4/27/2017 G.R. No.

81314

TodayisThursday,April27,2017

Custom Search

RepublicofthePhilippines
SUPREMECOURT
Manila

THIRDDIVISION

G.R.No.81314May18,1989

EAGLESECURITYAGENCY,INC.,petitioner,
vs.
NATIONALLABORRELATIONSCOMMISSION,LABORARBITEREDUARDOG.MAGNO,RODOLFO
DEQUINA,AVELINOM.NARVAEZ,JACULOJ.JEROME,ROLANDON.VALENCIA,CLODUALDON.ANGRA,
JOSESAMONTE,RUELA.LAGASTOS,PRISCILOMALDO,JR.,R.C.DELACRUZ,JOSEAJEDA,JOSE
ANASTACIO,LAUROROBERTO,ISMAELSALACATA,ULDARICOCAMU,JESUSCARILLO,andDIORITO
BRAGA,respondents.

G.R.No.81447May18,1989

PHILIPPINETUBERCULOSISSOCIETY,INC.,petitioner,
vs.
NATIONALLABORRELATIONSCOMMISSION,EAGLESECURITYAGENCY,INC.,RODOLFOV.DEQUINA,
AVELINOM.NARVAEZ,JACULOJ.JEROME,ROLANDON.VALENCIA,CLODUALDOM.ANGRA,JOSE
SAMONTE,RUELA.LAGASTOS,PRISCILOMALDO,JR.,R.C.DELACRUZ,JOSEAJEDA,HILARIOV.
LLANES,NAPOLEONSAPOLE,WILLIAMESTOSANEandAMANTESOBRETODO,respondents.

AntonioG.NalapoforEagleSecurityAgency,Inc.

Quiason,Makalintal,Barot&TorresforpetitionerinG.R.No.81447.

WilfredoEspirituTaganasforprivaterespondents.

CORTES,J.:

Thecoreissueinthesetwoconsolidatedcasesistheliabilityoftheprincipalandthecontractorforthepaymentof
theminimumwageandcostoflivingallowanceincreasestosecurityguardsunderWageOrderNos.2,3,5and6.

Theantecedentfactsareundisputed.

In 1980, petitioners Philippine Tuberculosis Society, Inc. (hereinafter referred to as PTSI) and Eagle Security
Agency, Inc. (hereinafter referred to as EAGLE) entered into a "Contract for Security Services" wherein the latter
agreed to provide security services in the formers premises. The contract covered the period from November 2,
1979 to July 31, 1985. Pursuant to this agreement, private respondents were assigned by EAGLE to PTSI as
securityguards.

Subsequently, on November 5, 1985, a complaint was filed by private respondents Rodolfo Dequina, Avelino
Narvaez, Jaculo Jerome, Rolando Valencia, Clodualdo Angra Jose Samonte, Raul Lagastos, Priscilo Maldo, Jr.,
R.C.delaCruz,JoseAjedaandothersagainstPTSIandEAGLEforunpaidwageandallowanceincreasesunder
WageOrderNos.2,3,5and6"**withinterestplusdamagesandattorney'sfees.

OnSeptember30,1986,whilethecasewasstillpending,ten(10)additionalcomplainants,namely:JoseAnastacio,
Lauro Roberto, Ismael Salacata, Uldarico Camu, Jesus Carrillo, Diorito Braga, Hilario Llanes, Napoleon Sepole,
WilliamEstosaneandAmanteSobretodo,joinedinthesuit.However,thelaborarbiterdroppedthenamesofHilario
Llanes,NapoleonSapole,WilliamEstosaneandAmanteSobretodoascomplainantsonthegroundthatonlythose
whosignedtheverifiedcomplaintandreplyshouldberecognized.[LaborArbiter'sDecision,p.1G.R.No.81447,
Rollo,p.74.]

OnApril6,1987,thelaborarbiterrenderedadecision,thedispositiveportionofwhichreadsasfollows:

http://www.lawphil.net/judjuris/juri1989/may1989/gr_81314_1989.html 1/5
4/27/2017 G.R. No. 81314
INVIEWOFTHEFOREGOING,respondentEagleSecurityAgency,Inc.andPhilippineTuberculosis
Society,Inc.areherebyorderedtopayjointlyandseverallythesixteen(16)complainantsof(sic)their
unpaidwagesandallowancesunderWageOrderNos.2,3,5and6.TheofficeoftheSocioEconomic
Analystisherebyorderedtoexaminetherecordsandpayrollsofthetwo(2)respondentstodetermine
theirliabilities.

Theclaimfordamagesandattorney'sfeesareherebyDISMISSEDforlackofmerit.

SOORDERED.[LaborArbiter'sDecision,pp.G.R.No.81447,Rollo,pp.7980.]

PTSI,EAGLEandthefour(4)securityguardswhosenameswheredroppedfromthecomplaintfiledtheirappealsto
theNationalLaborrelationsCommission(hereinafterreferredtoasNLRC).

The NLRC, on November 27, 1987, rendered its decision granting the appeal as to the four (4) security guards
whosenamesweredroppedanddenyingPTSIandEAGLE'sappeals.Thedispositiveportionofitsdecisionreads
asfollows:

WHEREFORE,thepremisesconsidered,lettheappealeddecisionbe,asitishereby,Modifiedinthat
respondent Eagle Security Agency, Inc. and yhe Philippine Tuberculosis Society, In c. are hereby
ordered to pay jointly and severally the twenty (20) complainants of (sic) their unpaid wages and
allowancesunderWageOrderNos.2,3,5and6.Inallotherrespects,thedecisionisaffirmed.

SOORDERED.[NLRCDecision,p.8G.R.No.81447,Rollo,p.27.]

BothPTSIandEAGLEfiledtheirmotionsforreconsideration.InaresolutiondatedDecember29,1987,theNLRC
deniedthesemotionsforlackofmerit.

PTSI and EAGLE filed separate petitions for certiorari with this Court. PTSI's petition was docketed as G.R. No.
81447whilethatofEAGLE,G.R.No.81314.

OnmotionofPTSI,thecourt,onapril6,1988,resolvedtoconsolidatethetwo(2)petitions.Thereafter,onMay25,
1988,theCourt,alsouponmotionofPTSI,resolvedtoissueatemporaryrestrainingorderenjoiningtheNLRCfrom
enforcingand/orcarryingoutitsdecisiondatedNovember27,1987andresolutionofDecember29,1987.

1PetitionersPTSIandEAGLE,inthisspecialcivilactionofcertiorari,impugnthedecisionoftheNLRCashaving
beenissuedwithgraveabuseofdiscretionamountingtolackorexcessofjurisdiction.Petitionersassailthedecision
oftheNLRCfindingthemjointlyandseverallyliabletothesecurityguardsforpaymentoftheminimumwageand
costoflivingallowanceincreasesunderthewageorders.BothPTSIandEAGLEpointtotheotherastheonewho
shouldbesolelyliableforpayingtheincreases.

PetitionerPTSIallegesthatpaymentofthewageandallowanceincreasesunderWageOrderNos.2,3,5and6
shouldbeborneexclusivelybyEAGLE,pursuanttothefollowingprovisioninthe"ContractforSecurityServices":

3AGENCYherebybindsitselftopayitsemployeesinaccordancewiththeprovisionoftheNewLabor
Code, as amended, Eight Hour Labor Law, the Minimum Wage Law, and the other laws, and/or
decrees governing security agency. AGENCY shall be solely responsible for the payment of all
indemnitiestoitsemployeeswhichmayariseunderPDNo.442,asamended,andshallcomplywith
theprovisionsofallotherPhilippineLawsrelativetoitsemployees....[ArticleVIIsec.3oftheContract
forSecurityServicesG.R.No.81447,Rollo,p.34Emphasissupplied].

Petitioner EAGLE, on the other hand, invokes the following provision common to Wage Order Nos. 3, 5 and 6 to
supportitstheorythatitisPTSIthatshouldbeheldliablefortheincreases:

In case of contracts for construction projects and for security, janitorial and similar services, the
increase in the minimum wage and allowance rates of the workers shall be borne by the principal or
clientoftheconstruction/servicecontractorandthecontractshallbedeemedamendedaccordingly...

TheCourtfindsthattheNLRCactedcorrectlyinorderingthetwopetitionerstojointlyandseverallypaythewage
andallowanceincreasestothesecurityguards.

Petitioners'solidaryliabilityfortheamountsduethesecurityguardsfindssupportinArticles106,..107and109of
theLaborCodewhichstatethat:

ART.106.Contractororsubcontractor.Wheneveranemployerentersintoacontractwithanother
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor,ifany,shallbepaidinaccordancewiththeprovisionsofthisCode.

Intheeventthatthecontractororsubcontractorfailstopaythewageshisemployeesinaccordance
http://www.lawphil.net/judjuris/juri1989/may1989/gr_81314_1989.html 2/5
4/27/2017 G.R. No. 81314
withthisCode,theemployershallbejointlyandseverallyliablewithhiscontractororsubcontractorto
suchemployeestotheextentthatheisliabletoemployeesdirectlyemployedbyhim.

xxx

ART.107.Indirectemployer.TheprovisionsoftheimmediatelyprecedingArticleshalllikewiseapply
toanyperson,partnership,associationorcorporationwhich,notbeinganemployer,contractswithan
independentcontractorfortheperformanceofanywork,task,joborproject.

xxx

ART.109.Solidaryliability. The provisions of existing laws to the contrary not withstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of this Code. For purposes of determining the extent of the civil liability under this Chapter,
theyshallbeconsideredasdirectemployers.

This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure
complianceoftheprovisionsthereinincludingthestatutoryminimumwage[Article99,LaborCode].Thecontractor
is made Liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect
employerofthecontractor'semployeesforpurposesofpayingtheemployeestheirwagesshouldthecontractorbe
unabletopaythem.Thisjointandseveralliabilityfacilitates,ifnotguarantees,paymentoftheworkers'performance
of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution
[SeeArticleIISec.18andArticleXIIISec.3].

Inthecaseatbar,itisbeyonddisputethatthesecurityguardsaretheemployeesofEAGLE[SeeArticleVIISec.2
oftheContractforSecurityServicesG.R.No.81447,Rollo,p.34].Thattheywereassignedtoguardthepremises
of PTSI pursuant to the latter's contract with EAGLE and that neither of these two entities paid their wage and
allowanceincreasesunderthesubjectwageordersarealsoadmitted[SeeLaborArbiter'sDecision,p.2G.R.No.
81447,Rollo,p.75].Thus,theapplicationoftheaforecitedprovisionsoftheLaborCodeonjointandseveralliability
oftheprincipalandcontractorisappropriate[SeeDelRosario&SonsLoggingEnterprises,Inc.v.NLRC,G.R.No.
64204,May31,1985,136SCRA669].

ThesolidaryliabilityofPTSIandEAGLE,however,doesnotprecludetherightofreimbursementfromhiscodebtor
bytheonewhopaid[SeeArticle1217,CivilCode].Itiswithrespecttothisrightofreimbursementthatpetitioners
canfindsupportintheaforecitedcontractualstipulationandWageOrderprovision.

TheWageOrdersareexplicitthatpaymentoftheincreasesare"tobeborne"bytheprincipalorclient."Tobeborne
however,doesnotmeanthattheprincipal,PTSIinthiscase,woulddirectlypaythesecurityguardsthewageand
allowance increases because there is no privity of contract between them. The security guards' contractual
relationshipiswiththeirimmediateemployer,EAGLE.Eagleanemployer,EAGLEistasked,amongothers,withthe
paymentoftheirwages[SeeArticleVIISec.3oftheContractforSecurityServices,supraandBautistav.Inciong,
G.R.No.52824,March16,1988,158SCRA665].

Ontheotherhand,thereexistedacontractualagreementbetweenPTSIandEAGLEwhereintheformeravailedof
the security services provided by the latter. In return, the security agency collects from its client payment for its
securityservices.Thispaymentcoversthewagesforthesecurityguardsandalsoexpensesfortheirsupervision
and training, the guards' bonds, firearms with ammunitions, uniforms and other equipments, accessories, tools,
materialsandsuppliesnecessaryforthemaintenanceofasecurityforce.

Premisesconsidered,thesecurityguards'immediaterecourseforthepaymentoftheincreasesiswiththeirdirect
employer,EAGLE.However,inorderforthesecurityagencytocomplywiththenewwageandallowanceratesit
hastopaythesecurityguards,theWageOrdersmadespecificProvisiontoamendexistingcontractsforsecurity
services by allowing the adjustment of the consideration paid by the principal to the security agency concerned.
What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the
servicecontractor'spaymentoftheincreasesmandated.Intheend,therefore,ultimateliabilityforthepaymentof
theincreasesrestswiththeprincipal.

In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the
LaborCode,incasetheagencyfailstopaythemtheamountsclaimed,PTSIshouldbeheldsolidarilyliablewith
EAGLE [Articles 106,107 and 109]. Should EAGLE pay, it can claim an adjustment from PTSI for an increase in
considerationtocovertheincreasespayabletothesecurityguards.

However, in the instant case, the contract for security services had already expired without being amended
consonantwiththeWageOrders.ItisalsoapparentfromareadingofarecordthatEAGLEdoesnotnowdemand
from PTSI any adjustment in the contract price and its main concern is freeing itself from liability. Given these
peculiarcircumstances,ifPTSIpaysthesecurityguards,itcannotclaimreimbursementfromEAGLE.Butincaseit
isEAGLEthatpaysthem,thelattercanclaimreimbursementfromPTSIinlieuofanadjustment,consideringthat

http://www.lawphil.net/judjuris/juri1989/may1989/gr_81314_1989.html 3/5
4/27/2017 G.R. No. 81314
thecontract,hadexpiredandhadnotbeenrenewed.

2. PTSI also alleges that it is exempt from payment under the subject Wage Orders because it is a public sector
employer while the Wage Orders cover only employers and employees in the private sector [G.R. No. 81447,
Petition,p.9Rollo,p.10].Thisisunmeritorious.Thedefinitionofapublicsectoremployer****relieduponbyPTSI
isrelevantonlyforpurposesofcoverageundertheEmployees'Compensation.Moreover,theLaborCodeprovides
thatasusedinBookThree,TitleIIonWages,thetermemployerincludes"theGovernmentandallitsbranches,
subdivisionsandinstrumentalities,allgovernmentownedorcontrolledcorporationsandinstitutions...[Article97
(b),LaborCode.]

3. It is further contended by PTSI that to uphold the ruling of the NLRC would be violative of the Constitutional
prohibitionagainstimpairmentoftheobligationofcontracts[ArticleIIIsec.10ofthe1987Constitution].Timeand
again,thisCourthasrejectedthislineofreasoninginsustainingthevalidityandconstitutionalityoflaborandsocial
legislationsliketheBlueSundayLaw[AsiaBedFactoryv.NationalBedandKapokIndustriesWorkers'union,etal.,
100 Phil. 837 (1957)], compulsory coverage of private sector employees in the Social Security System [Phil.
BloomingMillsCo.,Inc.v.SocialSecuritySystem,G.R.No.L21223,August31,1966,17SCRA1077],andthe
abolitionofsharetenancy[Vda.deGenuinov.CourtofAgrarianRelations,G.R.No.L25035,February26,1968,
22SCRA792]enactedpursuanttothepolicepoweroftheState.

TheWageOrdersarenodifferentfromtheaforecitedlaws.Theyarelaborstandardlegislationsenactedtoalleviate
the plight of the workers whose wages barely meet the spiralling costs of their basic needs. The increase in the
minimumwageandthecostoflivingallowancewasorderedpreciselytoensuretheworkers'health,efficiencyand
wellbeing towards achieving the country's goal of ensuring increased productivity and viability of business and
industry[SeeWhereasClauseoftheWageOrders].

4.PetitionerEAGLEwouldmoreoverascribegraveabuseofdiscretiontoboththeLaborArbiterandtheNLRCfor
theinclusionofcertainsecurityguardsinthecomplaint.

Firstly,EAGLEcontendsthatthenamesofRodolfoDequinaandR.C.delaCruzshouldhavebeendroppedfrom
thecomplaintastheyhadalreadyresignedfromitsemployandsignedaquitclaiminfavorofthesecurityagency
[G.R.No.81314,Petition,p.6Rollo,p.7].

However,nograveabuseofdiscretioncanbeascribedtothelaborarbiterfornotdroppingtheirnamesfromthe
complaintitappearingthattheallegedresignationlettersarenotofrecord[LaborArbiter'sDecision,p.6G.R.No.
81314,Rollo,p.18].

Secondly,EAGLEassailstheNLRC'sinclusionofthefour(4)securityguardswhosenamesweredroppedbythe
labor arbiter in the complaint. However, these four (4) security guards are part of the ten (10) additional
complainants denominated as "and others" in the complaint and who were identified in their Manifestation dated
September 30, 1986. Further, they submitted individual computations in their "Reply to Separate Position Papers
Filed by Respondents." Accordingly, the Court finds no grave abuse of discretion committed by the NLRC in
grantingtheirappeal.

WHEREFORE, in view of the foregoing, the petitions in G.R. No. 81314 and G.R. No. 81447 are hereby
DISMISSEDandthedecisionandresolutionoftheNLRCinNLRCNCR11365285datedNovember27,1987and
December29,1987,respectively,areAFFIRMED.ThetemporaryrestrainingorderissuedbytheCourtonJune20,
1988isherebyLIFTEDandSETASIDE.

SOORDERED.

Fernan,C.J.,Gutierrez,Jr.,FelicianoandBidin,JJ.,concur.

Footnotes

**WageOrderNo.2waspassedonJuly6,1983andimmediatelytookeffectWageOrderNo.3
passedonNovember7,1983,tookeffectonNovember1,1983WageOrderNo.5waspassedon
June11,1984andtookeffectonJune16,1984andWageOrderNo.6,passedonOctober26,1984,
tookeffectonNovember1,1984.

***Section4,6and9ofWageOrderNos.3,5and6,respectively.WageOrderNo.2issilentas
regardsaidprovisionbutitsimplementingrulescontainasimilarprovisioninSection4(b),ChapterIV.

****Rule1Sec.3oftheAmendedRulesonEmployees'Compensationprovidesthat(b)An
employershallbelongtoeither:(1)ThepublicsectorcoveredbytheGSIS,comprisingtheNational
Government,includinggovernmentownedorcontrolledcorporations,thePhilippineTuberculosis
Society,thePhilippineNationalRedCrossandthePhilippineVeteransBank...
http://www.lawphil.net/judjuris/juri1989/may1989/gr_81314_1989.html 4/5
4/27/2017 G.R. No. 81314

TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri1989/may1989/gr_81314_1989.html 5/5