
companies for longer or shorter periods of time, ... 28
In the case at bar, Livi is admittedly an "independent contractor
providing temporary services of manpower to its client. " 29 When it thus
provided California with manpower, it supplied California with personnel,
as if such personnel had been directly hired by California. Hence, Article
106 of the Code applies.
The Court need not therefore consider whether it is Livi or California
which exercises control over the petitioner vis-a-vis the four barometers

referred to earlier, since by fiction of law, either or both shoulder

responsibility.
It is not that by dismissing the terms and conditions of the manpower
supply agreement, we have, hence, considered it illegal. Under the
Labor Code, genuine job contracts are permissible, provided they are
genuine job contracts. But, as we held in Philippine Bank of
Communications, supra, when such arrangements are resorted to "in
anticipation of, and for the very purpose of making possible, the
secondment" 30 of the employees from the true employer, the Court will
be justified in expressing its concern. For then that would compromise
the rights of the workers, especially their right to security of tenure.
This brings us to the question: What is the liability of either Livi or
California?
The records show that the petitioners bad been given an initial sixmonth contract, renewed for another six months. Accordingly, under
Article 281 of the Code, they had become regular employees-ofCalifornia-and had acquired a secure tenure. Hence, they cannot be
separated without due process of law.
California resists reinstatement on the ground, first, and as we Id, that
the petitioners are not its employees, and second, by reason of financial
distress brought about by "unfavorable political and economic
atmosphere" 31"coupled by the February Revolution." 32 As to the first
objection, we reiterate that the petitioners are its employees and who,
by virtue of the required one-year length-of-service, have acquired a
regular status. As to the second, we are not convinced that California
has shown enough evidence, other than its bare say so, that it had in
fact suffered serious business reverses as a result alone of the prevailing
political and economic climate. We further find the attribution to the
February Revolution as a cause for its alleged losses to be gratuitous
and without basis in fact.
California should be warned that retrenchment of workers, unless clearly
warranted, has serious consequences not only on the State's initiatives
to maintain a stable employment record for the country, but more so, on
the workingman himself, amid an environment that is desperately

scarce in jobs. And, the National Labor Relations Commission should

have known better than to fall for such unwarranted excuses and
nebulous claims.

Appeal by certiorari , taken by the Philippine Air Lines, Inc. hereinafter

referred to as the PAL from an order of the Court of Industrial Relations
hereinafter referred to as the CIR the dispositive part of reads:

WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED:

(1): SETTING ASIDE the decision, dated March 20, 1987, and the
resolution, dated August 19, 1987; (2) ORDERING the respondent, the
California Manufacturing Company, to REINSTATE the petitioners with full
status and rights of regular employees; and (3) ORDERING the
respondent, the California Manufacturing Company, and the
respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon, to
PAY, jointly and severally, unto the petitioners: (a) backwages and
differential pays effective as and from the time they had acquired a
regular status under the second paragraph, of Section 281, of the Labor
Code, but not to exceed three (3) years, and (b) all such other and
further benefits as may be provided by existing collective bargaining
agreement(s) or other relations, or by law, beginning such time; and (4)
ORDERING the private respondents to PAY unto the petitioners
attorney's fees equivalent to ten (10%) percent of all money claims
hereby awarded, in addition to those money claims. The private
respondents are likewise ORDERED to PAY the costs of this suit.

WHEREFORE , THE Philippine Air Lines is hereby ordered to pay the four
claimants, Messrs. Fortuno Biangco, Hernando Guevarra, Bernardino
Abarrientos and 140 days each, sick leave which the two may use or
enjoy according to existing company rules, and regulations regarding
this privilege, and to allow the four claimants the enjoyment of their
earned and accumulated free trip passes both here and aboard subject
to the above-mentioned plan the company may adopt. In order to effect
early payment of the Christmas bonus, the Chief Examiner of the Court
or his duly authorized representatives is hereby directed to examine;
pertinent records of the company, to compute and determine the
Christmas bonus due each of the four claimant and to submit a report
therefore immediately upon completion of the same.

4. PHILIPPINE AIR LINES, INC., petitioner, vs.

PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION and COURT OF
INDUSTRIAL RELATIONS, respondents. G.R. No. L-21120
February 28, 1967

Paredes, Poblador, Cruz & Nazareno for petitioner.

Taada, Lerum & Cinco and Beltran & Lacson for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
CONCEPCION, C.J.:

It appears that on May 4, 1950, PAL dismissed its above named four (4)
employees, who are member of the Philippine Air Lines Employees
Association hereinafter referred to as PALEA and that on July 13,
1954, the CIR en banc passed resolution, in Case No. 465-V thereof,
directing the reinstatement of said employess "to their former or
equivalent position in the company, with back wages from the date of
their reinstatement, and without prejudice to their seniority or other
rights and privileges. This resolution was affirmed by the Supreme Court,
in G.R. No. L-8197, on October 31, 1958.
On January 14, 1959, said employees were reinstated and subsequently
their backwages, computed at the rate of their compensation at the
time of the aforementioned dismissal, less the wages and salaries
earned by them elsewhere during the lay-off period, were paid to them.
The employees objected to this deduction and the CIR sustained them,
in a Resolution dated May 22, 1960, which was reversed by the Supreme
Court, on July 26, 1960, in G.R. No. L-15544. Soon later, or on November
10, 1960, the PALEA moved for the execution of the CIR resolution of July
13, 1954, as regards the "other rights and privileges" therein mentioned,
referring, more specifically to: (1) Christmas bonus from 1950 to 1958;
(2) accumulated sick leave; (3) transportation allowance during lay-off
period; and (4) accumulated free trip passes, both domestic and

international. By an order dated October 8, 1962, the CIR granted this

motion, except as regards the sick leave of Onofre Grio and Bernardino
Abarrientos, and the transportation allowance, which were denied.
Hence this appeal.
PAL maintains that the CIR has erred in acting as it did, because : (1) the
aforementioned privileges were not specifically mentioned in the CIR
resolution of July 13, 1954; (2) the order of the CIR dated October 8,
1962, had, allegedly, the effect of amending said resolution; and (3) the
clause therein "without prejudice to their seniority or other rights and
privileges" should be construed prospectively, not retroactively.
Insofar as the Christmas bonus, the accumulated sick leave privileges
and the transportation allowance during the lay-off period, the PAL's
contention is clearly devoid of merit. The aforementioned clause must
be considered in the light of the entire context of the resolution of July
13, 1954 and of its dispositive part. In ordering therein the
"reinstatement" of said employees with "back wages from the date of
their dismissal to the date of their reinstatement, and without prejudice
to their seniority or other rights and privileges," it is obvious that the
resolution intended to restore the employees to their status immediately
prior to their dismissal.
Hence, it directed , not only their reinstatement, but, also, the payment
of their back wages during the period of their lay-off thus referring
necessarily to a period of time preceding their reinstatement and the
retention of "their seniority or other rights and privileges". Rights
reinstatement, but at the time? Certainly, not after their reinstatement,
but at the time of their aforementioned dismissal. In other words, the
reinstatement was with back wages for the lay-off period, coupled with
"seniority or other rights and privileges", attached to the status of the
employees when they were dismissed. To put it differently, the CIR
treated said employees as if they had not been absent form work and
had been uninterruptedly working during the lay-off period.1wph1.t
Thus, in Republic Steel Corporation vs. NLRB (114 F. 2d. 820), it was held
that, under a decree of the Circuit Court of Appeals and Order of the
National Labor Relations Board directing the employer to reinstate the
striking employees without prejudice to their seniority or other rights or

privileges, it was the intention of the Board and Court to provide that,
upon reinstatement the employees were to be treated in matters
involving seniority and continuity of employment as though they had not
been absent from work, and hence the reinstated employees were
entitled to the benefits of the employer's vacation plan for the year in
which they were reinstated and subsequent years upon the basis of
continuity of service computed as though they had been actually at
during the entire period from the date of strike to the date of
reinstatement.
As a consequence, the employees involved in the case at bar are
entitled to the Christmas bonus that PAL had given to all of its
employees during said period, for said bonus, having been paid
regularly, has become part of the compensation of the employees.1 Said
employees are, likewise, entitled to transportation allowance and the
corresponding sick leave privileges. These sick leave privileges are
subject, however, to the following qualifications, namely: (1) that the
accumulated sick leave cannot exceed 140 days, pursuant to the
collective bargaining agreement between the PAL and the PALEA,
effective in 1959; and (2) that, pursuant to the same agreement, which
denies sick leave privileges to retired employees, Onofre Grio and
Bernardino Abarrientos, who have retired, are not entitled to said
privileges.
The PAL's appeal as regards the free trip passes is, however, well taken,
for the employees had no absolute right thereto, even if they had
actually rendered services during the lay-off period. The free trip passes
were given, neither automatically, nor indiscriminately. The employees
had to apply therefore and their applications were subject PAL's
approval.
Wherefore, except as to the free trip passes for the lay-off period, which
should not be deemed included in the "rights and privileges" awarded in
the resolution of July 13, 1954, and subject to the qualification that the
accumulated sick leave privileges cannot exceed 140 days, the
appealed resolution of October 8, 1962, is hereby affirmed in all other
respects, without pronouncement as to costs. It is so ordered.

Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, Sanchez and Castro,

JJ., concur. G.R. No. 114733 January 2, 1997

5. AURORA LAND PROJECTS CORP. Doing business under the

name "AURORA PLAZA" and TERESITA T. QUAZON,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
and HONORIO DAGUI, respondents. G.R. No. 114733 January
2, 1997

properties. On June 8, 1991, private respondent Dagui received the

shock of his life when Mrs. Quazon suddenly told him: "Wala ka nang
trabaho mula ngayon," 3 on the alleged ground that his work was
unsatisfactory. On August 29, 1991, private respondent, who was then
already sixty-two (62) years old, filed a complaint for illegal dismissal
with the Labor Arbiter.

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

HERMOSISIMA, JR., J.:

The question as to whether an employer-employee relationship exists in
a certain situation continues to bedevil the courts. Some businessmen
try to avoid the bringing about of an employer-employee relationship in
their enterprises because that judicial relation spawns obligations
connected with workmen's compensation, social security, medicare,
minimum wage, termination pay, and unionism. 1 In light of this
observation, it behooves this Court to be ever vigilant in Checking the
unscrupulous efforts of some of our entrepreneurs, primarily aimed at
maximizing their return on investments at the expense of the lowly
workingman.
This petition for certiorari seeks the reversal of the Resolution 2 of public
respondent National Labor Relations Commission dated March 16, 1994
affirming with modification the decision of the Labor Arbiter, dated May
25, 1992, finding petitioners liable to pay private respondent the total
amount of P195,624.00 as separation pay and attorney's fees.
The relevant antecedents:
Private respondent Honorio Dagui was hired by Doa Aurora Suntay
Tanjangco in 1953 to take charge of the maintenance and repair of the
Tanjangco apartments and residential buildings. He was to perform
carpentry, plumbing, electrical and masonry work. Upon the death of
Doa Aurora Tanjangco in 1982, her daughter, petitioner Teresita
Tanjangco Quazon, took over the administration of all the Tanjangco

IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or

Teresita Tanjangco Quazon are hereby ordered to pay the complainant
the total amount of ONE HUNDRED NINETY FIVE THOUSAND SIX
HUNDRED TWENTY FOUR PESOS (P195,624.00) representing
complainant's separation pay and the ten (10%) percent attorney's fees
within ten (10) days from receipt of this Decision.
All other issues are dismissed for lack of merit. 4
Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T.
Quazon appealed to the National Labor Relations Commission. The
Commission affirmed, with modification, the Labor Arbiter's decision in a
Resolution promulgated on March 16, 1994, in the following manner:
WHEREFORE, in view of the above considerations, let the appealed
decision be as it is hereby AFFIRMED with (the) MODIFICATION that
complainant must be paid separation pay in the amount of P88,920.00
instead of P177,840.00. The award of attorney's fees is hereby deleted.
5
As a last recourse, petitioners filed the instant petition based on grounds
not otherwise succinctly and distinctly ascribed, viz:
I

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION

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

he would take to perform a contracted job. On occasion, Dagui was hired

only as a "tubero" or plumber as the need arises in order to unclog
sewerage pipes. Every time his services were needed, he was paid
accordingly. It was understood that his job was limited to the specific
undertaking of unclogging the pipes. In effect, petitioners would like us
to believe that private respondent Dagui was an independent contractor,
particularly a job contractor, and not an employee of Aurora Plaza.

II

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

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION

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

We are not persuaded.

There is job contracting permissible under the Code if the following

conditions are met:
xxx xxx xxx

III
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING
SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT MORE SO FOR THE
EQUIVALENT OF 38 YEARS OF ALLEGED SERVICE.
IV
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING BOTH
PETITIONERS LIABLE FOR SEPARATION PAY. 6
It is our impression that the crux of this petition rests on two elemental
issues: (1) Whether or not private respondent Honorio Dagui was an
employee of petitioners; and (2) If he were, whether or not he was
illegally dismissed.
Petitioners insist that private respondent had never been their
employee. Since the establishment of Aurora Plaza, Dagui served therein
only as a job contractor. Dagui had control and supervision of whoever

(2) The contractor has substantial capital or investment in the form of

tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.
Honorio Dagui earns a measly sum of P180.00 a day (latest salary). 7
Ostensibly, and by no stretch of the imagination can Dagui qualify as a
job contractor. No proof was adduced by the petitioners to show that
Dagui was merely a job contractor, and it is absurd to expect that
private respondent, with such humble resources, would have substantial
capital or investment in the form of tools, equipment, and machineries,
with which to conduct the business of supplying Aurora Plaza with
manpower and services for the exclusive purpose of maintaining the
apartment houses owned by the petitioners herein.
The bare allegation of petitioners, without more, that private respondent
Dagui is a job contractor has been disbelieved by the Labor Arbiter and
the public respondent NLRC. Dagui, by the findings of both tribunals,
was an employee of the petitioners. We are not inclined to set aside
these findings. The issue whether or not an employer-employee
relationship exists in a given case is essentially a question of fact. 8 As a

rule, repetitious though it has become to state, this Court does not
review supposed errors in the decision of the NLRC which raise factual
issues, because factual findings of agencies exercising quasi-judicial
functions [like public respondent NLRC] are accorded not only respect
but even finality, aside from the consideration that this Court is
essentially not a trier of facts. 9

basis at the rate of P180.00. 15 Employees are those who are

compensated for their labor or services by wages rather than by profits.
16 Clearly, Dagui fits under this classification.

However, we deem it wise to discuss this issue full-length if only to

bolster the conclusions reached by the labor tribunals, to which we fully
concur.

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

Jurisprudence is firmly settled that whenever the existence of an

employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee's conduct. 10 It is the socalled "control test," and that is, whether the employer controls or has
reserved the right to control the employee not only as to the result of
the work to be done but also as to the means and methods by which the
same is to be accomplished, 11which constitute the most important
index of the existence of the employer-employee relationship. Stated
otherwise, an employer-employee relationship exists where the person
for whom the services are performed reserves the right to control not
only the end to be achieved but also the means to be used in reaching
such end. 12
All these elements are present in the case at bar. Private respondent
was hired in 1953 by Doa Aurora Suntay Tanjangco (mother of Teresita
Tanjangco-Quazon), who was then the one in charge of the
administration of the Tanjangco's various apartments and other
properties. He was employed as a stay-in worker performing carpentry,
plumbing, electrical and necessary work (sic) needed in the repairs of
Tanjangco's properties. 13 Upon the demise of Doa Aurora in 1982,
petitioner Teresita Tanjangco-Quazon took over the administration of
these properties and continued to employ the private respondent, until
his unceremonious dismissal on June 8, 1991. 14
Dagui was not compensated in terms of profits for his labor or services
like an independent contractor. Rather, he was paid on a daily wage

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

The employment relationship established, the next question would have

to be: What kind of an employee is the private respondent regular,
casual or probationary?
We find private respondent to be a regular employee, for Article 280 of
the Labor Code provides:
Regular and Casual employment. The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific project or

undertaking the completion or termination of which has been

determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such actually exists.
As can be gleaned from this provision, there are two kinds of regular
employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade
of the employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in
which they are employed. 19
Whichever standard is applied, private respondent qualifies as a regular
employee. As aptly ruled by the Labor Arbiter:
. . . As owner of many residential and apartment buildings in Metro
Manila, the necessity of maintaining and employing a permanent stay-in
worker to perform carpentry, plumbing, electrical and necessary work
needed in the repairs of Tanjangco's properties is readily apparent and is
in fact needed. So much so that upon the demise of Doa Aurora
Tanjangco, respondent's daughter Teresita Tanjangco-Quazon apparently
took over the administration of the properties and continued to employ
complainant until his outright dismissal on June 8, 1991. . . . 20
The jobs assigned to private respondent as maintenance man,
carpenter, plumber, electrician and mason were directly related to the
business of petitioners as lessors of residential and apartment buildings.
Moreover, such a continuing need for his services by herein petitioners
is sufficient evidence of the necessity and indispensability of his services
to petitioners' business or trade.

Private respondent Dagui should likewise be considered a regular

employee by the mere fact that he rendered service for the Tanjangcos
for more than one year, that is, beginning 1953 until 1982, under Doa
Aurora; and then from 1982 up to June 8, 1991 under the petitioners, for
a total of twenty-nine (29) and nine (9) years respectively. Owing to
private respondent's length of service, he became a regular employee,
by operation of law, one year after he was employed in 1953 and
subsequently in 1982. In Baguio Country Club Corp., v. NLRC, 21 we
decided that it is more in consonance with the intent and spirit of the
law to rule that the status of regular employment attaches to the casual
employee on the day immediately after the end of his first year of
service. To rule otherwise is to impose a burden on the employee which
is not sanctioned by law. Thus, the law does not provide the qualification
that the employee must first be issued a regular appointment or must
first be formally declared as such before he can acquire a regular status.
Petitioners argue, however, that even assuming arguendo that private
respondent can be considered an employee, he cannot be classified as a
regular employee. He was merely a project employee whose services
were hired only with respect to a specific job and only while the same
exists, 22 thus falling under the exception of Article 280, paragraph 1 of
the Labor Code. Hence, it is claimed that he is not entitled to the
benefits prayed for and subsequently awarded by the Labor Arbiter as
modified by public respondent NLRC.
The circumstances of this case in light of settled case law do not, at all,
support this averment. Consonant with a string of cases beginning with
Ochoco v. NLRC, 23 followed by Philippine National Construction
Corporation v. NLRC, 24Magante v. NLRC, 25 and Capitol Industrial
Construction Corporation v. NLRC, 26 if truly, private respondent was
employed as a "project employee," petitioners should have submitted a
report of termination to the nearest public employment office everytime
his employment is terminated due to completion of each project, as
required by Policy Instruction No. 20, which provides:
Project employees are not entitled to termination pay if they are
terminated as a result of the completion of the project or any phase
thereof in which they are employed, regardless of the number of project
in which they have been employed by a particular construction

company. Moreover, the company is not required to obtain a clearance

from the Secretary of Labor in connection with such termination. What is
required of the company is a report to the nearest Public Employment
Office for statistical purposes.
Throughout the duration of private respondent's employment as
maintenance man, there should have been filed as many reports of
termination as there were projects actually finished, if it were true that
private respondent was only a project worker. Failure of the petitioners
to comply with this simple, but nonetheless compulsory, requirement is
proof that Dagui is not a project employee. 27
Coming now to the second issue as to whether or not private respondent
Dagui was illegally dismissed, we rule in the affirmative.
Jurisprudence abound as to the rule that the twin requirements of due
process, substantive and procedural, must be complied with, before a
valid dismissal exists. 28 Without which the dismissal becomes void. 29
The twin requirements of notice and hearing constitute the essential
elements of due process. This simply means that the employer shall
afford the worker ample opportunity to be beard and to defend himself
with the assistance of his representative, if he so desires. 30 As held in
the case of Pepsi Cola Bottling Co. v. NLRC: 31
The law requires that the employer must furnish the worker sought to be
dismissed with two written notices before termination of employee can
be legally effected: (1) notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought; and (2) the
subsequent notice which informs the employee of the employer's
decision to dismiss him (Section 13, BP 130; Sections, 2-6, Rule XIV,
Book V Rules and Regulations Implementing the Labor Code as
amended), Failure to comply with the requirements taints the dismissal
with illegality. This procedure is mandatory; in the absence of which, any
judgment reached by management is void and inexistent. (Tingson, Jr. v.
NLRC, 185 SCRA 498 [1990]; National Service Corporation v. NLRC, 168
SCRA 122 [1988]; Ruffy v. NLRC, 182 SCRA 365 [1990].

These mandatory requirements were undeniably absent in the case at

bar. Petitioner Quazon dismissed private respondent on June 8, 1991,
without giving him any written notice informing the worker herein of the
cause for his termination. Neither was there any hearing conducted in
order to give Dagui the opportunity to be heard and defend himself. He
was simply told: "Wala ka nang trabaho mula ngayon," allegedly
because of poor workmanship on a previous job. 32 The undignified
manner by which private respondent's services were terminated smacks
of absolute denial of the employee's right to due process and betrays
petitioner Quazon's utter lack of respect for labor. Such an attitude
indeed deserves condemnation.
The Court, however, is bewildered why only an award for separation pay
in lieu of reinstatement was made by both the Labor Arbiter and the
NLRC. No backwages were awarded. It must be remembered that
backwages and reinstatement are two reliefs that should be given to an
illegally dismissed employee. They are separate and distinct from each
other. In the event that reinstatement is no longer possible, as in this
case, 33 separation pay is awarded to the employee. The award of
separation pay is in lieu of reinstatement and not of backwages. In other
words, an illegally dismissed employee is entitled to (1) either
reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and (2) backwages. 34 Payment of backwages is specifically
designed to restore an employee's income that was lost because of his
unjust dismissal. 35 On the other hand, payment of separation pay is
intended to provide the employee money during the period in which he
will be looking for another employment. 36
Considering, however, that the termination of private respondent Dagui
was made on June 8, 1991 or after the effectivity of the amendatory
provision of Republic Act No. 6715 on March 21, 1989, private
respondent's backwages should be computed on the basis of said law.
It is true that private respondent did not appeal the award of the Labor
Arbiter awarding separation pay sansbackwages. While as a general
rule, a party who has not appealed is not entitled to affirmative relief
other than the ones granted in the decision of the court below, 37 law
and jurisprudence authorize a tribunal to consider errors, although
unassigned, if they involve (1) errors affecting the lower court's

jurisdiction over the subject matter, (2) plain errors not specified, and
(3) clerical errors. 38 In this case, the failure of the Labor Arbiter and the
public respondent NLRC to award backwages to the private respondent,
who is legally entitled thereto having been illegally dismissed, amounts
to a "plain error" which we may rectify in this petition, although private
respondent Dagui did not bring any appeal regarding the matter, in the
interest of substantial justice. The Supreme Court is clothed with ample
authority to review matters, even if they are not assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a
just decision of the case. 39 Rules of procedure are mere tools designed
to facilitate the attainment of justice. Their strict and rigid application,
which would result in technicalities that tend to frustrate rather than
promote substantial justice, must always be avoided. 40Thus,
substantive rights like the award of backwages resulting from illegal
dismissal must not be prejudiced by a rigid and technical application of
the rules. 41
Petitioner Quazon argues that, granting the petitioner corporation
should be held liable for the claims of private respondent, she cannot be
made jointly and severally liable with the corporation, notwithstanding
the fact that she is the highest ranking officer of the company, since
Aurora Plaza has a separate juridical personality.
We disagree.
In the cases of Maglutac v. National Labor Relations Commission, 42
Chua v. National Labor Relations Commission,43 and A.C. Ransom Labor
Union-CCLU v. National Labor Relations Commission 44 we were
consistent in holding that the highest and most ranking officer of the
corporation, which in this case is petitioner Teresita Quazon as manager
of Aurora Land Projects Corporation, can be held jointly and severally
liable with the corporation for the payment of the unpaid money claims
of its employees who were illegally dismissed. In this case, not only was
Teresita Quazon the most ranking officer of Aurora Plaza at the time of
the termination of the private respondent, but worse, she had a direct
hand in the private respondent's illegal dismissal. A corporate officer is
not personally liable for the money claims of discharged corporate
employees unless he acted with evident malice and bad faith in
terminating their employment. 45 Here, the failure of petitioner Quazon

to observe the mandatory requirements of due process in terminating

the services of Dagui evinced malice and bad faith on her part, thus
making her liable.
Finally, we must address one last point. Petitioners aver that, assuming
that private respondent can be considered an employee of Aurora Plaza,
petitioners cannot be held liable for separation pay for the duration of
his employment with Doa Aurora Tanjangco from 1953 up to 1982. If
petitioners should be held liable as employers, their liability for
separation pay should only be counted from the time Dagui was rehired
by the petitioners in 1982 as a maintenance man.
We agree.
Petitioners' liability for separation pay ought to be reckoned from 1982
when petitioner Teresita Quazon, as manager of Aurora Plaza, continued
to employ private respondent. From 1953 up to the death of Doa
Aurora sometime in 1982, private respondent's claim for separation pay
should have been filed in the testate or intestate proceedings of Doa
Aurora. This is because the demand for separation pay covered by the
years 1953-1982 is actually a money claim against the estate of Doa
Aurora, which claim did not survive the death of the old woman. Thus, it
must be filed against her estate in accordance with Section 5, Rule 86 of
the Revised Rules of Court, to wit:
Sec. 5. Claims which must be filed under tire notice. If not filed, barred;
exceptions. All claims for money against the decedent, arising from
contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses for the last sickness of the
decedent, and judgment for money against the decedent, must be filed
within the time limited in the notice; otherwise they are barred forever,
except that they may be set forth as counterclaims in any action that
the executor or administrator may bring against the claimants. . . .
WHEREFORE, the instant petition is partly GRANTED and the Resolution
of the public respondent National Labor Relations Commission dated
March 16, 1994 is hereby MODIFIED in that the award of separation pay
against the petitioners shall be reckoned from the date private
respondent was re-employed by the petitioners in 1982, until June 8,

1991. In addition to separation pay, full backwages are likewise awarded

to private respondent, inclusive of allowances, and other benefits or
their monetary equivalent pursuant to Article 279 46 of the Labor Code,
as amended by Section 34 of Republic Act No. 6715, computed from the
time he was dismissed on June 8, 1991 up to the finality of this decision,
without deducting therefrom the earnings derived by private respondent
elsewhere during the period of his illegal dismissal, pursuant to our
ruling in Osmalik Bustamante, et al. v. National Labor Relations
Commission. 47
No costs.
SO ORDERED.

6. WILLIAM L. TIU, petitioner, vs.NATIONAL LABOR RELATIONS

COMMISSION and HERMES DELA CRUZ, respondents. G.R. No.
95845
February 21, 1996
DECISION
MENDOZA, J.:
On February 18, 1986, private respondent filed a complaint, for illegal
dismissal, violation of the Minimum Wage Law and non-payment of the
cost of living allowances, legal holiday pay, service incentive pay and
separation pay, against petitioner. Petitioner denied that private
respondent was his employee. But after consideration of the parties'
evidence, the Labor Arbiter found that private respondent was an
employee of petitioner and that he had been illegally dismissed. The
Labor Arbiter ordered petitioner to pay private respondent the sum of
P25,076.96, corresponding to the latter's differentials, 13th month pay
and separation pay. On appeal, the Labor Arbiter's decision was affirmed
in toto by the NLRC. Hence this petition for certiorari. Petitioner alleges
that the NLRC's decision was made in "reckless disregard" of the
applicable facts and law and that it amounts to a grave abuse of
discretion of the NLRC.1

Petitioner, as operator of the D'Rough Riders Transportation, is engaged

in the transportation of passengers from Cebu City to the northern towns
of Cebu. Private respondent worked in petitioner's bus terminals as a
"dispatcher," assisting and guiding passengers and carrying their bags.
The Labor Arbiter and the NLRC found, and petitioner had admitted in
his position paper below, that private respondent was paid a regular
daily wage of P20.00.
Petitioner denies that private respondent was his employee. He alleges
that he did not have the power of selection and dismissal nor the power
of control over private respondent. According to petitioner, private
respondent, together with so-called "standbys," hung around his bus
terminals, assisting passengers with their baggages as "dispatchers."
Petitioner claims that, in league with "bad elements" in the locality who
threatened to cause damage to his passenger buses and scare
passengers away if petitioner and other bus operators did not let them,
private respondent and other "standbys" forced passengers to hire them
as baggage boys. Petitioner alleges that he had no choice but to allow
private respondent and other "standbys" to carry on their activities
within the premises of his bus terminals.2 He also claims he allowed
them to do so even if their services as so-called "dispatchers" were not
needed in his business. Petitioner insists that as "dispatcher," private
respondent worked in his own way, without supervision by him.
The Labor Arbiter and the NLRC found private respondent to be an
employee of petitioner, applying the Four-fold test, namely (a) who has
the power of selection and engagement of the employees; (b) who pays
the wages; (c) who has the power of dismissal, and (d) and who has the
power to control the employees' conduct. The Labor Arbiter stated in his
decision:
Respondents would want this office to believe that the sum of P20.00
that they pay complainant is ex gratia; hence, not compensation for
services rendered. This is however belied by respondents' own
allegation in their position paper that, "for purposes of preservation of
his transportation business, agreed to give each 'standby' a fixed daily
rate; and in exchange, they would canvass, assist and help passengers
of respondents' passenger trucks. This privilege or arrangement was
made possible due to the efforts and representation of complainant's

father, Mr. Regino dela Cruz, who is close and known to the standbys
and/or dispatchers." The impression that this office gets from said
allegation is that the P20.00 received by complainant represents the
value that respondents attach to complainant's services; hence, it is
remuneration for services rendered. Respondent's admission of regular
payment of such an amount, already establishes the existence of one of
the factors that indicate employment relationship.
The right to hire and fire, on the other hand, has been indubitably
established by complainant's Exhibit A (rebuttal) which remains
untraversed and unrefuted, a translation of its contents of which are
hereunder quoted for quick and easy reference:
Since there was an agreement for your return that when you are caught
that you are inside the terminal you are to be dismissed outright and
you agreed to this condition so that last Tuesday you were caught taking
a bath inside the terminal so that from now on you are no longer with
the company "you are dismissed" because you broke the agreement.
Evident therefrom is management's unequivocal language as regards its
exercise of the prerogative to dismiss.
Complainant's Exhibit "D" rebuttal, respondent's official document,
reflecting the designation of respondent's witness, (Regino) dela Cruz as
Chief Dispatcher, likewise buttresses complainant's claim of
employment, for the reason that the office of Chief (Dispatcher)
presupposes the existence of subordinates over whom said chief
exercises supervisory control. If a chief dispatcher works with the
company, uses and signs official documents as is reflected in Exhibit
"D," it follows that his employment as such was in consideration of a
chief dispatcher's exercise of his duties to supervise and control
subordinate dispatchers. Along this line, Regino dela Cruz's testimony
that D'Rough Riders does not exercise control over the complainant
cannot preponderate over Exhibit "D."
In fine, this Office finds that complainant was an employee of
respondent.
Affirming the Labor Arbiter decision, the NLRC held:

We perused at length the record of the instant case, analyzing in the

process, the grounds and supporting arguments advanced in the appeal
and the reply thereto and we found no merit in the appeal.
. . . A reading of the affidavit of Regino dela Cruz, a witness for the
respondent who is the Chief Dispatcher and father of the complainant
would reveal that it was he who included the complainant as one of the
dispatchers of the respondents. Considering that Regino dela Cruz is the
Chief Dispatcher, the selection and engagement of the complainant as a
dispatcher of the respondents was made thru him and with the
acquiescence of the management.
Also, it is admitted by the respondents, as borne out by the records,
including the affidavit of Regino dela Cruz, that complainant was
receiving a fixed daily rate from the respondent. The Labor Arbiter is
therefore correct when she ruled that what complainant received from
the respondents is a remuneration for services rendered.
The power of dismissal which respondents exercised over the person of
the complainant is clearly established by complainants' Exhibit "A"
(rebuttal). This exhibit refers to a disciplinary memorandum to the complainant written in Visayan dialect. This exhibit was not refuted by
the respondents.
Also, we agree with the observation of the Labor Arbiter that
respondent's Chief Dispatcher is exercising his supervision and control
over the complainant who is a dispatcher as clearly manifested in
Exhibit "D" (rebuttal) for the complainant.
A close scrutiny of the same exhibit would reveal that complainant was
indeed signing a daily time record of their hours of work.
The evidences [sic] submitted by the complainant have proven that
complainant is really an employee of the respondents.
The question whether an employer-employee relationship exists is a
question of fact. As long as the findings of the labor agencies on this
question are supported by substantial evidence, the findings will not be

disturbed on review in this Court. Review in this Court concerning factual

findings in labor cases is confined to determining allegations of lack of
jurisdiction or grave abuse of discretion.3
We agree with the finding that an employer-employee relationship
existed between petitioner and private respondent, such finding being
supported by substantial evidence. Petitioner has failed to refute the
evidence presented by private respondent. He points to his Chief
Dispatcher, Regino de la Cruz, as the one who exercised the powers of
an employer over the "dispatchers." Petitioner argues that under an
agreement with Regino de la Cruz, it is the latter who selects and
engages the "dispatchers," dictates their time, supervises the
performance of their work, and pays their wages. He further argues that
the "disciplinary memorandum" issued by him was not addressed to
private respondent but to Regino de la Cruz, as employer of private
respondent, to remind him regarding the discipline of the "dispatchers."
Petitioner's contention is without merit. In determining whether there is
an employer-employee relationship between the parties the following
questions must be considered: (a) who has the power of selection and
engagement of the employee? (b) who pays the wages of employee? (c)
who has the power of dismissal? and; (d) who has the power to control
the employee's conduct?4 Of these powers the power of control over the
employees' conduct is generally regarded as determinative of the
existence of the relationship.5 The "control test," under which the
person for whom the services are rendered reserves the right to direct
not only the end to be achieved but also the means for reaching such
end, is generally relied on by the courts.6
Petitioner would have us believe that Chief Dispatcher Regino de la Cruz
exercised these powers on his own and independently of petitioner. This
is untenable. Petitioner admits that Regino de la Cruz was merely
assigned to do dispatch work. While Regino dela Cruz took charge of the
hiring of men and paid their wages, he did so as he was told by
petitioner. The payment of salaries and wages came from petitioner.
Regino de la Cruz filled up and signed daily time records for dispatchers
and took disciplinary action against erring employees in accordance with
instructions given to him by petitioner. In sum, it cannot be said that
Regino de la Cruz was the employer of the "dispatchers" or that he was

an independent contractor. He was himself only an employee of

petitioner.
Indeed the "control test" only requires the existence of the right to
control the manner of doing the work in a person, not necessarily the
actual exercise of the power by him, which he can delegate.7
Consequently, in the case at bar, the power is exercised by Regino de la
Cruz but it is power which is only delegated to him so that in truth the
power inherently and primarily is possessed by petitioner. De la Cruz is a
mere supervisor, while petitioner is the real employer.
Petitioner does not claim that Regino de la Cruz and his dispatchers
were independent contractors. Even if this be his contention, however,
the argument would still be without merit. Job contracting is permissible
only if the following conditions are met: (1) the contractor carries on an
independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal
in all matters connected with the performance of the work except as to
the results thereof; and (2) the contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his
business.8In the absence of these requisites, what exists is a "laboronly" contract under which the person acting as contractor is considered
merely an agent or intermediary of the employer who is responsible to
the workers in the same manner and to the same extent as if they had
been directly employed by him.9 As held in Broadway Motors, Inc. v.
NLRC,10 citing Philippine Bank of Communications v. NLRC, 11 the
"labor-only" contractor is a mere agent of the employer who is
responsible to the employees of the "labor-only" contractor as if such
employees had been employed by him directly. In such a case the
statute establishes an employer-employee relationship between the
employer and the employees of the "labor-only" contractor to prevent
any violation or circumvention of the provisions of the Labor Code, by
holding both the employer and the "labor-only" contractor responsible to
the employees.
For this reason, we hold that Regino de la Cruz can, at most, be
considered a "labor-only" contractor and, therefore, a mere agent of

petitioner. As he is acting in behalf of petitioner, private respondent

Hermes de la Cruz is actually the employee of petitioner.

Articles IX, Section 1-d of the by-laws and those approved by the Board
en banc.

WHEREFORE, the petition is DENIED for lack of merit.

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

SO ORDERED.

This shall form part of your 201 file.

BY AUTHORITY OF THE BOARD:

7. AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC.,

petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, et al.,
respondents. G.R. No. 111870 June 30, 1994

LUVIN S. MANAY

Jerry D. Banares for petitioner.

On January 9, 1990, the petitioner issued another order reminding Salas

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

Perdrelito Q. Aquino for private respondent.

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

President & Chief of the Board

TO: ATTY. LUIS S. SALAS

Instead of filing an answer, AMWSLAI moved to dismiss for lack of

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

Per approval of the Board en banc in a regular meeting held on January

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

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

Aside from notarization of loan & other legal documents, your duties and
responsibilities are hereby enumerated in the attached sheet, per

It was there held that Salas was not illegally dismissed and so not
entitled to collect separation benefits. His claims for vacation leave, sick
leave, medical and dental allowances and refund of SSS premiums were

SUBJECT: Implementing Order on the Reappointment of the Legal Officer

rejected on the ground that he was a managerial employee. He was also

denied moral and exemplary damages for lack of evidence of bad faith
on the part of AMWSLAI. Neither was he allowed to collect his notarial
fees from 1980 up to 1986 because the claim therefor had already
prescribed. However, the petitioner was ordered to pay Salas his notarial
fees from 1987 up to March 2, 1990, and attorney's fee equivalent to
10% of the judgment award.

2. To seek remedies to effect collection of overdue accounts of members

without prejudice to initiating court action to protect the interest of the
association.
3. To defend by all means all suit against the interest of the Association.
5
In the earlier case of Hydro Resources Contractors Corp. v.

On appeal, the decision was affirmed in toto by the respondent

Commission, prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be
considered an employee of the petitioner company.
We have held in a long line of decisions that the elements of an
employer-employee relationship are: (1) selection and engagement of
the employee; (2) payment of wages; (3) power of dismissal; and (4)
employer's own power to control employee's conduct. 3
The existence of such a relationship is essentially a factual question. The
findings of the NLRC on this matter are accorded great respect and even
finality when the same are supported by substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by
the parties on January 23, 1987, clearly show that Salas was an
employee of the petitioner. His selection as the company counsel was
done by the board of directors in one of its regular meetings. The
petitioner paid him a monthly compensation/retainer's fee for his
services. Though his appointment was for a fixed term of three years,
the petitioner reserved its power of dismissal for cause or as it might
deem necessary for its interest and protection. No less importantly,
AMWSLAI also exercised its power of control over Salas by defining his
duties and functions as its legal counsel, to wit:
1. To act on all legal matters pertinent to his Office.

Pagalilauan, 6 this Court observed that:

A lawyer, like any other professional, may very well be an employee of a
private corporation or even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its in-house counsel, pay them
regular salaries, rank them in its table of organization, and otherwise
treat them like its other officers and employees. At the same time, it
may also contract with a law firm to act as outside counsel on a retainer
basis. The two classes of lawyers often work closely together but one
group is made up of employees while the other is not. A similar
arrangement may exist as to doctors, nurses, dentists, public relations
practitioners and other professionals.
We hold, therefore, that the public respondent committed no grave
abuse of discretion in ruling that an employer-employee relationship
existed between the petitioner and the private respondent.
We must disagree with the NLRC, however, on Salas' claims for notarial
fees.
The petitioner contends that the public respondents are not empowered
to adjudicate claims for notarial fees. On the other hand, the Solicitor
General believes that the NLRC acted correctly when it took cognizance
of the claim because it arose out of Salas' employment contract with the
petitioner which assigned him the duty to notarize loan agreements and
other legal documents. Moreover, Section 9 of Rule 141 of the Rules of
Court does not restrict or prevent the labor arbiter and the NLRC from
determining claims for notarial fees.

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

JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners, vs.

NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION)
and BROAD STREET TAILORING and/or RODOLFO ZAPANTA,
respondents. G.R. No. L-75038 August 23, 1993
Balguma, Macasaet & Associates for petitioners.

Salas' claim for notarial fees is based on his employment as a notarial

officer of the petitioner and thus comes under the jurisdiction of the
labor arbiter.

Teresita Gandionco Oledan for private respondents.

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

A basic factor underlying the exercise of rights and the filing of claims
for benefits under the Labor Code and other presidential issuances or
labor legislations is the status and nature of one's employment. Whether
an employer-employee relationship exist and whether such employment
is managerial in character or that of a rank and file employee are
primordial considerations before extending labor benefits. Thus,
petitioners in this case seek a definitive ruling on the status and nature
of their employment with Broad Street Tailoring and pray for the
nullification of the resolution dated May 12, 1986 of the National Labor
Relations Commissions in NLRC Case No. RB-IV- 21558-78-T affirming the
decision of Labor Arbiter Ernilo V. Pealosa dated May 28, 1979, which
held eleven of them as independent contractors and the remaining one
as employee but of managerial rank.

The letter-contract of January 23, 1987, does not contain any stipulation
for the separate payment of notarial fees to Salas in addition to his basic
salary. On the contrary, it would appear that his notarial services were
part of his regular functions and were thus already covered by his
monthly compensation. It is true that the notarial fees were paid by
members-borrowers of the petitioner for its own account and not of
Salas. However, this is not a sufficient basis for his claim to such fees in
the absence of any agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with
the modification that the award of notarial fees and attorney's fees is
disallowed. It is so ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

8. ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES

ABAD, BENJAMIN BRIZUELA, NORLITO LADIA, MARCELO
AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO,

NOCON, J.:

The facts of the case shows that petitioner Elias Villuga was employed
as cutter in the tailoring shop owned by private respondent Rodolfo
Zapanta and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly
salary of P840.00 and a monthly transportation allowance of P40.00. In
addition to his work as cutter, Villuga was assigned the chore of
distributing work to the shop's tailors or sewers when both the shop's
manager and assistant manager would be absent. He saw to it that their
work conformed with the pattern he had prepared and if not, he had
them redone, repaired or resewn.
The other petitioners were either ironers, repairmen and sewers. They
were paid a fixed amount for every item ironed, repaired or sewn,
regardless of the time consumed in accomplishing the task. Petitioners

did not fill up any time record since they did not observe regular or fixed
hours of work. They were allowed to perform their work at home
especially when the volume of work, which depended on the number of
job orders, could no longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work
allegedly due to illness. For not properly notifying his employer, he was
considered to have abandoned his work.
In a complaint dated March 27, 1978, filed with the Regional Office of
the Department of Labor, Villuga claimed that he was refused
admittance when he reported for work after his absence, allegedly due
to his active participation in the union organized by private respondent's
tailors. He further claimed that he was not paid overtime pay, holiday
pay, premium pay for work done on rest days and holidays, service
incentive leave pay and 13th month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David
Oro also claimed that they were dismissed from their employment
because they joined the Philippine Social Security Labor Union (PSSLU).
Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela,
Flora Escobido, Justilita Cabaneg and Domingo Saguit claimed that they
stopped working because private respondents gave them few pieces of
work to do after learning of their membership with PSSLU. All the
petitioners laid claims under the different labor standard laws which
private respondent allegedly violated.
On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision
ordering the dismissal of the complaint for unfair labor practices, illegal
dismissal and other money claims except petitioner Villuga's claim for
13th month pay for the years 1976, 1977 and 1980. The dispositive
portion of the decision states as follows:
WHEREFORE, premises considered, the respondent Broad Street
Tailoring and/or Rodolfo Zapanta are hereby ordered to pay complainant
Elias Villuga the sum of ONE THOUSAND TWO HUNDRED FORTY-EIGHT
PESOS AND SIXTY-SIX CENTAVOS (P1,248.66) representing his 13th
month pay for the years 1976, 1977 and 1978. His other claims in this
case are hereby denied for lack of merit.

The complaint insofar as the other eleven (11) complainants are

concerned should be, as it is hereby dismissed for want of jurisdiction. 1
On appeal, the National Labor Relations Commission affirmed the
questioned decision in a resolution dated May 12, 1986, the dispositive
portion of which states as follows:
WHEREFORE, premises considered, the decision appealed from is, as it is
hereby AFFIRMED, and the appeal dismissed. 2
Presiding Commissioner Guillermo C. Medina merely concurred in the
result while Commissioner Gabriel M. Gatchalian rendered a dissenting
opinion which states as follows:
I am for upholding employer-employee relationship as argued by the
complainants before the Labor Arbiter and on appeal. The further fact
that the proposed decision recognizes complainant's status as piece-rate
worker all the more crystallizes employer-employee relationship the
benefits prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case on the following
grounds:
1. That the respondent National Labor Relations Commission abused its
discretion when it ruled that petitioner/complainant, Elias Villuga falls
within the category of a managerial employee;
2. . . . when it ruled that the herein petitioners were not dismissed by
reason of their union activities;
3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela,
Norlito Ladia, Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido,
Justilita Cabaneg and Domingo Saguit were not employees of private
respondents but were contractors.
4. . . . when it ruled that petitioner Elias Villuga is not entitled to
overtime pay and services for Sundays and Legal Holidays; and

5. . . . when it failed to grant petitioners their respective claims under

the provisions of P.D. Nos. 925, 1123 and 851. 4
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor
Code, to be a member of a managerial staff, the following elements
must concur or co-exist, to wit: (1) that his primary duty consists of the
performance of work directly related to management policies; (2) that
he customarily and regularly exercises discretion and independent
judgment in the performance of his functions; (3) that he regularly and
directly assists in the management of the establishment; and (4) that he
does not devote his twenty per cent of his time to work other than those
described above.
Applying the above criteria to petitioner Elias Villuga's case, it is
undisputed that his primary work or duty is to cut or prepare patterns for
items to be sewn, not to lay down or implement any of the management
policies, as there is a manager and an assistant manager who perform
said functions. It is true that in the absence of the manager the assistant
manager, he distributes and assigns work to employees but such duty,
though involving discretion, is occasional and not regular or customary.
He had also the authority to order the repair or resewing of defective
item but such authority is part and parcel of his function as cutter to see
to it that the items cut are sewn correctly lest the defective nature of the
workmanship be attributed to his "poor cutting." Elias Villuga does not
participate in policy-making. Rather, the functions of his position involve
execution of approved and established policies. InFranklin Baker
Company of the Philippines v. Trajano, 5 it was held that employees who
do not participate in policy-making but are given ready policies to
execute and standard practices to observe are not managerial
employees. The test of "supervisory or managerial status" depends on
whether a person possesses authority that is not merely routinary or
clerical in nature but one that requires use of independent judgment. In
other words, the functions of the position are not managerial in nature if
they only execute approved and established policies leaving little or no
discretion at all whether to implement said policies or not. 6
Consequently, the exclusion of Villuga from the benefits claimed under
Article 87 (overtime pay and premium pay for holiday and rest day
work), Article 94, (holiday pay), and Article 95 (service incentive leave

pay) of the Labor Code, on the ground that he is a managerial employee

is unwarranted. He is definitely a rank and file employee hired to
perform the work of the cutter and not hired to perform supervisory or
managerial functions. The fact that he is uniformly paid by the month
does not exclude him from the benefits of holiday pay as held in the
case ofInsular Bank of America Employees Union v. Inciong. 7 He should
therefore be paid in addition to the 13th month pay, his overtime pay,
holiday pay, premium pay for holiday and rest day, and service incentive
leave pay.
As to the dismissal of the charge for unfair labor practices of private
respondent consisting of termination of employment of petitioners and
acts of discrimination against members of the labor union, the
respondent Commission correctly held the absence of evidence that Mr.
Zapanta was aware of petitioners' alleged union membership on
February 22, 1978 as the notice of union existence in the establishment
with proposal for recognition and collective bargaining negotiation was
received by management only an March 3, 1978. Indeed, self-serving
allegations without concrete proof that the private respondent knew of
their membership in the union and accordingly reacted against their
membership do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his
work acceptable. For abandonment to constitute a valid cause for
dismissal, there must be a deliberate and unjustified refusal of the
employee to resume his employment. Mere absence is not sufficient, it
must be accompanied by overt acts unerringly pointing to the fact that
the employee simply does not want to work anymore. 8 At any rate,
dismissal of an employee due to his prolonged absence without leave by
reason of illness duly established by the presentation of a medical
certificate is not justified. 9 In the case at bar, however, considering that
petitioner Villuga absented himself for four (4) days without leave and
without submitting a medical certificate to support his claim of illness,
the imposition of a sanction is justified, but surely, not dismissal, in the
light of the fact that this is petitioner's first offense. In lieu of
reinstatement, petitioner Villuga should be paid separation pay where
reinstatement can no longer be effected in view of the long passage of
time or because of the realities of the situation. 10 But petitioner should
not be granted backwages in addition to reinstatement as the same is

not just and equitable under the circumstances considering that he was
not entirely free from blame. 11
As to the other eleven petitioners, there is no clear showing that they
were dismissed because the circumstances surrounding their dismissal
were not even alleged. However, we disagree with the finding of
respondent Commission that the eleven petitioners are independent
contractors.
For an employer-employee relationship to exist, the following elements
are generally considered: "(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." 12
Noting that the herein petitioners were oftentimes allowed to perform
their work at home and were paid wages on a piece-rate basis, the
respondent Commission apparently found the second and fourth
elements lacking and ruled that "there is no employer-employee
relationship, for it is clear that respondents are interested only in the
result and not in the means and manner and how the result is obtained."
Respondent Commission is in error. The mere fact that petitioners were
paid on a piece-rate basis is no argument that herein petitioners were
not employees. The term "wage" has been broadly defined in Article 97
of the Labor Code as remuneration or earnings, capable of being
expressed in terms of money whether fixed or ascertained on a time,
task, piece or commission

In determining whether the relationship is that of employer and

employee or one of an independent contractor, "each case must be
determined on its own facts and all the features of the relationship are
to be considered." 15Considering that petitioners who are either sewers,
repairmen or ironer, have been in the employ of private respondent as
early as 1972 or at the latest in 1976, faithfully rendering services which
are desirable or necessary for the business of private respondent, and
observing management's approved standards set for their respective
lines of work as well as the customers' specifications, petitioners should
be considered employees, not independent contractors.
Independent contractors are those who exercise independent
employment, contracting to do a piece of work according to their own
methods and without being subjected to control of their employer
except as to the result of their work. By the nature of the different
phases of work in a tailoring shop where the customers' specifications
must be followed to the letter, it is inconceivable that the workers
therein would not be subjected to control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and
similar workers hired in the tailoring department, although paid weekly
wages on piece work basis, are employees not independent contractors.
Accordingly, as regular employees, paid on a piece-rate basis,
petitioners are not entitled to overtime pay, holiday pay, premium pay
for holiday/rest day and service incentive leave pay. Their claim for
separation pay should also be defined for lack of evidence that they
were in fact dismissed by private respondent. They should be paid,
however, their 13th month pay under P.D. 851, since they are
employees not independent contractors.

basis. . . ." The facts of this case indicate that payment by the piece is
just a method of compensation and does not define the essence of the

WHEREFORE, in view of the foregoing reasons, the assailed decision of

respondent National Labor Relations Commission is hereby MODIFIED by
awarding

relation. 13 The petitioners were allowed to perform their work at home

does not likewise imply absence of control and supervision. The control
test calls merely for the existence of a right to control the manner of
doing the work, not the actual exercise of the right. 14

(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay
for holiday and rest day, service incentive leave pay and separation pay,
in addition to his 13th month pay; and

(b) in favor of the rest of the petitioners, their respective 13th month
pay.
The case is hereby REMANDED to the National Labor Relations
Commission for the computation of the claims herein-above mentioned.
SO ORDERED.

9. GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,

vs.HONORATO JUDICO and NATIONAL LABOR RELATIONS
COMMISSION, respondents. G.R. No. 7388 December 21, 1989
G.A. Fortun and Associates for petitioner.
Corsino B. Soco for private respondent.
PARAS J.:
Before us is a Petition for certiorari to review the decision of the National
Labor Relations Commission (NLRC, for brevity) dated September 9,
1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9,
1983, by 1) ordering petitioner insurance company, Great Pacific Life
Assurance Corporation (Grepalife, for brevity) to recognize private
respondent Honorato Judico, as its regular employee as defined under
Art. 281 of the Labor Code and 2) remanding the case to its origin for
the determination of private respondent Judico's money claims.
The records of the case show that Honorato Judico filed a complaint for
illegal dismissal against Grepalife, a duly organized insurance firm,
before the NLRC Regional Arbitration Branch No. VII, Cebu City on
August 27, 1982. Said complaint prayed for award of money claims
consisting of separation pay, unpaid salary and 13th month pay, refund
of cash bond, moral and exemplary damages and attorney's fees.

Both parties appealed to the NLRC when a decision was rendered by the
Labor Arbiter dismissing the complaint on the ground that the employeremployee relations did not exist between the parties but ordered
Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian
Charity.
On appeal, said decision was reversed by the NLRC ruling that
complainant is a regular employee as defined under Art. 281 of the
Labor Code and declaring the appeal of Grepalife questioning the
legality of the payment of Pl,000.00 to complainant moot and academic.
Nevertheless, for the purpose of revoking the supersedeas bond of said
company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to
complainant in the absence of any legal or factual basis to support its
payment.
Petitioner company moved to reconsider, which was denied, hence this
petition for review raising four legal issues to wit:
I.
Whether the relationship between insurance agents and their
principal, the insurance company, is that of agent and principal to be
governed by the Insurance Code and the Civil Code provisions on
agency, or one of employer-employee, to be governed by the Labor
Code.
II. Whether insurance agents are entitled to the employee benefits
prescribed by the Labor Code.
III. Whether the public respondent NLRC has jurisdiction to take
cognizance of a controversy between insurance agent and the insurance
company, arising from their agency relations.
IV. Whether the public respondent acted correctly in setting aside the
decision of Labor Arbiter Vito J. Minoria and in ordering the case
remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)
The crux of these issues boil down to the question of whether or not
employer-employee relationship existed between petitioner and private
respondent.

Petitioner admits that on June 9, 1976, private respondent Judico

entered into an agreement of agency with petitioner Grepalife to
become a debit agent attached to the industrial life agency in Cebu City.
Petitioner defines a debit agent as "an insurance agent selling/servicing
industrial life plans and policy holders. Industrial life plans are those
whose premiums are payable either daily, weekly or monthly and which
are collectible by the debit agents at the home or any place designated
by the policy holder" (p. 156, Rollo). Such admission is in line with the
findings of public respondent that as such debit agent, private
respondent Judico had definite work assignments including but not
limited to collection of premiums from policy holders and selling
insurance to prospective clients. Public respondent NLRC also found out
that complainant was initially paid P 200. 00 as allowance for thirteen
(13) weeks regardless of production and later a certain percentage
denominated as sales reserve of his total collections but not lesser than
P 200.00. Sometime in September 1981, complainant was promoted to
the position of Zone Supervisor and was given additional (supervisor's)
allowance fixed at P110.00 per week. During the third week of
November 1981, he was reverted to his former position as debit agent
but, for unknown reasons, not paid so-called weekly sales reserve of at
least P 200.00. Finally on June 28, 1982, complainant was dismissed by
way of termination of his agency contract.
Petitioner assails the findings of the NLRC that private respondent is an
employee of the former. Petitioner argues that Judico's compensation
was not based on any fixed number of hours he was required to devote
to the service of petitioner company but rather it was the production or
result of his efforts or his work that was being compensated and that the
so-called allowance for the first thirteen weeks that Judico worked as
debit agent, cannot be construed as salary but as a subsidy or a way of
assistance for transportation and meal expenses of a new debit agent
during the initial period of his training which was fixed for thirteen (13)
weeks. Stated otherwise, petitioner contends that Judico's
compensation, in the form of commissions and bonuses, was based on
actual production, (insurance plans sold and premium collections).
Said contentions of petitioner are strongly rejected by private
respondent. He maintains that he received a definite amount as his
Wage known as "sales reserve" the failure to maintain the same would

bring him back to a beginner's employment with a fixed weekly wage of

P 200.00 regardless of production. He was assigned a definite place in
the office to work on when he is not in the field; and in addition to
canvassing and making regular reports, he was burdened with the job of
collection and to make regular weekly report thereto for which an
anemic performance would mean dismissal. He earned out of his faithful
and productive service, a promotion to Zone Supervisor with additional
supervisor's allowance, (a definite or fixed amount of P110.00) that he
was dismissed primarily because of anemic performance and not
because of the termination of the contract of agency substantiate the
fact that he was indeed an employee of the petitioner and not an
insurance agent in the ordinary meaning of the term.
That private respondent Judico was an agent of the petitioner is
unquestionable. But, as We have held in Investment Planning Corp. vs.
SSS, 21 SCRA 294, an insurance company may have two classes of
agents who sell its insurance policies: (1) salaried employees who keep
definite hours and work under the control and supervision of the
company; and (2) registered representatives who work on commission
basis. The agents who belong to the second category are not required to
report for work at anytime, they do not have to devote their time
exclusively to or work solely for the company since the time and the
effort they spend in their work depend entirely upon their own will and
initiative; they are not required to account for their time nor submit a
report of their activities; they shoulder their own selling expenses as
well as transportation; and they are paid their commission based on a
certain percentage of their sales. One salient point in the determination
of employer-employee relationship which cannot be easily ignored is the
fact that the compensation that these agents on commission received is
not paid by the insurance company but by the investor (or the person
insured). After determining the commission earned by an agent on his
sales the agent directly deducts it from the amount he received from the
investor or the person insured and turns over to the insurance company
the amount invested after such deduction is made. The test therefore is
whether the "employer" controls or has reserved the right to control the
"employee" not only as to the result of the work to be done but also as
to the means and methods by which the same is to be accomplished.

Applying the aforementioned test to the case at bar, We can readily see
that the element of control by the petitioner on Judico was very much
present. The record shows that petitioner Judico received a definite
minimum amount per week as his wage known as "sales reserve"
wherein the failure to maintain the same would bring him back to a
beginner's employment with a fixed weekly wage of P 200.00 for
thirteen weeks regardless of production. He was assigned a definite
place in the office to work on when he is not in the field; and in addition
to his canvassing work he was burdened with the job of collection. In
both cases he was required to make regular report to the company
regarding these duties, and for which an anemic performance would
mean a dismissal. Conversely faithful and productive service earned him
a promotion to Zone Supervisor with additional supervisor's allowance, a
definite amount of P110.00 aside from the regular P 200.00 weekly
"allowance". Furthermore, his contract of services with petitioner is not
for a piece of work nor for a definite period.
On the other hand, an ordinary commission insurance agent works at his
own volition or at his own leisure without fear of dismissal from the
company and short of committing acts detrimental to the business
interest of the company or against the latter, whether he produces or
not is of no moment as his salary is based on his production, his anemic
performance or even dead result does not become a ground for
dismissal. Whereas, in private respondent's case, the undisputed facts
show that he was controlled by petitioner insurance company not only
as to the kind of work; the amount of results, the kind of performance
but also the power of dismissal. Undoubtedly, private respondent, by
nature of his position and work, had been a regular employee of
petitioner and is therefore entitled to the protection of the law and could
not just be terminated without valid and justifiable cause.
Premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ .,
concur.

10.INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs.NATIONAL

LABOR RELATIONS COMMISSION and MELECIO BASIAO,
respondents. G.R. No. 84484 November 15, 1989
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply
called the Company) and Melecio T. Basiao entered into a contract 1 by
which:
1. Basiao was "authorized to solicit within the Philippines applications for
insurance policies and annuities in accordance with the existing rules
and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as
provided in the Schedule of Commissions" of the contract to "constitute
a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as
well as all its circulars ... and those which may from time to time be
promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the
relations of the parties, the duties of the Agent, the acts prohibited to
him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his
own judgment as to time, place and means of soliciting insurance.
Nothing herein contained shall therefore be construed to create the
relationship of employee and employer between the Agent and the
Company. However, the Agent shall observe and conform to all rules and
regulations which the Company may from time to time prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from

giving, directly or indirectly, rebates in any form, or from making any
misrepresentation or over-selling, and, in general, from doing or
committing acts prohibited in the Agent's Manual and in circulars of the
Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without
any previous notice to the Agent, for or on account of ... (explicitly
specified causes). ...
Either party may terminate this contract by giving to the other notice in
writing to that effect. It shall become ipso facto cancelled if the
Insurance Commissioner should revoke a Certificate of Authority
previously issued or should the Agent fail to renew his existing
Certificate of Authority upon its expiration. The Agent shall not have any
right to any commission on renewal of premiums that may be paid after
the termination of this agreement for any cause whatsoever, except
when the termination is due to disability or death in line of service. As to
commission corresponding to any balance of the first year's premiums
remaining unpaid at the termination of this agreement, the Agent shall
be entitled to it if the balance of the first year premium is paid, less
actual cost of collection, unless the termination is due to a violation of
this contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another
contract an Agency Manager's Contract and to implement his end
of it Basiao organized an agency or office to which he gave the name M.
Basiao and Associates, while concurrently fulfilling his commitments
under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract.
After vainly seeking a reconsideration, Basiao sued the Company in a
civil action and this, he was later to claim, prompted the latter to
terminate also his engagement under the first contract and to stop
payment of his commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4

against the Company and its president. Without contesting the
termination of the first contract, the complaint sought to recover
commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim,
asserting that he was not the Company's employee, but an independent
contractor and that the Company had no obligation to him for unpaid
commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He
ruled that the underwriting agreement had established an employeremployee relationship between him and the Company, and this
conferred jurisdiction on the Ministry of Labor to adjudicate his claim.
Said official's decision directed payment of his unpaid commissions "...
equivalent to the balance of the first year's premium remaining unpaid,
at the time of his termination, of all the insurance policies solicited by ...
(him) in favor of the respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National
Labor Relations Commission. 7 Hence, the present petition for certiorari
and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he
had become the Company's employee by virtue of the contract invoked
by him, thereby placing his claim for unpaid commissions within the
original and exclusive jurisdiction of the Labor Arbiter under the
provisions of Section 217 of the Labor Code, 8 or, contrarily, as the
Company would have it, that under said contract Basiao's status was
that of an independent contractor whose claim was thus cognizable, not
by the Labor Arbiter in a labor case, but by the regular courts in an
ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal
and generally accepted sense existed between it and Basiao, is drawn
from the terms of the contract they had entered into, which, either
expressly or by necessary implication, made Basiao the master of his
own time and selling methods, left to his judgment the time, place and
means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to

observe any schedule of working hours or report to any regular station;

he could seek and work on his prospects anywhere and at anytime he
chose to, and was free to adopt the selling methods he deemed most
effective.

and an individual contractor is not to vanish altogether. Realistically, it

would be a rare contract of service that gives untrammelled freedom to
the party hired and eschews any intervention whatsoever in his
performance of the engagement.

Without denying that the above were indeed the expressed implicit
conditions of Basiao's contract with the Company, the respondents
contend that they do not constitute the decisive determinant of the
nature of his engagement, invoking precedents to the effect that the
critical feature distinguishing the status of an employee from that of an
independent contractor is control, that is, whether or not the party who
engages the services of another has the power to control the latter's
conduct in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiao's contract
obliging him to "... observe and conform to all rules and regulations
which the Company may from time to time prescribe ...," as well as to
the fact that the Company prescribed the qualifications of applicants for
insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made
Basiao, in legal contemplation, an employee of the Company. 9

... In determining the existence of employer-employee relationship, the

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

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

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

There is no dearth of authority holding persons similarly placed as

respondent Basiao to be independent contractors, instead of employees
of the parties for whom they worked. In Mafinco Trading Corporation vs.
Ople,13 the Court ruled that a person engaged to sell soft drinks for
another, using a truck supplied by the latter, but with the right to
employ his own workers, sell according to his own methods subject only
to prearranged routes, observing no working hours fixed by the other
party and obliged to secure his own licenses and defray his own selling

It is true that the "control test" expressed in the following

pronouncement of the Court in the 1956 case of Viana vs. Alejo AlLagadan 10

expenses, all in consideration of a peddler's discount given by the other

party for at least 250 cases of soft drinks sold daily, was not an
employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security
System 14 a case almost on all fours with the present one, this Court
held that there was no employer-employee relationship between a
commission agent and an investment company, but that the former was
an independent contractor where said agent and others similarly placed
were: (a) paid compensation in the form of commissions based on
percentages of their sales, any balance of commissions earned being
payable to their legal representatives in the event of death or
registration; (b) required to put up performance bonds; (c) subject to a
set of rules and regulations governing the performance of their duties
under the agreement with the company and termination of their services
for certain causes; (d) not required to report for work at any time, nor to
devote their time exclusively to working for the company nor to submit a
record of their activities, and who, finally, shouldered their own selling
and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been
engaged by a rice miller to buy and sell rice and palay without
compensation except a certain percentage of what he was able to buy or
sell, did work at his own pleasure without any supervision or control on
the part of his principal and relied on his own resources in the
performance of his work, was a plain commission agent, an independent
contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract
with the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing
has been made that any such rules or regulations were in fact
promulgated, much less that any rules existed or were issued which
effectively controlled or restricted his choice of methods or the
methods themselves of selling insurance. Absent such showing, the
Court will not speculate that any exceptions or qualifications were
imposed on the express provision of the contract leaving Basiao "... free
to exercise his own judgment as to the time, place and means of
soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having

been connected with the Company for twenty-five years. Whatever this
is meant to imply, the obvious reply would be that what is germane here
is Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.
The Court, therefore, rules that under the contract invoked by him,
Basiao was not an employee of the petitioner, but a commission agent,
an independent contractor whose claim for unpaid commissions should
have been litigated in an ordinary civil action. The Labor Arbiter erred in
taking cognizance of, and adjudicating, said claim, being without
jurisdiction to do so, as did the respondent NLRC in affirming the
Arbiter's decision. This conclusion renders it unnecessary and premature
to consider Basiao's claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations
Commission is set aside, and that complaint of private respondent
Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No
pronouncement as to costs. SO ORDERED. Cruz, Gancayco, GrioAquino, and Medialdea, JJ., concur.

11.MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO

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

FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private
respondents against herein petitioners assails the decision of
respondent National Labor Relations Commission in NLRC CASE No. 72603-84 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.

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

The undisputed facts are as follows:

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment,

the dispositive portion of which reads:

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.

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-42885 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.

Private respondents are required to work from or before 9:30 a.m. up to

6:00 or 7:00 p.m. from Monday to Saturday and during peak periods
even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor
organization of the respondent workers, filed a complaint docketed as
NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage;
(b) underpayment of living allowance; (c) non-payment of overtime
work; (d) non-payment of holiday pay; (e) non-payment of service
incentive pay; (f) 13th month pay; and (g) benefits provided for under
Wage Orders Nos. 1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private
respondent Dioscoro Pelobello left with Salvador Rivera, a salesman of
petitioner Haberdashery, an open package which was discovered to

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

underpayment re violation of the minimum wage law is hereby ordered
dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost
of living allowance, service incentive leave pay and the 13th Month Pay.
In view thereof, the economic analyst of the Commission is directed to
compute the monetary awards due each complainant based on the
available records of the respondents retroactive as of three years prior
to the filing of the instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter
on March 30, 1988 affirmed said decision but limited the backwages

awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1)
year. 6

actively manifested in all these aspects the manner and quality of

cutting, sewing and ironing.

After their motion for reconsideration was denied, petitioners filed the
instant petition raising the following issues:

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:

I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER
HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE
THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor
of private respondents. We have repeatedly held in countless decisions
that the test of employer-employee relationship is four-fold: (1) the
selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employee's
conduct. It is the so called "control test" that is the most important
element. 8 This simply means the determination of whether the
employer controls or has reserved the right to control the employee not
only as to the result of the work but also as to the means and method by
which the same is to be accomplished. 9
The facts at bar indubitably reveal that the most important requisite of
control is present. As gleaned from the operations of petitioner, when a
customer enters into a contract with the haberdashery or its proprietor,
the latter directs an employee who may be a tailor, pattern maker,
sewer or "plantsadora" to take the customer's measurements, and to
sew the pants, coat or shirt as specified by the customer. Supervision is

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 been established by the Secretary of
Labor. ..." 12No such rate has been established in this case.
But all these notwithstanding, the question as to whether or not there is
in fact an underpayment of minimum wages to private respondents has
already been resolved in the decision of the Labor Arbiter where he
stated: "Hence, for lack of sufficient evidence to support the claims of
the complainants for alleged violation of the minimum wage, their
claims for underpayment re violation of the Minimum Wage Law under
Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above
ruling of the Labor Arbiter to the NLRC; neither did they file any petition
raising that issue in the Supreme Court. Accordingly, insofar as this case
is concerned, that issue has been laid to rest. As to private respondents,
the judgment may be said to have attained finality. For it is a wellsettled 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 self-destruction of the employer.17 More importantly,
while the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every
labor dispute will automatically be decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise
impose discriplinary sanctions upon an employee for just and valid
cause, pertains in the first place to the employer, as well as the
authority to determine the existence of said cause in accordance with
the norms of due process. 19
There is no evidence that the employer violated said norms. On the
contrary, private respondents who vigorously insist on the existence of
employer-employee relationship, because of the supervision and control
of their employer over them, were the very ones who exhibited their
lack of respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had
valid grounds to terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission
dated March 30, 1988 and that of the Labor Arbiter dated June 10, 1986
are hereby modified. The complaint filed by Pelobello and Zapata for
illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed
for lack of factual and legal bases. Award of service incentive leave pay
to private respondents is deleted.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

12.COSMOPOLITAN FUNERAL HOMES, INC., petitioner, vs.

NOLI MAALAT and NATIONAL LABOR RELATIONS COMMISSION,
respondents. G.R. No. 86693
July 2, 1990
Castro, Enriquez, Carpio, Guillen & Associates for petitioner.
Castro B. Dorado for private respondent.

GUTIERREZ, JR., J.:

The nature of the work of a "funeraria" supervisor, whether employee or
commission agent, is the issue raised in this petition.
Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc.
engaged the services of private respondent Noli Maalat as a "supervisor"
to handle the solicitation of mortuary arrangements, sales and
collections. The funeral services which he sold refer to the taking of the
corpse, embalming, casketing, viewing and delivery. The private
respondent was paid on a commission basis of 3.5% of the amounts
actually collected and remitted.
On January 15, 1987, respondent Maalat was dismissed by the petitioner
for commission of the following violations despite previous warnings:
(a)
Understatement of the reported contract price against the actual
contract price charged to and paid by the customers;
(b)
Misappropriation of funds or collections by non-remittance of
collections and non-issuance of Official Receipt;
(c)
Charging customers additional amount and pocketing the same
for the cost of medicines, linen, and security services without issuing
Official Receipt;
(d)
Non-reporting of some embalming and re-embalming charges
and pocketing the same and non-issuance of Official Receipt;
(e)
Engaging in tomb making and inclusion of the price of the tomb
in the package price without prior knowledge of the customers and the
company. (At p. 16, Records)

ordering the petitioner to pay separation pay, commission, interests and

attorney's fee in the total amount of P205,571.52.
In an appeal from the decision, the National Labor Relations Commission
(NLRC), on May 31, 1988, reversed the Arbiter's action and rendered a
new decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the decision dated November 27,
1987, is hereby SET ASIDE and VACATED and a New One ENTERED,
ordering as follows:
1.
Judgment is hereby rendered declaring the dismissal of
complainant Noli Maalat by respondent-appellant as justified and with
lawful cause. By way of equitable relief and in the interest of social and
compassionate justice, We hereby order and direct respondent
Cosmopolitan Funeral Homes, Inc. to pay complainant Maalat his
separation pay equivalent to one-half (1/2%) month average income for
every year of service to appellant, computed on his last year of service
immediately preceding his separation from respondent, subject to
allowable set-offs and deductions of the counter-claims of respondent
company, after due notice and hearing.
2.
The claims for accrued commissions by complainant may be
admitted, subject to proofs thereof, and allowable set-offs and
deductions credited to the account of respondent-appellant by way of
counterclaims, after due notice and hearing.
3.
All the evidence adduced by the parties are hereby admitted,
subject to rebuttal and/or controvertion by either party during the
hearing and the hearings hereafter.

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

commissions.

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

On the basis of the parties' position papers, Labor Arbiter Newton R.

Sancho rendered a decision declaring Maalat's dismissal illegal and

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

Finally, this case is remanded to the Regional Arbitration Branch of origin

for further proceedings in accordance with the above judgment. No
findings as to costs. (At pp. 66-67, Rollo)

inimical to company interests proves that it had the right of control and
actually exercised its control over the private respondent. In other
words, Maalat worked exclusively for the petitioner.

The petitioner's motion for reconsideration was denied, hence, this

petition for review before this Court.

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

The issues raised in this petition are:

I.
Whether or not the NLRC erred in ruling that an employment
relationship existed between the parties; and
II.
Whether or not there was equitable basis for the award of 1/2
month separation pay for every year of service.
I
In determining whether a person who performs work for another is the
latter's employee or an independent contractor, the prevailing test is the
"right of control" test. Under this test, an employer-employee
relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be achieved,
but also the manner and means to be used in reaching that end.
The petitioner argues that Maalat was never its employee for he was
only a commission agent whose work was not subject to its control.
Citing Investment Planning Corporation of the Philippines v. Social
Security System (21 SCRA 924 [1967]), the petitioner states that the
work of its agents approximates that of an independent contractor since
the agent is not under control by the latter with respect to the means
and methods employed in the performance of the work, but only as to
the results.
The NLRC, after its perusal of the facts and evidence on record, stated
that there exists an employment relationship between the parties. The
petitioner has failed to overcome this factual finding.
The fact that the petitioner imposed and applied its rule prohibiting
superiors from engaging in other funeral business which it considered

The petitioner admits that these prohibitive rules bound the private
respondent but states that these rules have no bearing on the means
and methods ordinarily required of a supervisor. The overall picture is
one of employment. The petitioner failed to prove that the contract with
private respondent was but a mere agency, which indicates that a
"supervisor" is free to accomplish his work on his own terms and may
engage in other means of livelihood.
In Investment Planning Corporation, supra, cited by the petitioner, the
majority of the "commission agents" are regularly employed elsewhere.
Such a circumstance is absent in Maalat's case. Moreover, the private
respondent's job description states that ". . . he attends to the needs of
the clientele and arranges the kind of casket and funeral services the
customers would like to avail themselves of" and indicates that he must
always be on the job or at least most of time.
Likewise, the private respondent was not allowed to issue his own
receipts, nor was he allowed to directly deduct his commission as truly
independent salesmen practice.
Worthy of note too are two other company rules which provide that
"negotiation and making of contract with customers shall be done inside
the office" and "signing of contract should be made immediately before
the cadaver or deceased is place in the casket." (Annex 10-B,
Petitioner's Position Paper, Records) Said rules belie the petitioner's
stand that it does not have control over the means and methods by
which the work is accomplished. The control test has been satisfied.
(Social Security System v. Court of Appeals, 156 SCRA 383 [1987])

The finding by the public respondent that the petitioner has reported
private respondent to the Social Security System as a covered employee
adds strength to the conclusion that Maalat is an employee.
There is no reversible error in the findings of facts by the NLRC which are
supported by substantial evidence and which we, therefore, do not
disturb on appeal.
The payment of compensation by way of commission does not militate
against the conclusion that private respondent was an employee. Under
Article 97 of the Labor Code, "wage" shall mean "the renumeration of
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, pace or
commission basis . . .".
The non-observance of regular office hours does not sufficiently show
that Maalat is a "supervisor on commission basis" nor does the same
indicate that he is an independent salesman. As a supervisor, although
compensated on commission basis, he is exempt from the observance of
normal hours of work for his compensation is measured by the number
of sales he makes. He may not have had the usual fixed time for starting
and ending his work as in other types of employment but he had to
spend most of his working hours at his job. People die at all times of the
day or night.
All considered, we rule that private respondent is an employee of
petitioner corporation.

known previous record, and the ends of social and compassionate justice
will thus be served if he is paid a portion of his separation pay,
equivalent to one-half (1/2) month every year of his service to said
company. (See Soco v. Mercantile Corporation, G.R. No. 53364-65, March
16, 1987; and Firestone, et al, v. Lariosa et al., G.R. No. 70479, February
27, 1987). We are not inclined to grant complainant his full month
termination pay for every year of his service because, unlike in the
former Soco case, the misconduct of the employee merely involves
infraction of company rules while in the latter Firestone case it involves
misconduct of a rank-and-file employee, although similarly involving
acts of dishonesty. (At pp. 65-66, Rollo)

This Court will not disturb the finding by the NLRC that private
respondent Maalat was dishonest in the discharge of his functions. The
finding is sufficiently supported by the evidence on record.
Additionally, the private respondent did not appeal from the NLRC
decision, thereby impliedly accepting the validity of his dismissal.
We take exception, therefore, to the grant of separation pay to private
respondent.
In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164
SCRA 671 [1988]), this Court re-examined, the doctrine in the aforecited
Firestone and Soco cases and other previous cases that employees
dismissed for cause are nevertheless entitled to separation pay on the
ground of social and compassionate justice. In abandoning this doctrine,
the Court held, and we quote:

II
The petitioner impugns the award of separation pay equivalent to onehalf (1/2) month average income for every year of service to private
respondent. The NLRC ruled that:
However, mindful of the fact the complainant Noli Maalat has served
respondent company for the last twenty four (24) years, more or less, it
is but proper to afford him some equitable relief, consistent with the
recent rulings of the Supreme Court, due to his past services with no

. . . We hold that henceforth separation pay shall be allowed as a

measure of social justice only in those instances where the employee is
validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving
moral turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect
of rewarding rather than punishing the erring employee for his
offense. . . .
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege.
...
Subsequent decisions have abided by this pronouncement. (See
Philippine National Construction Corporation v. National Labor Relations
Commission, 170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National
Labor Relations Commission, 170 SCRA 597 [1989]; Osias Academy v.
National Labor Relations Commission, G.R. No. 83234, April 18, 1989;
and Nasipit Lumber Co., Inc. v. National Labor Relations Commission,
G.R. No. 54424, August 31, 1989.)
Conformably with the above cited PLDT ruling, this Court pronounces
that the grant of separation pay to private respondent Maalat, who was
validly terminated for dishonesty, is not justified.
Parenthetically, it may be mentioned that the Labor Arbiter, apparently
unaware of the petition for review pending before this Court, conducted
further proceedings to compute private respondent's separation pay,
unclaimed commission and 2% attorney's fees, in compliance with the
NLRC decision of May 31, 1988. After hearing, the Labor Arbiter
rendered a decision on May 10, 1989, the pertinent portion of which
reads:
In sum, the sustainable claims of complainant are as follows:
(1)
Separation Pay :
(2)
Unpaid Commissions

Sub-total
:
P
(3)
2% Attorney's Fees

P
:

76,064.40
39,344.80

115,409.20
:
2,308.18

P
117, 717.38
WHEREFORE, judgment is hereby rendered ordering respondent
Cosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat his
claims above set forth in the total amount of P117,717.38 only.
Neither party appealed from said decision.
For being in conflict with our holding that the private respondent is not
entitled to separation pay, this Court sets aside the Labor Arbiter's
computation of separation pay. However, we uphold his computation of
unclaimed commissions amounting to P39,344.80. The amount of
attorney's fee should consequently be recomputed at 2% of P39,344.80
or P786.89.
WHEREFORE, the judgment of the National Labor Relations Commission
is AFFIRMED except for the grant of separation pay which is hereby
disallowed. Private respondent Maalat is entitled to unclaimed
commissions of P39,344.80 and 2% attorney's fees of P786.89, said
amounts being considered final.
SO ORDERED.

13.DR. RENATO SARA and/or ROMEO ARANA petitioners, vs.

CERILA AGARRADO and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Amparo & Barcelona Law Offices for petitioners. G.R. No. 73199 October
26, 1988
The Solicitor General for public respondent. Nicanor A. Magno for private
respondent.

FERNAN, C.J.:

Challenged in this petition for certiorari is the jurisdiction of the Labor

Tribunal over Case No. LRD-ROXII-006-82, a claim for unpaid
commissions and reimbursement of certain sums of money filed by
herein private respondent Cerila Agarrado against herein petitioners Dr.
Renato Sara and Romeo Arabia.
Private respondent Cerila Agarrado was an attendant in the clinic of
petitioner Dr. Renato Sara She quit her job in 1973. Four years later,
petitioners Dr. Sara and Romeo Arabia, being owners of a rice mill and
having begun to engage in the buy and sell of palay and rice, entered
into a verbal agreement with private respondent Agarrado whereby it
was agreed that the latter would be paid P2.00 commission per sack of
milled rice sold as well as a commission of 10% per kilo of palay
purchased. It was further agreed that private respondent would spend
her own money for the undertaking, but to enable her to carry out the
agreement more effectively, she was authorized to borrow money from
other persons, as in fact she did, subject to reimbursement by
petitioners. 1
In 1982, private respondent filed with the National Labor Relations
Commission (NLRC) Regional Arbitration Branch No. XI, Cotabato City, a
complaint against petitioners for unpaid commission of P4,598.00 on
milled rice sold, P2,982.80 on palay sold, reimbursement of P17,500.00
which she had borrowed from various persons and Pl,749.00 of her own
money which petitioners allegedly had not reimbursed (LRD-ROXII-00682).
By way of defense, petitioners raised the issue of lack of jurisdiction on
the part of the Labor Arbiter to take cognizance of the case, there being
no employer-employee relationship between the parties. They averred
that the claim for alleged unpaid commission and certain sums of money
is governed by the law on agency under the Civil Code and hence a
purely civil obligation cognizable by the regular courts.
On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in
favor of private respondent ordering petitioners to pay all the claims
amounting to P26,397.80. 2

Petitioner appealed the decision to the NLRC, which in a resolution dated

June 25, 1986 affirmed the Labor Arbiter's decision and dismissed the
appeal. 3
Their motion for reconsideration having been denied, petitioners took
the present recourse, maintaining lack of jurisdiction on the part of the
Labor Tribunal as well as grave abuse of discretion on its part in finding
them liable to private respondent.
In his comment, the Solicitor General agreed with petitioners that there
was no employer-employee relationship between the parties and that by
reason thereof the Labor Arbiter had no jurisdiction over the case. The
Solicitor General's comment was accompanied by a manifestation and
motion stating that he was filing the comment on his own behalf and
that the public respondent NLRC had been informed about his contrary
stand. 4
The primordial issue in this case is whether an employer-employee
relationship exists between petitioners and private respondent as to
warrant cognizance by the Labor Arbiter of LRD-ROXII-006-82.
To determine the existence of an employer-employee relationship, this
Court in a long line of decisions 5 has invariably applied the following
four-fold test: [1] the selection and engagement of the employee; [2] the
payment of wages; [3] the power of dismissal; and [4] the power to
control the employee's conduct.
In the case at bar, we find that although there was a selection and
engagement of private respondent in 1977, the verbal agreement
between the parties negated the existence of the other requisites.
As to the payment of wages, the verbal agreement entered into by the
parties stipulated that private respondent would be paid a commission
of P2.00 per sack of milled rice sold as well as a 10% commission on
palay purchase. The arrangement thus was explicitly on a commission
basis dependent on the volume of sale or purchase. Private respondent
was not guaranteed any minimum compensation nor was she allowed
any drawing account or advance of any kind against unearned
commissions. Her right to compensation depended upon and was

measured by the tangible results she produced the quantity of rice sold
and the quantity of palay purchased.

higher buying rates. She was thus free to sell it to anybody whom she
pleased.

The power to terminate the relationship was mutually vested upon the
parties. Either may terminate the business arrangement at will, with or
without cause.

Moreover, private respondent worked for petitioners at her own pleasure

and was not subject to definite hours or conditions of work. She could
even delegate the task of buying and selling to others, if she so desired,
or simultaneously engaged in other means of livelihood while selling and
purchasing rice or palay.

Finally, noticeably absent from the agreement between the parties is the
element of control. Among the four (4) requisites, control is deemed the
most important that the other requisites may even be disregarded. 6
Under the control test, an employer-employee relationship exists if the
"employer" has reserved the right to control the "employee" not only as
to the result of the work done but also as to the means and methods by
which the same is to be accomplished. 7Otherwise, no such relationship
exists.

Under the conditions set forth in their agreement, private respondent

was an independent contractor, who exercising independent
employment, contracted to do a piece of work according to her own
method and without being subject to the control of her employer except
as to the result of her work. She was paid for the result of her labor,
unlike an employee who is paid for the labor he performs. 8

We observe that the means and methods of purchasing and selling rice
or palay by private respondent were totally independent of petitioners'
control. As established by the NLRC:

The verbal agreement devoid as it was of any stipulations indicative of

control leaves no doubt that private respondent was not an employee of
petitioners but was rather an independent contractor.

... Sometime in June 1977, respondent re-engaged the services of herein

complainant to sell milled rice to the customers of the former, as well as
to buy palay for and in behalf of Dr. Renato Sara, with the verbal
agreement that to carry out effectively the said task, complainant was
duly authorized by respondent, Dr. Sara to spend her own money, if
necessary but subject to reimbursment and if that would not be
sufficient, to borrow money from other sources with further
understanding that Dr. Sala will repay the ill thru the complainant; ...
([Emphasis supplied], p. 21, Rollo)

The Labor Tribunal's jurisdiction being primarily predicated upon the

existence of an employer-employee relationship between the parties,
the absence of such element, as in the case at bar, removes the
controversy from the scope of its limited jurisdiction.

Note that private respondent was never given capital by his supposed
employer but relied on her own resources and if insufficient, she
borrowed money from others. Petitioners did not supply private
respondent with tools and appliances needed to enable her to carry her
undertaking, except to authorize her to borrow money from others,
subject to reimbursement.
The absence of control is made more evident by the fact that private
respondent was not even obliged to sell the palay she purchased to
petitioners. She was at liberty to sell the palay to any trader offering

WHEREFORE, the instant petition for certiorari is granted. Case No. LRDROXII-006-82 of the National Labor Relations Commission is hereby
ordered DISMISSED for lack of jurisdiction. SO ORDERED.Gutierrez, Jr.,
Feliciano, Bidin and Cortes, JJ., concur.

14.INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES,

petitioner-appellant, vs. SOCIAL SECURITY SYSTEM,
respondent-appellee. G.R. No. L-19124
November 18,
1967
MAKALINTAL, J.:
Petitioner is a domestic corporation engaged in business management
and the sale of securities. It has two classes of agents who sell its

investment plans: (1) salaried employees who keep definite hours and
work under the control and supervision of the company; and (2)
registered representatives who work on commission basis.
On August 27, 1960 petitioner, through counsel, applied to respondent
Social Security Commission for exemption of its so-called registered
representatives from the compulsory coverage of the Social Security
Act. The application was denied in a letter signed by the Secretary to the
Commission on January 16, 1961. A motion to reconsider was filed and
also denied, after hearing, by the Commission itself in its resolution
dated September 8, 1961. The matter was thereafter elevated to this
Court for review.
The issue submitted for decision here is whether petitioner's registered
representatives are employees within the meaning of the Social Security
Act (R.A. No. 1161 as amended). Section 8 (d) thereof defines the term
"employee" for purposes of the Act as "any person who performs
services for an 'employer' in which either or both mental and physical
efforts are used and who receives compensation for such services,
where there is, employer-employee relationship." (As amended by Sec.4,
R.A. No. 2658). These representatives are in reality commission agents.
The uncontradicted testimony of petitioner's lone witness, who was its
assistant sales director, is that these agents are recruited and trained by
him particularly for the job of selling "'Filipinos Mutual Fund" shares,
made to undergo a test after such training and, if successful, are given
license to practice by the Securities and Exchange Commission. They
then execute an agreement with petitioner with respect to the sale of
FMF shares to the general public. Among the features of said agreement
which respondent Commission considered pertinent to the issue are: (a)
an agent is paid compensation for services in the form of commission;
(b) in the event of death or resignation he or his legal representative
shall be paid the balance of the commission corresponding to him; (c) he
is subject to a set of rules and regulations governing the performance of
his duties under the agreement; (d) he is required to put up a
performance bond; and (e) his services may be terminated for certain
causes. At the same time the Commission found from the evidence and
so stated in its resolution that the agents "are not required to report (for
work) at any time; they do not have to devote their time exclusively to
or work solely for petitioner; the time and the effort they spend in their

work depend entirely upon their own will and initiative; they are not
required to account for their time nor submit a record of their activities;
they shoulder their own selling expenses as well as transportation; and
they are paid their commission based on a certain percentage of their
sales." The record also reveals that the commission earned by an agent
on his sales is directly deducted by him from the amount he receives
from the investor and turns over to the company the amount invested
after such deduction is made. The majority of the agents are regularly
employed elsewhere either in the government or in private
enterprises.
Of the three requirements under Section 8 (d) of the Social Security Act
it is admitted that the first is present in respect of the agents whose
status is in question. They exert both mental and physical efforts in the
performance of their services. The compensation they receive, however,
is not necessarily for those efforts but rather for the results thereof, that
is, for actual sales that they make. This point is relevant in the
determination of whether or not the third requisite is also present,
namely, the existence of employer-employee relationship. Petitioner
points out that in effect such compensation is paid not by it but by the
investor, as shown by the basis on which the amount of the commission
is fixed and the manner in which it is collected.
Petitioner submits that its commission agents, engaged under the terms
and conditions already enumerated, are not employees but independent
contractors, as defined in Article 1713 of the Civil Code, which provides:
Art. 1713. By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in consideration of
a certain price or compensation. The contractor may either employ only
his labor or skill, or also furnish the material.
We are convinced from the facts that the work of petitioner's agents or
registered representatives more nearly approximates that of an
independent contractor than that of an employee. The latter is paid for
the labor he performs, that is, for the acts of which such labor consists;
the former is paid for the result thereof. This Court has recognized the
distinction in Chartered Bank, et al. vs. Constantino, 56 Phil. 717, where
it said:

On this point, the distinguished commentator Manresa in referring to

Article 1588 of the (Spanish) Civil Code has the following to say. . . .
The code does not begin by giving a general idea of the subject matter,
but by fixing its two distinguishing characteristics.
But such an idea was not absolutely necessary because the difference
between the lease of work by contract or for a fixed price and the lease
of services of hired servants or laborers is sufficiently clear. In the latter,
the direct object of the contract is the lessor's labor; the acts in which
such labor consists, performed for the benefit of the lessee, are taken
into account immediately. In work done by contract or for a fixed price,
the lessor's labor is indeed an important, a most important factor; but it
is not the direct object of the contract, nor is it immediately taken into
account. The object which the parties consider, which they bear in mind
in order to determine the cause of the contract, and upon which they
really give their consent, is not the labor but its result, the complete and
finished work, the aggregate of the lessor's acts embodied in something
material, which is the useful object of the contract. . . . (Manresa
Commentarios al Codigo Civil, Vol. X, ed., pp. 774-775.)
Even if an agent of petitioner should devote all of his time and effort
trying to sell its investment plans would not necessarily be entitled to
compensation therefor. His right to compensation depends upon and is
measured by the tangible results he produces.
The specific question of when there is "employer-employee relationship"
for purposes of the Social Security Act has not yet been settled in this
jurisdiction by any decision of this Court. But in other connections
wherein the term is used the test that has been generally applied is the
so-called control test, that is, whether the "employer" controls or has
reserved the right to control the "employee" not only as to the result of
the work to be done but also as to the means and methods by which the
same is to be accomplished.
Thus in Philippine Manufacturing Company vs. Geronimo, et al., L-6968,
November 29, 1954, involving the Workmen's Compensation Act, we
read:

. . . Garcia, a painting contractor, had a contract undertaken to paint a

water tank belonging to the Company "in accordance with specifications
and price stipulated," and with "the actual supervision of the work
(being) taken care of by" himself. Clearly, this made Garcia an
independent contractor, for while the company prescribed what should
be done, the doing of it and the supervision thereof was left entirely to
him, all of which meant that he was free to do the job according to his
own method without being subject to the control of the company except
as to the result.
Cruz, et al. vs. The Manila Hotel Company, L-9110, April 30, 1957,
presented the issue of who were to be considered employees of the
defendant firm for purposes of separation gratuity. LVN Pictures, Inc. vs.
Phil. Musicians Guild, et al., L-12582, January 28, 1961, involved the
status of certain musicians for purposes of determining the appropriate
bargaining representative of the employees. In both instances the
"control" test was followed. (See also Mansal vs. P.P. Gocheco Lumber
Co., L-8017, April 30, 1955; and Viana vs. Allagadan, et al., L-8967, May
31, 1956.)
In the United States, the Federal Social Security Act of 1935 set forth no
definition of the term 'employee' other than that it 'includes an officer of
a corporation.' Under that Act the U.S. Supreme Court adopted for a
time and in several cases the so-called 'economic-reality' test instead of
the 'control' test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs.
Birmingham, Ibid, 1947, both decided in June 1947). In the Bartels case
the Court said:
In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 SCt 1463,
supra, we held that the relationship of employer-employee, which
determines the liability for employment taxes under the Social Security
Act was not to be determined solely by the idea of control which an
alleged employer may or could exercise over the details of the service
rendered to his business by the worker or workers. Obviously control is
characteristically associated with the employer-employee relationship,
but in the application of social legislation employees are those who as a
matter of economic reality are dependent upon the business to which
they render service. In Silk, we pointed out that permanency of the
relation, the skill required, the investment in the facilities for work and
opportunities for profit or less from the activities were also factors that

should enter into judicial determination as to the coverage of the Social

Security Act. It is the total situation that controls. The standards are as
important in the entertainment field as we have just said, in Silk, that
they were in that of distribution and transportation. (91 Law, Ed. 1947,
1953;)
However, the 'economic-reality' test was subsequently abandoned as
not reflective of the intention of Congress in the enactment of the
original Security Act of 1935. The change was accomplished by means
of an amendatory Act passed in 1948, which was construed and applied
in later cases. In Benson vs. Social Security Board, 172 F. 2d. 682, the
U.S. Supreme Court said:
After the decision by the Supreme Court in the Silk case, the Treasury
Department revamped its Regulation, 12 Fed. Reg. 7966, using the test
set out in the Silk case for determining the existence of an employeremployee relationship. Apparently this was not the concept of such a
relationship that Congress had in mind in the passage of such remedial
acts as the one involved here because thereafter on June 14, 1948,
Congress enacted Public Law 642, 42 U.S C.A. Sec. 1301 (a) (6). Section
1101(a) (6) of the Social Security Act was amended to read as follows:
The term "employee" includes an officer of a corporation, but such term
does not include (1) any individual who, under the usual common-law
rules applicable in determining the employer-employee relationship, has
the status of an independent contractor or (2) any individual (except an
officer of a corporation) who is not an employee under such common
law rules.
While it is not necessary to explore the full effect of this enactment in
the determination of the existence of employer-employee relationships
arising in the future, we think it can fairly be said that the intent of
Congress was to say that in determining in a given case whether under
the Social Security Act such a relationship exists, the common-law
elements of such a relationship, as recognized and applied by the courts
generally at the time of the passage of the Act, were the standard to be
used . . . .
The common-law principles expressly adopted by the United States
Congress are summarized in Corpus Juris Secundum as follows:

Under the common-law principles as to tests of the independent

contractor relationship, discussed in Master and Servant, and applicable
in determining coverage under the Social Security Act and related taxing
provisions, the significant factor in determining the relationship of the
parties is the presence or absence of a supervisory power to control the
method and detail of performance of the service, and the degree to
which the principal may intervene to exercise such control, the presence
of such power of control being indicative of an employment relationship
and the absence of such power being indicative of the relationship of
independent contractor. In other words, the test of existence of the
relationship of independent contractor, which relationship is not taxable
under the Social Security Act and related provisions, is whether the one
who is claimed to be an independent contractor has contracted to do the
work according to his own methods and without being subject to the
control of the employer except as to the result of the work. (81 C.J.S.
Sec. 5, pp. 24-25); See also Millard's Inc. vs. United States, 46 F. Supp.
385; Schmidt vs. Ewing, 108 F. Supp. 505; Ramblin vs. Ewing, 106 F.
Supp. 268.
In the case last cited (Rambin v. Ewing) the question presented was
whether the plaintiff there, who was a sales representative of a
cosmetics firm working on a commission basis, was to be considered an
employee. Said the Court:
Plaintiff's only remuneration was her commission of 40%, plus $5 extra
for every $250 of sales. Plaintiff was not guaranteed any minimum
compensation and she was not allowed a drawing account or advance of
any kind against unearned commissions. Plaintiff paid all of her traveling
expenses and she even had to pay the postage for sending orders to
Avon.
The only office which Avon maintained in Shreveport was an office for
the city manager. Plaintiff worked from her own home and she was
never furnished any leads. The relationship between plaintiff and Avon
was terminable at will . . .
xxx

xxx

xxx

. . . A long line of decisions holds that commission sales representatives

are not employees within the coverage of the Social Security Act. The

underlying circumstances of the relationship between the sales

representatives and company often vary widely from case to case, but
commission sales representatives have uniformly been held to be
outside the Social Security Act.
Considering the similarity between the definition of "employee" in the
Federal Social Security Act (U.S.) as amended and its definitions in our
own Social Security Act, and considering further that the local statute is
admittedly patterned after that of the United States, the decisions of
American courts on the matter before us may well be accorded
persuasive force. The logic of the situation indeed dictates that where
the element of control is absent; where a person who works for another
does so more or less at his own pleasure and is not subject to definite
hours or conditions of work, and in turn is compensated according to the
result of his efforts and not the amount thereof, we should not find that
the relationship of employer and employee exists.
We have examined the contract form between petitioner and its
registered representatives and found nothing therein which would
indicate that the latter are under the control of the former in respect of
the means and methods they employ in the performance of their work.
The fact that for certain specified causes the relationship may be
terminated (e.g., failure to meet the annual quota of sales, inability to
make any sales production during a six-month period, conduct
detrimental to petitioner, etc.) does not mean that such control exists,
for the causes of termination thus specified have no relation to the
means and methods of work that are ordinarily required of or imposed
upon employees.
In view of the foregoing considerations, the resolution of respondent
Social Security Commission subject of this appeal is reversed and set
aside, without pronouncement as to costs.
Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles
and Fernando, JJ., concur.
Concepcion, C.J., took no part part.

15.SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.PHILIPPINE MUSICIANS Guild (FFW) and COURT OF
INDUSTRIAL RELATIONS, respondents-appellees. G.R. No. L12598
January 28, 1961
LVN PICTURES, INC., petitioner-appellant, vs.PHILIPPINE
MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees. G.R. No. L-12582
January 28, 1961
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians
Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek
a review by certiorari of an order of the Court of Industrial Relations in
Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW),
petitioner therein and respondent herein, as the sole and exclusive
bargaining agency of all musicians working with said companies, as well
as with the Premiere Productions, Inc., which has not appealed. The
appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582,
whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc.
Involving as they do the same order, the two cases have been jointly
heard in this Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW),
hereafter referred to as the Guild, averred that it is a duly registered
legitimate labor organization; that LVN Pictures, Inc., Sampaguita
Pictures, Inc., and Premiere Productions, Inc. are corporations, duly
organized under the Philippine laws, engaged in the making of motion
pictures and in the processing and distribution thereof; that said
companies employ musicians for the purpose of making music
recordings for title music, background music, musical numbers, finale

music and other incidental music, without which a motion picture is

incomplete; that ninety-five (95%) percent of all the musicians playing
for the musical recordings of said companies are members of the Guild;
and that the same has no knowledge of the existence of any other
legitimate labor organization representing musicians in said companies.
Premised upon these allegations, the Guild prayed that it be certified as
the sole and exclusive bargaining agency for all musicians working in
the aforementioned companies. In their respective answers, the latter
denied that they have any musicians as employees, and alleged that the
musical numbers in the filing of the companies are furnished by
independent contractors. The lower court, however, rejected this
pretense and sustained the theory of the Guild, with the result already
adverted to. A reconsideration of the order complained of having been
denied by the Court en banc, LVN Pictures, inc., and Sampaguita
Pictures, Inc., filed these petitions for review forcertiorari.
Apart from impugning the conclusion of the lower court on the status of
the Guild members as alleged employees of the film companies, the LVN
Pictures, Inc., maintains that a petition for certification cannot be
entertained when the existence of employer-employee relationship
between the parties is contested. However, this claim is neither borne
out by any legal provision nor supported by any authority. So long as,
after due hearing, the parties are found to bear said relationship, as in
the case at bar, it is proper to pass upon the merits of the petition for
certification.
It is next urged that a certification is improper in the present case,
because, "(a) the petition does not allege and no evidence was
presented that the alleged musicians-employees of the respondents
constitute a proper bargaining unit, and (b) said alleged musiciansemployees represent a majority of the other numerous employees of the
film companies constituting a proper bargaining unit under section 12
(a) of Republic Act No. 875."
The absence of an express allegation that the members of the Guild
constitute a proper bargaining unit is fatal proceeding, for the same is
not a "litigation" in the sense in which this term is commonly
understood, but a mere investigation of a non-adversary, fact finding
character, in which the investigating agency plays the part of a

disinterested investigator seeking merely to ascertain the desires of

employees as to the matter of their representation. In connection
therewith, the court enjoys a wide discretion in determining the
procedure necessary to insure the fair and free choice of bargaining
representatives by employees.1 Moreover, it is alleged in the petition
that the Guild it a duly registered legitimate labor organization and that
ninety-five (95%) percent of the musicians playing for all the musical
recordings of the film companies involved in these cases are members
of the Guild. Although, in its answer, the LVN Pictures, Inc. denied both
allegations, it appears that, at the hearing in the lower court it was
merely the status of the musicians as its employees that the film
companies really contested. Besides, the substantial difference between
the work performed by said musicians and that of other persons who
participate in the production of a film, and the peculiar circumstances
under which the services of that former are engaged and rendered,
suffice to show that they constitute a proper bargaining unit. At this
juncture, it should be noted that the action of the lower court in deciding
upon an appropriate unit for collective bargaining purposes is
discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed.
145) and that its judgment in this respect is entitled to almost complete
finality, unless its action is arbitrary or capricious (Marshall Field & Co. v.
N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the
cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive
bargaining agency for the musicians working in the aforesaid film
companies. It does not intend to represent the other employees therein.
Hence, it was not necessary for the Guild to allege that its members
constitute a majority of all the employees of said film companies,
including those who are not musicians. The real issue in these cases, is
whether or not the musicians in question are employees of the film
companies. In this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies
when a picture is to be made, the producer invariably chooses, from the
musical directors, one who will furnish the musical background for a film.
A price is agreed upon verbally between the producer and musical
director for the cost of furnishing such musical background. Thus, the
musical director may compose his own music specially written for or

adapted to the picture. He engages his own men and pays the
corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are summoned
through 'call slips' in the name of the film company (Exh 'D'), which
show the name of the musician, his musical instrument, and the date,
time and place where he will be picked up by the truck of the film
company. The film company provides the studio for the use of the
musicians for that particular recording. The musicians are also provided
transportation to and from the studio by the company. Similarly, the
company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an
employee of the company, supervises the recording of the musicians
and tells what to do in every detail. He solely directs the performance of
the musicians before the camera as director, he supervises the
performance of all the action, including the musicians who appear in the
scenes so that in the actual performance to be shown on the screen, the
musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a
scene, the technicians, soundmen and other employees of the company
assist in the operation. Hence, the work of the musicians is an integral
part of the entire motion picture since they not only furnish the music
but are also called upon to appear in the finished picture.
The question to be determined next is what legal relationship exits
between the musicians and the company in the light of the foregoing
facts.
We are thus called upon to apply R.A. Act 875. which is substantially the
same as and patterned after the Wagner Act substantially the same as a
Act and the Taft-Hartley Law of the United States. Hence, reference to
decisions of American Courts on these laws on the point-at-issue is
called for.
Statutes are to be construed in the light of purposes achieved and the
evils sought to be remedied. (U.S. vs. American Tracking Association,
310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322
U.S. 111, the United States Supreme Court said the Wagner Act was
designed to avert the 'substantial obstruction to the free flow of
commerce which results from strikes and other forms of industrial unrest
by eliminating the causes of the unrest. Strikes and industrial unrest
result from the refusal of employers' to bargain collectively and the
inability of workers to bargain successfully for improvement in their
working conditions. Hence, the purposes of the Act are to encourage
collective bargaining and to remedy the workers' inability to bargaining
power, by protecting the exercise of full freedom of association and
designation of representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment.'
The mischief at which the Act is aimed and the remedies it offers are not
confined exclusively to 'employees' within the traditional legal
distinctions, separating them from 'independent contractor'. Myriad
forms of service relationship, with infinite and subtle variations in the
term of employment, blanket the nation's economy. Some are within this
Act, others beyond its coverage. Large numbers will fall clearly on one
side or on the other, by whatever test may be applied. Inequality of
bargaining power in controversies of their wages, hours and working
conditions may characterize the status of one group as of the other. The
former, when acting alone may be as helpless in dealing with the
employer as dependent on his daily wage and as unable to resist
arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress
thought it necessary to create a balance of forces in certain types of
economic relationship. Congress recognized those economic
relationships cannot be fitted neatly into the containers designated as
'employee' and 'employer'. Employers and employees not in proximate
relationship may be drawn into common controversies by economic
forces and that the very dispute sought to be avoided might involve
'employees' who are at times brought into an economic relationship with
'employers', who are not their 'employers'. In this light, the language of
the Act's definition of 'employee' or 'employer' should be determined
broadly in doubtful situations, by underlying economic facts rather than
technically and exclusively established legal classifications. (NLRB vs.
Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood

with reference to the purposes of the Act and the facts involved in the
economic relationship. Where all the conditions of relation require
protection, protection ought to be given .

test an employer-employee relationship exist where the person for

whom the services are performed reserves the right to control not only
the end to be achieved, but also the manner and means to be used in
reaching the end. (United Insurance Company, 108, NLRB No. 115.).

By declaring a worker an employee of the person for whom he works

and by recognizing and protecting his rights as such, we eliminate the
cause of industrial unrest and consequently we promote industrial
peace, because we enable him to negotiate an agreement which will
settle disputes regarding conditions of employment, through the process
of collective bargaining.

Thus, in said similar case of Connor Lumber Company, the Supreme

Court said:.

The statutory definition of the word 'employee' is of wide scope. As used

in the Act, the term embraces 'any employee' that is all employees in
the conventional as well in the legal sense expect those excluded by
express provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the
causes of industrial unrest by protecting the exercise of their right to
self-organization for the purpose of collective bargaining. (b) To promote
sound stable industrial peace and the advancement of the general
welfare, and the best interests of employers and employees by the
settlement of issues respecting terms and conditions of employment
through the process of collective bargaining between employers and
representatives of their employees.
The primary consideration is whether the declared policy and purpose of
the Act can be effectuated by securing for the individual worker the
rights and protection guaranteed by the Act. The matter is not
conclusively determined by a contract which purports to establish the
status of the worker, not as an employee.
The work of the musical director and musicians is a functional and
integral part of the enterprise performed at the same studio
substantially under the direction and control of the company.
In other words, to determine whether a person who performs work for
another is the latter's employee or an independent contractor, the
National Labor Relations relies on 'the right to control' test. Under this

'We find that the independent contractors and persons working under
them are employees' within the meaning of Section 2 (3) of its Act.
However, we are of the opinion that the independent contractors have
sufficient authority over the persons working under their immediate
supervision to warrant their exclusion from the unit. We shall include in
the unit the employees working under the supervision of the
independent contractors, but exclude the contractors.'
'Notwithstanding that the employees are called independent
contractors', the Board will hold them to be employees under the Act
where the extent of the employer's control over them indicates that the
relationship is in reality one of employment. (John Hancock Insurance
Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1)
by calling the musicians through 'call slips' in 'the name of the company;
(2) by arranging schedules in its studio for recording sessions; (3) by
furnishing transportation and meals to musicians; and (4) by supervising
and directing in detail, through the motion picture director, the
performance of the musicians before the camera, in order to suit the
music they are playing to the picture which is being flashed on the
screen.
Thus, in the application of Philippine statutes and pertinent decisions of
the United States Courts on the matter to the facts established in this
case, we cannot but conclude that to effectuate the policies of the Act
and by virtue of the 'right of control' test, the members of the Philippine
Musicians Guild are employees of the three film companies and,
therefore, entitled to right of collective bargaining under Republic Act
No. 875.

In view of the fact that the three (3) film companies did not question the
union's majority, the Philippine Musicians Guild is hereby declared as the
sole collective bargaining representative for all the musicians employed
by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons
given in support thereof. Both are substantially in line with the spirit of
our decision in Maligaya Ship Watchmen Agency vs. Associated
Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the
contention of the employers in the Maligaya cases, to the effect that
they had dealt with independent contractors, was stronger than that of
the film companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases were
agencies registered with the Bureau of Commerce and duly licensed by
the City of Manila to engage in the business of supplying watchmen to
steamship companies, with permits to engage in said business issued by
theCity Mayor and the Collector of Customs. In the cases at bar, the
musical directors with whom the film companies claim to have dealt with
had nothing comparable to the business standing of said watchmen
agencies. In this respect, the status of said musical directors is
analogous to that of the alleged independent contractor in Caro vs.
Rilloraza, L-9569 (September 30, 1957), with the particularity that the
Caro case involved the enforcement of the liability of an employer under
the Workmen's Compensation Act, whereas the cases before us are
merely concerned with the right of the Guild to represent the musicians
as a collective bargaining unit. Hence, there is less reason to be
legalistic and technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases
of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509),
Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968
(November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and
Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead
of favoring the theory of said petitioners-appellants, the case of the
Sunripe Coconut Product Co., Inc. is authority for herein respondentsappellees. It was held that, although engaged as piece-workers, under
the "pakiao" system, the "parers" and "shellers" in the case were, not
independent contractor, butemployees of said company, because "the
requirement imposed on the 'parers' to the effect that 'the nuts are

pared whole or that there is not much meat wasted,' in effect limits or
controls the means or details by which said workers are to accomplish
their services" as in the cases before us.
The nature of the relation between the parties was not settled in the
Viana case, the same having been remanded to the Workmen's
Compensation Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract
between said company and Eliano Garcia, who undertook to paint a tank
of the former. Garcia, in turn engaged the services of Arcadio Geronimo,
a laborer, who fell while painting the tank and died in consequence of
the injuries thus sustained by him. Inasmuch as the company was
engaged in the manufacture of soap, vegetable lard, cooking oil and
margarine, it was held that the connection between its business and the
painting aforementioned was purely casual; that Eliano Garcia was an
independent contractor; that Geronimo was not an employee of the
company; and that the latter was not bound, therefore, to pay the
compensation provided in the Workmen's Compensation Act. Unlike the
Philippine Manufacturing case, the relation between the business of
herein petitioners-appellants and the work of the musicians is not
casual. As held in the order appealed from which, in this respect, is not
contested by herein petitioners-appellants "the work of the musicians
is an integral part of the entire motion picture." Indeed, one can hardly
find modern films without music therein. Hence, in the Caro case
(supra), the owner and operator of buildings for rent was held bound to
pay the indemnity prescribed in the Workmen's Compensation Act for
the injury suffered by a carpenter while working as such in one of said
buildings even though his services had been allegedly engaged by a
third party who had directly contracted with said owner. In other words,
the repair work had not merely a casual connection with the business of
said owner. It was a necessary incident thereof, just as music is in the
production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April
30, 1957) differs materially from the present cases. It involved the
interpretation of Republic Act No. 660, which amends the law creating
and establishing the Government Service Insurance System. No labor
law was sought to be construed in that case. In act, the same was

originally heard in the Court of First Instance of Manila, the decision of

which was, on appeal, affirmed by the Supreme Court. The meaning or
scope if the term "employee," as used in the Industrial Peace Act
(Republic Act No. 875), was not touched therein. Moreover, the subject
matter of said case was a contract between the management of the
Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the
latter greed to furnish the former the services of his orchestra,
consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to
closing time daily." In the language of this court in that case, "what
pieces the orchestra shall play, and how the music shall be arranged or
directed, the intervals and other details such are left to the
leader'sdiscretion."
This is not situation obtaining in the case at bar. The musical directors
above referred to have no such control over the musicians involved in
the present case. Said musical directors control neither the music to be
played, nor the musicians playing it. The film companies summon the
musicians to work, through the musical directors. The film companies,
through the musical directors, fix the date, the time and the place of
work. The film companies, not the musical directors, provide the
transportation to and from the studio. The film companies furnish meal
at dinner time.
What is more in the language of the order appealed from "during
the recording sessions, the motion picture director who is an employee
of the company" not the musical director "supervises the recording
of the musicians and tells them what to do in every detail". The motion
picture director not the musical director "solely directs and
performance of the musicians before the camera". The motion picture
director "supervises the performance of all the actors, including the
musicians who appear in the scenes, so that in the actual performance
to be shown in the screen, the musical director's intervention has
stopped." Or, as testified to in the lower court, "the movie director tells
the musical director what to do; tells the music to be cut or tells
additional music in this part or he eliminates the entire music he does
not (want) or he may want more drums or move violin or piano, as the
case may be". The movie director "directly controls the activities of the
musicians." He "says he wants more drums and the drummer plays
more" or "if he wants more violin or he does not like that.".

It is well settled that "an employer-employee relationship exists . .

.where the person for whom the services are performed reserves a right
to control not only the end to be achieved but also the means to be used
in reaching such end . . . ." (Alabama Highway Express Co., Express Co.,
v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the
"means to be used", is illustrated in the case of Gilchrist Timber Co., et
al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by
reason of said control, the employer-employee relationship was held to
exist between the management and the workers, notwithstanding the
intervention of an alleged independent contractor, who had, and
exercise, the power to hire and fire said workers. The aforementioned
control over the means to be used" in reading the desired end is
possessed and exercised by the film companies over the musicians in
the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs
against petitioners herein. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L.,
Barrera, Paredes and Dizon, JJ., concur.
Gutierrez David, J., took no part.

16.MAM REALTY DEVELOPMENT CORPORATION and MANUEL

CENTENO, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and CELSO B. BALBASTRO respondents. G.R.
No. 114787 June 2, 1995
VITUG, J.:
A prime focus in the instant petition is the question of when to hold a
director or officer of a corporation solidarily obligated with the latter for
a corporate liability.
The case originated from a complaint filed with the Labor Arbiter by
private respondent Celso B. Balbastro against herein petitioners, MAM

Realty Development Corporation ("MAM") and its Vice President Manuel

P. Centeno, for wage differentials, "ECOLA," overtime pay, incentive
leave pay, 13th month pay (for the years 1988 and 1989), holiday pay
and rest day pay. Balbastro alleged that he was employed by MAM as a
pump operator in 1982 and had since performed such work at its
Rancho Estate, Marikina, Metro Manila. He earned a basic monthly salary
of P1,590.00 for seven days of work a week that started from 6:00 a.m.
to up until 6:00 p.m. daily.

WHEREFORE, the respondents are hereby directed to pay jointly and

severally complainant the sum of P86,641.05 as above-computed. 3

MAM countered that Balbastro had previously been employed by

Francisco Cacho and Co., Inc., the developer of Rancho Estates.
Sometime in May 1982, his services were contracted by MAM for the
operation of the Rancho Estates' water pump. He was engaged,
however, not as an employee, but as a service contractor, at an agreed
fee of P1,590.00 a month. Similar arrangements were likewise entered
into by MAM with one Rodolfo Mercado and with a security guard of
Rancho Estates III Homeowners' Association. Under the agreement,
Balbastro was merely made to open and close on a daily basis the water
supply system of the different phases of the subdivision in accordance
with its water rationing scheme. He worked for only a maximum period
of three hours a day, and he made use of his free time by offering
plumbing services to the residents of the subdivision. He was not at all
subject to the control or supervision of MAM for, in fact, his work could
so also be done either by Mercado or by the security guard. On 23 May
1990, prior to the filing of the complaint, MAM executed a Deed of
Transfer, 1effective 01 July 1990, in favor of the Rancho Estates Phase III
Homeowners Association, Inc., conveying to the latter all its rights and
interests over the water system in the subdivision.

Once again, the matter of ascertaining the existence of an employeremployee relationship is raised. Repeatedly, we have said that this
factual issue is determined by:

In a decision, dated 23 December 1991, the Labor Arbiter dismissed the

complaint for lack of merit.
On appeal to it, respondent National Labor Relations Commission
("NLRC") rendered judgment (a) setting aside the questioned decision of
the Labor Arbiter and (b) referring the case, pursuant to Article 218(c) of
the Labor Code, to Arbiter Cristeta D. Tamayo for further hearing and
submission of a report within 20 days from receipt of the Order. 2 On 21
March 1994, respondent Commissioner, after considering the report of
Labor Arbiter Tamayo, ordered:

The instant petition asseverates that respondent NLRC gravely abused

its discretion, amounting to lack or excess of jurisdiction, (1) in finding
that an employer-employee relationship existed between petitioners and
private respondent and (2) in holding petitioners jointly and severally
liable for the money claims awarded to private respondent.

(a) the selection and engagement of the employee;

(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the
result of the work to be done and to the means and methods by which
the work is to be accomplished.
We see no grave abuse of discretion on the part of NLRC in finding a full
satisfaction, in the case at bench, of the criteria to establish that
employer-employee relationship. The power of control, the most
important feature of that relationship and, here, a point of controversy,
refers merely to the existence of the power and not to the actual
exercise thereof. It is not essential for the employer to actually supervise
the performance of duties of the employee; it is enough that the former
has a right to wield the power. 4 It is hard to accede to the contention of
petitioners that private respondent should be considered totally free
from such control merely because the work could equally and easily be
done either by Mercado or by the subdivision's security guard. Not
without any significance is that private respondent's employment with
MAM has been registered by petitioners with the Social Security System.
5

It would seem that the money claims awarded to private respondent

were computed from 06 March 1988 to 06 March 1991, 6 the latter
being the date of the filing of the complaint. The NLRC might have
missed the transfer by MAM of the water system to the Homeowners
Association on 01 July 1990, a matter that would appear not to be in
dispute. Accordingly, the period for the computation of the money
claims should only be for the period from 06 March 1988 to 01 July 1990
(when petitioner corporation could be deemed to have ceased from the
activity for which private respondent was employed), and petitioner
corporation should, instead, be made liable for the employee's
separation pay equivalent to one-half (1/2) month pay for every year of
service. 7 While the transfer was allegedly due to MAM's financial
constraints, unfortunately for petitioner corporation, however, it failed to
sufficiently establish that its business losses or financial reverses were
serious enough that possibly can warrant an exemption under the law. 8
We agree with petitioners, however, that the NLRC erred in holding
Centeno jointly and severally liable with MAM. A corporation, being a
juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them, acting as such corporate
agents, are not theirs but the direct accountabilities of the corporation
they represent. True, solidary liabilities may at times be incurred but
only when exceptional circumstances warrant such as, generally, in the
following cases: 9
1. When directors and trustees or, in appropriate cases, the officers of a
corporation
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate
affairs;

2. When a director or officer has consented to the issuance of watered

stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto. 11
3. When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
Corporation. 12
4 When a director, trustee or officer is made, by specific provision of
law, personally liable for his corporate action. 13
In labor cases, for instance, the Court has held corporate directors and
officers solidarily liable with the corporation for the termination of
employment of employees done with malice or in bad faith. 14
In the case at Bench, there is nothing substantial on record that can
justify, prescinding from the foregoing, petitioner Centeno's solidary
liability with the corporation.
An extra note. Private respondent avers that the questioned decision,
having already become final and executory, could no longer be reviewed
by this Court. The petition before us has been filed under Rule 65 of the
Rules of Court, there being no appeal, or any other plain, speedy and
adequate remedy in the ordinary course of law from decisions of the
National Labor Relations Commission; it is a relief that is open so long as
it is availed of within a reasonable time.
WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is
REMANDED to the NLRC for a re-computation of private respondent's
monetary awards, which, conformably with this opinion, shall be paid
solely by petitioner MAM Realty Development Corporation. No special
pronouncement on costs.
SO ORDERED.

(c) are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons. 10

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

Footnotes

1 Rollo, p. 48.

8 Article 283, Labor Code, supra.

2 Rollo, pp. 28-30.

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

3 Rollo, p. 38.
10 See Section 31, Corporation Code.
4 See Zanotte Shoes/Leonardo Lorenzo vs. NLRC, et al., G.R. No. 100665,
13 February 1995,citing Dy Keh Beng vs. International Labor and Marine
Union of the Philippines, et al., 90 SCRA 161.

11 Section 65, Corporation Code.

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

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

13 Exemplified in Article 144, Corporation Code; see also Section 13,

Presidential Decree 115 (Trust Receipts Law).

6 Rollo, p. 35.

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

7 Article 283, Labor Code provides:

Art. 283. Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent loses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy the worker
affected thereby shall be entitled to a separation pay equivalent to at
least one (1) month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

17.ZANOTTE SHOES/LEONARDO LORENZO, petitioners, vs.

NATIONAL LABOR RELATIONS COMMISSION, HON. BENIGNO C.
VILLARENTE, JR., JOSEPH LLUZ, LOLITO LLUZ, NOEL
ADARAYAN, ROGELIO SIRA, VIRGINIA HERESANO, GENELITO
HERESANO and CARMELITA DE DIOS, respondents. G.R. No.
100665 February 13, 1995
VITUG, J.:
This petition for certiorari assails the 24th April 1991 resolution of
respondent National Labor Relations Commission ("NLRC"), as well as its
resolution of 30 May 1991 denying a motion for reconsideration, which
has dismissed herein petitioners' appeal of the 16th October 1989
decision of Labor Arbiter Benigno C. Villarente, Jr.
Private respondents filed a complaint for illegal dismissal and for various
monetary claims, including the recovery of damages and attorney's
fees, against petitioners. In their supplemental position paper, the

complainants subsequently confined themselves to the illegal dismissal

charge and abandoned the monetary claims. One of the original eight
complainants, Virgilio Alcunaba, decided to resume his work with
petitioners, thus leaving the rest to pursue the case. Private respondents
averred that they started to work for petitioners on, respectively, the
following dates:
NAME DATE
1

Joseph Lluz

March, 1985

Noel Adarayan

Rogelio Sira

Lolito Lluz

Virginia Heresano

6
7

On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered

judgment in favor of the complainants, thus:
WHEREFORE, judgment is hereby rendered declaring that there was an
employer-employee relationship between complainants and respondents
and that the former were regular employees of the latter. Accordingly,
respondents are hereby directed to pay all complainants their respective
separation pay based on their one-half month's earnings per year of
service, a fraction of at least six months to be considered one whole
year, or the following amounts:
1

Joseph Lluz

January, 1982

Noel Adarayan

March, 1982

Rogelio Sira

8,828.00

(6 yrs. & 9 mos.)

May, 1987

Lolito Lluz

8,828.00

(6 yrs. & 7 mos.)

Genelito Heresano

20-Oct-87

Genelito Heresano

1,404.00

Carmelita de Dios

January, 1975 1

Virginia Heresano

665.00 (1 yr. & 5 mos.)

Carmelita de Dios

19,656.00

Feb. 17, 1980

that they worked for a minimum of twelve hours daily, including

Sundays and holidays when needed; that they were paid on piece-work
basis; that it "angered" petitioner Lorenzo when they requested to be
made members of the Social Security System ("SSS"); and that, when
they demanded an increase in their pay rates, they were prevented
(starting 24 October 1988) from entering the work premises.
Petitioners, in turn, claimed that their business operations were only
seasonal, normally twice a year, one in June (coinciding with the opening
of school classes) and another in December (during the Christmas
holidays), when heavy job orders would come in. Private respondents,
according to petitioners, were engaged on purely contractual basis and
paid the rates conformably with their respective agreements.

Total

P 7,488.00

(3 yrs. & 7 mos.)

12,636.00

(8 yrs. & 8 mos.)

(1 year)

(13 yrs. & 9 mos.)

P 59,515.002

Respondents are also hereby directed to pay complainants' counsel the

amount of P5,950.00 which is equivalent to 10% of the above total
awards as attorney's fees.
SO ORDERED. 3
An appeal was interposed by petitioners. The NLRC, on 24 April 1991,
sustained the findings of the Labor Arbiter and dismissed the appeal. On
30 May 1991, the NLRC denied petitioners' motion for reconsideration.
Hence, the instant petition.

In his comment, dated 14 October 1991, the Solicitor General moved for
the modification of NLRC's resolution of 24 April 1991. While conceding
that an employer-employee relationship existed between petitioners and
private respondents, the Solicitor General, nevertheless, expressed
strong reservations on the award of separation pay in view of the
findings by both the Labor Arbiter and the NLRC that there was neither
dismissal nor abandonment in the case at bench. The NLRC submitted
its own comment on 11 February 1992.
Well-settled is the rule that factual findings of the NLRC, particularly
when they coincide with that of the Labor Arbiter, are accorded respect,
if not finality, and will not be disturbed absent any showing that
substantial evidence which might otherwise affect the result of the case
has been discarded. We see no reason, in this case at bench, for
disturbing the findings of the Labor Arbiter and the NLRC on the
existence of an employer-employee relationship between herein private
parties. The work of private respondents is clearly related to, and in the
pursuit of, the principal business activity of petitioners. The indicia used
for determining the existence of an employer-employee relationship, all
extant in the case at bench, include (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the
result of the work to be done and to the means and methods by which
the work to be done and to the means and methods by which the work
is to be accomplished. The requirement, so herein posed as an issue,
refers to the existence of the right to control and not necessarily to the
actual exercise of the right. In Dy Keh Beng v. International Labor and
Marine Union of the Philippines, et al., 4 the Court has held:
While this Court up holds the control test under which an employeremployee relationship exists "where the person for whom the services
are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end," it finds
no merit with petitioner's arguments as stated above. It should be borne
in mind that the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of the
right. Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of basket
known as kaing," it is natural to expect that those working under Dy

would have to observe, among others, Dy's requirements of size and

quality of the kaing. Some control would necessarily be exercised by
Dy's specifications. Parenthetically, since the work on the baskets is
done at Dy's establishments, it can be inferred that the proprietor Dy
could easily exercise control on the men he employed.
We share the opinion of the Solicitor General that the award of
separation pay to private respondents appears, nonetheless, to be
unwarranted.
The Labor Arbiter, sustained by the NLRC, concluded that there was
neither dismissal nor abandonment. The Labor Arbiter said
. . . At any rate, records show that even during the conciliation stage,
respondents had repeatedly indicated that they were willing to accept
back all complainants aside from denying complainants allegation.
Hence, it is clear that there was no dismissal to talk about in the first
place which would have to be determined whether legal or not. We also
take particular note of complainants' desire to be given separation pay
instead of being ordered back to work. Considering all these factors we
hereby rule that there was neither dismissal nor abandonment but
complainants are simply out of job for reasons not attributable to either
party. (Rollo, pp. 30-31.)
The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's
award of separation pay, ventured to say:
. . . It is not difficult to see the rationale behind the Labor Arbiter's
disposition he saw in respondents' offer of reinstatement the
commanding advantage it had to later force (by whatever unlawful
means they may resort to) the complainants out of job, just as the Labor
Arbiter saw that fear on the part of complainants to enter into a trap
being laid before them for indeed, it is peculiar for an employer who
wants to get rid of its employees, to insist on reinstatement rather than
a separation pay scheme which the law allows them so they may be
able to better manage their business. (Rollo, p. 39.)
We find the above disquisition of the NLRC too peculative and
conjectural to be sustained. The fact of the matter is that petitioners

have repeatedly indicated their willingness to accept private

respondents but the latter have steadfastly refused the offer. For being
without any clear legal basis, the award of separation pay must thus be
set aside. 5 There is nothing, however, that prevents petitioners from
voluntarily giving private respondents some amounts on ex gratia basis.
WHEREFORE, the questioned findings and resolutions of respondents
Labor Arbiter and NLRC are MODIFIED by deleting the award of
separation pay and the corresponding attorney's fees. No costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.

18.DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitionersappellants, vs.THE COURT OF APPEALS, TOURIST WORLD
SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees. G.R. No. L-41182-3 April
16, 1988
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil
Code in this appeal by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for
the appellees) entered into on Oct. 19, 1960 by and between Mrs.
Segundina Noguera, party of the first part; the Tourist World Service,
Inc., represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former-s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the
part for the prompt payment of the monthly rental agreed on. When the

branch office was opened, the same was run by the herein appellant
Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any
fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with
a rival firm, the Philippine Travel Bureau, and, since the branch office
was anyhow losing, the Tourist World Service considered closing down its
office. This was firmed up by two resolutions of the board of directors of
Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the
first abolishing the office of the manager and vice-president of the
Tourist World Service, Inc., Ermita Branch, and the second,authorizing
the corporate secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further appears that on
Jan. 3, 1962, the contract with the appellees for the use of the Branch
Office premises was terminated and while the effectivity thereof was Jan.
31, 1962, the appellees no longer used it. As a matter of fact appellants
used it since Nov. 1961. Because of this, and to comply with the
mandate of the Tourist World Service, the corporate secretary Gabino
Canilao went over to the branch office, and, finding the premises locked,
and, being unable to contact Lina Sevilla, he padlocked the premises on
June 4, 1962 to protect the interests of the Tourist World Service. When
neither the appellant Lina Sevilla nor any of her employees could enter
the locked premises, a complaint wall filed by the herein appellants
against the appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with counterclaims. For
apparent lack of interest of the parties therein, the trial court ordered
the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order
dismissing her counterclaim which the court a quo, in an order dated
June 8, 1963, granted permitting her to present evidence in support of
her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of appellant
Lina Sevilla were jointly heard following which the court a quo ordered

both cases dismiss for lack of merit, on the basis of which was elevated
the instant appeal on the following assignment of errors:

3. Whether or not the lessee to the office premises belonging to the

appellee Noguera was appellees TWS or TWS and the appellant.

I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF

PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.

In this appeal, appealant Lina Sevilla claims that a joint bussiness

venture was entered into by and between her and appellee TWS with
offices at the Ermita branch office and that she was not an employee of
the TWS to the end that her relationship with TWS was one of a joint
business venture appellant made declarations showing:

II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0.
SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE,
INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN
FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT
MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A
MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE,
INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD
NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A.
MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S
FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT
MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to
be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the
telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World
Service was actionable or not; and

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an

eminent eye, ear and nose specialist as well as a imediately columnist
had been in the travel business prior to the establishment of the joint
business venture with appellee Tourist World Service, Inc. and appellee
Eliseo Canilao, her compadre, she being the godmother of one of his
children, with her own clientele, coming mostly from her own social
circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19
October 1960 (Exh. 'A') covering the premises at A. Mabini St., she
expressly warranting and holding [sic] herself 'solidarily' liable with
appellee Tourist World Service, Inc. for the prompt payment of the
monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn.
Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist
World Service, Inc., which had its own, separate office located at the
Trade & Commerce Building; nor was she an employee thereof, having
no participation in nor connection with said business at the Trade &
Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers,
her own bookings her own business (and not for any of the business of
appellee Tourist World Service, Inc.) obtained from the airline
companies. She shared the 7% commissions given by the airline
companies giving appellee Tourist World Service, Lic. 3% thereof aid
retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining
the A. Mabini St. office, paying for the salary of an office secretary, Miss

Obieta, and other sundry expenses, aside from desicion the office
furniture and supplying some of fice furnishings (pp. 15,18 tsn. April
6,1965), appellee Tourist World Service, Inc. shouldering the rental and
other expenses in consideration for the 3% split in the co procured by
appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs. Sevilla
would be given the title of branch manager for appearance's sake only
(p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for
dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao
pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino
Canilao (pp- 2-5, Appellants' Reply Brief)

BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE

CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE
PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP
AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE
LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX
"B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE
RULE OF LAW.
II

Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager. 1

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY

ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF
BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED
THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES
WERE WITHDRAWN." (ANNEX "A" P. 8)

xxx xxx xxx

III

The trial court 2 held for the private respondent on the premise that the
private respondent, Tourist World Service, Inc., being the true lessee, it
was within its prerogative to terminate the lease and padlock the
premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc. and as such, she was bound
by the acts of her employer. 4 The respondent Court of Appeal 5
rendered an affirmance.

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY

ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND
RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

The petitioners now claim that the respondent Court, in sustaining the
lower court, erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE
PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE
AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING
MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY

IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY
ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA
RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT
VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT
COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR
REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of
the relation between Lina Sevilla and Tourist World Service, Inc. The
respondent Court of see fit to rule on the question, the crucial issue, in
its opinion being "whether or not the padlocking of the premises by the
Tourist World Service, Inc. without the knowledge and consent of the

appellant Lina Sevilla entitled the latter to the relief of damages prayed
for and whether or not the evidence for the said appellant supports the
contention that the appellee Tourist World Service, Inc. unilaterally and
without the consent of the appellant disconnected the telephone lines of
the Ermita branch office of the appellee Tourist World Service, Inc. 7
Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA
was a mere employee, being "branch manager" of its Ermita "branch"
office and that inferentially, she had no say on the lease executed with
the private respondent, Segundina Noguera. The petitioners contend,
however, that relation between the between parties was one of joint
venture, but concede that "whatever might have been the true
relationship between Sevilla and Tourist World Service," the Rule of Law
enjoined Tourist World Service and Canilao from taking the law into their
own hands, 8 in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation
between the parties was in the character of employer and employee, the
courts would have been without jurisdiction to try the case, labor
disputes being the exclusive domain of the Court of Industrial Relations,
later, the Bureau Of Labor Relations, pursuant to statutes then in force.
9
In this jurisdiction, there has been no uniform test to determine the
evidence of an employer-employee relation. In general, we have relied
on the so-called right of control test, "where the person for whom the
services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end." 10
Subsequently, however, we have considered, in addition to the standard
of right-of control, the existing economic conditions prevailing between
the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as to
the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the
Tourist Worlds Ermita office, she had bound herself insolidum as and for
rental payments, an arrangement that would be like claims of a master-

servant relationship. True the respondent Court would later minimize her
participation in the lease as one of mere guaranty, 12 that does not
make her an employee of Tourist World, since in any case, a true
employee cannot be made to part with his own money in pursuance of
his employer's business, or otherwise, assume any liability thereof. In
that event, the parties must be bound by some other relation, but
certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the
branch office was opened, the same was run by the herein appellant
Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for
any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these
circumstances, it cannot be said that Sevilla was under the control of
Tourist World Service, Inc. "as to the means used." Sevilla in pursuing
the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For
her efforts, she retained 4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an employee then, who
earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not
make her, ergo, Tourist World's employee. As we said, employment is
determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not,
as a consequence, accepting Lina Sevilla's own, that is, that the parties
had embarked on a joint venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly 'concedes
your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office 14 in effect, accepting Tourist World Service, Inc.'s control
over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a of standing between
the joint co-venturers or partners, in which each party has an equal
proprietary interest in the capital or property contributed 15 and where
each party exercises equal rights in the conduct of the business. 16

furthermore, the parties did not hold themselves out as partners, and
the building itself was embellished with the electric sign "Tourist World
Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina
Sevilla, agreed to (wo)man the private respondent, Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a
contract of agency. It is the essence of this contract that the agent
renders services "in representation or on behalf of another. 18 In the
case at bar, Sevilla solicited airline fares, but she did so for and on
behalf of her principal, Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of commissions. And as we
said, Sevilla herself based on her letter of November 28, 1961, preassumed her principal's authority as owner of the business undertaking.
We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had contemplated a
principal agent relationship, rather than a joint managament or a
partnership..
But unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties, cannot be
revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for mutual interest, of the agent and the
principal. 19 It appears that Lina Sevilla is a bona fidetravel agent
herself, and as such, she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a personal obligation for
the operation thereof, holding herself solidarily liable for the payment of
rentals. She continued the business, using her own name, after Tourist
World had stopped further operations. Her interest, obviously, is not to
the commissions she earned as a result of her business transactions, but
one that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we said, cannot
be revoked at the pleasure of the principal. Accordingly, the revocation
complained of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining
itself to the telephone disconnection and padlocking incidents. Anent
the disconnection issue, it is the holding of the Court of Appeals that
there is 'no evidence showing that the Tourist World Service, Inc.

disconnected the telephone lines at the branch office. 20Yet, what

cannot be denied is the fact that Tourist World Service, Inc. did not take
pains to have them reconnected. Assuming, therefore, that it had no
hand in the disconnection now complained of, it had clearly condoned it,
and as owner of the telephone lines, it must shoulder responsibility
therefor.
The Court of Appeals must likewise be held to be in error with respect to
the padlocking incident. For the fact that Tourist World Service, Inc. was
the lessee named in the lease con-tract did not accord it any authority
to terminate that contract without notice to its actual occupant, and to
padlock the premises in such fashion. As this Court has ruled, the
petitioner, Lina Sevilla, had acquired a personal stake in the business
itself, and necessarily, in the equipment pertaining thereto. Furthermore,
Sevilla was not a stranger to that contract having been explicitly named
therein as a third party in charge of rental payments (solidarily with
Tourist World, Inc.). She could not be ousted from possession as
summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed
some malevolent design to put the petitioner, Lina Sevilla, in a bad light
following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the closure
'21 but there is no clear showing that Tourist World Ermita Branch had in
fact sustained such reverses, let alone, the fact that Sevilla had moonlit
for another company. What the evidence discloses, on the other hand, is
that following such an information (that Sevilla was working for another
company), Tourist World's board of directors adopted two resolutions
abolishing the office of 'manager" and authorizing the corporate
secretary, the respondent Eliseo Canilao, to effect the takeover of its
branch office properties. On January 3, 1962, the private respondents
ended the lease over the branch office premises, incidentally, without
notice to her.
It was only on June 4, 1962, and after office hours significantly, that the
Ermita office was padlocked, personally by the respondent Canilao, on
the pretext that it was necessary to Protect the interests of the Tourist
World Service. " 22 It is strange indeed that Tourist World Service, Inc.
did not find such a need when it cancelled the lease five months earlier.

While Tourist World Service, Inc. would not pretend that it sought to
locate Sevilla to inform her of the closure, but surely, it was aware that
after office hours, she could not have been anywhere near the premises.
Capping these series of "offensives," it cut the office's telephone lines,
paralyzing completely its business operations, and in the process,
depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister
effort to punish Sevillsa it had perceived to be disloyalty on her part. It is
offensive, in any event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of
agency, the private respondent, Tourist World Service, Inc., should be
sentenced to pay damages. Under the Civil Code, moral damages may
be awarded for "breaches of contract where the defendant acted ... in
bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages
for the moral injury done to Lina Sevilla from its brazen conduct
subsequent to the cancellation of the power of attorney granted to her
on the authority of Article 21 of the Civil Code, in relation to Article 2219
(10) thereof
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and
analogous cases:

Insofar, however, as the private respondent, Segundina Noguera is

concerned, no evidence has been shown that she had connived with
Tourist World Service, Inc. in the disconnection and padlocking incidents.
She cannot therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral
damages,24 P10,000.00 as exemplary damages,25 and P5,000.00 as
nominal 26 and/or temperate 27 damages, to be just, fair, and
reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as
the Resolution issued on July 31, 1975, by the respondent Court of
Appeals is hereby REVERSED and SET ASIDE. The private respondent,
Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and
severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00
as and for moral damages, the sum of P10,000.00, as and for exemplary
damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.
Costs against said private respondents.
SO ORDERED.

19.CABALAN PASTULAN NEGRITO LABOR ASSOCIATION

(CAPANELA) and JOSE ALVIZ, SR. petitioners, vs.NATIONAL
LABOR RELATIONS COMMISSION and FERNANDO SANCHEZ,
respondents. G.R. No. 106108 February 23, 1995

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34,
and 35.

REGALADO, J.:
A man said to the Universe,

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby

ordered to respond for the same damages in a solidary capacity.

Behold, I am born!

However, replied the Universe,

The fact does not create in me
A sense of obligation.
To most, these familiar verses express the article of faith for selfreliance. To the racist in some countries, however, they mean that the
world does not owe the Negroid or other colored people equal solicitude.
The neo-colonial in the Philippines would hold the Negrito or a member
of indigenous cultural communities to the same social bondage. But our
Constitution and our laws were precisely formulated under a sense of
obligation to the marginalized and the under privileged. Under such
mandates, this Court has always accorded them scrupulous and
compassionate attention. In now resolving their predicament in the case
at bar, it call once again on the old Castilian tenet: A l que la vida ha
dado menos, dsele mas por la ley. 1
In this petition for certiorari, the resolution of the National Labor
Relations Commission (hereafter, NLRC) dated February 28, 1992 2
which dismissed the appeal of herein petitioners from the decision of the
labor arbiter 3 for failure to file a supersedeas bond, as well as its April
30, 1992 4 denying their motion for reconsideration, are assailed for
having been rendered with grave abuse of discretion.
The antecedents of the present recourse, as culled from the records, are
that herein private respondent, Fernando Sanchez, filed a complaint for
illegal dismissal, non-payment of back wages and other benefits on
January 3, 1991 with Regional Office No. III of the Department of Labor
and Employment in Olongapo City originally docketed therein as NLRC
Case No. RAB III 01-1931-91. The complaint, naming Cabalan Pastulan
Negrito Labor Association (CAPANELA, for brevity) and its president, Jose
Alviz, Sr., as respondents, alleged that the former was employed by
CAPANELA as a foreman with a monthly salary of P3,245.70 from March,
1977 until he was illegally dismissed on January 1, 1990. 5
Said complaint was later amended on February 22, 1991 to introduce
the correction that private respondent was illegally dismissed on March
27, 1990 (instead of January 1, 1990), and to further pray for

reinstatement without loss of seniority rights and payment of full back

wages and moral and exemplary damages. 6 As no amicable settlement
was arrived at during the mandatory pre-conference despite efforts
exerted by the labor arbiter, the parties were required to simultaneously
submit their respective position papers and/or affidavits. 7 The case was
submitted for resolution on March 11, 1991 on the bases of said position
papers and other evidence, but the parties were further allowed to
submit their respective memoranda, 8 after which the case was deemed
submitted for decision on May 29, 1991. 9
A decision was rendered on June 24, 1991 in favor of herein private
respondent, declaring his dismissal illegal, and ordering herein
petitioners, jointly and severally
1. To pay the backwages of complainant from March 24, 1990 until June
24, 1991 and for 15 months at P3,245.70 a month equals P48,685.50;
2. To immediately reinstate complainant to his former or equivalent
position without loss of seniority rights and other privileges, and for this
purpose, respondents are hereby ordered to submit proof of the physical
or payroll reinstatement of the complainant within five (5) working days
from receipt hereof, provided further that should reinstatement (be) not
feasible due to any supervening event, respondents are further ordered
to pay the separation pay of complainant equivalent to one month
salary for every year of service, a fraction of at least six (6) months
service considered as in addition to his respondents are further one (1)
whole year, in addition to his backwages; . . . .
but dismissing the claim for moral and exemplary damages for want of
substantial evidence. 10
The records further reveal that private respondent subsequently filed a
motion for the issuance of a writ of 11 This was opposed by execution on
July 15, 1991. 11 This was opposed by CAPANELA 12 through its new
counsel, Atty. Isagani M. Jungco, who at the same time filed a
memorandum of appeal 13 in its behalf, although admittedly without
posting a supersedeas bond because of want of funds of either
CAPANELA or its president and co-petitioner Alviz, Sr. Private
respondent, in his answer to CAPANELA's memorandum of, appeal 14

and reply to opposition to motion for execution, 15was unconvinced and

adamantly insisted on the dismissal of the appeal due to non-perfection
thereof for failure to comply with the legal requirement of posting a cash
or surety bond as a requisite for the perfection of an appeal.
A partial writ of execution 16 was issued by Labor Arbiter Saludares on
August 15, 1991 ordering the physical or payroll reinstatement of
private respondent. The sheriff's return of November 4, 1991, signed by
Numeriano S. Reyes, Sheriff II of the NLRC Regional Arbitration Branch
No. III, stated that the writ expired without any indication of private
respondent having been reinstated. 17
As stated at the outset, the NLRC dismissed the appeal on February 28,
1992 for failure of petitioners to post the supersedeas bond required by
law, stating that "(r)espondents' contention that it cannot post bond
because it is insolvent deserve(s) scant consideration not being
accompanied by proof there(of)," and denied petitioner's motion for
reconsideration.
The present controversy raises as principal issues for resolution by the
Court whether or not (1) the dismissal of private respondent was legal,
and; (2) the appeal was perfected despite failure to file a supersedeas
bond.
Anent the first issue, before we delve into the matter of the alleged
illegal dismissal of private respondent Sanchez by petitioner CAPANELA,
it is evidently necessary to ascertain the existence of an employeremployee relationship between them.
Petitioners asseverate that CAPANELA is an association composed of
Negritos who worked inside the American naval base in Subic Bay
(hereinafter referred to as the Base). They initially received a daily wage
of P100.00 and thus earned, on the average, less than P3,000.00 per
month. Said association organized the system of employment of
members of this cultural community who were accorded special
treatment concededly because of the occupancy of their ancestral lands
as part of the operational area and military facility used by the Base
authorities.

CAPANELA, through its officers, saw to it that its members reported for
work, recorded their attendance, and distributed the workers' salaries
paid by the Base at the end of a specific pay period, without gaining any
amount from such undertakings petitioner Alviz, Sr., for his part and as
president of CAPANELA, was himself only an employee at the Base. In
other words, neither CAPANELA nor its president was the employer of
private respondent Sanchez; rather, it was the United States
Government acting through the military base authorities. 18
Contrarily, private respondent maintains that there existed an employeremployee relationship, as allegedly supported by the evidence on
record, and that petitioners CAPANELA and Alviz, Sr. exercised control as
employer over the means and methods by which the work was
accomplished. He further argues that since the determination of the
existence of an employer-employee relationship is a factual question,
the findings of the labor officials thereon should be considered
conclusive and binding upon and respected by the appellate courts.19
It is hence clearly apparent that the judgment of the labor arbiter, as
affirmed by respondent commission, declaring the dismissal of private
respondent illegal and ordering the payment of back wages to him
together with his payroll or physical reinstatement, was premised on the
finding that there was an existing employer-employee relationship.
Indeed, findings of fact and conclusions of the labor arbiter, 20 as well
as those of the NLRC, 21 or, for that matter, any other adjudicative body
which
can be considered as a trier of facts on specific matters within its field of
expertise, 22 should be considered as binding and conclusive upon the
appellate courts. This is in addition to the fact that they were in a better
position to assess and evaluate the credibility of the contending parties
and the validity of their respective evidence. 23 However, these
doctrinal strictures hold true only when such findings and conclusions
are supported by substantial evidence. 24
In the case at bar, we are hard put to find sufficient evidential support
for public respondent's conclusion on the putative existence of an
employer-employee relationship between petitioners and private

respondent. We are accordingly persuaded that there is ample

justification to disturb the findings of respondent NLRC and to hold that
a reconsideration of its challenged resolutions is in order.

arrogate unto themselves an employer's prerogatives of hiring and firing

workers.
As succinctly pointed out by the Solicitor General:

A careful reevaluation of the documentary evidence of record belies the

finding that CAPANELA, through its president and co-petitioner, Jose
Alviz, Sr., wielded control as an employer over private respondent. It will
be noted that in his affidavit dated March 4, 1991, 25 private respondent
himself declared that through the intervention of CAPANELA, by way of
its June 13, 1389 letter 26 to Lt. Mark S. Kistner, he was cleared of the
charge of larceny of U.S. government property. Thereafter, in an
indorsement dated July 11, 1989 from the Director of Security, U.S. Navy
Public Works Center, the recommendation for his reinstatement and the
release of his gate pass to the Base was addressed to the Director,
Investigation Section, U.S. Facility Security Department via the Director
of the Contracts Administration Division.27
This only goes to show that CAPANELA had in fact no control over the
continued employment of its members working in the U.S. naval base.
For, after conducting its own investigation, CAPANELA could only
intervene in behalf of its members facing charges through a
recommendatory action request for favorable consideration. It could not,
on its own authority, exonerate such members from the charges, much
less effect their reinstatement without the approval of the Base
authorities. Interestingly, in order to comply with the labor arbiter's
decision of June 24, 1991, CAPANELA even had to write to the Resident
Officer-in-Charge of the Facility Support Contracts at Subic Bay
recommending the reinstatement of private respondent to his former
position. 28
Under their arrangement, CAPANELA, through its officers, could only
impose disciplinary sanctions upon its members for infractions of its own
rules and regulations, to the extent of ousting a member from the
association when called for under the circumstances. Nonetheless, such
called termination of membership in the association, which could result
in curtailment of the privilege of working at the Base inasmuch as
employment therein was conditioned upon membership in CAPANELA, is
not equivalent to the illegal dismissal from employment contemplated in
our labor laws. Petitioners, not being the employer, obviously could not

True, there was a stipulation to the effect that Fernando Sanchez was
employed by petitioner CAPANELA, but the real employer was the United
States government and petitioner was just a "labor-only contractor."
Annexes "G" and "H" of CAPANELA's Memorandum on Appeal show that
the award or contract of work was between CAPANELA and the United
States government through the U.S. Navy. The same contract likewise
clearly stipulated that CAPANELA was "to provide labor and material to
perform trash sorting services in the Base period for all work specified in
Section C." Annex "A" of complainant Fernando Sanchez' Answer to
petitioner's Memorandum on Appeal itself proves that the negotiation
was between CAPANELA and the U.S. Navy, with the former supplying
the labor and the U.S. government paying the wages. Since CAPANELA
merely provided the labor force, it cannot be deduced therefrom that
CAPANELA should also compensate the laborers; it is a case of non
sequitur. In other words, the actual mechanical act of making payments
was done by CAPANELA, but the monies therefor were provided and
disbursements made by the disbursing officer of the U.S. Naval Supply
Depot, Subic Bay (see Annexes "G" and "H").
Moreover, ingress and egress in the work premises were controlled not
by CAPANELA but by the U.S. Base authorities who could even reject
entry of CAPANELA members then duly employed as part of the project,
and impose disciplinary sanctions against them. Annex "1" of
petitioners' Position Paper as respondent in the NLRC Case No. RAB-III01-193 1-91, which was the letter of Lt. M.E. Kistner of the U.S. Navy,
clearly proves this. 29 (Emphasis in the original text.)
Prevailing case law enumerates the essential elements of an employeremployee relationship as: (a) the selection and engagement of the
employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the power
of control with regard to the means and methods by which the work is to

be accomplished, with the power of control being the most

determinative factor.30
The Solicitor General pertinently illustrates the glaring absence of these
elements in the present case:
. . . , as aforeshown, CAPANELA had no control of the premises as it was
the U.S. naval authorities who had the power to issue passes or deny
their issuance. In fact, CAPANELA did not have absolute control on the
disciplinary measures to be imposed on its members employed in the
Base. Annex "1" of CAPANELA's Position Paper submitted before the
NLRC Regional Arbitration Branch established the U.S. Navy's right to
impose disciplinary measures for violations or infractions of its rules and
regulations as well as the right to recommend suspensions or dismissals
of the workers. Moreover, it was not shown that CAPANELA had control
of the means and methods or manner by which the workers were to go
about their work. These are indeed strong indicia of the U.S. Navy's right
of control over the workers as direct employer.
Third, there is evidence to prove that payment of wages was merely
done through CAPANELA, but the source of payment was actually the
U.S. government paying workers according to the volume of work
accomplished on rates agreed upon between CAPANELA and the U.S.
government. . . . 31
It would, therefore, be inutile to discuss the matter of the legality or
illegality of the dismissal of private respondent. Considering that
petitioners cannot legally be considered as the employer of herein
private respondent, it follows that it cannot be made liable as such nor
be required to bear the responsibility for the legal consequences of the
charge of illegal dismissal. Granting arguendo that private respondent
was illegally dismissed, the action should properly be directed against
the U.S. government which, through the Base authorities, was the true
employer in this case.
Neither can petitioners be deemed to have been engaged in permissible
job contracting under the law, for failure to satisfy the following
prescribed conditions:

1. The contractor carries on an independent business and undertakes

the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with
performance of the work except as to the results thereof; and
2. The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises and other materials which
are necessary in the conduct of his business. 32
In the present case, the setup was such that CAPANELA was merely
tasked with organizing the Negritos to facilitate the orderly
administration of work made available to them at the base facilities, that
is, sorting scraps for recycling. CAPANELA recorded the attendance of its
members and submitted the same to the Base authorities for the
determination of wages due them and the preparation of the payroll.
Payment of wages was coursed through CAPANELA but the funds
therefor came from the coffers of the Base. Once inside the Base,
control over the means and methods of work was exercised by the Base
authorities. Accordingly, CAPANELA functioned as just an administrator
of its Negrito members employed at the Base.
From the legal standpoint, CAPANELA's activities may at most be
considered akin to that of labor-only contracting, albeit of a special or
peculiar type, wherein CAPANELA, operating like a contractor, merely
acted as an agent or intermediary of the employer. 33
The Solicitor General ramifies this aspect:
. . . , petitioner CAPANELA could not be classified as an "independent
contractor" because it was not shown that it has substantial capital or
investments to qualify as such under the law. On the other hand, it was
apparent that the premises, tools, equipment, and other paraphernalia
used by the workers were all supplied by the U.S. government through
the U.S. Navy. What CAPANELA supplied was only the local labor force,
complainant Fernando Sanchez among them. It is therefore clear that
CAPANELA had no capital outlay involved in the business or in the
maintenance thereof. 34

While it is not denied that an association or a labor organization or union

can at times be an employer insofar as people hired by it to dispose of
its business are concerned, 35 the situation in this case is altogether
different. A proper and necessary distinction should be made between
the employees of CAPANELA who actually attended to its myriad
functions as an association and its members who were employed in the
jobsite inside the Base vis-a-vis CAPANELA's relative position as the
employer of the former and a mere administrator with respect to the
latter.

intention of the Labor Code to ascertain the facts of each case speedily
and objectively without regard to technical rules of law and procedure,
all in the interest of due process. 42 Punctilious adherence to stringent
technical rules may be relaxed in the interest of the working man, 43
and should not defeat the complete and equitable resolution of the
rights and obligations of the parties. 44 Moreover, it is the duty of labor
officials to consider their decisions and inquire into the correctness of
execution, as supervening events may affect such execution. 45
The Solicitor General realistically assesses the situation, thus:

On the matter of the perfection of an appeal from the decision of the

NLRC, petitioners plead for a more considerate and humane application
of the law as would allow their appeal to prosper despite non-posting of
a supersedeas bond on account of their insolvency. To dismiss the
appeal for failure to post said bond, petitioners aver, is tantamount to
denial of the constitutionally guaranteed right of access to courts by
reason of poverty. 36Private respondent, on the other hand, argues that
perfection of an appeal within the reglementary period and in
compliance with all requirements of the law therefor is jurisdictional.
That petitioners do not have the funds for the premiums for posting a
supersedeas bond or for a cash deposit, disdainfully says private
respondent, "is not in the least our problem." 37
We have no quarrel with the provision of Article 223 of the Labor Code
which, in part and among others, requires that in case of a judgment
involving a monetary award, an appeal by the employer may be
perfected only upon posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the commission in the
amount equivalent to the monetary award in the judgment appealed
from. Perfection of an appeal within the period and in the manner
prescribed by law is jurisdictional 38 and non-compliance with such legal
requirements is fatal and has the effect of rendering the judgment final
and executory. 39
However, in a number of recent cases, 40 the Court has eased the
requirement of posting a bond, as a condition for perfection of appeals
in labor cases, when to do so would bring about the immediate and
appropriate resolution of controversies on the merits without overindulgence in technicalities, 41 ever mindful of the underlying spirit and

. . . As aforestated, above the technical consideration on whether failure

to post a supersedeas bond was fatal to petitioners' appeal is the
importance of first resolving whether there was indeed an employeremployee relationship in this case so as not to render the execution of
the NLRC's resolution unenforceable or impossible to implement. . . .
Besides, it is of public notice that the U.S. Navy had withdrawn from the
Subic Base in view of the termination of the Bases Treaty. Even if
CAPANELA were ordered to reinstate complainant Fernando Sanchez,
this is obviously an impossible thing to perform as there is no longer any
work to be done inside the Base. Nor is petitioner CAPANELA in a
position to pay Sanchez's back wages considering that it was the U.S.
Navy that paid his wages. . . . 46
In light of the circumstances in this case, the Solicitor General further
suggests two ways of writing finis to this dispute, i.e., to reconsider
public respondent's resolution of February 28, 1992 and April 30, 1992
and reinstate petitioner's appeal to give the latter a chance to prove
CAPANELA's insolvency or poverty, or to reverse the decision of the
labor arbiter on the ground that there was no employer-employee
relationship between petitioner CAPANELA and private respondent
Sanchez. Harmonizing our evaluation of the facts of this case with the
greater interests of social justice, and considering that the parties
involved are those upon whose socio-economic status we prefaced this
opinion, we opt for the latter.
While this Court, when it finds that a lower court or quasi-judicial body is
in error, may simply and conveniently nullify the challenged decision,
resolution or order and remand the case thereto for further appropriate

action, it is well within the conscientious exercise of its broad review

powers to refrain from doing so and instead choose to render judgment
on the merits when all material facts have been duly laid before it as
would buttress its ultimate conclusion, in the public interest and for the
expeditious administration of justice, such as where the ends of justice
would not be subserved by the remand of the case. 47

P3,000.00, a month, or 25% of the monthly net income of the company,

whichever is greater, and when the company failed to pay his salary for
the months of May, June, and July 1974, Rodito Nasayao filed a
complaint with the National Labor Relations Commission, Branch IV, for
the recovery of said unpaid varies. The case was docketed therein as
NLRC Case No. LR-6151.

IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February

28, 1992 and April 30, 1992 of respondent National Labor Relations
Commission are accordingly ANNULLED, and the adjudgment of Labor
Arbiter Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 is
hereby REVERSED and SET ASIDE. SO ORDERED. Narvasa, C.J., Bidin,
Puno and Mendoza, JJ., concur.

Answering, the herein petitioners denied that Rodito Nasayao was

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

20.CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,

vs.NATIONAL LABOR RELATIONS COMMISSION (NLRC);
ARBITRATOR JOSE T. COLLADO and RODITO NASAYAO,
respondents. G.R. No. L-43825 May 9, 1988
Benito P. Fabie for petitioners.
Narciso C. Parayno, Jr. for respondents.
PADILLA, J.:
In this petition for mandamus, prohibition and certiorari with preliminary
injunction, petitioners seek to annul and set aside the decision rendered
by the respondent Arbitrator Jose T. Collado, dated 29 December 1975,
in NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant,
versus Continental Marble Corp. and Felipe David, respondents," and the
resolution issued by the respondent Commission, dated 7 May 1976,
which dismissed herein petitioners' appeal from said decision.
In his complaint before the NLRC, herein private respondent Rodito
Nasayao claimed that sometime in May 1974, he was appointed plant
manager of the petitioner corporation, with an alleged compensation of

The case was submitted for voluntary arbitration and the parties
selected the herein respondent Jose T. Collado as voluntary arbitrator. In
the course of the proceedings, however, the herein petitioners
challenged the arbitrator's capacity to try and decide the case fairly and
judiciously and asked him to desist from further hearing the case. But,
the respondent arbitrator refused. In due time, or on 29 December 1975,
he rendered judgment in favor of the complainant, ordering the herein
petitioners to pay Rodito Nasayao the amount of P9,000.00, within 10
days from notice. 1
Upon receipt of the decision, the herein petitioners appealed to the
National Labor Relations Commission on grounds that the labor arbiter
gravely abused his discretion in persisting to hear and decide the case
notwithstanding petitioners' request for him to desist therefrom: and
that the appealed decision is not supported by evidence. 2
On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal
on the ground that the decision of the voluntary arbitrator is final,

unappealable, and immediately executory; 3 and, on 23 March 1976, he

filed a motion for the issuance of a writ of execution. 4
Acting on the motions, the respondent Commission, in a resolution dated
7 May 1976, dismissed the appeal on the ground that the decision
appealed from is final, unappealable and immediately executory, and
ordered the herein petitioners to comply with the decision of the
voluntary arbitrator within 10 days from receipt of the resolution. 5
The petitioners are before the Court in the present recourse. As prayed
for, the Court issued a temporary restraining order, restraining herein
respondents from enforcing and/or carrying out the questioned decision
and resolution. 6
The issue for resolution is whether or not the private respondent Rodito
Nasayao was employed as plant manager of petitioner Continental
Marble Corporation with a monthly salary of P3,000.00 or 25% of its
monthly income, whichever is greater, as claimed by said respondent, or
entitled to receive only an amount equivalent to 25% of net profits, if
any, that the company would realize, as contended by the petitioners.
The respondent arbitrator found that the agreement between the parties
was for the petitioner company to pay the private respondent, Rodito
Nasayao, a monthly salary of P3,000.00, and, consequently, ordered the
company to pay Rodito Nasayao the amount of P9,000.00 covering a
period of three (3) months, that is, May, June and July 1974.
The respondent Rodito Nasayao now contends that the judgment or
award of the voluntary arbitrator is final, unappealable and immediately
executory, and may not be reviewed by the Court. His contention is
based upon the provisions of Art. 262 of the Labor Code, as amended.
The petitioners, upon the other hand, maintain that "where there is
patent and manifest abuse of discretion, the rule on unappealability of
awards of a voluntary arbitrator becomes flexible and it is the inherent
power of the Courts to maintain the people's faith in the administration
of justice." The question of the finality and unappealability of a decision
and/or award of a voluntary arbitrator had been laid to rest in Oceanic
Bic Division (FFW) vs. Romero, 7 and reiterated in Mantrade FMMC

Division Employees and Workers Union vs. Bacungan. 8 The Court

therein ruled that it can review the decisions of voluntary arbitrators,
thusWe agree with the petitioner that the decisions of voluntary arbitrators
must be given the highest respect and as a general rule must be
accorded a certain measure of finality. This is especially true where the
arbitrator chosen by the parties enjoys the first rate credentials of
Professor Flerida Ruth Pineda Romero, Director of the U.P. Law Center
and an academician of unquestioned expertise in the field of Labor Law.
It is not correct, however, that this respect precludes the exercise of
judicial review over their decisions. Article 262 of the Labor Code making
voluntary arbitration awards final, inappealable, and executory except
where the money claims exceed P l 00,000.00 or 40% of paid-up capital
of the employer or where there is abuse of discretion or gross
incompetence refers to appeals to the National Labor Relations
Commission and not to judicial review.
Inspite of statutory provisions making 'final' the decisions of certain
administrative agencies, we have taken cognizance of petitions
questioning these decisions where want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice, or
erroneous interpretation of the law were brought to our attention. There
is no provision for appeal in the statute creating the Sandiganbayan but
this has not precluded us from examining decisions of this special court
brought to us in proper petitions. ...
The Court further said:
A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial
capacity. There is no reason why herdecisions involving interpretation of
law should be beyond this Court's review. Administrative officials are
presumed to act in accordance with law and yet we do hesitate to pass
upon their work where a question of law is involved or where a showing
of abuse of authority or discretion in their official acts is properly raised
in petitions for certiorari.
The foregoing pronouncements find support in Section 29 of Republic
Act No. 876, otherwise known as the Arbitration Law, which provides:

Sec. 29. Appeals An appeal may be taken from an order made in a

proceeding under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to
questions of law. The proceedings upon such an appeal, including the
judgment thereon shall be governed by the Rules of Court in so far as
they are applicable.
The private respondent, Rodito Nasayao, in his Answer to the petition, 9
also claims that the case is premature for non-exhaustion of
administrative remedies. He contends that the decision of the
respondent Commission should have been first appealed by petitioners
to the Secretary of Labor, and, if they are not satisfied with his decision,
to appeal to the President of the Philippines, before resort is made to the
Court.
The contention is without merit. The doctrine of exhaustion of
administrative remedies cannot be invoked in this case, as contended. In
the recent case of John Clement Consultants, Inc. versus National Labor
Relations Commission, 10 the Court said:
As is well known, no law provides for an appeal from decisions of the
National Labor Relations Commission; hence, there can be no review and
reversal on appeal by higher authority of its factual or legal conclusions.
When, however, it decides a case without or in excess of its jurisdiction,
or with grave abuse of discretion, the party thereby adversely affected
may obtain a review and nullification of that decision by this Court
through the extraordinary writ of certiorari. Since, in this case, it appears
that the Commission has indeed acted without jurisdiction and with
grave abuse of discretion in taking cognizance of a belated appeal
sought to be taken from a decision of Labor Arbiter and thereafter
reversing it, the writ of certiorari will issue to undo those acts, and do
justice to the aggrieved party.
We also find no merit in the contention of Rodito Nasayao that only
questions of law, and not findings of fact of a voluntary arbitrator may
be reviewed by the Court, since the findings of fact of the voluntary
arbitrator are conclusive upon the Court.

While the Court has accorded great respect for, and finality to, findings
of fact of a voluntary arbitrator 11 and administrative agencies which
have acquired expertise in their respective fields, like the Labor
Department and the National Labor Relations Commission, 12 their
findings of fact and the conclusions drawn therefrom have to be
supported by substantial evidence. ln that instant case, the finding of
the voluntary arbitrator that Rodito Nasayao was an employee of the
petitioner corporation is not supported by the evidence or by the law.
On the other hand, we find the version of the petitioners to be more
plausible and in accord with human nature and the ordinary course of
things. As pointed out by the petitioners, it was illogical for them to hire
the private respondent Rodito Nasayao as plant manager with a monthly
salary of P3,000.00, an amount which they could ill-afford to pay,
considering that the business was losing, at the time he was hired, and
that they were about to close shop in a few months' time.
Besides, there is nothing in the record which would support the claim of
Rodito Nasayao that he was an employee of the petitioner corporation.
He was not included in the company payroll, nor in the list of company
employees furnished the Social Security System.
Most of all, the element of control is lacking. In Brotherhood Labor Unity
Movement in the Philippines vs. Zamora,13 the Court enumerated the
factors in determining whether or not an employer-employee
relationship exists, to wit:
In determining the existence of an employer-employee relationship, the
elements that are generally considered are the following: (a) the
selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by which the work is
to be accomplished. It is the so-called "control test" that is the most
important element (Investment Planning Corp. of the Phils. vs. The
Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople,
supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).<re||an1w>
In the instant case, it appears that the petitioners had no control over
the conduct of Rodito Nasayao in the performance of his work. He

decided for himself on what was to be done and worked at his own
pleasure. He was not subject to definite hours or conditions of work and,
in turn, was compensated according to the results of his own effort. He
had a free hand in running the company and its business, so much so,
that the petitioner Felipe David did not know, until very much later, that
Rodito Nasayao had collected old accounts receivables, not covered by
their agreement, which he converted to his own personal use. It was
only after Rodito Nasayao had abandoned the plant following discovery
of his wrong- doings, that Felipe David assumed management of the
plant.
Absent the power to control the employee with respect to the means
and methods by which his work was to be accomplished, there was no
employer-employee relationship between the parties. Hence, there is no
basis for an award of unpaid salaries or wages to Rodito Nasayao.
WHEREFORE, the decision rendered by the respondent Jose T. Collado in
NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus
Continental Marble Corp. and Felipe David, respondents," on 29
December 1975, and the resolution issued by the respondent National
Labor Relations Commission in said case on 7 May 1976, are REVERSED
and SET ASIDE and another one entered DISMISSING private
respondent's complaints. The temporary restraning order heretofore
isued by the Court is made permanent. Without costs. SO ORDERED.Yap,
C.J, Melencio-Herrera, Paras and Sarmiento, JJ, concur.

21.ILOILO CHINESE COMMERCIAL SCHOOL, petitioner, vs.

LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION
COMMISSION, respondents. G.R. No. L-16600
December 27, 1961
Luis G. Hofilea for petitioner.
J. T. de Leon for respondents.
PAREDES, J.:

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs
in the person of Leonora Fabrigar (common-law wife) and their children,
filed a claim for compensation with the Workmen's Compensation
Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al.,
Claimants, vs. Iloilo Chinese Commercial School, Respondent." In this
claim, it was alleged that the cause of death was " pulmonary
tuberculosis contractedduring and as a result of his employment as
janitor." The Hearing Officer of the WCC denied the claim and dismissed
the case, finding that the claimant failed to prove the casual effect of
employment and death; nothing was shown that the disease was
contracted in line of duty; that whatever evidence claimant presented
about the cause of death was only a mere suggestion that progressively
developed from tuberculosis with heart trouble to a sudden fatal turn,
ending up for the cause of "beriberi adult" at the time of death, as per
certification of Sanitary Inspector Dr. P. E. Labitoria, of Dao, Capiz
(Exhibits C & 4).
The heirs of Santiago Fabrigar appealed the decision with the Workmen's
Compensation Commission which, on November 12, 1959, rendered
judgment reversing the decision of its Hearing Officer, making the
following findings of facts:
That Santiago Fabrigar had been employed from 1947 to March 12,
1956, as a janitor-messenger of the respondent Iloilo Chinese
Commercial School, his work consisting of sweeping and scrubbing the
floors, cleaning the classrooms and the school premises, and other
janitorial chores; on March 11, 1956, preparatory to graduation day, he
carried desks and chairs from the classrooms to the auditorium, set the
curtains and worked harder and faster than usual; that although he felt
shortness of breath and did not feel very well that day, he continued
working at the request of the overseer of respondent, that on the
following day he reported for work, but on March 13, he spat blood and
stopped working; that from April 29, 1956 to May 15, 1956, he was
under treatment by Dr. Quirico Villareal "for far advanced pulmonary
tuberculosis and for heart disease"; and that previous to said treatment,
he was attended by Dr. Jaranilla for pulmonary tuberculosis. The
Commission concluded that the short period of intervention between his
last day of work (March 13, 1956) when he spat blood and his death on
June 28, 1956, due to pulmonary tuberculosis, indicated that he had

been suffering from such disease even during the time he was employed
by the respondent and considering the strenuous work he performed, his
employment as janitor aggravated his pre-existing illness; that although
here is a discrepancy between the cause of death "beriberi adult," as
appearing in the death Certificate and the testimony of Dr. Villareal, the
latter deserves more credence, because the information (cause of
death) was given by the sanitary inspector who did not, in any way,
examine the deceased before or after his death. The Commission,
therefore, ordered the respondent Chinese Commercial School, Inc., in
said case
1. To pay to the claimant, for and in behalf of her minor children by the
deceased, namely, Carlito, Gloria, Rosita and Ernesto, all surnamed
Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY SIX
and 00/00 Pesos (P2,496.00) as Death benefits; and
2. To pay to the Commission the amount of P25.00 as fees pursuant to
Section 55 of Act 3428, as amended.

Petitioner contends that the preponderance of evidence on the matters

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

3. In holding that the herein petitioner was the employer of the

deceased Santiago Fabrigar; and

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

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

We find no plausible reason for altering or disturbing the above factual

findings of the Commission, in the present appeal by certiorari.

The above decision is now before Us for Review on a Writ of Certiorari,

after the motion for reconsideration had been denied, petitioner alleging
that the Commission erred:
1. In disregarding completely the evidentiary value of the death
certificate of the attending physician which was presented as evidence
by both claimants and respondent (Exhibits C & 4) to prove the cause of
death;
2. In finding that the cause of death of said Santiago Fabrigar was
tuberculosis and was contracted during and as a result of the nature of
his employment;

It is claimed that actually the deceased was not an employee of the

petitioner, but by the Iloilo Chinese Chamber of Commerce which was
the one that furnished the janitor service in the premises of its buildings,
including the part thereof occupied by the petitioner; that the Chamber
of Commerce paid the salaries of janitors, including the deceased; that
the petitioner could not afford to pay rentals of its premises and janitor
due to limited finances depended largely on funds raised among its
Board of Directors, the Chinese Chamber of Commerce and Chinese
nationals who helped the school. In other words, it is pretended that the
deceased was not an employee of the school but of the Chinese
Chamber of Commerce which should be the one responsible for the
compensation of the deceased. On one hand, according to the
Commission, there is substantial proof to the effect that Fabrigar was
employed by and rendered service for the petitioner and was an
employee within the purview of the Workmen's Compensation Law. On
the other hand, the most important test of employer-employee relation
is the power to control the employee's conduct. The records disclose
that the person in charge (encargado) of the respondent school
supervised the deceased in his work and had control over the manner
he performed the same.
It is finally contended that petitioner is an institution devoted solely for
learning and is not an industry within the meaning of the Workmen's
Compensation Law. Consequently, it is argued, it is exempt from the
scope of the same law. Considering that this factual question has not
been properly put in issue before the Commission, it may not now be
entertained in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et
al., L-16992, Dec. 23, 1961, citing International Oil Factory Union v. Hon.
Martinez, et al., L-15560, Dec. 31, 1960). The decision of the
Commission does not show that the matter was taken up. We are at a
loss to state whether the issue was raised in the motion for
reconsideration filed with the Commission, because the said motion is
not found in the record before us. And the resolution to the motion for
reconsideration does not touch this question.
IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed,
and the decision appealed from is affirmed, with costs against the herein
petitioner.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,

Barrera, Dizon and De Leon, JJ., concur.
Padilla, J., took no part.

22.FILAMER CHRISTIAN INSTITUTE, petitioner, vs. HON.

INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO,
in his capacity as Judge of the Regional Trial Court, Branch
XIV, Roxas City and POTENCIANO KAPUNAN, SR.,
respondents. G.R. No. 75112 August 17, 1992
Bedona & Bedona Law Office for petitioner.
Rhodora G. Kapunan for private respondents.
GUTIERREZ, JR., J.:
The private respondents, heirs of the late Potenciano Kapunan, seek
reconsideration of the decision rendered by this Court on October 16,
1990 (Filamer Christian Institute v. Court of Appeals, 190 SCRA 477)
reviewing the appellate court's conclusion that there exists an employeremployee relationship between the petitioner and its co-defendant
Funtecha. The Court ruled that the petitioner is not liable for the injuries
caused by Funtecha on the grounds that the latter was not an
authorized driver for whose acts the petitioner shall be directly and
primarily answerable, and that Funtecha was merely a working scholar
who, under Section 14, Rule X, Book III of the Rules and Regulations
Implementing the Labor Code is not considered an employee of the
petitioner.
The private respondents assert that the circumstances obtaining in the
present case call for the application of Article 2180 of the Civil Code
since Funtecha is no doubt an employee of the petitioner. The private
respondents maintain that under Article 2180 an injured party shall have
recourse against the servant as well as the petitioner for whom, at the
time of the incident, the servant was performing an act in furtherance of

the interest and for the benefit of the petitioner. Funtecha allegedly did
not steal the school jeep nor use it for a joy ride without the knowledge
of the school authorities.
After a re-examination of the laws relevant to the facts found by the trial
court and the appellate court, the Court reconsiders its decision. We
reinstate the Court of Appeals' decision penned by the late Justice
Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and
Serafin E. Camilon. Applying Civil Code provisions, the appellate court
affirmed the trial court decision which ordered the payment of the
P20,000.00 liability in the Zenith Insurance Corporation policy,
P10,000.00 moral damages, P4,000.00 litigation and actual expenses,
and P3,000.00 attorney's fees.
It is undisputed that Funtecha was a working student, being a part-time
janitor and a scholar of petitioner Filamer. He was, in relation to the
school, an employee even if he was assigned to clean the school
premises for only two (2) hours in the morning of each school day.
Having a student driver's license, Funtecha requested the driver, Allan
Masa, and was allowed, to take over the vehicle while the latter was on
his way home one late afternoon. It is significant to note that the place
where Allan lives is also the house of his father, the school president,
Agustin Masa. Moreover, it is also the house where Funtecha was
allowed free board while he was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a
road, negotiating a sharp dangerous curb, and viewing that the road was
clear. (TSN, April 4, 1983, pp. 78-79) According to Allan's testimony, a
fast moving truck with glaring lights nearly hit them so that they had to
swerve to the right to avoid a collision. Upon swerving, they heard a
sound as if something had bumped against the vehicle, but they did not
stop to check. Actually, the Pinoy jeep swerved towards the pedestrian,
Potenciano Kapunan who was walking in his lane in the direction against
vehicular traffic, and hit him. Allan affirmed that Funtecha followed his
advise to swerve to the right. (Ibid., p. 79) At the time of the incident
(6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security
guard of the petitioner-school. He further said that there was no specific
time for him to be off-duty and that after driving the students home at
5:00 in the afternoon, he still had to go back to school and then drive
home using the same vehicle.
Driving the vehicle to and from the house of the school president where
both Allan and Funtecha reside is an act in furtherance of the interest of
the petitioner-school. Allan's job demands that he drive home the school
jeep so he can use it to fetch students in the morning of the next school
day.
It is indubitable under the circumstances that the school president had
knowledge that the jeep was routinely driven home for the said purpose.
Moreover, it is not improbable that the school president also had
knowledge of Funtecha's possession of a student driver's license and his
desire to undergo driving lessons during the time that he was not in his
classrooms.
In learning how to drive while taking the vehicle home in the direction of
Allan's house, Funtecha definitely was not having a joy ride. Funtecha
was not driving for the purpose of his enjoyment or for a "frolic of his
own" but ultimately, for the service for which the jeep was intended by
the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R.
577, 80 ALR 722 [1932]; See also Association of Baptists for World
Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124 SCRA 618 [1983]).
Therefore, the Court is constrained to conclude that the act of Funtecha
in taking over the steering wheel was one done for and in behalf of his
employer for which act the petitioner-school cannot deny any
responsibility by arguing that it was done beyond the scope of his
janitorial duties. The clause "within the scope of their assigned tasks" for
purposes of raising the presumption of liability of an employer, includes
any act done by an employee, in furtherance of the interests of the
employer or for the account of the employer at the time of the infliction
of the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47
[1950]) Even if somehow, the employee driving the vehicle derived
some benefit from the act, the existence of a presumptive liability of the
employer is determined by answering the question of whether or not the
servant was at the time of the accident performing any act in

furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643,

50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])
Section 14, Rule X, Book III of the Rules implementing the Labor Code,
on which the petitioner anchors its defense, was promulgated by the
Secretary of Labor and Employment only for the purpose of
administering and enforcing the provisions of the Labor Code on
conditions of employment. Particularly, Rule X of Book III provides
guidelines on the manner by which the powers of the Labor Secretary
shall be exercised; on what records should be kept; maintained and
preserved; on payroll; and on the exclusion of working scholars from,
and inclusion of resident physicians in the employment coverage as far
as compliance with the substantive labor provisions on working
conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the
substantive law on labor. The Court, thus, makes the distinction and so
holds that Section 14, Rule X, Book III of the Rules is not the decisive law
in a civil suit for damages instituted by an injured person during a
vehicular accident against a working student of a school and against the
school itself.
The present case does not deal with a labor dispute on conditions of
employment between an alleged employee and an alleged employer. It
invokes a claim brought by one for damages for injury caused by the
patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the
Civil Code is misplaced. An implementing rule on labor cannot be used
by an employer as a shield to avoid liability under the substantive
provisions of the Civil Code.
There is evidence to show that there exists in the present case an extracontractual obligation arising from the negligence or reckless
imprudence of a person "whose acts or omissions are imputable, by a
legal fiction, to other(s) who are in a position to exercise an absolute or
limited control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624
[1915])

Funtecha is an employee of petitioner Filamer. He need not have an

official appointment for a driver's position in order that the petitioner
may be held responsible for his grossly negligent act, it being sufficient
that the act of driving at the time of the incident was for the benefit of
the petitioner. Hence, the fact that Funtecha was not the school driver or
was not acting within the scope of his janitorial duties does not relieve
the petitioner of the burden of rebutting the presumption juris tantum
that there was negligence on its part either in the selection of a servant
or employee, or in the supervision over him. The petitioner has failed to
show proof of its having exercised the required diligence of a good
father of a family over its employees Funtecha and Allan.
The Court reiterates that supervision includes the formulation of suitable
rules and regulations for the guidance of its employees and the issuance
of proper instructions intended for the protection of the public and
persons with whom the employer has relations through his employees.
(Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, v.
Intermediate Appellate Court, 148 SCRA 353 [1987])
An employer is expected to impose upon its employees the necessary
discipline called for in the performance of any act indispensable to the
business and beneficial to their employer.
In the present case, the petitioner has not shown that it has set forth
such rules and guidelines as would prohibit any one of its employees
from taking control over its vehicles if one is not the official driver or
prohibiting the driver and son of the Filamer president from authorizing
another employee to drive the school vehicle. Furthermore, the
petitioner has failed to prove that it had imposed sanctions or warned its
employees against the use of its vehicles by persons other than the
driver.
The petitioner, thus, has an obligation to pay damages for injury arising
from the unskilled manner by which Funtecha drove the vehicle.
(Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the absence
of evidence that the petitioner had exercised the diligence of a good
father of a family in the supervision of its employees, the law imposes
upon it the vicarious liability for acts or omissions of its employees.
(Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v. Fabros, 93 SCRA 200

[1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco
v. Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North
Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability of the
employer is, under Article 2180, primary and solidary. However, the
employer shall have recourse against the negligent employee for
whatever damages are paid to the heirs of the plaintiff.
It is an admitted fact that the actual driver of the school jeep, Allan
Masa, was not made a party defendant in the civil case for damages.
This is quite understandable considering that as far as the injured
pedestrian, plaintiff Potenciano Kapunan, was concerned, it was
Funtecha who was the one driving the vehicle and presumably was one
authorized by the school to drive. The plaintiff and his heirs should not
now be left to suffer without simultaneous recourse against the
petitioner for the consequent injury caused by a janitor doing a driving
chore for the petitioner even for a short while. For the purpose of
recovering damages under the prevailing circumstances, it is enough
that the plaintiff and the private respondent heirs were able to establish
the existence of employer-employee relationship between Funtecha and
petitioner Filamer and the fact that Funtecha was engaged in an act not
for an independent purpose of his own but in furtherance of the business
of his employer. A position of responsibility on the part of the petitioner
has thus been satisfactorily demonstrated.
WHEREFORE, the motion for reconsideration of the decision dated
October 16, 1990 is hereby GRANTED. The decision of the respondent
appellate court affirming the trial court decision is REINSTATED.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.


23.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. L21278
December 27, 1966
---------------------------------------FEATI UNIVERSITY, petitioner-appellant, vs. FEATI
UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee. 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
Rafael Dinglasan for petitioner.
Cipriano Cid and Associates for respondents.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered
together, and the parties were allowed to file only one brief for the three
cases.
On January 14, 1963, the President of the respondent Feati University
Faculty Club-PAFLU hereinafter referred to as Faculty Club wrote a
letter to Mrs. Victoria L. Araneta, President of petitioner Feati University
hereinafter referred to as University informing her of the
organization of the Faculty Club into a registered labor union. The
Faculty Club is composed of members who are professors and/or
instructors of the University. On January 22, 1963, the President of the
Faculty Club sent another letter containing twenty-six demands that
have connection with the employment of the members of the Faculty

Club by the University, and requesting an answer within ten days from
receipt thereof. The President of the University answered the two letters,
requesting that she be given at least thirty days to study thoroughly the
different phases of the demands. Meanwhile counsel for the University,
to whom the demands were referred, wrote a letter to the President of
the Faculty Club demanding proof of its majority status and designation
as a bargaining representative. On February 1, 1963, the President of
the Faculty Club again wrote the President of the University rejecting the
latter's request for extension of time, and on the same day he filed a
notice of strike with the Bureau of Labor alleging as reason therefor the
refusal of the University to bargain collectively. The parties were called
to conferences at the Conciliation Division of the Bureau of Labor but
efforts to conciliate them failed. On February 18, 1963, the members of
the Faculty Club declared a strike and established picket lines in the
premises of the University, resulting in the disruption of classes in the
University. Despite further efforts of the officials from the Department of
Labor to effect a settlement of the differences between the
management of the University and the striking faculty members no
satisfactory agreement was arrived at. On March 21, 1963, the President
of the Philippines certified to the Court of Industrial Relations the dispute
between the management of the University and the Faculty Club
pursuant to the provisions of Section 10 of Republic Act No. 875.
In connection with the dispute between the University and the Faculty
Club and certain incidents related to said dispute, various cases were
filed with the Court of Industrial Relations hereinafter referred to as
CIR. The three cases now before this Court stemmed from those cases
that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for
certiorari and prohibition with writ of preliminary injunction", docketed
as G.R. No. L-21278, praying: (1) for the issuance of the writ of
preliminary injunction enjoining respondent Judge Jose S. Bautista of the
CIR to desist from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V30; (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 41-IPA is one of the orders sought
to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by
respondent Judge, the University had employed professors and/or
instructors to take the places of those professors and/or instructors who
had struck. On April 1, 1963, the Faculty Club filed with the CIR in Case
41-IPA a petition to declare in contempt of court certain parties, alleging
that the University refused to accept back to work the returning strikers,
in violation of the return-to-work order of March 30, 1963. The University
filed, on April 5,1963, its opposition to the petition for contempt,
denying the allegations of the Faculty Club and alleging by way of
special defense that there was still the motion for reconsideration of the
order of March 30, 1963 which had not yet been acted upon by the CIR
en banc. On April 6, 1963, the respondent Judge issued an order stating
that "said replacements are hereby warned and cautioned, for the time
being, not to disturb nor in any manner commit any act tending to
disrupt the effectivity of the order of March 30,1963, pending the final
resolution of the same."2 On April 8, 1963, there placing professors

and/or instructors concerned filed, thru counsel, a motion for

reconsideration by the CIR en banc of the order of respondent Judge of
April 6, 1963. This order of April 6, 1963 is one of the orders that are
sought to be annulled in case G.R. No. L-21278.

CIR Case No. 1183-MC relates to a petition for certification election filed
by the Faculty Club on March 8, 1963 before the CIR, praying that it be
certified as the sole and exclusive bargaining representative of all the
employees of the University. The University filed an opposition to the
petition for certification election and at the same time a motion to
dismiss said petition, raising the very same issues raised in Case No. 41IPA, claiming that the petition did not comply with the rules promulgated
by the CIR; that the Faculty Club is not a legitimate labor union; that the
members of the Faculty Club cannot unionize for collective bargaining
purposes; that the terms of the individual contracts of the professors,
instructors, and teachers, who are members of the Faculty Club, would
expire on March 25 or 31, 1963; and that the CIR has no jurisdiction to
take cognizance of the petition because the Industrial Peace Act is not
applicable to the members of the Faculty Club nor to the University. This
case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge
Villanueva could act on the motion to dismiss, however, the Faculty Club
filed on April 3, 1963 a motion to withdraw the petition on the ground
that the labor dispute (Case No. 41-IPA) had already been certified by
the President to the CIR and the issues raised in Case No. 1183-MC were
absorbed by Case No. 41-IPA. The University opposed the withdrawal,
alleging that the issues raised in Case No. 1183-MC were separate and
distinct from the issues raised in Case No. 41-IPA; that the questions of
recognition and majority status in Case No. 1183-MC were not absorbed
by Case No. 41-IPA; and that the CIR could not exercise its power of
compulsory arbitration unless the legal issue regarding the existence of
employer-employee relationship was first resolved. The University
prayed that the motion of the Faculty Club to withdraw the petition for
certification election be denied, and that its motion to dismiss the
petition be heard. Judge Baltazar Villanueva, finding that the reasons
stated by the Faculty Club in the motion to withdraw were well taken, on
April 6, 1963, issued an order granting the withdrawal. The University
filed, on April 24, 1963, a motion for reconsideration of that order of
April 6, 1963 by the CIR en banc. This order of April 6, 1963 in Case No.
1183-MC is one of the orders sought to be annulled in the case, G.R. No.
L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court
filed against the administrative officials of the University. The Faculty
Club, through the Acting Chief Prosecutor of the CIR, filed with the CIR a

complaint docketed as Case No. V-30, charging President Victoria L.

Araneta, Dean Daniel Salcedo, Executive Vice-President Rodolfo Maslog,
and Assistant to the President Jose Segovia, as officials of the University,
with indirect contempt of court, reiterating the same charges filed in
Case No. 41-IPA for alleged violation of the order dated March 30, 1963.
Based on the complaint thus filed by the Acting Chief Prosecutor of the
CIR, respondent Judge Bautista issued on April 29, 1963 an order
commanding any officer of the law to arrest the above named officials of
the University so that they may be dealt with in accordance with law,
and the same time fixed the bond for their release at P500.00 each. This
order of April 29, 1963 is also one of the orders sought to be annulled in
the case, G.R. No. L-2l278.
The principal allegation of the University in its petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278, now
before Us, is that respondent Judge Jose S. Bautista acted without, or in
excess of, jurisdiction, or with grave abuse of discretion, in taking
cognizance of, and in issuing the questioned orders in, CIR Cases Nos.
41-IPA 1183-MC and V-30. Let it be noted that when the petition for
certiorari and prohibition with preliminary injunction was filed on May
10, 1963 in this case, the questioned order in CIR Cases Nos. 41-IPA,
1183-MC and V-30 were still pending action by the CIR en banc upon
motions for reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition for
certiorari and prohibition with preliminary injunction, admitting some
allegations contained in the petition and denying others, and alleging
special defenses which boil down to the contentions that (1) the CIR had
acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of
the presidential certification, so that it had jurisdiction to issue the
questioned orders in said Case No. 41-IPA; (2) that the Industrial Peace
Act (Republic Act 875) is applicable to the University as an employer and
to the members of the Faculty Club as employees who are affiliated with
a duly registered labor union, so that the Court of Industrial Relations
had jurisdiction to take cognizance of Cases Nos. 1183-MC and V-30 and
to issue the questioned orders in those two cases; and (3) that the
petition for certiorari and prohibition with preliminary injunction was
prematurely filed because the orders of the CIR sought to be annulled
were still the subjects of pending motions for reconsideration before the

CIR en banc when said petition for certiorari and prohibition with
preliminary injunction was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As
already stated Case No. 1183-MC relates to a petition for certification
election filed by the Faculty Club as a labor union, praying that it be
certified as the sole and exclusive bargaining representative of all
employees of the University. This petition was opposed by the
University, and at the same time it filed a motion to dismiss said
petition. But before Judge Baltazar Villanueva could act on the petition
for certification election and the motion to dismiss the same, Faculty
Club filed a motion to withdraw said petition upon the ground that the
issue raised in Case No. 1183-MC were absorbed by Case No. 41-IPA
which was certified by the President of the Philippines. Judge Baltazar
Villanueva, by order April 6, 1963, granted the motion to withdraw. The
University filed a motion for reconsideration of that order of April 6, 1963
by the CIR en banc. That motion for reconsideration was pending action
by the CIR en banc when the petition forcertiorari and prohibition with
preliminary injunction in Case G.R. no. L-21278 was filed on May 10,
1963. As earlier stated this Court, in Case G.R. No. L-21278, issued a writ
of preliminary injunction on May 10, 1963, ordering respondent Judge
Bautista, until further order from this Court, to desist and refrain from
further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of
preliminary injunction in Case G.R. No. L-21278, the CIR en banc issued
a resolution denying the motion for reconsideration of the order of April
6, 1963 in Case No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for
certiorari, by way of an appeal from the resolution of the CIR en banc,
dated June 5, 1963, denying the motion for reconsideration of the order
of April 6, 1963 in Case No. 1183-MC. This petition was docketed as G.R.
No. L-21462. In its petition for certiorari, the University alleges (1) that
the resolution of the Court of Industrial Relations of June 5, 1963 was
null and void because it was issued in violation of the writ of preliminary

injunction issued in Case G.R. No. L-21278; (2) that the issues of
employer-employee relationship, the alleged status as a labor union,
majority representation and designation as bargaining representative in
an appropriate unit of the Faculty Club should have been resolved first in
Case No. 1183-MC prior to the determination of the issues in Case No.
41-IPA and therefore the motion to withdraw the petition for certification
election should not have been granted upon the ground that the issues
in the first case have been absorbed in the second case; and (3) the
lower court acted without or in excess of jurisdiction in taking
cognizance of the petition for certification election and that the same
should have been dismissed instead of having been ordered withdrawn.
The University prayed that the proceedings in Case No. 1183-MC and the
order of April 6, 1963 and the resolution of June 5, 1963 issued therein
be annulled, and that the CIR be ordered to dismiss Case No. 1183-MC
on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other,
allegations in the petition for certiorari; and specially alleging that the
lower court's order granting the withdrawal of the petition for
certification election was in accordance with law, and that the resolution
of the court en banc on June 5, 1963 was not a violation of the writ of
preliminary injunction issued in Case G.R. No. L-21278 because said writ
of injunction was issued against Judge Jose S. Bautista and not against
the Court of Industrial Relations, much less against Judge Baltazar
Villanueva who was the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier
stated, Case No. 41-IPA relates to the strike staged by the members of
the Faculty Club and the dispute was certified by the President of the
Philippines to the CIR. The University filed a motion to dismiss that case
upon the ground that the CIR has no jurisdiction over the case, and on
March 30, 1963 Judge Jose S. Bautista issued an order denying the
motion to dismiss and declaring that the Industrial Peace Act is
applicable to both parties in the case and that the CIR had acquired
jurisdiction over the case by virtue of the presidential certification; and
in that same order Judge Bautista ordered the strikers to return to work
and the University to take them back under the last terms and

conditions existing before the dispute arose; and enjoined the University
from dismissing any employee or laborer without previous authority
from the court. On April 1, 1963, the University filed a motion for
reconsideration of the order of March 30, 1963 by the CIR en banc. That
motion for reconsideration was pending action by the CIR en banc when
the petition for certiorari and prohibition with preliminary injunction in
Case G.R. No. L-21278 was filed on May 10, 1963. As we have already
stated, this Court in said case G.R. No. L-21278, issued a writ of
preliminary injunction on May 10, 1963 ordering respondent Judge Jose
S. Bautista, until further order from this Court, to desist and refrain from
further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V30 of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution of the
CIR en banc, dated May 7, 1963 but actually received and stamped at
the Office of the Clerk of the CIR on June 28, 1963, denying the motion
for reconsideration of the order dated March 30, 1963 in Case No. 41IPA.
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. L-21278; (2) that the CIR,
through its Presiding Judge, had no jurisdiction to take cognizance of
Case No. 41-IPA and the order of March 30, 1963 and the resolution
dated May 7, 1963 issued therein are null and void; (3) that the
certification made by the President of the Philippines is not authorized
by Section 10 of Republic Act 875, but is violative thereof; (4) that the
Faculty Club has no right to unionize or organize as a labor union for
collective bargaining purposes and to be certified as a collective
bargaining agent within the purview of the Industrial Peace Act, and
consequently it has no right to strike and picket on the ground of
petitioner's alleged refusal to bargain collectively where such duty does

not exist in law and is not enforceable against an educational institution;

and (5) that the return-to-work order of March 30, 1963 is improper and
illegal. The petition prayed that the proceedings in Case No. 41-IPA be
annulled, that the order dated March 30, 1963 and the resolution dated
May 7, 1963 be revoked, and that the lower court be ordered to dismiss
Case 41-IPA on the ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a
motion to dismiss the petition for certiorari on the ground that the
petition being filed by way of an appeal from the orders of the Court of
Industrial Relations denying the motion to dismiss in Case No. 41-IPA,
the petition for certiorari is not proper because the orders appealed from
are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these
three cases (G.R. Nos. L-21278, L-21462 and L-21500) be considered
together and the motion to dismiss in Case G.R. No. L-21500 be taken up
when the cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their
pleadings, We proceed to decide these three cases on the merits of the
issues raised.
The University has raised several issues in the present cases, the pivotal
one being its claim that the Court of Industrial Relations has no
jurisdiction over the parties and the subject matter in CIR Cases 41-IPA,
1183-MC and V-30, brought before it, upon the ground that Republic Act
No. 875 is not applicable to the University because it is an educational
institution and not an industrial establishment and hence not an
"employer" in contemplation of said Act; and neither is Republic Act No.
875 applicable to the members of the Faculty Club because the latter
are independent contractors and, therefore, not employees within the
purview of the said Act.
In support of the contention that being an educational institution it is
beyond the scope of Republic Act No. 875, the University cites cases
decided by this Court: Boy Scouts of the Philippines vs. Juliana Araos, L10091, 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. L12222, 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 nonstock corporation duly organized and existing under the laws of the
Philippines." It was organized not for profit or gain or division of the
dividends among its stockholders, but solely for religious and
educational purposes. It likewise appears that the Philippine Association
of College and University Professors, respondent herein, is a non-stock
association composed of professors and teachers in different colleges
and universities and that since its organization two years ago, the
university has adopted a hostile attitude to its formation and has tried to
discriminate, harass and intimidate its members for which reason the
association and the members affected filed the unfair labor practice
complaint which initiated this proceeding. To the complaint of unfair
labor practice, petitioner filed an answer wherein it disputed the
jurisdiction of the Court of Industrial Relations over the controversy on
the following grounds:
"(a) That complainants therein being college and/or university professors
were not "industrial" laborers or employees, and the Philippine

Association of College and University Professors being composed of

persons engaged in the teaching profession, is not and cannot be a
legitimate labor organization within the meaning of the laws creating the
Court of Industrial Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein, is not an
institution established for the purpose of gain or division of profits, and
consequently, it is not an "industrial" enterprise and the members of its
teaching staff are not engaged in "industrial" employment (U.S.T.
Hospital Employees Association vs. Sto. Tomas University Hospital, G.R.
No. L-6988, 24 May 1954; and San Beda College vs. Court of Industrial
Relations and National Labor Union, G.R. No. L-7649, 29 October 1955;
51 O.G. (Nov. 1955) 5636-5640);
"(c) That, as a necessary consequence, alleged controversy between
therein complainants and respondent is not an "industrial" dispute, and
the Court of Industrial Relations has no jurisdiction, notonly on the
parties but also over the subject matter of the complaint."
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. L13282, 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 non-profit organizations
which include educational institutions not operated for profit. There are
members of this Court who hold the view that the Industrial Peace Act
would apply also to non-profit organizations or entities the only
exception being the Government, including any political subdivision or
instrumentality thereof, in so far as governmental functions are
concerned. However, in the Far Eastern University case this Court is
unanimous in supporting the view that an educational institution that is
operated for profit comes within the scope of the Industrial Peace Act.
We consider it a settled doctrine of this Court, therefore, that the
Industrial Peace Act is applicable to any organization or entity
whatever may be its purpose when it was created that is operated for
profit or gain.

Does the University operate as an educational institution for profit? Does

it declare dividends for its stockholders? If it does not, it must be
declared beyond the purview of Republic Act No. 875; but if it does,
Republic Act No. 875 must apply to it. The University itself admits that it
has declared dividends.3 The CIR in its order dated March 30, 1963 in
CIR Case No. 41-IPA which order was issued after evidence was heard
also found that the University is not for strictly educational purposes
and that "It realizes profits and parts of such earning is distributed as
dividends to private stockholders or individuals (Exh. A and also 1 to 1-F,
2-x 3-x and 4-x)"4 Under this circumstance, and in consonance with the
rulings in the decisions of this Court, above cited, it is obvious that
Republic Act No. 875 is applicable to herein petitioner Feati University.
But the University claims that it is not an employer within the
contemplation of Republic Act No. 875, because it is not an industrial
establishment. At most, it says, it is only a lessee of the services of its
professors and/or instructors pursuant to a contract of services entered
into between them. We find no merit in this claim. Let us clarify who is
an "employer" under the Act. Section 2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the interest of an
employer, directly or indirectly, but shall not include any labor
organization (otherwise than when acting as an employer) or any one
acting in the capacity or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses the
word "includes", which it also used in defining "employee". [Sec. 2 (d)],
and "representative" [Sec. 2(h)]; and not the word "means" which the
Act uses in defining the terms "court" [Sec. 2(a)], "labor organization"
[Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company union"
[Sec. 2(g)], "unfair labor practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)],
"strike" [Sec. 2(l)] and "lock-out" [Sec. 2(m)]. A methodical variation in
terminology is manifest. This variation and distinction in terminology
and phraseology cannot be presumed to have been the inconsequential
product of an oversight; rather, it must have been the result of a
deliberate and purposeful act, more so when we consider that as
legislative records show, Republic Act No. 875 had been meticulously

and painstakingly drafted and deliberated upon. In using the word

"includes" and not "means", Congress did not intend to give a complete
definition of "employer", but rather that such definition should be
complementary to what is commonly understood as employer. Congress
intended the term to be understood in a broad meaning because, firstly,
the statutory definition includes not only "a principal employer but also
a person acting in the interest of the employer"; and, secondly, the Act
itself specifically enumerated those who are not included in the term
"employer", namely: (1) a labor organization (otherwise than when
acting as an employer), (2) anyone acting in the capacity of officer or
agent of such labor organization [Sec. 2(c)], and (3) the Government and
any political subdivision or instrumentality thereof insofar as the right to
strike for the purpose of securing changes or modifications in the terms
and conditions of employment is concerned (Section 11). Among these
statutory exemptions, educational institutions are not included; hence,
they can be included in the term "employer". This Court, however, has
ruled that those educational institutions that are not operated for profit
are not within the purview of Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive
but only a complementary definition of the term "employer". The term
encompasses those that are in ordinary parlance "employers." What is
commonly meant by "employer"? The term "employer" has been given
several acceptations. The lexical definition is "one who employs; one
who uses; one who engages or keeps in service;" and "to employ" is "to
provide work and pay for; to engage one's service; to hire." (Webster's
New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The
Workmen's Compensation Act defines employer as including "every
person or association of persons, incorporated or not, public or private,
and the legal representative of the deceased employer" and "includes
the owner or lessee of a factory or establishment or place of work or any
other person who is virtually the owner or manager of the business
carried on in the establishment or place of work but who, for reason that
there is an independent contractor in the same, or for any other reason,
is not the direct employer of laborers employed there." [Sec. 39(a) of Act
No. 3428.] The Minimum Wage Law states that "employer includes any
person acting directly or indirectly in the interest of the employer in
relation to an employee and shall include the Government and the
government corporations". [Rep. Act No. 602, Sec. 2(b)]. The Social

Security Act defines employer as "any person, natural or juridical,

domestic or foreign, who carries in the Philippines any trade, business,
industry, undertaking, or activity of any kind and uses the services of
another person who is under his orders as regards the employment,
except the Government and any of its political 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 L10944, December 28, 1957, which cases involve unfair labor practices
and hence within the purview of Republic Act No. 875, defined the term
employer as follows:
An employer is one who employs the services of others; one for whom
employees work and who pays their wages or salaries (Black Law
Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer,
directly or indirectly (Sec. 2-c, Rep. Act 875).
Under none of the above definitions may the University be excluded,
especially so if it is considered that every professor, instructor or
teacher in the teaching staff of the University, as per allegation of the
University itself, has a contract with the latter for teaching services,
albeit for one semester only. The University engaged the services of the
professors, provided them work, and paid them compensation or salary
for their services. Even if the University may be considered as a lessee
of services under a contract between it and the members of its Faculty,
still it is included in the term "employer". "Running through the word
`employ' is the thought that there has been an agreement on the part of
one person to perform a certain service in return for compensation to be
paid by an employer. When you ask how a man is employed, or what is
his employment, the thought that he is under agreement to perform
some service or services for another is predominant and paramount."
(Ballentine Law Dictionary, Philippine ed., p. 430, citing Pinkerton
National Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R. 557, 560,
122 S.E. Rep. 202).

To bolster its claim of exception from the application of Republic Act No.
875, the University contends that it is not state that the employers
included in the definition of 2 (c) of the Act. This contention can not be
sustained. In the first place, Sec. 2 (c) of Republic Act No. 875 does not
state that the employers included in the definition of the term
"employer" are only and exclusively "industrial establishments"; on the
contrary, as stated above, the term "employer" encompasses all
employers except those specifically excluded by the Act. In the second
place, even the Act itself does not refer exclusively to industrial
establishments and does not confine its application thereto. This is
patent inasmuch as several provisions of the Act are applicable to nonindustrial workers, such as Sec. 3, which deals with "employees' right to
self-organization"; Sections 4 and 5 which enumerate unfair labor
practices; Section 8 which nullifies private contracts contravening
employee's rights; Section 9 which relates to injunctions in any case
involving a labor dispute; Section 11 which prohibits strikes in the
government; Section 12 which provides for the exclusive collective
bargaining representation for labor organizations; Section 14 which
deals with the procedure for collective bargaining; Section 17 which
treats of the rights and conditions of membership in labor organizations;
Sections 18, 19, 20 and 21 which provide respectively for the
establishment of conciliation service, compilation of collective
bargaining contracts, advisory labor-management relations; Section 22
which empowers the Secretary of Labor to make a study of labor
relations; and Section 24 which enumerates the rights of labor
organizations. (See Dissenting Opinion of Justice Concepcion in Boy
Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091, January 29,
1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra,
had occasion to state that the Industrial Peace Act "refers only to
organizations and entities created and operated for profits, engaged in a
profitable trade, occupation or industry". It cannot be denied that
running a university engages time and attention; that it is an occupation
or a business from which the one engaged in it may derive profit or gain.
The University is not an industrial establishment in the sense that an
industrial establishment is one that is engaged in manufacture or trade
where raw materials are changed or fashioned into finished products for
use. But for the purposes of the Industrial Peace Act the University is an

industrial establishment because it is operated for profit and it employs

persons who work to earn a living. The term "industry", for the purposes
of the application of our labor laws should be given a broad meaning so
as to cover all enterprises which are operated for profit and which
engage the services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor
relations in industry, cover labor conditions in any field of employment
where the objective is earning a livelihood on the one side and gaining
of a profit on the other. Labor Law Sec. 700 et seq. State Labor Relations
Board vs. McChesney, 27 N.Y.S. 2d 866, 868." (Words and Phrases,
Permanent Edition, Vol. 21, 1960 edition p. 510).
The University urges that even if it were an employer, still there would
be no employer-employee relationship between it and the striking
members of the Faculty Club because the latter are not employees
within the purview of Sec. 2(d) of Republic Act No. 875 but are
independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:
(d) The term "employee" shall include any employee and shall not be
limited to the employee of a particular employer unless the act explicitly
states otherwise and shall include any individual whose work has ceased
as a consequence of, or in connection with, any current labor dispute or
because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.
This definition is again, like the definition of the term "employer" [Sec.
2(c)], by the use of the term "include", complementary. It embraces not
only those who are usually and ordinarily considered employees, but
also those who have ceased as employees as a consequence of a labor
dispute. The term "employee", furthermore, is not limited to those of a
particular employer. As already stated, this Court in the cases of The
Angat River Irrigation System, et al. v. Angat River Workers' Union
(PLUM), et al., supra, has defined the term "employer" as "one who
employs the services of others; one for whom employees work and who
pays their wages or salaries. "Correlatively, an employee must be one
who is engaged in the service of another; who performs services for

another; who works for salary or wages. It is admitted by the University

that the striking professors and/or instructors are under contract to
teach particular courses and that they are paid for their services. They
are, therefore, employees of the University.
In support of its claim that the members of the Faculty Club are not
employees of the University, the latter cites as authority Francisco's
Labor Laws, 2nd ed., p. 3, which states:
While the term "workers" as used in a particular statute, has been
regarded as limited to those performing physical labor, it has been held
to embrace stenographers and bookkeepers. Teachers are not included,
however.
It is evident from the above-quoted authority that "teachers" are not to
be included among those who perform "physical labor", but it does not
mean that they are not employees. We have checked the source of the
authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites
Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A
reading of the last case confirms Our view.
That teachers are "employees' has been held in a number of cases
(Aebli v. Board of Education of City and County of San Francisco, 145 P.
2d 601, 62 Col. App 2.d 706; Lowe & Campbell Sporting Goods Co. v.
Tangipahoa Parish School Board, La. App., 15 So. 2d 98, 100; Sister
Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited
in Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court
in the Far Eastern University case, supra, considered university
instructors as employees and declared Republic Act No. 875 applicable
to them in their employment relations with their school. The professors
and/or instructors of the University neither ceased to be employees
when they struck, for Section 2 of Rep. Act 875 includes among
employees any individual whose work has ceased as consequence of, or
in connection with a current labor dispute. Striking employees maintain
their status as employees of the employer. (Western Cartridge Co. v.
NLRB, C.C.A. 7, 139 F2d 855, 858).
The contention of the University that the professors and/or instructors
are independent contractors, because the University does not exercise

control over their work, is likewise untenable. This Court takes judicial
notice that a university controls the work of the members of its faculty;
that a university prescribes the courses or subjects that professors
teach, and when and where to teach; that the professors' work is
characterized by regularity and continuity for a fixed duration; that
professors are compensated for their services by wages and salaries,
rather than by profits; that the professors and/or instructors cannot
substitute others to do their work without the consent of the university;
and that the professors can be laid off if their work is found not
satisfactory. All these indicate that the university has control over their
work; and professors are, therefore, employees and not independent
contractors. There are authorities in support of this view.
The principal consideration in determining whether a workman is an
employee or an independent contractor is the right to control the
manner of doing the work, and it is not the actual exercise of the right
by interfering with the work, but the right to control, which constitutes
the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co., 133 N.E. 259,
261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed., Vol. 14,
p. 576).
Where, under Employers' Liability Act, A was instructed when and where
to work . . . he is an employee, and not a contractor, though paid
specified sum per square. (Heine v. Hill, Harris & Co., 2 La. App. 384,
390, in Words and Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by
wages rather than by profits. (People vs. Distributors Division, Smoked
Fish Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words
and Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a
contractor, are usually characterized by regularity and continuity of work
for a fixed period or one of indefinite duration, as contrasted with
employment to do a single act or a series of isolated acts; by
compensation on a fixed salary rather than one regulated by value or
amount of work; . . . (Underwood v. Commissioner of Internal Revenue,
C.C.A., 56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)

Independent contractors can employ others to work and accomplish

contemplated result without consent of contractee, while "employee"
cannot substitute another in his place without consent of his employer.
(Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82
Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent
contractors, still they would be covered by Rep. Act No. 875. In the case
of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Court
observed that Republic Act No. 875 was modelled after the Wagner Act,
or the National Labor Relations Act, of the United States, and this Act did
not exclude "independent contractors" from the orbit of "employees". It
was in the subsequent legislation the Labor Management Relation Act
(Taft-Harley
Act) that "independent contractors" together with agricultural
laborers, individuals in domestic service of the home, supervisors, and
others were excluded. (See Rothenberg on Labor Relations, 1949, pp.
330-331).
It having been shown that the members of the Faculty Club are
employees, it follows that they have a right to unionize in accordance
with the provisions of Section 3 of the Magna Carta of Labor (Republic
Act No. 875) which provides as follows:
Sec. 3. Employees' right to self-organization.Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and other mutual aid
or protection. . . .
We agree with the statement of the lower court, in its order of March 30,
1963 which is sought to be set aside in the instant case, that the right of
employees to self-organization is guaranteed by the Constitution, that
said right would exist even if Republic Act No. 875 is repealed, and that
regardless of whether their employers are engaged in commerce or not.
Indeed, it is Our considered view that the members of the faculty or
teaching staff of private universities, colleges, and schools in the

Philippines, regardless of whether the university, college or school is run

for profit or not, are included in the 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-towork order of March 30, 1963, now in question, was a confirmation of an
agreement between the University and the Faculty Club during a
prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim
of the members of the Faculty Club to return to their work, as their
individual contracts for teaching had expired on March 25 or 31, 1963,
as the case may be, and consequently, there was also no basis for the
return-to-work order of the CIR because the contractual relationships
having ceased there were no positions to which the members of the
Faculty Club could return to. This contention is not well taken. This
argument loses sight of the fact that when the professors and
instructors struck on February 18, 1963, they continued to be employees
of the University for the purposes of the labor controversy
notwithstanding the subsequent termination of their teaching contracts,
for Section 2(d) of the Industrial Peace Act includes among employees
"any individual whose work has ceased a consequence of, or in
connection with, any current labor dispute or of any unfair labor practice
and who has not obtained any other substantially equivalent and regular
employment."
The question raised by the University was resolved in a similar case in
the United States. In the case of Rapid Roller Co. v. NLRB 126 F. 2d 452,
we read:
On May 9, 1939 the striking employees, eighty-four in number, offered
to the company to return to their employment. The company believing it
had not committed any unfair labor practice, refused the employees'
offer and claimed the right to employ others to take the place of the
strikers, as it might see fit. This constituted discrimination in the hiring
and tenure of the striking employees. When the employees went out on
a strike because of the unfair labor practice of the company, their status
as employees for the purpose of any controversy growing out of that
unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp.
v. National Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed.
1271, 133 A.L.R. 1217.

For the purpose of such controversy they remained employees of the

company. The company contended that they could not be their
employees in any event since the "contract of their employment expired
by its own terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just
pointed out, that the status of the employees on strike became fixed
under Sec. 2 (3) of the Act because of the unfair labor practice of the
company which caused the strike.
The University, furthermore, claims that the information for indirect
contempt filed against the officers of the University (Case No. V-30) as
well as the order of April 29, 1963 for their arrest were improper,
irregular and illegal because (1) the officers of the University had
complied in good faith with the return-to-work order and in those cases
that they did not, it was due to circumstance beyond their control; (2)
the return-to-work order and the order implementing the same were
illegal; and (3) even assuming that the order was legal, the same was
not Yet final because there was a motion to reconsider it.
Again We find no merit in this claim of Petitioner. We have already ruled
that the CIR had jurisdiction to issue the order of March 30, 1963 in CIR
Case 41-IPA, and the return-to-work provision of that order is valid and
legal. Necessarily the order of April 6, 1963 implementing that order of
March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of
Industrial Relations of any Judge thereof to punish direct and indirect
contempts as provided in Rule 64 (now Rule 71) of the Rules of Court,
under the same procedure and penalties provided therein. Section 3 of
Rule 71 enumerates the acts which would constitute indirect contempt,
among which is "disobedience or resistance to lawful writ, process,
order, judgment, or command of a court," and the person guilty thereof
can be punished after a written charge has been filed and the accused
has been given an opportunity to be heard. The last paragraph of said
section provides:

But nothing in this section shall be so construed as to prevent the court

from issuing process to bring the accused party into court, or from
holding him in custody pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged
contemner (Francisco, et al. v. Enriquez, L-7058, March 20, 1954, 94
Phil., 603) and this, apparently, is the provision upon which respondent
Judge Bautista relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is
unwarranted. The return-to-work order allegedly violated was within the
court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought
before the Court of Industrial Relations under Section 4 of the Act
(referring to strikes and lockouts) the appeal to the Supreme Court from
any award, order or decision shall not stay the execution of said award,
order or decision sought to be reviewed unless for special reason the
court shall order that execution be stayed. Any award, order or decision
that is appealed is necessarily not final. Yet under Section 14 of
Commonwealth Act No. 103 that award, order or decision, even if not
yet final, is executory, and the stay of execution is discretionary with the
Court of Industrial Relations. In other words, the Court of Industrial
Relations, in cases involving strikes and lockouts, may compel
compliance or obedience of its award, order or decision even if the
award, order or decision is not yet final because it is appealed, and it
follows that any disobedience or non-compliance of the award, order or
decision would constitute contempt against the Court of Industrial
Relations which the court may punish as provided in the Rules of Court.
This power of the Court of Industrial Relations to punish for contempt an
act of non-compliance or disobedience of an award, order or decision,
even if not yet final, is a special one and is exercised only in cases
involving strikes and lockouts. And there is reason for this special power
of the industrial court because in the exercise of its jurisdiction over
cases involving strikes and lockouts the court has to issue orders or
make decisions that are necessary to effect a prompt solution of the
labor dispute that caused the strike or the lockout, or to effect the
prompt creation of a situation that would be most beneficial to the
management and the employees, and also to the public even if the

solution may be temporary, pending the final determination of the case.

Otherwise, if the effectiveness of any order, award, or decision of the
industrial court in cases involving strikes and lockouts would be
suspended pending appeal then it can happen that the coercive powers
of the industrial court in the settlement of the labor disputes in those
cases would be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which
provides that "Any violation of any order, award, or decision of the Court
of Industrial Relations shall after such order, award or decision has
become final, conclusive and executory constitute contempt of court,"
and contends that only the disobedience of orders that are final
(meaning one that is not appealed) may be the subject of contempt
proceedings. We believe that there is no inconsistency between the
above-quoted provision of Section 6 and the provision of Section 14 of
Commonwealth Act No. 103. It will be noted that Section 6 speaks of
order, award or decision that is executory. By the provision of Section 14
an order, award or decision of the Court of Industrial Relations in cases
involving strikes and lockouts are immediately executory, so that a
violation of that order would constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of
April 29, 1963 is also authorized under Section 19 of Commonwealth Act
No. 103 which provides as follows:
SEC. 19. Implied condition in every contract of employment.In every
contract of employment whether verbal or written, it is an implied
condition that when any dispute between the employer and the
employee or laborer has been submitted to the Court of Industrial
Relations for settlement or arbitration pursuant to the provisions of this
Act . . . and pending award, or decision by the Court of such dispute . . .
the employee or laborer shall not strike or walk out of his employment
when so enjoined by the Court after hearing and when public interest so
requires, and if he has already done so, that he shall forthwith return to
it, upon order of the Court, which shall be issued only after hearing when
public interest so requires or when the dispute cannot, in its opinion, be
promptly decided or settled; and if the employees or laborers fail to
return to work, the Court may authorize the employer to accept other
employees or laborers. A condition shall further be implied that while

such dispute . . . is pending, the employer shall refrain from accepting

other employees or laborers, unless with the express authority of the
Court, and shall permit the continuation in the service of his employees
or laborers under the last terms and conditions existing before the
dispute arose. . . . A violation by the employer or by the employee or
laborer of such an order or the implied contractual condition set forth in
this section shall constitute contempt of the Court of Industrial Relations
and shall be punished by the Court itself in the same manner with the
same penalties as in the case of contempt of a Court of First Instance. . .
.
We hold that the CIR acted within its jurisdiction when it ordered the
arrest of the officers of the University upon a complaint for indirect
contempt filed by the Acting Special Prosecutor of the CIR in CIR Case V30, 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. L21462 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. L21278. After all, the University wanted CIR Case 1183-MC dismissed,
and the withdrawal of the petition for certification election had in a way
produced the situation desired by the University. After considering the
arguments adduced by the University in support of its petition for
certiorari by way of appeal in Case G.R. No. L-21278, We hold that the
CIR did not commit any error when it granted the withdrawal of the
petition for certification election in Case No. 1183-MC. The principal case
before the CIR is Case No. 41-IPA and all the questions relating to the
labor disputes between the University and the Faculty Club may be
threshed out, and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the
CIR of March 30, 1963, issued by Judge Bautista, and from the resolution
of the CIR en banc promulgated on June 28, 1963, denying the motion
for the reconsideration of that order of March 30, 1963, in CIR Case No.
41-IPA. We have already ruled that the CIR has jurisdiction to issue that
order of March 30, 1963, and that order is valid, and We, therefore, hold
that the CIR did not err in issuing that order of March 30, 1963 and in
issuing the resolution promulgated on June 28, 1963 (although dated
May 7, 1963) denying the motion to reconsider that order of March 30,
1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition
with preliminary injunction in Case G.R. No. L-21278 is dismissed and
the writs prayed for therein are denied. The writ of preliminary injunction

issued in Case G.R. No. L-21278 is dissolved. The orders and resolutions
appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with
costs in these three cases against the petitioner-appellant Feati
University. It is so ordered.
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.

24.FAR EASTERN UNIVERSITY, petitioner, vs.THE COURT OF

INDUSTRIAL RELATIONS, PHILIPPINE ASSOCIATION OF
COLLEGES AND UNIVERSITY PROFESSORS (PACUP) and
TOMAS N. AGUIRRE, respondents. G.R. No. L-17620
August 31, 1962
Crispin D. Baizas & Associates for petitioner.
Mariano B. Tuason for respondent Court of Industrial Relations.
Eulogio R. Lerum for the other respondents.
CONCEPCION, J.:
Appeal by certiorari, taken by the Far Eastern University, hereafter
referred to as the University, from resolution of the Court of Industrial
Relations sitting en banc, modifying a decision of one of the Judges of
said Court. The main facts are set forth in said decision, from which we
quote:
From the evidence on record, it appears that Tomas N. Aguirre became a
faculty member of the respondent in 1948. He was first employed at the
rate of P6.00 per hour and then was contracted to teach in the Boys'

High School Department in the same university at the rate of P30.00 per
class, earning an average of P500.00 to P600.00 a month. Aguirre joined
the PACUP, a legitimate labor organization in June 1953. In July or
August, 1953, upon orders of the president of the PACUP, Jose M.
Hernandez, Aguirre began to campaign and recruit members for the
PACUP. As a result of his efforts in campaigning for membership, he was
able to influence seven members from the faculty of the university
(Exhibits "B", "B-1" to "B-6", inclusive). In his campaign for membership,
he approached practically all of the faculty members of the respondent's
Institute of Education and some from the Arts and Sciences, Business
Administration and Finance, but most of them were afraid to join the
union. They were afraid of any retaliation that the respondent may make
because of their joining the union.
In the year 1953, respondent formed a committee to classify all faculty
members and determine the rates of their backpay and assignments.
Ninety-six of the more than four hundred faculty members were
classified as full time instructors. Aguirre was one of those who was
classified by the said committee as full time instructor in the
respondent's Institute of Education, with a fixed compensation of
P450.00 a month, effective September 1, 1953.
During the months of December, 1953 up to May, 1954, for teaching in
the Far Eastern University, respondent herein, Aguirre was paid the
following: December, 1953-P210.00; January, 1954 P302.40;
February, 1954 P313.20; March, 1954 P249.00. In June, 1954,
respondent stopped giving him teaching assignments.
Aguirre claims that in June, 1954, he was no longer given an assignment
because of his union activities while respondent claims that Aguirre was
not given assignment because of decreased enrollment in the university.
He further avers that after recruiting some members, his classification
as full time instructor changed to reserved full time instructor and his
teaching load was decreased to two hours a day. Hence, his reduced
earnings from December, 1953 to May, 1954 as previously mentioned.
His salary as a full time instructor was P5,400.00 per annum or P450.00
per month, irrespective of his teaching load. Respondent, thru its
witness, the dean in the Institute of Education where Aguirre was
teaching, testified and admitted that the reason for Aguirre's not

receiving any teaching assignment in June, 1954 was because

enrollment in the Institute of Education was going down steadily in the
Filipino Language class where Aguirre was teaching. Among the other
Filipino Language instructors are Baldomero de Jesus, Teodoro Gener,
Rosario Bernards, Dolores Gupit, Inigo Regalado, and Flordeliza Mendoza
who are older members of the faculty than Aguirre except Regalado,
Bernards and Mendoza. The dean of the Institute of Education, Luz A.
Zafra, admitted also that in the assignment of subjects to faculty
members, length of service, experience, preparation and professional
growth as well as student-faculty relation were taken into consideration.
Hence if these above-mentioned factors, particularly length of service
and experience, were really taken into consideration, Aguirre a full time
professor should have been given the assignment in stead of Regalado
and Mendoza who were only part time professors and who started
teaching after him. The other Tagalo instructors (professors under the
classification) who were given assignments when Aguirre was not, are
not members of the PACUP. It should also be noted that since before the
last war, Aguirre had been teaching in the University of the Philippines.
It is true that there were charges brought by respondent against Aguirre
but the same had been investigated and found to be groundless. On the
other hand, Aguirre brought charge against the respondent before the
Department of Education when his teaching load was reduced and the
Director of Private Schools, in his decision of November 9, 1954, directed
the respondent to pay the salary differential which Aguirre fail to earn
from December 1, 1953 to 1954 and to give Aguirre assignment in the
college department during the first semester of the current school year
under the same condition before his teaching load was reduced. The
Secretary of Education, in his decision, dated June 22, 1955, affirmed
the decision of the Director of Private Schools and on December 8, 1956,
the Executive Secretary, by authority of the President of the Philippines
affirmed the decision of the Director of Private School as well as the
Secretary of Education's decision, previously mentioned. Of course,
those proceedings in no way could considered as controlling or affecting
the case at bar. At best, they may serve as a grim reminder of the
actions, of the governmental entity that could do something to bolster
the relationship between the university and the faculty members. The
allegation of respondent to the effect that it suffered reduce enrollment
in 1953-1954, hence necessitating the laying off of Aguirre, cannot be

taken into consideration after a careful examination of the balance sheet

submitted by the respondent in relation to its motion to dismiss. Said
balance sheet shows that in the 1952-1953 fiscal year, respondent made
a net profit of P158,035.25 and in 1953-1954, P258,619.98, while in
1954-1955, a net profit of P707,003.70 and in 1955-1956, P999,766.88.
The figures show that respondent from 1952 to 1956, has been steadily
increasing its income until in 1958-1959 when it made net income of
P1,511,293.42. And even on the assumption the enrollment in the
department where Aguirre was teaching reduced, still the Court cannot
validly reconcile the fact that Aguirre who was a full time professor
receiving a fixed monthly salary could not any further be given
assignment the time professors and whose length of service in the
university cannot compare with that of Aguirre were given assignment
and suffered no reeducating in salary. Undoubtedly, this Court cannot
but conclude that when the respondent changed status of Aguirre from a
full time professor at P450.00 a month to that of a reserved full time
professor with a teaching load of two hours and finally got no
assignments in June, 1964, it was motivated other than decreased
enrollment, especially in the case of the evidence that Aguirre
campaigned for union membership among the professors, instructors
and teachers of the respondent and the further fact, that other full time
instructors similarly situated but are not union members did not suffer
the same facts of abrupt reduction in their teaching load and salary. As
indicated, Aguirre was later deprived of any teaching load in the
Institute of Education. Even part time professors as Panganiban,
Mendoza and Regalado had assignments to the exclusion of Aguirre who
was a full time professor. This eventuality, was apparently, the fear of
most of the faculty members who refused to join the PACUP when
Aguirre asked them to become members.
Ordinarily, back wages are granted whenever there is a finding of a
commission of unfair labor practices. However, in this particular case the
testimony of Aguirre, himself as well as the documentary evidence on
the record show that since June, 1958, Aguirre began teaching at the
Philippine College of Commerce with an income of P100.00 a month and
on November 17, 1955, he began working as a permanent employee in
the Central Bank of the Philippines with a compensation of P3,000.00
per annum. On September 5, 1956, his salary was raised to P3,600.00
per annum. The permanent employment obtained by Aguirre in the

Central Bank of the Philippines as well as in the Philippine College of

Commerce is substantial and under the concept of the Industrial Peace
Act, his employment elsewhere in a permanent capacity is sufficient to
bar his reinstatement to his former position in the respondent. While it
may be true that his earnings with the Central Bank may be less than
that he was receiving from the Far Eastern University, yet his status with
the Central Bank, is permanent and he could teach as a sideline in any
school, as in fact he is connected with the Philippine College of
Commerce, a fact that could not happen if he were still connected with
the Far Eastern University.
At the instance of the Philippine Association of Colleges and University
Professors, hereafter referred to as the PACUP, and/or Tomas N. Aguirre,
on September 28, 1954, an Acting Prosecutor of the Court of Industrial
Relations filed a complaint for unfair labor practice against the
University, which later moved on November 17, 1954, to dismiss the
complaint. Subsequently, or on February 4, 1955, the complainant
and/or the offended party, Tomas N. Aguirre filed a motion to withdraw
said complaint upon the ground that there was a decision of the Director
of Private Schools ordering his reinstatement and the payment of back
wages, as well as wage differential, and that the University was "using
the pendency" of the case "as a ground for not complying with the said
decision". Acting upon this latter motion, on March 29, 1955, the Court
dismissed said complaint. However, on August 30, 1955 the order of
dismissal was, on motion of the complainant dated April 22, 1955, set
aside for the reason that the expected amicable settlement of the case
had not materialized. On October 16, 1955, the University filed a
"supplemental pleading" to its motion to dismiss of November 17, 1954
both of which were denied by the Court on June 23, 1956. Later on the
University filed its answer and, the issue having been joined, the case
was tried, after which Judge Arsenio L. Martinez of said Court rendered
the aforementioned decision finding the University guilty of unfair labor
practice and sentencing said institution to pay to Aguirre the salary
differential due him from December 1, 1953 to May 31, 1954, based on
Aguirre's salary of P450.00 a month, as well as back wages at the same
rate, from June 1, 1954 to November 17, 1955, after deducting
therefrom the compensation paid to him by the Philippine College of
Commerce from June 1, 1955 to November 17, 1955, as well as to cease
and desist from further committing unfair labor practices. However, said

Judge did not order the reinstatement of Aguirre in the University, upon
the ground that his employment in the Central Bank of the Philippines,
is, within the purview of the Industrial Peace Act, a substantial
equivalent of his position as full time instructor in said University.
On motion for reconsideration filed by the complainant, a majority of the
judges of said Court sitting en banc, affirmed the decision of Judge
Martinez, insofar as the commission of unfair labor practice charged and
the payment of the salary differential and back wages are concerned,
but held that Aguirre's employment in the Central Bank and the
Philippine College of Commerce are not the substantial equivalent of his
aforementioned position as full time instructor in the University, and,
accordingly, modified said decision by, likewise, sentencing the
University to reinstate Tomas N. Aguirre, in addition to paying him the
aforementioned wages differential and back wages plus "other
emoluments". Hence this appeal by certiorari taken by the University.
The Court of Industrial Relation, as one of the appellees herein, has filed
a motion, which we consider as its answer, to dismiss the appeal for lack
of merit upon the ground that appellant raises no question of law.
Appellant's contention is that the employment of Aguirre in the Central
Bank and his teaching load in the Philippine College of Commerce are
substantially equivalent to his former position in the University. Upon the
other hand, the resolution appealed reached the opposite conclusion for
the following reasons:

Central Bank is not substantially equivalent to his position in the Far

Eastern University. "Any employment at lower wage rate is not
substantially equivalent employment" [Willard, Inc. (1937 2 NLRB 1094,
Moorseville Cotton Mills vs. NLRB (CCA-4, 1940), 2. Labor Cases. 18.576;
110 fed. (2d) 79; Puleski Veneer Corn. (1938) 10 NLRB 136; Quidnick
Dye Works, Inc. (1937) 2 NLRB 963].
Although Mr. Aguirre was, not a professor, but a full time instructor in
the University, we agree with the opinion of the lower court, sitting en
banc. In addition to the circumstances relied upon by the latter, one
important factor, not mentioned in the resolution appealed from, is
decisively in favor of the conclusion therein reached, and that is that Mr.
Aguirre is an instructor in Tagalog, and that, as such, his position as
researcher in the Central Bank has no future for him. The situation would
perhaps have been different had his line been economics. Inasmuch,
however, as Mr. Aguirre has especialized in the Tagalog dialect, his work
as a researcher in the Central Bank is inferior to his job as full time
instructor in the University, not so much because his salary in the latter
is substantially bigger, even if we add thereto his emoluments in the
Philippine College of Commerce, but, specially, because of the future his
position as instructor in the University offers him as a career, which is
non-existent in the Central Bank.
WHEREFORE, the resolution appealed from is hereby affirmed, with costs
against petitioner. It is so ordered..1wph1.t

(a) Aguirre's work in the respondent university is that of a professor, ]

while his work in the Central Bank is clerical in nature;

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera,

Parades, Dizon, Regala and Makalintal, JJ., concur.

(b) As professor Aguirre's maximum teaching period is five (5) hours

daily; while in the bank he works eight (8) hours a day;

(c) Although his work in the bank allows him to teach part time in the
Philippine College of Commerce for one hour, he could also do the same
work even if he were employed in the university; and
(d) Aguirre was receiving from the respondent university P5,400.00 a
year, while he receives from the Central Bank P3,000.00 a year only.
This alone fact decides the issue, namely, that Aguirre's position in the

25. DY KEH BENG, petitioner, vs.INTERNATIONAL LABOR and

MARINE UNION OF THE PHILIPPINES, ET AL., respondents. G.R.
No. L-32245 May 25, 1979

A. M Sikat for petitioner.

D. A. Hernandez for respondents.

RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF

UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE
COMPLAINT.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the

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

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE

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

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

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

Now, Dy Keh Beng assigns the following errors 2 as having been

committed by the Court of Industrial Relations:
I
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO
AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO
AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY
PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES
ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A
PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.
IV

A charge of unfair labor practice was filed against Dy Keh Beng,

proprietor of a basket factory, for discriminatory acts within the meaning
of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3 by
dismissing on September 28 and 29, 1960, respectively, Carlos N.
Solano and Ricardo Tudla for their union activities. After preliminary
investigation was conducted, a case was filed in the Court of Industrial
Relations for in behalf of the International Labor and Marine Union of the
Philippines and two of its members, Solano and Tudla In his answer, Dy
Keh Beng contended that he did not know Tudla and that Solano was not
his employee because the latter came to the establishment only when
there was work which he did on pakiaw basis, each piece of work being
done under a separate contract. Moreover, Dy Keh Beng countered with
a special defense of simple extortion committed by the head of the labor
union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was
subsequently adopted in toto by the Court of Industrial Relations. An
employee-employer relationship was found to have existed between Dy
Keh Beng and complainants Tudla and Solano, although Solano was
admitted to have worked on piece basis. 4 The issue therefore centered
on whether there existed an employee employer relation between
petitioner Dy Keh Beng and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant
Union tended to show that Solano and Tudla became employees of Dy

Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that
except in the event of illness, their work with the establishment was
continuous although their services were compensated on piece basis.
Evidence likewise showed that at times the establishment had eight (8)
workers and never less than five (5); including the complainants, and
that complainants used to receive ?5.00 a day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for
the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing
for him to do;
(5) When orders came to the shop that his regular workers could not fill
it was then that Dy went to his address in Caloocan and fetched him for
these orders; and
(6) Solano's work with Dy's establishment was not continuous. , 7
According to petitioner, these facts show that respondents Solano and
Tudla are only piece workers, not employees under Republic Act 875,
where an employee 8 is referred to as
shall include any employee and shag not be limited to the employee of a
particular employer unless the Act explicitly states otherwise and shall
include any individual whose work has ceased as a consequence of, or in
connection with any current labor dispute or because of any unfair labor
practice and who has not obtained any other substantially equivalent
and regular employment.
while an employer 9

includes any person acting in the interest of an employer, directly or

indirectly but shall not include any labor organization (otherwise than
when acting as an employer) or anyone acting in the capacity of officer
or agent of such labor organization.
Petitioner really anchors his contention of the non-existence of
employee-employer relationship on the control test. He points to the
case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L13130, October 31, 1959, where the Court ruled that:
The test ... of the existence of employee and employer relationship is
whether there is an understanding between the parties that one is to
render personal services to or for the benefit of the other and
recognition by them of the right of one to order and control the other in
the performance of the work and to direct the manner and method of its
performance.
Petitioner contends that the private respondents "did not meet the
control test in the fight of the ... definition of the terms employer and
employee, because there was no evidence to show that petitioner had
the right to direct the manner and method of respondent's work. 10
Moreover, it is argued that petitioner's evidence showed that "Solano
worked on a pakiaw basis" and that he stayed in the establishment only
when there was work.
While this Court upholds the control test 11 under which an employeremployee relationship exists "where the person for whom the services
are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end, " it finds
no merit with petitioner's arguments as stated above. It should be borne
in mind that the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of the
right. 12 Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, 13 it is natural to expect that those working
under Dy would have to observe, among others, Dy's requirements of
size and quality of the kaing. Some control would necessarily be
exercised by Dy as the making of the kaing would be subject to Dy's
specifications. Parenthetically, since the work on the baskets is done at

Dy's establishments, it can be inferred that the proprietor Dy could

easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he
worked on piece basis, this Court agrees with the Hearing Examiner that
circumstances must be construed to determine indeed if payment by the
piece is just a method of compensation and does not define the essence
of the relation. Units of time ... and units of work are in establishments
like respondent (sic) just yardsticks whereby to determine rate of
compensation, to be applied whenever agreed upon. We cannot
construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him
out and take in another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with

Chief Justice Ricardo Paras who penned the decision in "Sunrise Coconut
Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined
that

Nevertheless, considering that about eighteen (18) years have already

elapsed from the time the complainants were dismissed, 15 and that the
decision being appealed ordered the payment of backwages to the
employees from their respective dates of dismissal until finally
reinstated, it is fitting to apply in this connection the formula for
backwages worked out by Justice Claudio Teehankee in "cases not
terminated sooner." 16 The formula cans for fixing the award of
backwages without qualification and deduction to three years, "subject
to deduction where there are mitigating circumstances in favor of the
employer but subject to increase by way of exemplary damages where
there are aggravating circumstances. 17Considering there are no such
circumstances in this case, there is no reason why the Court should not
apply the abovementioned formula in this instance.
WHEREFORE; the award of backwages granted by the Court of Industrial
Relations is herein modified to an award of backwages for three years
without qualification and deduction at the respective rates of
compensation the employees concerned were receiving at the time of
dismissal. The execution of this award is entrusted to the National Labor
Relations Commission. Costs against petitioner.
SO ORDERED.

judicial notice of the fact that the so-called "pakyaw" system mentioned
in this case as generally practiced in our country, is, in fact, a labor
contract -between employers and employees, between capitalists and
laborers.
Insofar as the other assignments of errors are concerned, there is no
showing that the Court of Industrial Relations abused its discretion when
it concluded that the findings of fact made by the Hearing Examiner
were supported by evidence on the record. Section 6, Republic Act 875
provides that in unfair labor practice cases, the factual findings of the
Court of Industrial Relations are conclusive on the Supreme Court, if
supported by substantial evidence. This provision has been put into
effect in a long line of decisions where the Supreme Court did not
reverse the findings of fact of the Court of Industrial Relations when they
were supported by substantial evidence. 14

Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.

Fernandez, J., took no part.

26.ISABELO DOCE, Petitioner, v. WORKMENS COMPENSATION

COMMISSION and DADO JADAO,Respondents. [G.R. No. L9417. December 22, 1958.]
Apacible, Suanes & Associates for Petitioner.
Cipriano Manansala for respondent Dado Jadao.
SYLLABUS

1. EMPLOYER AND EMPLOYEE; OWNER OF BUS AND CONDUCTOR UNDER

BOUNDARY SYSTEM. The relationship of employer and employee
exists between the owner of a bus and its conductor operating under the
boundary system within the meaning of the law and as such the case
comes under the jurisdiction of the Court of Industrial Relations.
DECISION
BAUTISTA ANGELO, J.:
Dado Jadao filed with the Workmens Compensation Commission a claim
for compensation against Isabelo Doce for injuries he suffered in an
accident that occurred on June 11, 1953 in the City of Manila while
working as a conductor of a bus belonging to the latter under a
boundary system. Doce interposed the defense that there was no
employer-employee relationship between him and Jadao and hence the
Commission has no jurisdiction to act on the claim.
The claim was assigned to a referee for hearing who, after receiving the
evidence, rendered decision holding that a conductor who works under
the boundary system in the operation of the bus of another is
considered an employee of the latter within the meaning of the law and
as such Doce is responsible to pay to Jadao the compensation prescribed
in the Workmens Compensation Act. Consequently, the referee ordered
Doce to pay Jadao a compensation of P757.43, plus the cost of the
medical and surgical expenses incurred by the latter, and to pay the
Commission the amount of P8.00 as fees in accordance with the law.
This decision was affirmed by the Commission on July 2, 1955. Doce
interposed the present petition for review.
The facts as found by the Commission are: Dado Jadao was a conductor
of Bus No. 9 of the B-Twelve Liner owned and operated by Isabelo Doce
who was paid under the boundary system. His average daily earnings as
conductor was P4.00, working five days a week. On June 11, 1953, while
acting as such conductor, Jadao was pinned by two buses on Quezon
Boulevard, Manila, suffering injuries on the right leg, head and left ear.
He was treated in the North General Hospital and in the National

Orthopedic Hospital, and as a result he suffered temporary total

disability from June 11, 1953 to May 10, 1954 and a partial loss of the
use of his right leg.
It was also proven that under the boundary system adopted by
petitioner and respondent, the driver and conductor of the bus gave to
the owner a fixed amount out of the daily earnings derived from its
operation. In this case, the conductor and the driver used to give to
respondent P15.00 daily. The owner supplied the gasoline at the
beginning but its cost is later reimbursed out of the earnings of the day.
After deducting the cost of the gasoline and the rental of P15.00, the
remainder is divided between the conductor and the driver.
The issue to be determined is whether the employer-employee
relationship existed between the owner of the bus and the conductor
considering that the latter worked under a boundary system as
explained above and is not paid directly by the former.
This case falls squarely within our ruling in National Labor Union v.
Dinglasan, 52 Off. Gaz., 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 petitioners 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 days 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 employeremployee 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 employer-employee, 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."
The contention of petitioner that the relation that existed between him
and the respondent is only one of lessor and lessee cannot therefore be
sustained.
Wherefore, the decision appealed from is affirmed, with costs against
petitioner.
Paras, C.J., Bengzon, Padilla, Labrador, Concepcion, Reyes, J.B.L. and
Endencia, JJ., concur.

27.ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE

BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP
CERVANTES and ELEUTERIO BARBIN, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN
FISHING ENTERPRISES and/or ARSENIO DE GUZMAN,
respondents. G.R. No. L-72654-61 January 22, 1990
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.
FERNAN, C.J.:

The issue to be resolved in the instant case is whether or not the

fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are
employees of its owner-operator, De Guzman Fishing Enterprises, and if
so, whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of
7/B Sandyman II, one of several fishing vessels owned and operated by
private respondent De Guzman Fishing Enterprises which is primarily
engaged in the fishing business with port and office at Camaligan,
Camarines Sur. Petitioners rendered service aboard said fishing vessel in
various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot;
Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime
Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip
Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular
business of "trawl" fishing, petitioners were paid on percentage
commission basis in cash by one Mrs. Pilar de Guzman, cashier of
private respondent. As agreed upon, they received thirteen percent
(13%) of the proceeds of the sale of the fish-catch if the total proceeds
exceeded the cost of crude oil consumed during the fishing trip,
otherwise, they received ten percent (10%) of the total proceeds of the
sale. The patron/pilot, chief engineer and master fisherman received a
minimum income of P350.00 per week while the assistant engineer,
second fisherman, and fisherman-winchman received a minimum
income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were
told by Jorge de Guzman, president of private respondent, to proceed to
the police station at Camaligan, Camarines Sur, for investigation on the
report that they sold some of their fish-catch at midsea to the prejudice
of private respondent. Petitioners denied the charge claiming that the
same was a countermove to their having formed a labor union and
becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3,
1983.
During the investigation, no witnesses were presented to prove the
charge against petitioners, and no criminal charges were formally filed

against them. Notwithstanding, private respondent refused to allow

petitioners to return to the fishing vessel to resume their work on the
same day, September 11, 1983.

fishing venture" relationship existed between private respondent and

petitioners.
Hence, the instant petition.

On September 22, 1983, petitioners individually filed their complaints

for illegal dismissal and non-payment of 13th month pay, emergency
cost of living allowance and service incentive pay, with the then Ministry
(now Department) of Labor and Employment, Regional Arbitration
Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to
1456-83. 2 They uniformly contended that they were arbitrarily
dismissed without being given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations manager,
Conrado S. de Guzman, submitted its position paper denying the
employer-employee relationship between private respondent and
petitioners on the theory that private respondent and petitioners were
engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor
Arbiter scheduled the case for joint hearing furnishing the parties with
notice and summons. On December 27, 1983, after two (2) previously
scheduled joint hearings were postponed due to the absence of private
respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain
of the 7/B Sandyman II, testified, among others, on the manner the
fishing operations were conducted, mode of payment of compensation
for services rendered by the fishermen-crew members, and the
circumstances leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor
Arbiter Asisclo S. Coralde rendered a joint decision 5 dismissing all the
complaints of petitioners on a finding that a "joint fishing venture" and
not one of employer-employee relationship existed between private
respondent and petitioners.
From the adverse decision against them, petitioners appealed to the
National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission promulgated
its resolution 6 affirming the decision of the labor arbiter that a "joint

Petitioners assail the ruling of the public respondent NLRC that what
exists between private respondent and petitioners is a joint venture
arrangement and not an employer-employee relationship. To stress that
there is an employer-employee relationship between them and private
respondent, petitioners invite attention to the following: that they were
directly hired by private respondent through its general manager,
Arsenio de Guzman, and its operations manager, Conrado de Guzman;
that, except for Laurente Bautu, they had been employed by private
respondent from 8 to 15 years in various capacities; that private
respondent, through its operations manager, supervised and controlled
the conduct of their fishing operations as to the fixing of the schedule of
the fishing trips, the direction of the fishing vessel, the volume or
number of tubes of the fish-catch the time to return to the fishing port,
which were communicated to the patron/pilot by radio (single side
band); that they were not allowed to join other outfits even the other
vessels owned by private respondent without the permission of the
operations manager; that they were compensated on percentage
commission basis of the gross sales of the fish-catch which were
delivered to them in cash by private respondent's cashier, Mrs. Pilar de
Guzman; and that they have to follow company policies, rules and
regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture"
exists between private respondent and petitioners, petitioners claim that
public respondent exceeded its jurisdiction and/or abused its discretion
when it added facts not contained in the records when it stated that the
pilot-crew members do not receive compensation from the boat-owners
except their share in the catch produced by their own efforts; that public
respondent ignored the evidence of petitioners that private respondent
controlled the fishing operations; that public respondent did not take
into account established jurisprudence that the relationship between the
fishing boat operators and their crew is one of direct employer and
employee.

Aside from seeking the dismissal of the petition on the ground that the
decision of the labor arbiter is now final and executory for failure of
petitioners to file their appeal with the NLRC within 10 calendar days
from receipt of said decision pursuant to the doctrine laid down in Vir-Jen
Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the
Solicitor General claims that the ruling of public respondent that a "joint
fishing venture" exists between private respondent and petitioners rests
on the resolution of the Social Security System (SSS) in a 1968 case,
Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De
Guzman Fishing Enterprises, private respondent herein, from compulsory
coverage of the SSS on the ground that there is no employer-employee
relations between the boat-owner and the fishermen-crew members
following the doctrine laid down inPajarillo vs. SSS, 17 SCRA 1014
(1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS,
supra, that there is no employer-employee relationship between the
boat-owner and the pilot and crew members when the boat-owner
supplies the boat and equipment while the pilot and crew members
contribute the corresponding labor and the parties get specific shares in
the catch for their respective contribution to the venture, the Solicitor
General pointed out that the boat-owners in the Pajarillo case, as in the
case at bar, did not control the conduct of the fishing operations and the
pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide
the instant case on the merits rather than to dismiss it on a mere
technicality. In so doing, we exercise the prerogative accorded to this
Court enunciated in Firestone Filipinas Employees Association, et al. vs.
Firestone Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340
(1974), thus "the well-settled doctrine is that in labor cases before this
Tribunal, no undue sympathy is to be accorded to any claim of a
procedural misstep, the idea being that its power be exercised according
to justice and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a
fishing vessel regularly engaged in trawl fishing, as in the case of
petitioners herein, who spend one (1) whole week or more 7 in the open
sea performing their job to earn a living to support their families,

convince Us to adopt a more liberal attitude in applying to petitioners

the 10-calendar day rule in the filing of appeals with the NLRC from the
decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's
decision of March 31, 1984 only on July 3,1984 by their non-lawyer
representative during the arbitration proceedings, Jose Dialogo who
received the decision eight (8) days earlier, or on June 25, 1984. As
adverted to earlier, the circumstances peculiar to petitioners' occupation
as fishermen-crew members, who during the pendency of the case
understandably have to earn a living by seeking employment elsewhere,
impress upon Us that in the ordinary course of events, the information
as to the adverse decision against them would not reach them within
such time frame as would allow them to faithfully abide by the 10calendar day appeal period. This peculiar circumstance and the fact that
their representative is a non-lawyer provide equitable justification to
conclude that there is substantial compliance with the ten-calendar day
rule of filing of appeals with the NLRC when petitioners filed on July 10,
1984, or seven (7) days after receipt of the decision, their appeal with
the NLRC through registered mail.
We have consistently ruled that in determining the existence of an
employer-employee relationship, the elements that are generally
considered are the following (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee with respect to the means
and methods by which the work is to be accomplished. 8 The
employment relation arises from contract of hire, express or implied. 9
In the absence of hiring, no actual employer-employee relation could
exist.
From the four (4) elements mentioned, We have generally relied on the
so-called right-of-control test 10 where the person for whom the services
are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end. The test
calls merely for the existence of the right to control the manner of doing
the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as
authority for the ruling that a "joint fishing venture" existed between
private respondent and petitioners is not applicable in the instant case.
There is neither light of control nor actual exercise of such right on the
part of the boat-owners in the Pajarillo case, where the Court found that
the pilots therein are not under the order of the boat-owners as regards
their employment; that they go out to sea not upon directions of the
boat-owners, but upon their own volition as to when, how long and
where to go fishing; that the boat-owners do not in any way control the
crew-members with whom the former have no relationship whatsoever;
that they simply join every trip for which the pilots allow them, without
any reference to the owners of the vessel; and that they only share in
their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not
exist in the instant case. The conduct of the fishing operations was
undisputably shown by the testimony of Alipio Ruga, the patron/pilot of
7/B Sandyman II, to be under the control and supervision of private
respondent's operations manager. Matters dealing on the fixing of the
schedule of the fishing trip and the time to return to the fishing port
were shown to be the prerogative of private respondent. 12 While
performing the fishing operations, petitioners received instructions via a
single-side band radio from private respondent's operations manager
who called the patron/pilot in the morning. They are told to report their
activities, their position, and the number of tubes of fish-catch in one
day. 13 Clearly thus, the conduct of the fishing operations was
monitored by private respondent thru the patron/pilot of 7/B Sandyman
II who is responsible for disseminating the instructions to the crew
members.
The conclusion of public respondent that there had been no change in
the situation of the parties since 1968 when De Guzman Fishing
Enterprises, private respondent herein, obtained a favorable judgment in
Case No. 708 exempting it from compulsory coverage of the SSS law is
not supported by evidence on record. It was erroneous for public
respondent to apply the factual situation of the parties in the 1968 case
to the instant case in the light of the changes in the conditions of
employment agreed upon by the private respondent and petitioners as
discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo
case where the crew members are under no obligation to remain in the
outfit for any definite period as one can be the crew member of an outfit
for one day and be the member of the crew of another vessel the next
day, the herein petitioners, on the other hand, were directly hired by
private respondent, through its general manager, Arsenio de Guzman,
and its operations manager, Conrado de Guzman and have been under
the employ of private respondent for a period of 8-15 years in various
capacities, except for Laurente Bautu who was hired on August 3, 1983
as assistant engineer. Petitioner Alipio Ruga was hired on September 29,
1974 as patron/captain of the fishing vessel; Eladio Calderon started as
a mechanic on April 16, 1968 until he was promoted as chief engineer of
the fishing vessel; Jose Parma was employed on September 29, 1974 as
assistant engineer; Jaime Barbin started as a pilot of the motor boat until
he was transferred as a master fisherman to the fishing vessel 7/B
Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972
while Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of
employment, nevertheless the hiring of petitioners to perform work
which is necessary or desirable in the usual business or trade of private
respondent for a period of 8-15 years since 1968 qualify them as regular
employees within the meaning of Article 281 of the Labor Code as they
were indeed engaged to perform activities usually necessary or
desirable in the usual fishing business or occupation of private
respondent. 14
Aside from performing activities usually necessary and desirable in the
business of private respondent, it must be noted that petitioners
received compensation on a percentage commission based on the gross
sale of the fish-catch i.e. 13% of the proceeds of the sale if the total
proceeds exceeded the cost of the crude oil consumed during the fishing
trip, otherwise only 10% of the proceeds of the sale. Such compensation
falls within the scope and meaning of the term "wage" as defined under
Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece or

commission basis, or other method of calculating the same, which is

payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and included the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. . . .
The claim of private respondent, which was given credence by public
respondent, that petitioners get paid in the form of share in the fishcatch which the patron/pilot as head of the team distributes to his crew
members in accordance with their own understanding 15 is not
supported by recorded evidence. Except that such claim appears as an
allegation in private respondent's position paper, there is nothing in the
records showing such a sharing scheme as preferred by private
respondent.
Furthermore, the fact that on mere suspicion based on the reports that
petitioners allegedly sold their fish-catch at midsea without the
knowledge and consent of private respondent, petitioners were
unjustifiably not allowed to board the fishing vessel on September 11,
1983 to resume their activities without giving them the opportunity to
air their side on the accusation against them unmistakably reveals the
disciplinary power exercised by private respondent over them and the
corresponding sanction imposed in case of violation of any of its rules
and regulations. The virtual dismissal of petitioners from their
employment was characterized by undue haste when less extreme
measures consistent with the requirements of due process should have
been first exhausted. In that sense, the dismissal of petitioners was
tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at
midsea the act of private respondent virtually resulting in their dismissal
evidently contradicts private respondent's theory of "joint fishing
venture" between the parties herein. A joint venture, including
partnership, presupposes generally a parity of standingbetween the joint
co-venturers or partners, in which each party has an equal proprietary
interest in the capital or property contributed 16 and where each party
exercises equal lights in the conduct of the business. 17 It would be
inconsistent with the principle of parity of standing between the joint co-

venturers as regards the conduct of business, if private respondent

would outrightly exclude petitioners from the conduct of the business
without first resorting to other measures consistent with the nature of a
joint venture undertaking, Instead of arbitrary unilateral action, private
respondent should have discussed with an open mind the advantages
and disadvantages of petitioners' action with its joint co-venturers if
indeed there is a "joint fishing venture" between the parties. But this
was not done in the instant case. Petitioners were arbitrarily dismissed
notwithstanding that no criminal complaints were filed against them.
The lame excuse of private respondent that the non-filing of the criminal
complaints against petitioners was for humanitarian reasons will not
help its cause either.
We have examined the jurisprudence on the matter and find the same to
be supportive of petitioners' stand. InNegre vs. WCC 135 SCRA 653
(1985), we held that fishermen crew members who were recruited by
one master fisherman locally known as "maestro" in charge of recruiting
others to complete the crew members are considered employees, not
industrial partners, of the boat-owners. In an earlier case of Abong vs.
WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong,
owner of the fishing boat, claimed that he was not the employer of the
fishermen crew members because of an alleged partnership agreement
between him, as financier, and Simplicio Panganiban, as his team leader
in charge of recruiting said fishermen to work for him, we affirmed the
finding of the WCC that there existed an employer-employee relationship
between the boat-owner and the fishermen crew members not only
because they worked for and in the interest of the business of the boatowner but also because they were subject to the control, supervision
and dismissal of the boat-owner, thru its agent, Simplicio Panganiban,
the alleged "partner" of Dr. Abong; that while these fishermen crew
members were paid in kind, or by "pakiao basis" still that fact did not
alter the character of their relationship with Dr. Abong as employees of
the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of
Industrial Relations, 112 SCRA 159 (1982), we held that the employeremployee relationship between the crew members and the owners of
the fishing vessels engaged in deep sea fishing is merely suspended
during the time the vessels are drydocked or undergoing repairs or

being loaded with the necessary provisions for the next fishing trip. The
said ruling is premised on the principle that all these activities i.e.,
drydock, repairs, loading of necessary provisions, form part of the
regular operation of the company fishing business.

Appeal by certiorari, taken by the Visayan Stevedoring Transportation

Co. hereinafter referred to as the Company and Rafael Xaudaro
from an order of the Court of Industrial Relations the dispositive part of
which reads:

WHEREFORE, in view of the foregoing, the petition is GRANTED. The

questioned resolution of the National Labor Relations Commission dated
May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is
ordered to reinstate petitioners to their former positions or any
equivalent positions with 3-year backwages and other monetary benefits
under the law. No pronouncement as to costs.

The Court, finding respondents guilty of unfair labor practice as charged,

directs them to cease and desist from such unfair labor practice and to
reinstate the complainants, with back wages from the date they were
laid off until reinstated.

SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.

28.VISAYAN STEVEDORE TRANSPORTATION COMPANY

(VISTRANCO) and RAFAEL XAUDARO, petitioners, vs.COURT
OF INDUSTRIAL RELATIONS, UNITED WORKERS' & FARMERS'
ASSOCIATION (UWFA) VENANCIO DANO-OG, BUENAVENTURA
AGARCIO and 137 others, respondents. G.R. No. L-21696
February 25, 1967

Pelaez, Jalandoni & Jamir for petitioners.

Luis B. Presbiterio for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
CONCEPCION, C.J.:

The Company is engaged in the loading and unloading of vessels, with a

branch office in Hinigaran, Negros Occidental, under the management of
said Rafael Xaudaro. Its workers are supplied by the United Workers and
Farmers Association, a labor organization hereinafter referred to as
UWFA whose men (affiliated to various labor unions) have regularly
worked as laborers of the Company during every milling season since
immediately after World War II up to the milling season immediately
preceding November 11, 1955, when the Company refused to engage
the services of Venancio Dano-og, Buenaventura, Agarcio and 137 other
persons named in the complaint filed in case No. 62-ULP-Cebu of the
Court of Industrial Relations and hereinafter referred to as the
Complainants owing, they claim, to their union activities. At the
behest of the UWFA and the Complainants, a complaint for unfair labor
practice was, accordingly, filed against the Company and Xaudaro with
the Court of Industrial Relations hereinafter referred to as the CIR in
which it was docketed as Case No. 62-ULP-Cebu. In due course, its
Presiding Judge issued the order appealed from, which was affirmed by
the CIR sitting en banc. Hence this petition for review by certiorari.
The issues raised in this appeal, are (1) whether there is employeremployee relationship between the Company and the Complainants; (2)
whether the Company has been guilty of unfair labor practice; and (3)
whether the order of reinstatement of Complainants, with backpay, is a
reversible error.1wph1.t
With respect to the first question, the Company maintains that it had
never had an employer-employee relationship with the Complainants,
the latter's services having allegedly been engaged by the UWFA not by
the Company, and that, in any event, whatever contractual relation

there may have been between the Company and the Complainants had
ceased at the end of each milling season, so that the Company can not
be guilty of unfair labor practice in refusing to renew said relation at the
beginning of the milling season in November, 1955.
This pretense is untenable. Although Complainants, through the labor
union to which they belong, form part of UWFA, there was no
independent contract between the latter, as an organization, and the
Company. After the first milling season subsequently to the liberation of
the Philippines, Complainants merely reported for work, at the beginning
of each succeeding milling season, and their services were invariably
availed of by the Company, although an officer of the UWFA or union
concerned determined the laborers who would work at a given time,
following a rotation system arranged therefor.
In the performance of their duties, Complainants worked, however,
under the direction and control of the officers of the Company, whose
paymaster, or disbursing officer paid the corresponding compensation
directly to said Complainants, who, in turn, acknowledged receipt in
payrolls of the Company. We have already held that laborers working
under these conditions are employees of the Company,1 in the same
manner as watchmen or security guards furnished, under similar
circumstances, by watchmen or security agencies,2 inasmuch as the
agencies and/or labor organizations involved therein merely performed
the role of a representative or agent of the employer in the recruitment
of men needed for the operation of the latter's business.3
As regards the alleged termination of employer-employee relationship
between the Company and the Complainants at the conclusion of each

milling season, it is, likewise, settled that the workers concerned are
considered, not separated from the service, but, merely on leave of
absence, without pay, during the off-season, their employer-employee
relationship being merely deemed suspended, not severed, in the
meanwhile.4
Referring to the unfair labor practice charge against the Company, we
find, with the CIR, that said charge is substantially borne out by the
evidence of record, it appearing that the workers not admitted to work
beginning from November, 1955, were precisely those belonging to the
UWFA and the Xaudaro, the Company Branch Manager, had told them
point-blank that severance of their connection with the UWFA was the
remedy, if they wanted to continue working with the Company.
As to the payment of back wages, the law5 explicitly vests in the CIR
discretion to order the reinstatement with back pay of laborers
dismissed due to union activities, and the record does not disclose any
cogent reason to warrant interference with the action taken by said
Court.6
Wherefore, the order and resolution appealed from are hereby affirmed,
with costs against petitioners herein. It is so ordered.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez
and Castro, JJ., concur.