G.R. No.

80609 August 23, 1988

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner, 

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents.

Nicanor G. Nuevas for petitioner.

CRUZ, J.:

The only issue presented in the case at bar is the legality of the award of financial assistance to an
employee who had been dismissed for cause as found by the public respondent.

Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was
accused by two complainants of having demanded and received from them the total amount of
P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone
installation. 1 Investigated and heard, she was found guilty as charged and accordingly separated from
the service. 2 She went to the Ministry of Labor and Employment claiming she had been illegally removed.
After consideration of the evidence and arguments of the parties, the company was sustained and the
complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of labor arbiter's decision
declared:

WHEREFORE, the instant complaint is dismissed for lack of merit.

Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally
blameless in the light of the fact that the deal happened outhide the premises of
respondent company and that their act of giving P3,800.00 without any receipt is
tantamount to corruption of public officers, complainant must be given one month pay
for every year of service as financial assistance. 3

Both the petitioner and the private respondent appealed to the National Labor Relations Board,
which upheld the said decision in toto and dismissed the appeals. 4 The private respondent took no
further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is now
before us to question the affirmance of the above- quoted award as having been made with grave abuse
of discretion.

In its challenged resolution of September 22, 1987, the NLRC said:

... Anent the award of separation pay as financial assistance in complainant's favor,
We find the same to be equitable, taking into consideration her long years of service
to the company whereby she had undoubtedly contributed to the success of
respondent. While we do not in any way approve of complainants (private
respondent) mal feasance, for which she is to suffer the penalty of dismissal, it is for
reasons of equity and compassion that we resolve to uphold the award of financial
assistance in her favor. 5

The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is
entitled to reinstatement and backwages as required by the labor laws. However, an employee
dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief
at all because his dismissal is in accordance with law. In the case of the private respondent, she has

1
been awarded financial assistance equivalent to ten months pay corresponding to her 10 year
service in the company despite her removal for cause. She is, therefore, in effect rewarded rather
than punished for her dishonesty, and without any legal authorization or justification. The award is
made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such
award puts a premium on dishonesty and encourages instead of deterring corruption.

For its part, the public respondent claims that the employee is sufficiently punished with her
dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to
help her for the loss of her employment after working faithfully with the company for ten years. In
support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company
of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation of Davao, 7 where the employees were
dismissed for cause but were nevertheless allowed separation pay on grounds of social and
compassionate justice. As the Court put it in the Firestone case:

In view of the foregoing, We rule that Firestone had valid grounds to dispense with
the services of Lariosa and that the NLRC acted with grave abuse of discretion in
ordering his reinstatement. However, considering that Lariosa had worked with the
company for eleven years with no known previous bad record, the ends of social and
compassionate justice would be served if he is paid full separation pay but not
reinstatement without backwages by the NLRC.

In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded
him full separation pay for his 11 years of service with the company. In Soco, the employee was also
legally separated for unauthorized use of a company vehicle and refusal to attend the grievance
proceedings but he was just the same granted one-half month separation pay for every year of his
18-year service.

Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed for
preferring certain dealers in violation of company policy but was allowed separation pay for his 2 years of
service. In Metro Drug Corporation v. NLRC, 9 the employee was validly removed for loss of confidence
because of her failure to account for certain funds but she was awarded separation pay equivalent to one-
half month's salary for every year of her service of 15 years. In Engineering Equipment, Inc. v.
NLRC, 10 the dismissal of the employee was justified because he had instigated labor unrest among the
workers and had serious differences with them, among other grounds, but he was still granted three
months separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, 11 the
employee's 3- year service was held validly terminated for lack of confidence and abandonment of work
but he was nonetheless granted three months separation pay. And in San Miguel Corporation v. Deputy
Minister of Labor and Employment, et al ., 12 full separation pay for 6, 10, and 16 years service,
respectively, was also allowed three employees who had been dismissed after they were found guilty of
misappropriating company funds.

The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not
entitled to separation pay. 13 The cases above cited constitute the exception, based upon considerations
of equity. Equity has been defined as justice outside law, 14 being ethical rather than jural and belonging to
the sphere of morals than of law. 15 It is grounded on the precepts of conscience and not on any sanction
of positive law. 16 Hence, it cannot prevail against the expressed provision of the labor laws allowing
dismissal of employees for cause and without any provision for separation pay.

Strictly speaking, however, it is not correct to say that there is no express justification for the grant of
separation pay to lawfully dismissed employees other than the abstract consideration of equity. The
reason is that our Constitution is replete with positive commands for the promotion of social justice,
and particularly the protection of the rights of the workers. The enhancement of their welfare is one
of the primary concerns of the present charter. In fact, instead of confining itself to the general

2
commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the
new Constitution contains a separate article devoted to the promotion of social justice and human
rights with a separate sub- topic for labor. Article XIII expressly recognizes the vital role of labor,
hand in hand with management, in the advancement of the national economy and the welfare of the
people in general. The categorical mandates in the Constitution for the improvement of the lot of the
workers are more than sufficient basis to justify the award of separation pay in proper cases even if
the dismissal be for cause.

The Court notes, however, that where the exception has been applied, the decisions have not been
consistent as to the justification for the grant of separation pay and the amount or rate of such
award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow
workers in the Engineering Equipment case were both awarded separation pay notnvithstanding that
the first cause was certainly more serious than the second. No less curiously, the employee in the
Soco case was allowed only one-half month pay for every year of his 18 years of service, but in
Filipro the award was two months separation pay for 2 years service. In Firestone, the emplovee
was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee
was granted only one-half month separation pay for every year of her 15year service. It would seem
then that length of service is not necessarily a criterion for the grant of separation pay and neither
apparently is the reason for the dismissal.

The Court feels that distinctions are in order. We note that heretofore the separation pay, when it
was considered warranted, was required regardless of the nature or degree of the ground proved, be
it mere inefficiency or something graver like immorality or dishonesty. The benediction of
compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the
validly dismissed employee whatever the reason for his dismissal. This policy should be re-
examined. It is time we rationalized the exception, to make it fair to both labor and management,
especially to labor.

There should be no question that where it comes to such valid but not iniquitous causes as failure to
comply with work standards, the grant of separation pay to the dismissed employee may be both just
and compassionate, particularly if he has worked for some time with the company. For example, a
subordinate who has irreconcilable policy or personal differences with his employer may be validly
dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who
has to be frequently absent because she has also to take care of her child may also be removed
because of her poor attendance, this being another authorized ground. It is not the employee's fault
if he does not have the necessary aptitude for his work but on the other hand the company cannot
be required to maintain him just the same at the expense of the efficiency of its operations. He too
may be validly replaced. Under these and similar circumstances, however, the award to the
employee of separation pay would be sustainable under the social justice policy even if the
separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the
law must be more discerning. There is no doubt it is compassionate to give separation pay to a
salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such
generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject
to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if
he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the
company premises, the situation is changed completely. This is not only inefficiency but immorality
and the grant of separation pay would be entirely unjustified.

3
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. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even
as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

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. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.

Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter
and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked
with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as
it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during
all of her 10 years of service with the company. If regarded as a justification for moderating the
penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all undesirables.

The Court also rules that the separation pay, if found due under the circumstances of each case,
should be computed at the rate of one month salary for every year of service, assuming the length of
such service is deemed material. This is without prejudice to the application of special agreements
between the employer and the employee stipulating a higher rate of computation and providing for
more benefits to the discharged employee. 17

WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is

AFFIRMED in toto except for the grant of separation pay in the form of financial assistance, which is
hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so
ordered.

4
[G.R. No. 127598. February 22, 2000]

MANILA ELECTRIC COMPANY, petitioner, vs. Hon. Secretary of Labor Leonardo Quisumbing and Meralco
Employees and Workers Association (MEWA), respondents.

RESOLUTION

YNARES_SANTIAGO, J.:

In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:

"WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated
August 19, 1996 and December 28, 1996 are set aside to the extent set forth above. The parties are
directed to execute a Collective Bargaining Agreement incorporating the terms and conditions contained
in the unaffected portions of the Secretary of Labors orders of August 19, 1996 and December 28, 1996,
and the modifications set forth above. The retirement fund issue is remanded to the Secretary of Labor
for reception of evidence and determination of the legal personality of the Meralco retirement fund."[1]

The modifications of the public respondents resolutions include the following:

January 27, 1999 decision Secretarys resolution

Wages -P1,900.00 for 1995-96 P2,200.00

Xmas bonus -modified to one month 2 months

Retirees -remanded to the Secretary granted

5
Loan to coops -denied granted

GHSIP, HMP

and Housing loans -granted up to P60,000.00 granted

Signing bonus -denied granted

Union leave -40 days (typo error) 30 days

High voltage/pole -not apply to those who are members of a team

not exposed to the risk

Collectors -no need for cash bond, no

need to reduce quota and MAPL

CBU -exclude confidential employees include

Union security -maintenance of membership closed shop

Contracting out -no need to consult union consult first

All benefits -existing terms and conditions all terms

6
Retroactivity -Dec 28, 1996-Dec 27, 199(9) from Dec 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity)
filed a motion for intervention and a motion for reconsideration of the said Decision. A separate
intervention was likewise made by the supervisors union (FLAMES[2]) of petitioner corporation alleging
that it has bona fide legal interest in the outcome of the case.[3] The Court required the "proper parties"
to file a comment to the three motions for reconsideration but the Solicitor-General asked that he be
excused from filing the comment because the "petition filed in the instant case was granted" by the
Court.[4] Consequently, petitioner filed its own consolidated comment. An "Appeal Seeking Immediate
Reconsideration" was also filed by the alleged newly elected president of the Union.[5] Other
subsequent pleadings were filed by the parties and intervenors.

The issues raised in the motions for reconsideration had already been passed upon by the Court in the
January 27, 1999 decision. No new arguments were presented for consideration of the Court.
Nonetheless, certain matters will be considered herein, particularly those involving the amount of wages
and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.

Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is
allowed, it would simply pass the cost covering such increase to the consumers through an increase in
the rate of electricity. This is a non sequitur. The Court cannot be threatened with such a misleading
argument. An increase in the prices of electric current needs the approval of the appropriate regulatory
government agency and does not automatically result from a mere increase in the wages of petitioners
employees. Besides, this argument presupposes that petitioner is capable of meeting a wage increase.
The All Asia Capital report upon which the Union relies to support its position regarding the wage issue
can not be an accurate basis and conclusive determinant of the rate of wage increase. Section 45 of Rule
130 Rules of Evidence provides:

"Commercial lists and the like. - Evidence of statements of matters of interest to persons engaged in an
occupation contained in a list, register, periodical, or other published compilation is admissible as
tending to prove the truth of any relevant matter so stated if that compilation is published for use by
persons engaged in that occupation and is generally used and relied upon by them therein."

7
Under the afore-quoted rule, statement of matters contained in a periodical may be admitted only "if
that compilation is published for use by persons engaged in that occupation and is generally used and
relied upon by them therein." As correctly held in our Decision dated January 27, 1999, the cited report
is a mere newspaper account and not even a commercial list. At most, it is but an analysis or opinion
which carries no persuasive weight for purposes of this case as no sufficient figures to support it were
presented. Neither did anybody testify to its accuracy. It cannot be said that businessmen generally rely
on news items such as this in their occupation. Besides, no evidence was presented that the publication
was regularly prepared by a person in touch with the market and that it is generally regarded as
trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible.[6] In
the same manner, newspapers containing stock quotations are not admissible in evidence when the
source of the reports is available.[7] With more reason, mere analyses or projections of such reports
cannot be admitted. In particular, the source of the report in this case can be easily made available
considering that the same is necessary for compliance with certain governmental requirements.

Nonetheless, by petitioners own allegations, its actual total net income for 1996 was P5.1 billion.[8] An
estimate by the All Asia financial analyst stated that petitioners net operating income for the same year
was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without
admitting the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by petitioner
as its projected net operating income. The P5.7 billion which was the Secretarys basis for granting the
P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It would be proper
then to increase this Courts award of P1,900.00 to P2,000.00 for the two years of the CBA award. For
1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00, for
1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for
the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing
figures, the P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than
the highest increase granted to supervisory employees.[9] As mentioned in the January 27, 1999
Decision, the Court does "not seek to enumerate in this decision the factors that should affect wage
determination" because collective bargaining disputes particularly those affecting the national interest
and public service "requires due consideration and proper balancing of the interests of the parties to the
dispute and of those who might be affected by the dispute."[10] The Court takes judicial notice that the
new amounts granted herein are significantly higher than the weighted average salary currently enjoyed
by other rank-and-file employees within the community. It should be noted that the relations between
labor and capital is impressed with public interest which must yield to the common good.[11] Neither
party should act oppressively against the other or impair the interest or convenience of the public.[12]
Besides, matters of salary increases are part of management prerogative.[13]

On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the
renegotiation of the parties 1992-1997 CBA insofar as the last two-year period thereof is concerned.
When the Secretary of Labor assumed jurisdiction and granted the arbitral awards, there was no

8
question that these arbitral awards were to be given retroactive effect. However, the parties dispute the
reckoning period when retroaction shall commence. Petitioner claims that the award should retroact
only from such time that the Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8
case[14] where the Court, citing Union of Filipino Employees v. NLRC,[15] said:

"The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on
June 5, 1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity
should be agreed upon by the parties. But since no agreement to that effect was made, public
respondent did not abuse its discretion in giving the said CBA a prospective effect. The action of the
public respondent is within the ambit of its authority vested by existing law."

On the other hand, the Union argues that the award should retroact to such time granted by the
Secretary, citing the 1993 decision of St Lukes.[16]

"Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of
the previous CBA, contrary to the position of petitioner. Under the circumstances of the case, Article
253-A cannot be properly applied to herein case. As correctly stated by public respondent in his assailed
Order of April 12, 1991 dismissing petitioners Motion for Reconsideration---

Anent the alleged lack of basis for the retroactivity provisions awarded, we would stress that the
provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by and
between the parties, and not arbitral awards . . .

"Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of
arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as
herein involved, public respondent is deemed vested with plenary and discretionary powers to
determine the effectivity thereof."

In the 1997 case of Mindanao Terminal,[17] the Court applied the St. Lukes doctrine and ruled that:

"In St. Lukes Medical Center v. Torres, a deadlock also developed during the CBA negotiations between
management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of
the CBA to the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of

9
Labor gravely abused its discretion in making his award retroactive. In dismissing this contention this
Court held:

"Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of
arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as
herein involved, public respondent is deemed vested with plenary and discretionary powers to
determine the effectivity thereof."

The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years
counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a
three-year period. Labor laws are silent as to when an arbitral award in a labor dispute where the
Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In
general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day
immediately following such date and if agreed thereafter, the effectivity depends on the agreement of
the parties.[18] On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that
granted not by virtue of the mutual agreement of the parties but by intervention of the government.
Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months
from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the
employees or their union. Absent such an agreement as to retroactivity, the award shall retroact to
the first day after the six-month period following the expiration of the last day of the CBA should
there be one. In the absence of a CBA, the Secretarys determination of the date of retroactivity as part
of his discretionary powers over arbitral awards shall control.

It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by
the parties because it requires the interference and imposing power of the State thru the Secretary of
Labor when he assumes jurisdiction. However, the arbitral award can be considered as an
approximation of a collective bargaining agreement which would otherwise have been entered into by
the parties.[19] The terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is
nothing that would prevent its application by analogy to an arbitral award by the Secretary considering
the absence of an applicable law. Under Article 253-A: "(I)f any such agreement is entered into beyond
six months, the parties shal! agree on the duration of retroactivity thereof." In other words, the law
contemplates retroactivity whether the agreement be entered into before or after the said six-month
period. The agreement of the parties need not be categorically stated for their acts may be considered
in determining the duration of retroactivity. In this connection, the Court considers the letter of
petitioners Chairman of the Board and its President addressed to their stockholders, which states that
the CBA "for the rank-and-file employees covering the period December 1, 1995 to November 30, 1997
is still with the Supreme Court,"[20] as indicative of petitioners recognition that the CBA award covers
the said period. Earlier, petitioners negotiating panel transmitted to the Union a copy of its proposed

10
CBA covering the same period inclusive.[21] In addition, petitioner does not dispute the allegation that
in the past CBA arbitral awards, the Secretary granted retroactivity commencing from the period
immediately following the last day of the expired CBA. Thus, by petitioners own actions, the Court sees
no reason to retroact the subject CBA awards to a different date. The period is herein set at two (2)
years from December 1, 1995 to November 30, 1997.

On the allegation concerning the grant of loan to a cooperative, there is no merit in the unions claim
that it is no different from housing loans granted by the employer. The award of loans for housing is
justified because it pertains to a basic necessity of life. It is part of a privilege recognized by the
employer and allowed by law. In contrast, providing seed money for the establishment of the employees
cooperative is a matter in which the employer has no business interest or legal obligation. Courts should
not be utilized as a tool to compel any person to grant loans to another nor to force parties to undertake
an obligation without justification. On the contrary, it is the government that has the obligation to
render financial assistance to cooperatives and the Cooperative Code does not make it an obligation of
the employer or any private individual.[22]

Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid
any confusion, it is herein declared that the union leave is only thirty (30) days as granted by the
Secretary of Labor and affirmed in the Decision of this Court.

The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6)
months or more has been rejected by the Court. Suffice it to say that the employer is allowed to
contract out services for six months or more. However, a line must be drawn between management
prerogatives regarding business operations per se and those which affect the rights of employees, and in
treating the latter, the employer should see to it that its employees are at least properly informed of its
decision or modes of action in order to attain a harmonious labor-management relationship and
enlighten the workers concerning their rights.[23] Hiring of workers is within the employers inherent
freedom to regulate and is a valid exercise of its management prerogative subject only to special laws
and agreements on the matter and the fair standards of justice.[24] The management cannot be denied
the faculty of promoting efficiency and attaining economy by a study of what units are essential for its
operation. It has the ultimate determination of whether services should be performed by its personnel
or contracted to outside agencies. While there should be mutual consultation, eventually deference is to
be paid to what management decides.[25] Contracting out of services is an exercise of business
judgment or management prerogative.[26] Absent proof that management acted in a malicious or
arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.[27] As
mentioned in the January 27, 1999 Decision, the law already sufficiently regulates this matter.[28]
Jurisprudence also provides adequate limitations, such that the employer must be motivated by good
faith and the contracting out should not be resorted to circumvent the law or must not have been the

11
result of malicious or arbitrary actions.[29] These are matters that may be categorically determined only
when an actual suit on the matter arises.

WHEREFORE, the motion for reconsideration is partially granted and the assailed Decision is modified as
follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997; and (2) the
award of wage is increased from the original amount of One Thousand Nine Hundred Pesos (P1,900.00)
to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject to the
monetary advances granted by petitioner to its rank-and-file employees during the pendency of this
case assuming such advances had actually been distributed to them. The assailed Decision is AFFIRMED
in all other respects.

SO ORDERED.

12
G.R. No. L-26298 September 28, 1984

CMS ESTATE, INC., petitioner,

vs.

SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.

Sison Dominguez & Cervantes for petitioner.

The Legal Counsel for respondent SSS.

CUEVAS, J.:

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

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

On January 28, 1957, petitioner entered into a contract of management with one Eufracio D. Rojas for
the operation and exploitation of the forest concession The logging operation actually started on April 1,

13
1957 with four monthly salaried employees. As of September 1, 1957, petitioner had 89 employees and
laborers in the logging operation. On December 26, 1957, petitioner revoked its contract of
management with Mr. Rojas.

On August 1, 1958, petitioner became a member of the Social Security System with respect to its real
estate business. On September 6, 1958, petitioner remitted to the System the sum of P203.13
representing the initial premium on the monthly salaries of the employees in its logging business.
However, on October 9, 1958, petitioner demanded the refund of the said amount, claiming that it is not
yet subject to compulsory coverage with respect to its logging business. The request was denied by
respondent System on the ground that the logging business was a mere expansion of petitioner's
activities and for purposes of the Social Security Act, petitioner should be considered a member of the
System since December 1, 1952 when it commenced its real estate business.

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

After both parties have submitted their respective memoranda, the Commission issued on January 14,
1960, Resolution No. 91, 2 the dispositive portion of which reads as follows:

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

SO ORDERED.

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

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

14
(1) that the contributions required of employers and employees under our Social Security Act of
1954 are not in the nature of excise taxes because the said Act was allegedly enacted by Congress in the
exercise of the police power of the State, not of its taxing power;

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

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

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

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

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

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

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

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

15
(4) that the amendment of petitioner's articles of incorporation, so as to enable it to engage in the
logging business did not alter the juridical personality of petitioner; and

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

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

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

xxx xxx xxx

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

All that is required of appellant is to make monthly contributions to the System for covered employees
in its employ. These contributions, contrary to appellant's contention, are not 'in the nature of taxes on
employment.' Together with the contributions imposed upon employees and the Government, they are
intended for the protection of said employees against the hazards of disability, sickness, old age and
death in line with the constitutional mandate to promote social justice to insure the well-being and
economic security of all the people. 4

16
Because of the broad social purpose of the Social Security Act, all doubts in construing the Act should
favor coverage rather than exemption.

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

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

Petitioner contends that the Commission cannot indiscriminately combine for purposes of coverage two
distinct and separate businesses when one has not yet been in operation for more than two years thus
rendering nugatory the period for more than two years thus rendering nugatory the period of
stabilization fixed by the Act. This contention lacks merit since the amendatory law, RA 2658, which was
approved on June 18, 1960, eliminated the two-year stabilization period as employers now become
automatically covered immediately upon the start of the business.

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

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

17
As We have previously mentioned, it is the intention of the law to cover as many persons as possible so
as to promote the constitutional objective of social justice. It is axiomatic that a later law prevails over a
prior statute and moreover the legislative in tent must be given effect. 6

Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in an
independent business of his own consisting of the operation of the timber concession of the former.
Rojas was appointed as operations manager of the logging consession; 7 he has no power to appoint or
hire employees; as the term implies, he only manages the employees and it is petitioner who furnishes
him the necessary equipment for use in the logging business; and he is not free from the control and
direction of his employer in matter connected with the performance of his work. These factors clearly
indicate that Rojas is not an independent contractor but merely an employee of petitioner; and should
be entitled to the compulsory coverage of the Act.

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

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

SO ORDERED.

18
G.R. No. 128845. June 1, 2000]

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.

QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B.
TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his
capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC.,
respondents.

DECISION

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle
that rests on fundamental notions of justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents.[1] To enable the School to continue carrying out its
educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes
the School to

employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether
a faculty member should be classified as a foreign-hire or a local hire:

19
a.....What is one's domicile?

b.....Where is one's home economy?

c.....To which country does one owe economic allegiance?

d.....Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines?[2]

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his
term: that he will eventually and inevitably return to his home country where he will have to confront
the uncertainty of obtaining suitable employment after a long period in a foreign land.

20
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education.
[3]

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires.[5]The
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires:

The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local hires.
[6]

The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

21
The principle "equal pay for equal work" does not find application in the present case. The international
character of the School requires the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided
to these people in order to entice them to render their services in the Philippines and in the process
remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment which include the employment
contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers
from abroad, under terms and conditions that are consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule.
The 25% differential is reflective of the agreed value of system displacement and contracted status of
the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.

22
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the same class. Verily, there is a
substantial distinction between foreign hires and local hires, the former enjoying only a limited tenure,
having no amenities of their own in the Philippines and have to be given a good compensation package
in order to attract them to join the teaching faculty of the School.[7]

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws
reflect the policy against these evils. The Constitution[8] in the Article on Social Justice and Human
Rights exhorts Congress to "give highest priority to the enactment of measures that protect and
enhance the right of all people to human dignity, reduce social, economic, and political inequalities."
The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the
performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good
faith."

International law, which springs from general principles of law,[9] likewise proscribes discrimination.
General principles of law include principles of equity,[10] i.e., the general principles of fairness and
justice, based on the test of what is reasonable.[11] The Universal Declaration of Human Rights,[12] the
International Covenant on Economic, Social, and Cultural Rights,[13] the International Convention on the
Elimination of All Forms of Racial Discrimination,[14] the Convention against Discrimination in Education,
[15] the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation[16]
- all embody the general principle against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include
as well the manner by which employers treat their employees.

23
The Constitution[18] also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code[19] provides that the State shall "ensure equal work opportunities regardless
of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State,
in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its
eyes to unequal and discriminatory terms and conditions of employment.[20]

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of lesser compensation to a female employee as
against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any
labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:

a.....Remuneration which provides all workers, as a minimum, with:

i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in
particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal
pay for equal work;

x x x.

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of
"equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries.[22] This rule applies to the
School, its "international character" notwithstanding.

24
The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires.[23] The Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these employees perform equal work.
This presumption is borne by logic and human experience. If the employer pays one employee less than
the rest, it is not for that employee to explain why he receives less or why the others receive more. That
would be adding insult to injury. The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-
hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions
and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid
at regular intervals for the rendering of services." In Songco v. National Labor Relations Commission,[24]
we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis
supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and
the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.

25
The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"[25] "to
afford labor full protection."[26] The State, therefore, has the right and duty to regulate the relations
between labor and capital.[27] These relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining agreements included, must yield to the
common good.[28] Should such contracts contain stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of
the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not
deserve the sympathy of this Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the law."[29]
The factors in determining the appropriate collective bargaining unit are (1) the will of the employees
(Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work
and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3)
prior collective bargaining history; and (4) similarity of employment status.[30] The basic test of an
asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining rights.[31]

It does not appear that foreign-hires have indicated their intention to be grouped together with local-
hires for purposes of collective bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under the same working conditions
as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits,
such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their
respective collective bargaining rights.

26
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders
of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-
hires higher salaries than local-hires.

SO ORDERED.

27
DOLE PHILIPPINES, INC., petitioner, vs. PAWIS NG MAKABAYANG OBRERO (PAMAO-NFL), respondent.

DECISION

CORONA, J.:

Before us is a petition for review filed under Rule 45 of the 1997 Rules of Civil Procedure, assailing the
January 9, 2001 resolution of the Court of Appeals which denied petitioners motion for reconsideration
of its September 22, 2000 decision[1] which in turn upheld the Order issued by the voluntary
arbitrator[2] dated 12 October 1998, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant.

Respondent is hereby directed to extend the free meal benefit as provided for in Article XVIII, Section 3
of the collective bargaining agreement to those employees who have actually performed overtime
works even for exactly three (3) hours only.

SO ORDERED. [3]

The core of the present controversy is the interpretation of the provision for free meals under Section 3
of Article XVIII of the 1996-2001 Collective Bargaining Agreement (CBA) between petitioner Dole
Philippines, Inc. and private respondent labor union PAMAO-NFL. Simply put, how many hours of
overtime work must a Dole employee render to be entitled to the free meal under Section 3 of Article
XVIII of the 1996-2001 CBA? Is it when he has rendered (a) exactly, or no less than, three hours of actual
overtime work or (b) more than three hours of actual overtime work?

The antecedents are as follows:

On February 22, 1996, a new five-year Collective Bargaining Agreement for the period starting February
1996 up to February 2001, was executed by petitioner Dole Philippines, Inc., and private respondent
Pawis Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the provisions of the new CBA is the disputed
section on meal allowance under Section 3 of Article XVIII on Bonuses and Allowances, which reads:

28
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN PESOS
(P10.00) to all employees who render at least TWO (2) hours or more of actual overtime work on a
workday, and FREE MEALS, as presently practiced, not exceeding TWENTY FIVE PESOS (P25.00) after
THREE (3) hours of actual overtime work.[4]

Pursuant to the above provision of the CBA, some departments of Dole reverted to the previous practice
of granting free meals after exactly three hours of actual overtime work. However, other departments
continued the practice of granting free meals only after more than three hours of overtime work. Thus,
private respondent filed a complaint before the National Conciliation and Mediation Board alleging that
petitioner Dole refused to comply with the provisions of the 1996-2001 CBA because it granted free
meals only to those who rendered overtime work for more than three hours and not to those who
rendered exactly three hours overtime work.

The parties agreed to submit the dispute to voluntary arbitration. Thereafter, the voluntary arbitrator,
deciding in favor of the respondent, issued an order directing petitioner Dole to extend the free meal
benefit to those employees who actually did overtime work even for exactly three hours only.

Petitioner sought a reconsideration of the above order but the same was denied. Hence, petitioner
elevated the matter to the Court of Appeals by way of a petition for review on certiorari.

On September 22, 2000, the Court of Appeals rendered its decision upholding the assailed order.

Thus, the instant petition.

Petitioner Dole asserts that the phrase after three hours of actual overtime work should be interpreted
to mean after more than three hours of actual overtime work.

On the other hand, private respondent union and the voluntary arbitrator see it as meaning after exactly
three hours of actual overtime work.

29
The meal allowance provision in the 1996-2001 CBA is not new. It was also in the 1985-1988 CBA and
the 1990-1995 CBA. The 1990-1995 CBA provision on meal allowance was amended by the parties in the
1993-1995 CBA Supplement. The clear changes in each CBA provision on meal allowance were in the
amount of the meal allowance and free meals, and the use of the words after and after more than to
qualify the amount of overtime work to be performed by an employee to entitle him to the free meal.

To arrive at a correct interpretation of the disputed provision of the CBA, a review of the pertinent
section of past CBAs is in order.

The CBA covering the period 21 September 1985 to 20 September 1988 provided:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of FOUR (P4.00)
PESOS to all employees who render at least TWO (2) hours or more of actual overtime work on a
workday, and FREE MEALS, as presently practiced, after THREE (3) hours of actual overtime work.[5]

The CBA for 14 January 1990 to 13 January 1995 likewise provided:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of EIGHT PESOS
(P8.00) to all employees who render at least TWO (2) hours or more of actual overtime work on a
workday, and FREE MEALS, as presently practiced, not exceeding SIXTEEN PESOS (P16.00) after THREE
(3) hours of actual overtime work.[6]

The provision above was later amended when the parties renegotiated the economic provisions of the
CBA pursuant to Article 253-A of the Labor Code. Section 3 of Article XVIII of the 14 January 1993 to 13
January 1995 Supplement to the 1990-1995 CBA reads:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL SUBSIDY of NINE PESOS (P9.00) to
all employees who render at least TWO (2) hours or more of actual overtime work on a workday, and
FREE MEALS, as presently practiced, not exceeding TWENTY ONE PESOS (P21.00) after more than THREE
(3) hours of actual overtime work (Section 3, as amended).[7]

30
We note that the phrase more than was neither in the 1985-1988 CBA nor in the original 1990-1995
CBA. It was inserted only in the 1993-1995 CBA Supplement. But said phrase is again absent in Section 3
of Article XVIII of the 1996-2001 CBA, which reverted to the phrase after three (3) hours.

Petitioner asserts that the phrase after three (3) hours of actual overtime work does not mean after
exactly three hours of actual overtime work; it means after more than three hours of actual overtime
work. Petitioner insists that this has been the interpretation and practice of Dole for the past thirteen
years.

Respondent, on the other hand, maintains that after three (3) hours of actual overtime work simply
means after rendering exactly, or no less than, three hours of actual overtime work.

The Court finds logic in private respondents interpretation.

The omission of the phrase more than between after and three hours in the present CBA spells a big
difference.

No amount of legal semantics can convince the Court that after more than means the same as after.

Petitioner asserts that the more than in the 1993-1995 CBA Supplement was mere surplusage because,
regardless of the absence of said phrase in all the past CBAs, it had always been the policy of petitioner
corporation to give the meal allowance only after more than 3 hours of overtime work. However, if this
were true, why was it included only in the 1993-1995 CBA Supplement and the parties had to negotiate
its deletion in the 1996-2001 CBA?

Clearly then, the reversion to the wording of previous CBAs can only mean that the parties intended that
free meals be given to employees after exactly, or no less than, three hours of actual overtime work.

The disputed provision of the CBA is clear and unambiguous. The terms are explicit and the language of
the CBA is not susceptible to any other interpretation. Hence, the literal meaning of free meals after
three (3) hours of overtime work shall prevail, which is simply that an employee shall be entitled to a

31
free meal if he has rendered exactly, or no less than, three hours of overtime work, not after more than
or in excess of three hours overtime work.

Petitioner also invokes the well-entrenched principle of management prerogative that the power to
grant benefits over and beyond the minimum standards of law, or the Labor Code for that matter,
belongs to the employer x x x. According to this principle, even if the law is solicitous of the welfare of
the employees, it must also protect the right of the employer to exercise what clearly are management
prerogatives.[8] Petitioner claims that, being the employer, it has the right to determine whether it will
grant a free meal benefit to its employees and, if so, under what conditions. To see it otherwise would
amount to an impairment of its rights as an employer.

We do not think so.

The exercise of management prerogative is not unlimited. It is subject to the limitations found in law, a
collective bargaining agreement or the general principles of fair play and justice.[9] This situation
constitutes one of the limitations. The CBA is the norm of conduct between petitioner and private
respondent and compliance therewith is mandated by the express policy of the law.[10]

Petitioner Dole cannot assail the voluntary arbitrators interpretation of the CBA for the supposed
impairment of its management prerogatives just because the same interpretation is contrary to its own.

WHEREFORE, petition is hereby denied.

SO ORDERED.

32
G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner,

vs.

ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO
FRUITS CORPORATION and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission
(NLRC), dismissing for lack of merit petitioner's appeal from the decision of the Labor Arbiter in NLRC
Case No. 1791-MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-
file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82) before the
Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against petitioner, for
"Payment of the Thirteenth-Month Pay Differentials." Respondent ALU sought to recover from
petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees, equivalent to
their sick, vacation and maternity leaves, premium for work done on rest days and special holidays, and
pay for regular holidays which petitioner, allegedly in disregard of company practice since 1975,
excluded from the computation of the thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the
computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult

33
question of law. According to petitioner, this mistake was discovered only in 1981 after the
promulgation of the Supreme Court decision in the case of San Miguel Corporation v. Inciong (103 SCRA
139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU.
The dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering
respondent to pay the 1982 — 13th month pay differential to all its rank-and-file workers/employees
herein represented by complainant Union (Rollo, p. 32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision
accordingly dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of
Court. This error notwithstanding and in the interest of justice, this Court resolved to treat the instant
petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391,
Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations Commission,
189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations Commission, 182 SCRA
446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay given by
employers to their employees under P.D.

No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays may be excluded in the computation and payment thereof,
regardless of long-standing company practice.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their
employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the "Rules
and Regulations Implementing Presidential Decree No. 851," thus:

SECTION 2. ...

34
(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within
a calendar year.

(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee
for services rendered but may not include cost of living allowances granted pursuant to Presidential
Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and
monetary benefits which are not considered or integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the Decree on December 16, 1975.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and
Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic
salary," thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not
be included in the computation of the 13th month pay.

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee,
but excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary
benefits which have not been considered as part of the basic salary of the employee as of December 16,
1975. The exclusion of cost-of-living allowances and profit sharing payments shows the intention to strip
"basic salary" of payments which are otherwise considered as "fringe" benefits. This intention is
emphasized in the catch all phrase "all allowances and monetary benefits which are not considered or
integrated as part of the basic salary." Basic salary, therefore does not merely exclude the benefits
expressly mentioned but all payments which may be in the form of "fringe" benefits or allowances (San
Miguel Corporation v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations
Implementing P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and other
renumerations shall be excluded in computing the thirteenth month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily
wage rate in the basic salary. Any compensation or remuneration other than the daily wage rate is
excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for work
done on rest days special holidays, as well as pay for regular holidays, are likewise excluded in
computing the basic salary for the purpose of determining the thirteen month pay.

35
Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions,
orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly including the
subject items in computing the thirteenth month pay. The inclusion of these items is clearly not
sanctioned under P.D. No. 851, the governing law and its implementing rules, which speak only of "basis
salary" as the basis for determining the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary
Rules and Regulations which clarified the definition of "basic salary."

As pointed out in San Miguel Corporation v. Inciong, (supra):

While doubt may have been created by the prior Rules and Regulations and Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic
salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for work
performed on rest days and special holidays, pay for regular holidays and night differentials. As such
they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-
month pay. If they were not so excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in computation of the 13th month-pay. Then the exclusionary provision would prove
to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in
the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January
16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet,
petitioner computed and paid the thirteenth month pay, without excluding the subject items therein

36
until 1981. Petitioner continued its practice in December 1981, after promulgation of the afore-quoted
San Miguel decision on February 24, 1981, when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its
employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for
work done on rest days and special holidays, and pay for regular holidays. The considerable length of
time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its
part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made
pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the
labor of the Philippines, which prohibit the diminution or elimination by the employer of the employees'
existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not
applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor
whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in
the instant case, does not demand the return of what it paid respondent ALU from 1975 until 1981; it
merely wants to "rectify" the error it made over these years by excluding unilaterally from the
thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is not applicable
to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby
DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED accordingly.

37
[G.R. No. 155059. April 29, 2005]

AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, petitioner, vs. AMERICAN WIRE AND
CABLE CO., INC. and THE COURT OF APPEALS, respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a special civil action for certiorari, assailing the Decision[1] of the Special Eighth Division of
the Court of Appeals dated 06 March 2002. Said Decision upheld the Decision[2] and Order[3] of
Voluntary Arbitrator Angel A. Ancheta of the National Conciliation and Mediation Board (NCMB) dated
25 September 2001 and 05 November 2001, respectively, which declared the private respondent herein
not guilty of violating Article 100 of the Labor Code, as amended. Assailed likewise, is the Resolution[4]
of the Court of Appeals dated 12 July 2002, which denied the motion for reconsideration of the
petitioner, for lack of merit.

THE FACTS

The facts of this case are quite simple and not in dispute.

American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables.
There are two unions in this company, the American Wire and Cable Monthly-Rated Employees Union
(Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated
Union).

On 16 February 2001, an original action was filed before the NCMB of the Department of Labor and
Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the private
respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits and
entitlements which they have long enjoyed. These are the following:

a. Service Award;

38
b. 35% premium pay of an employees basic pay for the work rendered during Holy Monday, Holy
Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29;

c. Christmas Party; and

d. Promotional Increase.

A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or
assigned new job classifications. According to petitioner, the new job classifications were in the nature
of a promotion, necessitating the grant of an increase in the salaries of the said 15 members.

On 21 June 2001, a Submission Agreement was filed by the parties before the Office for Voluntary
Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta.

On 04 July 2001, the parties simultaneously filed their respective position papers with the Office of the
Voluntary Arbitrator, NCMB, and DOLE.

On 25 September 2001, a Decision[5] was rendered by Voluntary Arbitrator Angel A. Ancheta in favor of
the private respondent. The dispositive portion of the said Decision is quoted hereunder:

WHEREFORE, with all the foregoing considerations, it is hereby declared that the Company is not guilty
of violating Article 100 of the Labor Code, as amended, or specifically for withdrawing the service award,
Christmas party and 35% premium for work rendered during Holy Week and Christmas season and for
not granting any promotional increase to the alleged fifteen (15) Daily-Rated Union Members in the
absence of a promotion. The Company however, is directed to grant the service award to deserving
employees in amounts and extent at its discretion, in consultation with the Unions on grounds of equity
and fairness.[6]

A motion for reconsideration was filed by both unions[7] where they alleged that the Voluntary
Arbitrator manifestly erred in finding that the company did not violate Article 100 of the Labor Code, as

39
amended, when it unilaterally withdrew the subject benefits, and when no promotional increase was
granted to the affected employees.

On 05 November 2001, an Order[8] was issued by Voluntary Arbitrator Angel A. Ancheta. Part of the
Order is quoted hereunder:

Considering that the issues raised in the instant case were meticulously evaluated and length[i]ly
discussed and explained based on the pleadings and documentary evidenc[e] adduced by the
contending parties, we find no cogent reason to change, modify, or disturb said decision.

WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are hereby, denied for lack
of merit. Our decision dated 25 September 2001 is affirmed en toto.[9]

An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the Daily-Rated Union
before the Court of Appeals[10] and docketed as CA-G.R. SP No. 68182. The petitioner averred that
Voluntary Arbitrator Angel A. Ancheta erred in finding that the company did not violate Article 100 of
the Labor Code, as amended, when the subject benefits were unilaterally withdrawn. Further, they
assert, the Voluntary Arbitrator erred in adopting the companys unaudited Revenues and Profitability
Analysis for the years 1996-2000 in justifying the latters withdrawal of the questioned benefits.[11]

On 06 March 2002, a Decision in favor of herein respondent company was promulgated by the Special
Eighth Division of the Court of Appeals in CA-G.R. SP No. 68182. The decretal portion of the decision
reads:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED, for lack of merit. The Decision of Voluntary Arbitrator Angel A. Ancheta dated September
25, 2001 and his Order dated November 5, 2001 in VA Case No. AAA-10-6-4-2001 are hereby AFFIRMED
and UPHELD.[12]

A motion for reconsideration[13] was filed by the petitioner, contending that the Court of Appeals
misappreciated the facts of the case, and that it committed serious error when it ruled that the
unaudited financial statement bears no importance in the instant case.

40
The Court of Appeals denied the motion in its Resolution dated 12 July 2002[14] because it did not
present any new matter which had not been considered in arriving at the decision. The dispositive
portion of the Resolution states:

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.[15]

Dissatisfied with the court a quos ruling, petitioner instituted the instant special civil action for certiorari,
[16] citing grave abuse of discretion amounting to lack of jurisdiction.

ASSIGNMENT OF ERRORS

The petitioner assigns as errors the following:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT VIOLATE ARTICLE 100 OF THE
LABOR CODE, AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE BENEFITS OF THE MEMBERS OF
PETITIONER UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS INCIDENTAL
BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN FACT SAID BENEFITS/ENTITLEMENTS HAVE
BEEN GIVEN THEM SINCE TIME IMMEMORIAL, AS A MATTER OF LONG ESTABLISHED COMPANY
PRACTICE, WITH THE FURTHER FACT THAT THE SAME NOT BEING DEPENDENT ON PROFITS.

II

THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND SINKER, THE RESPONDENT
COMPANYS SELF SERVING AND UNAUDITED REVENUES AND PROFITABILITY ANALYSIS FOR THE YEARS
1996-2000 WHICH THEY SUBMITTED TO FALSELY JUSTIFY THEIR UNLAWFUL ACT OF UNILATERALLY AND
SUDDENLY WITHDRAWING OR DENYING FROM THE PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS.

41
III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY SERVICE AWARD IS NOT
DEPENDENT ON PROFIT BUT ON SERVICE AND THUS, CANNOT BE UNILATERALLY WITHDRAWN BY
RESPONDENT COMPANY.

ISSUE

Synthesized, the solitary issue that must be addressed by this Court is whether or not private
respondent is guilty of violating Article 100 of the Labor Code, as amended, when the
benefits/entitlements given to the members of petitioner union were withdrawn.

THE COURTS RULING

Before we address the sole issue presented in the instant case, it is best to first discuss a matter which
was raised by the private respondent in its Comment. The private respondent contends that this case
should have been dismissed outright because of petitioners error in the mode of appeal. According to it,
the petitioner should have elevated the instant case to this Court through a petition for review on
certiorari under Rule 45, and not through a special civil action for certiorari under Rule 65, of the 1997
Rules on Civil Procedure.[17]

Assuming arguendo that the mode of appeal taken by the petitioner is improper, there is no question
that the Supreme Court has the discretion to dismiss it if it is defective. However, sound policy dictates
that it is far better to dispose the case on the merits, rather than on technicality.[18]

The Supreme Court may brush aside the procedural barrier and take cognizance of the petition as it
raises an issue of paramount importance. The Court shall resolve the solitary issue on the merits for
future guidance of the bench and bar.[19]

With that out of the way, we shall now resolve whether or not the respondent company is guilty of
violating Article 100 of the Labor Code, as amended.

42
Article 100 of the Labor Code provides:

ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. Nothing in this Book shall
be construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.

The petitioner submits that the withdrawal of the private respondent of the 35% premium pay for
selected days during the Holy Week and Christmas season, the holding of the Christmas Party and its
incidental benefits, and the giving of service awards violated Article 100 of the Labor Code. The grant of
these benefits was a customary practice that can no longer be unilaterally withdrawn by private
respondent without the tacit consent of the petitioner. The benefits in question were given by the
respondent to the petitioner consistently, deliberately, and unconditionally since time immemorial. The
benefits/entitlements were not given to petitioner due to an error in interpretation, or a construction of
a difficult question of law, but simply, the grant has been a practice over a long period of time. As such,
it cannot be withdrawn from the petitioner at respondents whim and caprice, and without the consent
of the former. The benefits given by the respondent cannot be considered as a bonus as they are not
founded on profit. Even assuming that it can be treated as a bonus, the grant of the same, by reason of
its long and regular concession, may be regarded as part of regular compensation.[20]

With respect to the fifteen (15) employees who are members of petitioner union that were given new
job classifications, it asserts that a promotional increase in their salaries was in order. Salary adjustment
is a must due to their promotion.[21]

On respondent companys Revenues and Profitability Analysis for the years 1996-2000, the petitioner
insists that since the former was unaudited, it should not have justified the companys sudden
withdrawal of the benefits/entitlements. The normal and/or legal method for establishing profit and loss
of a company is through a financial statement audited by an independent auditor.[22]

The petitioner cites our ruling in the case of Saballa v. NLRC,[23] where we held that financial
statements audited by independent auditors constitute the normal method of proof of the profit and
loss performance of the company. Our ruling in the case of Bogo-Medellin Sugarcane Planters
Association, Inc., et al. v. NLRC, et al.[24] was likewise invoked. In this case, we held:

43
The Court has previously ruled that financial statements audited by independent external auditors
constitute the normal method of proof of the profit and loss performance of a company.

On the matter of the withdrawal of the service award, the petitioner argues that it is the employees
length of service which is taken as a factor in the grant of this benefit, and not whether the company
acquired profit or not.[25]

In answer to all these, the respondent corporation avers that the grant of all subject benefits has not
ripened into practice that the employees concerned can claim a demandable right over them. The grant
of these benefits was conditional based upon the financial performance of the company and that
conditions/circumstances that existed before have indeed substantially changed thereby justifying the
discontinuance of said grants. The companys financial performance was affected by the recent political
turmoil and instability that led the entire nation to a bleeding economy. Hence, it only necessarily
follows that the companys financial situation at present is already very much different from where it was
three or four years ago.[26]

On the subject of the unaudited financial statement presented by the private respondent, the latter
contends that the cases cited by the petitioner indeed uniformly ruled that financial statements audited
by independent external auditors constitute the normal method of proof of the profit and loss
performance of a company. However, these cases do not require that the only legal method to ascertain
profit and loss is through an audited financial statement. The cases only provide that an audited
financial statement is the normal method.[27]

The respondent company likewise asseverates that the 15 members of petitioner union were not
actually promoted. There was only a realignment of positions.[28]

From the foregoing contentions, it appears that for the Court to resolve the issue presented, it is critical
that a determination must be first made on whether the benefits/entitlements are in the nature of a
bonus or not, and assuming they are so, whether they are demandable and enforceable obligations.

In the case of Producers Bank of the Philippines v. NLRC[29] we have characterized what a bonus is, viz:

44
A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to
the success of the employers business and made possible the realization of profits. It is an act of
generosity granted by an enlightened employer to spur the employee to greater efforts for the success
of the business and realization of bigger profits. The granting of a bonus is a management prerogative,
something given in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus
is not a demandable and enforceable obligation, except when it is made part of the wage, salary or
compensation of the employee.

Based on the foregoing pronouncement, it is obvious that the benefits/entitlements subjects of the
instant case are all bonuses which were given by the private respondent out of its generosity and
munificence. The additional 35% premium pay for work done during selected days of the Holy Week and
Christmas season, the holding of Christmas parties with raffle, and the cash incentives given together
with the service awards are all in excess of what the law requires each employer to give its employees.
Since they are above what is strictly due to the members of petitioner-union, the granting of the same
was a management prerogative, which, whenever management sees necessary, may be withdrawn,
unless they have been made a part of the wage or salary or compensation of the employees.

The consequential question therefore that needs to be settled is if the subject benefits/entitlements,
which are bonuses, are demandable or not. Stated another way, can these bonuses be considered part
of the wage or salary or compensation making them enforceable obligations?

The Court does not believe so.

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon
by the parties,[30] or it must have had a fixed amount[31] and had been a long and regular practice on
the part of the employer.[32]

The benefits/entitlements in question were never subjects of any express agreement between the
parties. They were never incorporated in the Collective Bargaining Agreement (CBA). As observed by the
Voluntary Arbitrator, the records reveal that these benefits/entitlements have not been subjects of any
express agreement between the union and the company, and have not yet been incorporated in the
CBA. In fact, the petitioner has not denied having made proposals with the private respondent for the
service award and the additional 35% premium pay to be made part of the CBA.[33]

45
The Christmas parties and its incidental benefits, and the giving of cash incentive together with the
service award cannot be said to have fixed amounts. What is clear from the records is that over the
years, there had been a downtrend in the amount given as service award.[34] There was also a
downtrend with respect to the holding of the Christmas parties in the sense that its location changed
from paid venues to one which was free of charge,[35] evidently to cut costs. Also, the grant of these
two aforementioned bonuses cannot be considered to have been the private respondents long and
regular practice. To be considered a regular practice, the giving of the bonus should have been done
over a long period of time, and must be shown to have been consistent and deliberate.[36] The
downtrend in the grant of these two bonuses over the years demonstrates that there is nothing
consistent about it. Further, as held by the Court of Appeals:

Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator that the same
was merely sponsored by the respondent corporation out of generosity and that the same is dependent
on the financial performance of the company for a particular year[37]

The additional 35% premium pay for work rendered during selected days of the Holy Week and
Christmas season cannot be held to have ripened into a company practice that the petitioner herein
have a right to demand. Aside from the general averment of the petitioner that this benefit had been
granted by the private respondent since time immemorial, there had been no evidence adduced that it
had been a regular practice. As propitiously observed by the Court of Appeals:

. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the same was in
excess of that provided by the law, the same however did not ripen into a company practice on account
of the fact that it was only granted for two (2) years and with the express reservation from respondent
corporations owner that it cannot continue to rant the same in view of the companys current financial
situation.[38]

To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to
penalize him for his past generosity.[39]

Having thus ruled that the additional 35% premium pay for work rendered during selected days of the
Holy Week and Christmas season, the holding of Christmas parties with its incidental benefits, and the
grant of cash incentive together with the service award are all bonuses which are neither demandable
nor enforceable obligations of the private respondent, it is not necessary anymore to delve into the
Revenues and Profitability Analysis for the years 1996-2000 submitted by the private respondent.

46
On the alleged promotion of 15 members of the petitioner union that should warrant an increase in
their salaries, the factual finding of the Voluntary Arbitrator is revealing, viz:

Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with respect
to the 15 employees, the Daily Rated Unions claim for promotional increase likewise fall[s] there being
no promotion established under the records at hand.[40]

WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of Appeals
dated 06 March 2002 and 12 July 2002, respectively, which affirmed and upheld the decision of the
Voluntary Arbitrator, are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

47
CHINA BANKING CORPORATION,

Petitioner,

MARIANO M. BORROMEO,

Respondent.

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

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by China Banking Corporation seeking the
reversal of the Decision[1] dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365,
remanding to the Labor Arbiter for further hearings the complaint for payment of separation pay, mid-
year bonus, profit share and damages filed by respondent Mariano M. Borromeo against the petitioner
Bank. Likewise, sought to be reversed is the appellate courts Resolution dated January 6, 2003, denying
the petitioner Banks motion for reconsideration.

The factual antecedents of the case are as follows:

Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989 as Manager assigned at
the latters Regional Office in Cebu City. He then had the rank of Manager Level I. Subsequently, the
respondent was laterally transferred to Cagayan de Oro City as Branch Manager of the petitioner Banks
branch thereat.

For the years 1989 and 1990, the respondent received a highly satisfactory performance rating and was
given the corresponding profit sharing/performance bonus. From 1991 up to 1995, he consistently
received a very good performance rating for each of the said years and again received the corresponding
profit sharing/performance bonus. Moreover, in 1992, he was promoted from Manager Level I to
Manager Level II. In 1994, he was promoted to Senior Manager Level I. Then again, in 1995, he was
promoted to Senior Manager Level II. Finally, in 1996, with a highly satisfactory performance rating, the

48
respondent was promoted to the position of Assistant Vice-President, Branch Banking Group for the
Mindanao area effective October 16, 1996. Each promotion had the corresponding increase in the
respondents salary as well as in the benefits he received from the petitioner Bank.

However, prior to his last promotion and then unknown to the petitioner Bank, the respondent, without
authority from the Executive Committee or Board of Directors, approved several DAUD/BP
accommodations amounting to P2,441,375 in favor of Joel Maniwan, with Edmundo Ramos as surety.
DAUD/BP is the acronym for checks Drawn Against Uncollected Deposits/Bills Purchased. Such checks,
which are not sufficiently funded by cash, are generally not honored by banks. Further, a DAUD/BP
accommodation is a credit accommodation granted to a few and select bank clients through the
withdrawal of uncollected or uncleared check deposits from their current account. Under the petitioner
Banks standard operating procedures, DAUD/BP accommodations may be granted only by a bank officer
upon express authority from its Executive Committee or Board of Directors.

As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town checks (7
PCIB checks and 3 UCPB checks) of various dates amounting to P2,441,375 were returned unpaid from
September 20, 1996 to October 17, 1996. Each of the returned checks was stamped with the notation
Payment Stopped/Account Closed.

On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks senior management
requesting for the grant of a P2.4 million loan to Maniwan. The memorandum stated that the loan was
to regularize/liquidate subjects (referring to Maniwan) DAUD availments. It was only then that the
petitioner Bank came to know of the DAUD/BP accommodations in favor of Maniwan. The petitioner
Bank further learned that these DAUD/BP accommodations exceeded the limit granted to clients, were
granted without proper prior approval and already past due. Acting on this information, Samuel L.
Chiong, the petitioner Banks First Vice- President and Head-Visayas Mindanao Division, in his
Memorandum dated November 19, 1996 for the respondent, sought clarification from the latter on the
following matters:

1) When DAUD/BP accommodations were allowed, what efforts, if any, were made to establish
the identity and/or legitimacy of the alleged broker or drawers of the checks accommodated?

2) Did the branch follow and comply with operating procedure which require that all checks
accommodated for DAUD/BP should be previously verified with the drawee bank and history if not
outright balances determined if enough to cover the checks?

49
3) How did the accommodations reach P2,441,375.00 when our records indicate that the
borrowers B/P-DAUD line is only for P500,000.00? When did the accommodations start exceeding the
limit of P500,000.00 and under whose authority?

4) When did the accommodated checks start bouncing?

5) What is the status of these checks now and what has the branch done so far to
protect/ensure collectibility of the returned checks?

6) What about client Joel Maniwan and surety Edmund Ramos, what steps have they done to
pay the checks returned?[2]

In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the foregoing queries
in seriatim and explained, thus:

1. None

2. No

3. The accommodations reach P2.4 million upon the request of Mr. Edmund Ramos, surety,
and this request was subsequently approved by undersigned. The excess accommodations started in
July 96 without higher management approval.

4. Checks started bouncing on September 20, 1996.

5. Checks have remained unpaid. The branch sent demand letters to Messrs. Maniwan and
Ramos and referred the matter to our Legal Dept. for filing of appropriate legal action.

50
6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention to settle by
Feb. 1997.

Justification for lapses committed (Item nos. 1 to 3).

The account was personally endorsed and referred to us by Mr. Edmund Ramos, Branch Manager of
Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA account was opened jointly as &/or
(Maniwan &/or Ramos). Mr. Ramos gave us his full assurance that the checks that we intend to purchase
are the same drawee that Metrobank has been purchasing for the past one (1) year already. He even
disclosed that these checks were verified by his own branch accountant and that Mr. Maniwans loan
account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin of CIFC. To show his
sincerity, Mr. Ramos signed as surety for Mr. Maniwan for P2.5MM. Corollary to this, Mr. Ramos applied
for a loan with us mortgaging his house, lot and duplex with an estimated market value of P4.508MM.
The branch, therefore, is not totally negligent as officer to officer bank checking was done. In fact, it is
also for the very same reason that other banks granted DAUD to subject account and, likewise, the
checks returned unpaid, namely:

Solidbank P1.8 Million

Allied Bank .8

Far East Bank 2.0

MBTC 5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself. Further to this, undersigned
conferred with the acting BOH VSYap if these checks are legitimate 3rd party checks.

On the other hand, Atty. Musni continues to insist that Mr. Maniwan was gypped by a broker in the total
amount of P10.00 Million.

Undersigned accepts full responsibility for committing an error in judgment, lapses in control and abuse
of discretion by relying solely on the word, assurance, surety and REM of Mr. Edmund Ramos, a friend
and a co-bank officer. I am now ready to face the consequence of my action.[3]

51
In another Letter dated April 8, 1997, the respondent notified Chiong of his intention to resign from the
petitioner Bank and apologized for all the trouble I have caused because of the Maniwan case.[4] The
respondent, however, vehemently denied benefiting therefrom. In his Letter dated April 30, 1997, the
respondent formally tendered his irrevocable resignation effective May 31, 1997.[5]

In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D. Yang, the petitioner
Banks Senior Vice-President and Head-Branch Banking Group, informed the former that his approval of
the DAUD/BP accommodations in favor of Maniwan without authority and/or approval of higher
management violated the petitioner Banks Code of Ethics. As such, he was directed to restitute the
amount of P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the petitioner
Bank. However, in view of his resignation and considering the years of service in the petitioner Bank, the
management earmarked only P836,637.08 from the respondents total separation benefits or pay. The
memorandum addressed to the respondent stated:

After a careful review and evaluation of the facts surrounding the above case, the following have been
conclusively established:

1. The branch granted various BP/DAUD accommodations to clients Joel Maniwan/Edmundo

Ramos in excess of approved lines through the following out-of-town checks which were returned for
the reason Payment Stopped/Account Closed:

1. PCIB Cebu Check No. 86256 P251,816.00

2. PCIB Cebu Check No. 86261 235,880.00

3. PCIB Cebu Check No. 8215 241,443.00

4. UCPB Tagbilaran Check No. 277,630.00

5. PCIB Bogo, Cebu Check No. 6117 267,418.00

6. UCPB Tagbilaran Check No. 216070 197,467.00

7. UCPB Tagbilaran Check No. 216073 263,920.00

8. PCIB Bogo, Cebu Check No. 6129 253,528.00

52
9. PCIB Bogo, Cebu Check No. 6122 198,615.00

10. PCIB Bogo, Cebu Check No. 6134 253,658.00

2. The foregoing checks were accommodated through your approval which was in excess of
your authority.

3. The branch failed to follow the fundamental and basic procedures in handling BP/DAUD
accommodations which made the accommodations basically flawed.

4. The accommodations were attended by lapses in control consisting of failure to report the
exception and failure to cover the account of Joel Maniwan with the required Credit Line Agreement.

Since the foregoing were established by your own admissions in your letter explanation dated 5
December 1996, and the Audit Report and findings of the Region Head, Management finds your actions
in violation of the Banks Code of Ethics:

Table 6.2., no. 1: Compliance with Standard Operating Procedures

- Infraction of Bank procedures in handling any bank transactions or work assignment which results in a
loss or probable loss.

Table 6.3., no. 6: Proper Conduct and Behavior -

Willful misconduct in the performance of duty whether or not the bank suffers a loss, and/or

Table 6.5., no. 1: Work Responsibilities -

Dereliction of duty whether or not the Bank suffers a loss, and/or

Table 6.6., no. 2: Authority and Subordination -

Failure to carry out lawful orders or instructions of superiors.

Your approval of the accommodations in excess of your authority without prior authority and/or
approval from higher management is a violation of the above cited Rules.

53
In view of these, you are directed to restitute the amount of P1,507,736.79 representing 90% of the
total loss of P1,675,263.10 incurred by the Bank as your proportionate share. However, in light of your
voluntary separation from the Bank effective May 31, 1997, in view of the years of service you have
given to the Bank, management shall earmark and segregate only the amount of P836,637.08 from your
total separation benefits/pay. The Bank further directs you to fully assist in the effort to collect from Joel
Maniwan and Edmundo Ramos the sums due to the Bank.[6]

In the Letter dated May 26, 1997 addressed to the respondent, Remedios Cruz, petitioner Banks Vice-
President of the Human Resources Division, again informed him that the management would withhold
the sum of P836,637.08 from his separation pay, mid-year bonus and profit sharing. The amount
withheld represented his proportionate share in the accountability vis--vis the DAUD/BP
accommodations in favor of Maniwan. The said amount would be released upon recovery of the sums
demanded from Maniwan in Civil Case No. 97174 filed against him by the petitioner Bank with the
Regional Trial Court in Cagayan de Oro City.

Consequently, the respondent, through counsel, made a demand on the petitioner Bank for the
payment of his separation pay and other benefits. The petitioner Bank maintained its position to
withhold the sum of P836,637.08. Thus, the respondent filed with the National Labor Relations
Commission (NLRC), Regional Arbitration Branch No. 10, in Cagayan de Oro City, the complaint for
payment of separation pay, mid-year bonus, profit share and damages against the petitioner Bank.

The parties submitted their respective position papers to the Labor Arbiter. Thereafter, the respondent
filed a motion to set case for trial or hearing. Acting thereon, the Labor Arbiter, in the Order dated
January 29, 1999, denied the same stating that:

... This Branch views that if complainant finds the necessity to controvert the allegations in the
respondents pleadings, then he may file a supplemental position paper and adduce thereto evidence
and additional supporting documents, the soonest possible time. All the evidence will be evaluated by
the Branch to determine whether or not a clarificatory hearing shall be conducted.[7]

On February 26, 1999, the Labor Arbiter issued another Order submitting the case for resolution upon
finding that he could judiciously pass on the merits without the necessity of further hearing.

54
On even date, the Labor Arbiter promulgated the Decision[8] dismissing the respondents complaint.
According to the Labor Arbiter, the respondent, an officer of the petitioner Bank, had committed a
serious infraction when, in blatant violation of the banks standard operating procedures and policies, he
approved the DAUD/BP accommodations in favor of Maniwan without authorization by senior
management. Even the respondent himself had admitted this breach in the letters that he wrote to the
senior officers of the petitioner Bank.

The Labor Arbiter, likewise, made the finding that the respondent offered to assign or convey a property
that he owned to the petitioner Bank as well as proposed the withholding of the benefits due him to
answer for the losses that the petitioner Bank incurred on account of unauthorized DAUD/BP
accommodations. But even if the respondent had not given his consent, the Labor Arbiter held that the
petitioner Banks act of withholding the benefits due the respondent was justified under its Code of
Ethics. The respondent, as an officer of the petitioner Bank, was bound by the provisions of the said
Code.

Aggrieved, the respondent appealed to the National Labor Relations Commission. After the parties had
filed their respective memoranda, the NLRC, in the Decision dated October 20, 1999, dismissed the
appeal as it affirmed in toto the findings and conclusions of the Labor Arbiter. The NLRC preliminarily
ruled that the Labor Arbiter committed no grave abuse of discretion when he decided the case on the
basis of the position papers submitted by the parties. On the merits, the NLRC, like the Labor Arbiter,
gave credence to the petitioner Banks allegation that the respondent offered to pledge his property to
the bank and proposed the withholding of his benefits in acknowledgment of the serious infraction he
committed against the bank. Further, the NLRC concurred with the Labor Arbiter that the petitioner
Bank was justified in withholding the benefits due the respondent. Being a responsible bank officer, the
respondent ought to know that, based on the petitioner Banks Code of Ethics, restitution may be
imposed on erring employees apart from any other penalty for acts resulting in loss or damage to the
bank. The decretal portion of the NLRC decision reads:

WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal is Dismissed for lack of merit.

SO ORDERED.[9]

55
The respondent moved for a reconsideration of the said decision but the NLRC, in the Resolution of
December 20, 1999, denied his motion.

The respondent then filed a petition for certiorari with the Court of Appeals alleging that the NLRC
committed grave abuse of discretion when it affirmed the findings and conclusions of the Labor Arbiter.
He vehemently denied having offered to pledge his property to the bank or proposed the withholding of
his separation pay and other benefits. Further, he argued that the petitioner Bank deprived him of his
right to due process because it unilaterally imposed the penalty of restitution on him. The DAUD/BP
accommodations in favor of Maniwan allegedly could not be considered as a loss to the bank as the
amounts may still be recovered. The respondent, likewise, maintained that the Labor Arbiter should not
have decided the case on the basis of the parties position papers but should have conducted a full-
blown hearing thereon.

On July 19, 2002, the CA rendered the Decision[10] now being assailed by the petitioner Bank. The CA
found merit in the respondents contention that he was deprived of his right to due process by the
petitioner Bank as no administrative investigation was conducted by it prior to its act of withholding the
respondents separation pay and other benefits. The respondent was not informed of any charge against
him in connection with the Maniwan DAUD/BP accommodations nor afforded the right to a hearing or
to defend himself before the penalty of restitution was imposed on him. This, according to the appellate
court, was contrary not only to the fundamental principle of due process but to the petitioner Banks
Code of Ethics as well.

The CA further held that the Labor Arbiter, likewise, failed to afford the respondent due process when it
denied his motion to set case for trial or hearing. While the authority of the Labor Arbiter to decide a
case based on the parties position papers and documents is indubitable, the CA opined that factual
issues attendant to the case, including whether or not the respondent proposed the withholding of his
benefits or pledged the same to the petitioner Bank, necessitated the conduct of a full-blown trial. The
appellate court explained that:

Procedural due process, as must be remembered, has two main concerns, the prevention of unjustified
or mistaken deprivation and the promotion of participation and dialogue by affected individuals in the
decision-making process. Truly, the magnitude of the case and the withholding of Borromeos property
as well as the willingness of the parties to conciliate, make a hearing imperative. As manifested by the
bank, it did not contest Borromeos motion for hearing or trial inasmuch as the bank itself wanted to
fully ventilate its side.[11]

Accordingly, the CA set aside the decision of the NLRC and ordered that the records of the case be
remanded to the Labor Arbiter for further hearings on the factual issues involved.

56
The petitioner Bank filed a motion for reconsideration of the said decision but the CA, in the assailed
Resolution of January 6, 2003, denied the same as it found no compelling ground to warrant
reconsideration.[12] Hence, its recourse to this Court alleging that the assailed CA decision is contrary to
law and jurisprudence in that:

I.

THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED BY THE NATIONAL LABOR RELATIONS
COMMISSION ARE SUPPORTED BY SUBSTANTIAL EVIDENCE AND SHOULD HAVE BEEN ACCORDED
RESPECT AND FINALITY BY THE COURT OF APPEALS IN ACCORDANCE WITH GOVERNING
JURISPRUDENCE.

II.

AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE WITH THE REQUIREMENTS OF DUE PROCESS
IN THE PROCEEDINGS A QUO.

III.

THERE WAS NO VIOLATION BY PETITIONER BANK OF RESPONDENTS RIGHT TO DUE PROCESS AS NO

ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE CONDUCTED ON HIS ADMITTED MISCONDUCT.
[13]

The petitioner Bank posits that the sole factual issue that remained in dispute was whether the
respondent pledged his benefits as guarantee for the losses the bank incurred resulting from the
unauthorized DAUD/BP accommodations in favor of Maniwan. On this issue, both the Labor Arbiter and
the NLRC found that the respondent had indeed pledged his benefits to

the bank. According to the petitioner Bank, this factual finding should have been accorded respect by
the CA as the same is supported by the evidence on record. By ordering the remand of the case to the
Labor Arbiter, the CA allegedly unjustifiably analyzed and weighed all over again the evidence
presented.

The petitioner Bank insists that the Labor Arbiter acted within his authority when he denied the
respondents motion to set case for hearing or trial and instead decided the case on the basis of the
position papers and evidence submitted by the parties. Due process simply demands an opportunity to

57
be heard and the respondent was not denied of this as he was even given the opportunity to file a
supplemental position paper and other supporting documents, but he did not do so.

The petitioner Bank takes exception to the findings of the appellate court that the respondent was not
afforded the right to a hearing or to defend himself by the petitioner Bank as it did not conduct an
administrative investigation. The petitioner Bank points out that it was poised to conduct one but was
preempted by the respondents resignation. In any case, respondent himself in his Letter dated
December 5, 1996, in reply to the clarificatory queries of Chiong, admitted that the DAUD/BP
accommodations were granted without higher management approval and that he (the respondent)
accepts full responsibility for committing an error of judgment, lapses in control and abuse of
discretion ... Given the respondents admission, the holding of a formal investigation was no longer
necessary.

For his part, the respondent, in his Comment, maintains that the DAUD/BP accommodations in favor of
Maniwan were approved, albeit not expressly, by the senior management of the petitioner Bank. He
cites the regular reports he made to Chiong, his superior, regarding the DAUD/BP transactions made by
the branch, including that of Maniwan, and Chiong never called his attention thereto nor stopped or
reprimanded him therefor. These reports further showed that he did not conceal these transactions to
the management.

The respondent vehemently denies having offered the withholding of his benefits or pledged the same
to the petitioner Bank. The findings of the Labor Arbiter and the NLRC that what he did are allegedly not
supported by the evidence on record.

The respondent is of the view that restitution is not proper because the petitioner Bank has not, as yet,
incurred any actual loss as the amount owed by Maniwan may still be recovered from him. In fact, the
petitioner Bank had already instituted a civil case against Maniwan for the recovery of the sum and the
RTC rendered judgment in the petitioner Banks favor. The case is still pending appeal. In any case, the
respondent argues that the petitioner Bank could not properly impose the accessory penalty of
restitution on him without imposing the principal penalty of Written Reprimand/Suspension as provided
under its Code of Ethics. He, likewise, vigorously avers that, in contravention of its own Code of Ethics,
he was denied due process by the petitioner Bank as it did not conduct any administrative investigation
relative to the unauthorized DAUD/BP accommodations. He was not informed in writing of any charge
against him nor was he given the opportunity to defend himself.

The petition is meritorious.

58
The Court shall first resolve the procedural issue raised in the petition, i.e., whether the CA erred in
remanding the case to the Labor Arbiter. The Court rules in the affirmative. It is settled that
administrative bodies like the NLRC, including the Labor Arbiter, are not bound by the technical niceties
of the law and procedure and the rules obtaining in courts of law.[14] Rules of evidence are not strictly
observed in proceedings before administrative bodies like the NLRC, where decisions may be reached on
the basis of position papers.[15] The holding of a formal hearing or trial is discretionary with the Labor
Arbiter and is something that the parties cannot demand as a matter of right.[16] As a corollary, trial-
type hearings are not even required as the cases may be decided based on verified position papers, with
supporting documents and their affidavits.[17]

Hence, the Labor Arbiter acted well within his authority when he issued the Order dated February 26,
1999 submitting the case for resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing. On the other hand, the assailed CA decisions directive requiring
him to conduct further hearings constitutes undue interference with the Labor Arbiters discretion.
Moreover, to require the conduct of hearings would be to negate the rationale and purpose of the
summary nature of the proceedings mandated by the Rules and to make mandatory the application of
the technical rules of evidence.[18] The appellate court, therefore, committed reversible error in
ordering the remand of the case to the Labor Arbiter for further hearings.

Before delving on the merits of the case, it is well to remember that factual findings of the NLRC
affirming those of the Labor Arbiter, both bodies being deemed to have acquired expertise in matters
within their jurisdiction, when sufficiently supported by evidence on record, are accorded respect, if not
finality, and are considered binding on this Court.[19] As long as their decisions are devoid of any
arbitrariness in the process of their deduction from the evidence proffered by the parties, all that is left
is for the Court to stamp its affirmation.[20]

In this case, the factual findings of the Labor Arbiter and those of the NLRC concur on the following
material points: the respondent was a responsible officer of the petitioner Bank; by his own admission,
he granted DAUD/BP accommodations in excess of the authority given to him and in violation of the
banks standard operating procedures; the petitioner Banks Code of Ethics provides that
restitution/forfeiture of benefits may be imposed on the employees for, inter alia, infraction of the
banks standard operating procedures; and, the respondent resigned from the petitioner Bank on May
31, 1998. These factual findings are amply supported by the evidence on record.

Indeed, it had been indubitably shown that the respondent admitted that he violated the petitioner
Banks standard operating procedures in granting the DAUD/BP accommodations in favor of Maniwan

59
without higher management approval. The respondents replies to the clarificatory questions
propounded to him by way of the Memorandum dated November 19, 1996 were particularly significant.
When the respondent was asked whether efforts were made to establish the identity and/or legitimacy
of the drawers of the checks before the DAUD/BP accommodations were allowed,[21] he replied in the
negative.[22] To the query did the branch follow and comply with operating procedure which require
that all checks accommodated for DAUD/BP should be previously verified with the drawee bank and
history, if not outright balances, determined if enough to cover the checks?[23] again, the respondent
answered no.[24] When asked under whose authority the excess DAUD/BP accommodations were
granted,[25] the respondent expressly stated that they were approved by undersigned (referring to
himself) and that the excess accommodation was granted without higher management approval.[26]
More telling, however, is the respondents statement that he accepts full responsibility for committing
an error in judgment, lapses in control and abuse of discretion by relying solely on the word, assurance,
surety and REM of Mr. Edmundo Ramos.[27] The respondent added that he was ready to face the
consequence of [his] action.[28]

The foregoing sufficiently establish that the respondent, by his own admissions, had violated the
petitioner Banks standard operating procedures. Among others, the petitioner Banks Code of Ethics
provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES

VIOLATIONS

PENALTIES

1ST

2ND

3RD

4TH

1. Infraction of Bank procedures in handling any Bank transaction or work assignment which results in a
loss or probable loss

Written Reprimand/ Suspension*

Suspension/ Dismissal*

60
Dismissal*

* With restitution, if warranted.

Further, the said Code states that:

7.2.5. Restitution/Forfeiture of Benefits

Restitution may be imposed independently or together with any other penalty in case of loss or damage
to the property of the Bank, its employees, clients or other parties doing business with the Bank. The
Bank may recover the amount involved by means of salary deduction or whatever legal means that will
prompt offenders to pay the amount involved. But restitution shall in no way mitigate the penalties
attached to the violation or infraction.

Forfeiture of benefits/privileges may also be effected in cases where infractions or violations were
incurred in connection with or arising from the application/availment thereof.

It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or
contrary to law, generally binding and

valid on the parties and must be complied with until finally revised or amended unilaterally or preferably
through negotiation or by competent authority.[29] Moreover, management has the prerogative to
discipline its employees and to impose appropriate penalties on erring workers pursuant to company
rules and regulations.[30] With more reason should these truisms apply to the respondent, who, by
reason of his position, was required to act judiciously and to exercise his authority in harmony with
company policies.[31]

61
Contrary to the respondents contention that the petitioner Bank could not properly impose the
accessory penalty of restitution on him without imposing the principal penalty of Written
Reprimand/Suspension, the latters Code of Ethics expressly sanctions the imposition of
restitution/forfeiture of benefits apart from or independent of the other penalties. Obviously, in view of
his voluntary separation from the petitioner Bank, the imposition of the penalty of reprimand or
suspension would be futile. The petitioner Bank was left with no other recourse but to impose the
ancillary penalty of restitution. It was certainly within the petitioner Banks prerogative to impose on the
respondent what it considered the appropriate penalty under the circumstances pursuant to its
company rules and regulations.

Anent the issue that the respondents right to due process was violated by the petitioner Bank since no
administrative investigation was conducted prior to the withholding of his separation benefits, the Court
rules that, under the circumstances obtaining in this case, no formal administrative investigation was
necessary. Due process simply demands an opportunity to be heard and this opportunity was not denied
the respondent.[32]

Prior to the respondents resignation, he was furnished with the Memorandum[33] dated November 19,
1996 in which several clarificatory questions were propounded to him regarding the DAUD/BP
accommodations in favor of Maniwan. Among others, the respondent was asked whether the banks
standard operating procedures were complied with and under whose authority the accommodations
were granted. From the tenor thereof, it could be reasonably gleaned that the said memorandum
constituted notice of the charge against the respondent.

Replying to the queries, the respondent, in his Letter[34] dated December 5, 1996, admitted, inter alia,
that he approved the DAUD/BP accommodations in favor of Maniwan and the amount in excess of the
credit limit of P500,000 was approved by him without higher management approval. The respondent,
likewise, admitted non-compliance with the banks standard operating procedures, specifically, that
which required that all checks accommodated for DAUD/BP be previously verified with the drawee bank
and history, if not outright balances determined if enough to cover the checks. In the same letter, the
respondent expressed that he

accepts full responsibility for committing an error in judgment, lapses in control and abuse of discretion
and that he is ready to face the consequence of his action.

Contrary to his protestations, the respondent was given the opportunity to be heard and considering his
admissions, it became unnecessary to hold any formal investigation.[35] More particularly, it became
unnecessary for the petitioner Bank to conduct an investigation on whether the respondent had

62
committed an [I]nfraction of Bank procedures in handling any Bank transaction or work assignment
which results in a loss or probable loss because the respondent already admitted the same. All that was
needed was to inform him of the findings of the management[36] and this was done by way of the
Memorandum[37] dated May 23, 1997 addressed to the respondent. His claim of denial of due process
must perforce fail.

Significantly, the respondent is not wholly deprived of his separation benefits. As the Labor Arbiter
stressed in his decision, the separation benefits due the complainant (the respondent herein) were
merely withheld.[38] The NLRC made the same conclusion and was even more explicit as it opined that
the respondent is entitled to the benefits he claimed in pursuance to the Collective Bargaining
Agreement but, in the meantime, such benefits shall be deposited with the bank by way of pledge.[39]
Even

the petitioner Bank itself gives the assurance that as soon as the Bank has satisfied a judgment in Civil
Case No. 97174, the earmarked portion of his benefits will be released without delay.[40]

It bears stressing that the respondent was not just a rank and file employee. At the time of his
resignation, he was the Assistant Vice- President, Branch Banking Group for the Mindanao area of the
petitioner Bank. His position carried authority for the exercise of independent judgment and discretion,
characteristic of sensitive posts in corporate hierarchy.[41] As such, he was, as earlier intimated,
required to act judiciously and to exercise his authority in harmony with company policies.[42]

On the other hand, the petitioner Banks business is essentially imbued with public interest and owes
great fidelity to the public it deals with.[43] It is expected to exercise the highest degree of diligence in
the selection and supervision of their employees.[44] As a corollary, and like all other business
enterprises, its prerogative to discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations must be respected.[45] The law, in protecting the
rights of labor, authorized neither oppression nor self-destruction of an employer company which itself
is possessed of rights that must be entitled to recognition and respect.[46]

WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the Court of Appeals and its
Resolution dated January 6, 2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The Resolution
dated October 20, 1999 of the NLRC, affirming the Decision dated February 26, 1999 of the Labor
Arbiter, is REINSTATED.

63
G.R. No. 114671. November 24, 1999]

AURELIO SALINAS, JR., ARMANDO SAMULDE, ALEJANDRO ALONZO and AVELINO CORTEZ, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC GULF AND PACIFIC CO. of MANILA, INC.,
respondents.

DECISION

PURISIMA, J.:

64
This petition for review should have been properly initiated and is therefore treated as a special civil
action for certiorari under Rule 65. The herein petitioners, Aurelio Salinas, Jr., Armando Samulde,
Alejandro Alonzo and Avelino Cortez, assail the Resolution[1] dated January 31, 1994 of the National
Labor Relations Commission (NLRC, for brevity) which dismissed their complaint, and affirming, in effect,
the Decision[2] of the Labor Arbiter declaring them project employees and not regular employees of
respondent Atlantic Gulf and Pacific Company of Manila, Inc. (hereinafter referred to as AG & P).

Petitioner Alejandro Alonzo had been employed with AG & P in the several construction projects of the
latter from 1982 to 1989, in the course of which he essentially performed the same job, initially as a
laborer, and later as bulk cement operator, bulk cement plant/carrier operator, and crane driver. Under
similar circumstances, petitioner Avelino Cortez had been employed with AG & P from 1979 to 1988 as
carpenter/forklift operator; petitioner Armando Samulde served as lubeman/stationary operator from
1982 to 1989; while petitioner Aurelio Salinas, Jr., used to work as carpenter/finishing carpenter from
1983 to 1988.

On May 29, June 6, July 4 and July 5 of 1989, respectively, petitioners Salinas, Samulde, Alonzo and
Cortez filed against the respondent corporation separate complaints for illegal dismissal, which cases
were consolidated and jointly heard by Labor Arbiter Manuel P. Asuncion.

In his Order of dismissal, Labor Arbiter Asuncion found that petitioners are project employees whose
work contracts with AG & P indicate that they were employed in such category; that they have been
assigned to different work projects, not just to one and that their work relation with AG & P, relative to
termination, is governed by Policy Instruction No. 20.

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of
merit, ratiocinating thus:

In the first place, examining the contract of employment of complainants herein presented as evidence
by respondent, we found that a) they were employed for a specific project and for a specific period; b)
that they were assigned to different projects and not just one as earlier claimed by them. In short, from
the evidence adduced by respondent which complainants miserably failed to rebut with their one page
position paper containing sweeping statements, there appears to be no doubt that they are project
employees hired for a specific project. Their subsequent separation from service, therefore, as a result
of the completion of the project or its phase did not result in illegal dismissal.[3]

65
Dissatisfied with the aforesaid disposition below, petitioners found their way to this Court via the
present petition posing as the sole issue whether they are regular or project employee.

Petitioners principally argue that following the ruling in the Caramol case,[4] NLRC gravely erred in
dismissing their complaint and declaring them project employees. According to them, they had been
covered by a number of contracts renewed continuously, with periods ranging from five (5) to nine (9)
years, and they performed the same kind of work through out their employment, and such was usually
necessary and desirable in the trade or business of the respondent corporation; and their work did not
end on a project-to-project basis, although the contrary was made to appear by the employer through
the signing of separate employment contracts.

Petitioners emphatically stressed that no report even a single one, was ever submitted by the
respondent corporation to the nearest public employment office every time petitioners employment
was terminated pursuant to Policy Instruction No. 20. There being no report, NLRCs insistence that they
(petitioners) were respondents corporations project employees is without any legal basis; petitioners
maintain.

In its Manifestation and Motion in Lieu of Comment,[5] the Office of the Solicitor General agrees with
the contention of petitioners, to wit:

5. Thus, since petitioners had continuously performed the same kind of work during the whole course of
their employment x x x their jobs were indeed necessary and desirable to the private respondents main
line of business. And this should be the main consideration in classifying the nature of employment
afforded the herein workers.

6. Furthermore, if private respondent really employed the herein petitioners on a project-to-project

basis, it should have submitted a series of reports to the nearest public employment office every time
the employment of the workers were terminated, in line with Policy Instruction No. 20 of the
Department of Labor. (citation omitted) Private respondent miserably failed to do its obligation under
the set-up. This failure effectively belies its assertion that herein petitioners are project employees.[6]

66
Respondent corporation preliminary contends that the present petition for review should have been
brought under Rule 65, Rule 45 not being the proper remedy. Assuming arguendo that the petition
should be treated under Rule 65, the petition would still fail for failure of the petitioners to present a
motion for reconsideration. It maintains that the instant petition should not be given due course due to
non-exhaustion of administrative remedies as required by Section 14, Rule VII (sic). It theorizes further
that the questioned Resolution had already become final and executory on March 20, 1994, ten days
after receipt thereof by petitioners on March 9, 1994. Respondent corporation also claims that the
present petition is insufficient in form, for failure to attach thereto a duplicate original or certified true
copies of the complainants-petitioners position paper, respondent corporations position paper, and the
questioned resolution of the public respondent.

AG & P staunchly claims that the petitioners are mere project employees; that the questioned resolution
of public respondent is supported by substantial evidence and therefore, conclusive and binding.
According to respondent corporation, factual findings of the NLRC are generally accorded not only
respect but, at times, finality as long as such findings are based on substantial evidence; that the
doctrinal cases cited by petitioners have no applicability in the case under scrutiny and that the Magante
case[7] does not apply because it was therein established that Magante was never deployed from
project to project but had been regularly assigned to perform carpentry work; and on the other hand,
the Baguio Country Club case[8] pertains to entertainment-service.

Meanwhile the De Leon case,[9] claims the respondent corporation, bolsters instead, its position since it
recognizes the legality of project employment, which is not deemed regular but a separate and distinct
category, particularly in the construction business. It also attempts to create a chasm between the
doctrinal case of Caramol and the present case, allegedly due to different circumstances involved, and
citing the implementation of Department Order No. 19, amending Policy Instruction No. 20, which
allows the rehiring of project workers on a project-to-project basis (Section 2.3.b), and which considers
the report of termination of employment a mere indicator of project employment. (Section 2.2)

The petition is impressed with merit.

The present case is on all fours with the cases of Caramol vs. NLRC (penned by Justice Bellosillo) and
Samson vs. NLRC[10] (with Justice Regalado as ponente), both of which involved the same private
respondent.

67
In the case of Caramol, petitioner Rogelio Caramol was hired as a rigger by AG & P on a project-to-
project basis but whose employment was renewed forty-four (44) times by the latter. In holding that
Caramol was a regular worker, the Court declared that the successive employment contracts where he
was made to perform the same kind of work as a rigger, would clearly manifest that Caramols tasks
were usually necessary or desirable in the usual trade or business of AG & P.[11]

The Court likewise upheld the validity of a project-to-project basis contract of employment, provided
that the period was agreed upon knowingly and voluntarily by the parties, without any force, duress or
improper pressure brought to bear upon the employee and absent any other circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by the former xxx.[12]
However, this Court warned, where from the circumstances it is apparent that periods have been
imposed to preclude the acquisition of tenurial security by the employee, they should be struck down as
contrary to public policy, morals, good custom or public order.[13]

The case of Samson on the other hand, concerned Ismail Samson who served initially as a rigger, as a
laborer and finally as a rigger foreman for AG & P, for approximately 28 years. He was also covered by
successive employment contracts with gaps of from one (1) day up to one (1) week. Noting the
successive contracts of employment, the repeated re-hiring, and petitioners performance of essentially
the same tasks, this Court held that Samson was a regular employee, because these were sufficient
evidence that he was performing tasks usually necessary and desirable in the ordinary course of
business of AG & P.[14] Thus the Court pronounced:

The mandate in Article 281 of the Labor Code, which pertinently prescribes that the provisions of
written agreement to the contrary notwithstanding and regardless of the oral agreements 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 and
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, should apply in the case of petitioner
(Samson).[15]

In the case under consideration, the Court likewise rules that failure to report the termination to Public
Employment Office is a clear indication that petitioners were not and are not project employees.

68
When these consolidated complaints were filed in 1989, and while petitioners were serving the
respondent corporation, the rule in force then was Policy Instruction (P.I.) No. 20, which required the
employer company to report to the nearest Public Employment Office the fact of termination of project
employee as a result of the completion of the project or any phase thereof, in which he is employed.
Further, Department Order (D.O.) No. 19, which was issued on April 1, 1993, did not totally dispense
with the notice requirement but, instead, made provisions therefor, and considered it as one of the
indicators that a worker is a project employee.[16]

It is significant to note that the notice of termination requirement has been retained under Section 6.1
of D.O. No. 19, viz:[17]

6.1. Requirements of labor and social legislations.--(a) The construction company and the general
contractor and/or subcontractor referred to in Sec. 2.5 shall be responsible for the workers in its employ
on matters of compliance with the requirements of existing laws and regulations on hours of work,
wages, wage-related benefits, health, safety and social welfare benefits, including submission to the
DOLE-Regional Office of Work Accident/Illness Report, Monthly Report on Employees
Terminations/Dismissals/Suspensions and other reports. x x x (Italics supplied)

In light of the cases of Caramol and Samson and the application of P.I. No. 20 as amended by D.O. No.
19, the retroactive or prospective effect of D.O. No. 19 is of no moment. Nevertheless, it was held in
Samson vs. NLRC that it is prospective in effect. Otherwise, it would be prejudicial to the employees and
would run counter to the constitutional mandate on social justice and protection to labor and
furthermore, such view is more in accord with the avowed purpose of said Department Order.[18]

It is basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code and
its implementing regulations, the workingmans welfare should be the primordial and paramount
consideration. The interpretation herein made gives meaning and substance to the liberal and
compassionate spirit of the law enunciated in Article 4 of Labor Code that all doubts in the
implementation and interpretation of the provisions of the Labor Code including its implementing rules
and regulations shall be resolved in favor of labor.[19]

It is beyond cavil that petitioners had been providing the respondent corporation with continuous and
uninterrupted services, except for a day or so gap in their successive employment contracts. Their
contracts had been renewed several times, with the total length of their services ranging from five (5) to
nine (9) years. Throughout the duration of their contracts, they had been performing the same kinds of

69
work (e.g., as lubeman, bulk cement operator and carpenter), which were usually necessary and
desirable in the construction business of AG & P, its usual trade or business.

Undoubtedly, periods in the present case have been imposed to preclude the acquisition of tenurial
security by petitioners, and must be struck down for being contrary to public policy, morals, good
customs or public order.

Anent the issue that the petition should have been brought under Rule 65 and not under Rule 45 of the
Revised Rules of Court, this rule is not inflexible.[20] In the interest of justice, often the Court has
judiciously treated as special civil actions for certiorari petitions erroneously captioned as petitions for
review on certiorari.[21]

With regard to the issue on non-exhaustion of administrative remedies, the Court hold that the failure
of petitioners to interpose a motion for reconsideration of the NLRC decision before coming to this
Court was not a fatal omission. The exhaustion of administrative remedies doctrine is not a hard and fast
rule and does not apply where the issue is purely a legal one.[22] A motion for reconsideration as a
prerequisite for the bringing of an action under Rule 65 may be dispensed with where the issue is purely
of law, as in this case.[23] At all events and in the interest of substantial justice, especially in cases
involving the rights of workers, procedural lapses, if any, may be disregarded to enable the Court to
examine and resolve the conflicting rights and responsibilities of the parties. This liberality is warranted
in the case at bar, especially since it has been shown that the intervention of the Court is necessary for
the protection of the herein petitioner(s).[24]

WHEREFORE, the questioned Resolution of the NLRC in NLRC NCR Case No. 00-05-02489-89; NLRC NCR
Case No. 00-06-02621-89; NLRC NCR Case No. 00-06-02815-89; NLRC NCR Case No. 00-07-03095-89; and
NLRC NCR Case No. 00-07-03129-89, is SET ASIDE and another one is hereby ENTERED ordering the
respondent corporation to reinstate petitioners without loss of seniority and with full backwages. Costs
against the respondent corporation.

SO ORDERED.

70
[G.R. No. 154448. August 15, 2003

DR. PEDRITO F. REYES, petitioner, vs. COURT OF APPEALS, PHIL. MALAY POULTRY BREEDERS, INC. and
LEONG HUP POULTRY FARM SDN, BHD., Mr. Francis T.N. Lau, President and Chairman of the Board and
Mr. Chor Tee Lim, Director, respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review under Rule 45 of the Revised Rules of Court are the January 28,
2002[1] and July 22, 2002[2] Resolutions[3] of the Court of Appeals in CA-G.R. SP No. 67431, which
dismissed the petition for certiorari filed by petitioner for failure to attach to the petition the duplicate
original or certified true copy of the Labor Arbiters decision as well as the relevant pleadings.

The facts show that on August 24, 1989, respondent Leong Hup Poultry Farms SDN. BHD (Leung Hup) of
Malaysia, thru its Managing Director Francis T. Lau, appointed petitioner Pedrito F. Reyes as
Technical/Sales Manager with a net salary of US$4,500.00 a month. His duties consisted of selling parent
stock day-old chicks and providing technical assistance to clients of the company in Malaysia and other

71
Asian countries.[4] Sometime in 1992, the company formed Philippine Malay Poultry Breeders, Inc.,
(Philmalay) in the Philippines. Petitioner was appointed General Manager thereof with a monthly salary
of US$5,500.00.

In 1996-1997, respondents suffered losses which caused them to reduce production and retrench
employees in Philmalay. On June 30, 1997, petitioner gave verbal notice to respondent Francis T. Lau
that he will serve as General Manager of Philmalay until December 31, 1997 only.[5] In a letter dated
January 12, 1998, petitioner confirmed his verbal notice of resignation and requested that he be given
the same benefits granted to retrenched and resigned employees of the company, consisting of
separation pay equivalent to 1 month salary for every year of service and the monetary equivalent of his
sick leave and vacation leave. He likewise requested for the following:

1. payment of underpaid salary for the period December 1989 December 31, 1997 together with the
additional one month salary payable in December of every year which was paid at the rate of P26.00
instead of the floating rate;

2. brand new car (Galant Super Saloon) or its equivalent;

3. life insurance policy in the amount of US$100,000.00 from December 1, 1989 to December 31, 1997,
or the premiums due thereon;

4. office rentals at the rate of US$300.00 or its peso equivalent for the use of his residence as office of
Philmalay for the period December 1, 1989 to July 1996; and

5. retention of the services of the law firm Quasha Ancheta Pena and Nolasco Law Firm, which was hired
by respondents to defend him in the illegal recruitment case filed against him in connection with his
employment with respondents.[6]

In a letter dated January 19, 1998, respondent Philmalay retrenched petitioner effective January 20,
1998 and promised to pay him separation benefits pursuant to the provisions of the Labor Code.[7] He
was, however, offered a separation pay equivalent to four months only, or the total amount of
P578,600.00 (P144,650 x 4). The offer was not accepted by petitioner and efforts to settle the impasse
proved futile.

72
Petitioner filed with the Arbitration Branch of the National Labor Relations Commission a complaint[8]
for underpayment of wages and non-payment of separation pay, sick leave, vacation leave and other
benefits against respondents.

On December 22, 1999, the Labor Arbiter rendered a decision[9] in favor of petitioner, the dispositive
portion of which reads:

PREMISES CONSIDERED, judgment is hereby rendered in favor of the complainant and against the
respondents, as follows:

1. To order respondents to pay jointly and severally the complainant, the following:

(a) Unpaid salary from January 1, 1998 to January 19, 1998, the same to be computed in the following
manner:

19 = days % 31 days of January 98

= 0.613 month x US$5,500.00

= US$3,370.00

(b) Underpayment of salary, the same to be computed at net US$5,500.00 or its peso-equivalent from
July 1, 1997 to December 31, 1997, together with the additional one (1) salary payable every year, the
same to be paid at the rate of P26.30 instead of the following rate computed as follows:

July 1997 - P27.66 P1.36 - P7, 480.00

73
August 1997 - 29.33 3.02 - 16, 665.00

September - 32.39 - 6.09 - 33, 495.00

October 1997 - 34.46 - 8.16 - 44, 880.00

November 1997 - 34.51 - 8.21 - 45, 155.00

December 1997 - 37.17 - 10.57- 59, 785.00

P207,460.00

(c) 13th month pay for December 1997 computed as follows: December 1997 P37.17 P10.57 P59,785.00.

2. To order respondents to pay jointly and severally the complainant the following:

(a) Unused vacation and sick leaves from December 01, 1989 to December 31, 1997 based on the same
salary, to be computed as follows:

i) Vacation Leave Fifteen (15) days for every year of services x 9 years = 135 days

135 days % 26 working days a month

= 5.2 months

= US$28,600.00

74
ii) Sick Leave Fifteen (15) Days for every [year] of service x 9 years = 135 days

135 days % 26 working days a month

= 5.2 months x US$5,500.00 / month

= US$28,600.00

3) To order respondents to pay jointly and severally the complainant his separation pay equivalent to
one (1) month pay for very year of service at the rate of US $5,500.00 or its peso equivalent from
December 1, 1989 to January 19, 1998, computed as follows:

9 years x US$5,500.00 = US$49,500.00

4) To order respondents to pay jointly and severally the complainants other claims and benefits:

a) A brand new car (Galant super saloon) or its equivalent in the sum of P945,100.00;

b) Office rentals for the use of his residence situated at No. 38 Don Wilfredo St., Don Enrique Heights
Diliman, Quezon City, [from] 01 December 1989 to July 1996 at the rate of US$300.00 or its peso
equivalent to US$23,700.00;

c) Life insurance policy for US$100,000.00 from December 1, 1989 to December 31, 1997, or if the same
was not secured the premiums due thereon for the above period, the same to be computed as follows:

US$2,736.50 x 9 years = US$24,628.50

75
d) The services of the Law firm of Quasha Ancheta Pea and Nolasco be continued to be retained by the
two (2) companies to represent complainant in the illegal recruitment case before the Regional Trial
Court of Quezon City, Branch 96, docketed as Crim. Case No. Q-93-46421, entitled People of the
Philippines vs. Dr. Antonio B. Mangahas, et al., filed against him in connection with his employment by
Leong Hup, or in default thereof to pay the attorneys fees of the new counsel, that may be hired by the
complainant to defend him in the said case estimated in the sum of P200,000.00, more or less;

5) To order the respondents to pay jointly and severally the complainant moral damages in the sum of
P2.5 million and exemplary damages of P2.5 million;

6) To order the respondents to pay jointly and severally the complainant in the sum equivalent to ten
percent (10%) of the total claim as and for attorneys fees.

7) Respondents counterclaims are hereby dismissed for lack of merit.

SO ORDERED.[10]

On appeal by respondents to the National Labor Relations Commission (NLRC), the Decision of the Labor
Arbiter was modified by deleting the awards of (1) US$3,370.00 representing unpaid salary for the
period January 1, 1998 to January 19, 1998; (2) US$28,600.00 as vacation leave; (3) brand new car or its
equivalent in the sum of P945,100.00; (4) US$23,700.00 as office rentals for the period of December 1,
1989 to July 1996; (5) US$100,000.00 life insurance policy or the equivalent premium in the amount of
US$24,628.50; (6) P2.5 million as moral damages; and (7) P2.5 million as exemplary damages. The NLRC
likewise reduced the amount of petitioners separation pay to US$44,400.00 after adjusting its
computation based on the length of service of petitioner which it lowered from 9 years to 8 years; and
by limiting the basis of the 10% attorneys fees to the total of the awards of underpayment of salary
(P207,460.00), 13th month pay differential (P59,785.00) and cash equivalent of sick leave
(US$28,600.00) only, and excluding therefrom the award of separation pay in the amount of
US$44,400.00. The decretal portion of the said decision[11] states:

WHEREORE, premises considered, the Decision dated December 22, 1999 is hereby MODIFIED as
follows:

76
Respondents are hereby ordered to pay jointly and severally the complainant, the following:

(a) underpayment of salary as computed in the appealed Decision in the amount of P207, 460.00;

(b) 13th month pay differential as computed in the appealed Decision in the amount of P59,785.00;

(c) monetary equivalent of complainants sick leave as computed in the appealed Decision in the amount
of US$28,600.00;

(d) separation pay in the amount of US$44,000.00 as earlier computed in this Decision;

(e) attorneys fees equivalent to ten (10%) percent of the total award based on the awards representing
underpayment of salary, 13th month pay, [and] cash equivalent of sick leave.

Respondents are likewise directed to provide legal counsel to complainant as defendant in Criminal Case
No. Q-93-46421.

The awards of unpaid wages from June 1-19, 1998, vacation leave in the amount of US$28,600,
P945,000 for car, US23,700.00, for office rentals, life insurance policy in the amount of US$100,000.00
and moral and exemplary damages in the amount of 2.5 million pesos are hereby DELETED on grounds
above-discussed.

SO ORDERED.[12]

Petitioner filed a motion for reconsideration, however, the same was denied.[13] Undaunted, petitioner
filed a petition for certiorari with the Court of Appeals, which was dismissed on January 28, 2002 for
failure to attach to the petition the following: (1) complainants (petitioner) Position Paper filed before

77
the Labor Arbiter; (2) Decision dated 22 December 1992 penned by Labor Arbiter Ariel Cadiente Santos;
and (3) Memorandum of Appeal filed by the petitioner.[14]

On February 21, 2002, petitioner filed a motion for reconsideration, attaching thereto a copy of the
Labor Arbiters decision and the pleadings he failed to attach to the petition. The Court of Appeals,
however, denied petitioners motion for reconsideration. Hence, the instant petition based on the
following grounds:

1. COURT OF APPEALS COMMITTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR

IN EXCESS OF JURISDICTION, IN ISSUING THE QUESTIONED RESOLUTION DISMISSING THE PETITION FOR
CERTIORARI BASED ON TECHNICALITIES, THAT PETITIONER FAILED TO COMPLY WITH SEC. 1, RULE 65,
RULES OF CIVIL PROCEDURE FOR FAILURE TO ATTACH THREE (3) DOCUMENTS CONSISTING OF:

Complainants (petitioner) Position Paper filed before the labor arbiter;

Decision dated 22 December 1999 penned by Labor Arbiter Ariel Cadiente Santos; and

Memorandum of Appeal filed by the petitioner.

WHICH RESPONDENT COURT OF APPEALS CONSIDERED AS MATERIAL PORTIONS OF THE RECORD

DESPITE THE FACT THAT THE SUBJECT DOCUMENTS SOUGHT TO BE PRODUCED HAVE ACTUALLY BEEN
REPRODUCED OR SUBSTANTIALLY COVERED BY THE QUESTIONED JUDGMENT, ORDER OR RESOLUTION
FILED/SUBMITTED BEFORE IT.

2. COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN DISMISSING THE PETITION, AND
IN DENYING THE MOTION FOR RECONSIDERATION THEREOF ON THE GROUND THAT THERE IS NO
COGENT REASON FOR IT TO OVERTURN ITS DISMISSAL, DESPITE CLEAR AND CONVINCING EVIDENCE,
EXTANT ON THE RECORDS SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSIONS (NLRC)
DECISION AND RESOLUTION WERE FLAWED, A PALPABLE OR PATENT ERROR, WHICH MAY BE
SUMMARIZED, TO WIT:

78
(A) IN DECLARING THAT PETITIONER HAD RESIGNED FROM HIS EMPLOYMENT, AND NOT RETRENCHED
OR TERMINATED DESPITE A DOCUMENTARY EVIDENCE EXTANT ON THE RECORD ISSUED BY PRIVATE
RESPONDENTS DATED JANUARY 19, 1998 GIVING FORMAL NOTICE TO YOU (PETITIONER) OF YOUR
TERMINATION DUE TO RETRENCHMENT EFFECTIVE JANUARY 20, 1998.

(B) IN HOLDING AGAIN, AND DENYING PETITIONERS VALID CLAIMS DESPITE DOCUMENTARY EVIDENCE
OR THE EXISTENCE OF A CONTRACT OF EMPLOYMENT STATING THAT:

(1) EMPLOYEES (INCLUDING PETITIONER AS GENERAL MANAGER) AS A MATTER OF COMPANY POLICY

AND/OR PRACTICE) WHO ARE RETRENCHED ARE ENTITLED TO INCENTIVES INCLUDING 15-DAYS
VACATION LEAVE AND 15-DAYS SICK LEAVE WITH PAY; A FACT ADMITTED NO LESS BY PRIVATE
RESPONDENTS OWN WITNESS, MS. MA. ROWENA LOPEZ (FORMER PERSONNEL MANAGER OR
PHILMALAY) WHO EXECUTED AN AFFIDAVIT ADMITTING THE SAME.

(2) PETITIONERS ENTITLEMENT AS PER CONTRACT TO A BRAND NEW CAR (OR AT LEAST TO THE CASH
EQUIVALENT THEREOF); $100,000.00 LIFE INSURANCE POLICY (OR IN DEFAULT THEREOF AT LEAST TO
THE PREMIUMS THEREIN), AND OFFICE RENTALS FOR THE USE OF THE PETITIONERS PRIVATE RESIDENCE
AS OFFICE OF RESPONDENTS.

(3) PETITIONER IS ENTITLED, TO MORAL AND EXEMPLARY DAMAGES DUE TO PRIVATE RESPONDENTS
ACTS OF BAD FAITH IN REQUIRING PETITIONER TO EXECUTE A LETTER OF RESIGNATION, WHEN IN FACT
HE WAS ADMITTEDLY TERMINATED THRU RETRENCHMENT, AND ITS REFUSAL TO PAY HIM HIS VALID
CLAIMS, DESPITE HIS CONTRACT OF EMPLOYMENT, COMPANY POLICY, AND LETTER OF TERMINATION
ISSUED BY PRIVATE RESPONDENTS.

(4) PETITIONERS ENTITLEMENT TO 10% OF THE TOTAL AMOUNT OF THE AWARD OF ATTORNEYS FEES AS
PROVIDED FOR BY LAW AND AS PER PETITIONERS CONTRACT WITH COUNSEL, AND NOT ONLY 10% OF
THE TOTAL AWARD REPRESENTING UNDER PAYMENT OF SALARY, 13TH MONTH PAY, AND CASH
EQUIVALENT OF SICK LEAVE AND IN ORDERING PRIVATE RESPONDENT TO PROVIDE LEGAL COUNSEL TO
PETITIONER IN CRIM. CASE NO. Q-93-46421, WHEN THE SUBJECT CASE HAD ALREADY BEEN DISMISSED
AT THE EXPENSE OF PETITIONER WHO HAD PREVIOUSLY HIRED HIS OWN COUNSEL OF CHOICE FOR THE
PURPOSE.

79
The issues for resolution are: (1) whether or not the Court of Appeals erred in dismissing the petition;
and (2) whether or not the decision of the Labor Arbiter should be reinstated.

The allowance of the petition on the ground of substantial compliance with the Rules is not a novel
occurrence in our jurisdiction. As consistently held by the Court, rules of procedure should not be
applied in a very technical sense, for they are adopted to help secure, not override, substantial justice.
[15] In Ramos v. Court of Appeals,[16] the Court of Appeals dismissed a petition for review of the
decision of the Regional Trial Court because the petitioner failed to attach to the petition a certified true
copy of the Metropolitan Trial Courts decision in addition to the certified true copy of the assailed
decision of the RTC. Holding that the Court of Appeals should have given due course to the petition
considering that petitioner subsequently submitted a certified true copy of the decision of the MeTC, we
held:

Petitioner is right that the MeTCs decision cannot be considered a disputed decision. The phrase is the
equivalent of ruling, order or decision appealed from in Rule 32, 2 of the 1964 Rules made applicable to
appeals from decisions of the then Courts of First Instance to the Court of Appeals by R.A. No. 296, as
amended by R.A. No. 5433. Since petitioner was not appealing from the decision of the MeTC in her
favor, she was not required to attach a certified true copy but only a true or plain copy of the aforesaid
decision of the MeTC. The reason is that inclusion of the decision is part of the requirement to attach to
the petition for review other material portion of the record as would support the allegations of the
petition. Indeed, petitioner referred to the MeTC decision in many parts of her petition for review in the
Court of Appeals for support of her theory.

Nonetheless, the Court of Appeals should have reconsidered its dismissal of petitioners appeal after
petitioner submitted a certified true copy of the MeTCs decision. It was clear from the petition for
review that the RTC incurred serious errors in awarding damages to private respondents which were
made without evidence to support the award and without any explanation[17]

In Jaro v. Court of Appeals,[18] we applied the rule on substantial compliance because the petitioner
amended his defective petition and attached thereto the relevant annexes certified according to the
rules. Thus

There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant
may call for the relaxation of the rules of procedure. In Cusi-Hernandez vs. Diaz and Piglas-Kamao vs.
National Labor Relations Commission, we ruled that the subsequent submission of the missing

80
documents with the motion for reconsideration amounts to substantial compliance. The reasons behind
the failure of the petitioners in these two cases to comply with the required attachments were no longer
scrutinized. What we found noteworthy in each case was the fact that the petitioners therein
substantially complied with the formal requirements[19]

The same leniency should be applied to the instant case considering that petitioner subsequently
submitted with his motion for reconsideration the certified true copy of the Labor Arbiters decision, the
complainants position paper and the respondents memorandum of appeal. Clearly, petitioner had
demonstrated willingness to comply with the requirements set by the rules. If we are to apply the rules
of procedure in a very rigid and technical sense, as the Court of Appeals did in this case, the ends of
justice would be defeated.

The pleadings and documents filed extensively discussed the issues raised by the parties. Such being the
case, there is sufficient basis to resolve the instant controversy.[20] Labor laws mandate the speedy
disposition of cases, with the least attention to technicalities but without sacrificing the fundamental
requisites of due process.[21] Remanding the case to the Court of Appeals will only frustrate speedy
justice and, in any event, would be a futile exercise, as in all probability the case would end up with this
Court.[22] We shall thus rule on the substantial claims of the parties.

Was the termination of petitioners employment caused by retrenchment or by voluntary resignation?

The Court finds that petitioners dismissal from service was due to retrenchment. This is evident from the
termination letter sent by Philmalay to petitioner, to wit

We regret to inform you that in view of the prevailing market conditions and the continuous losses
being incurred by the company, the management has decided to cut down on expenses and prevent
further losses through retrenchment of some of our personnel effective January 19, 1998.

In compliance with the requirement of the law, this will serve as a formal notice to you of your
termination due to retrenchment effective January 20, 1998. To provide you with sufficient time to seek
alternative employment, you need not report for work (unless otherwise requested) starting January 20,
1998. Notwithstanding the above mentioned affectivity date, you may come down to the office and
receive your separation benefits pursuant to the Labor Code[23]

81
While it is true that petitioner tendered his resignation letter to respondents requesting that he be given
the same benefits granted by the company to resigned/retrenched employees, there is no showing that
respondents accepted his resignation. Acceptance of a resignation tendered by an employee is
necessary to make the resignation effective.[24] No such acceptance, however, was shown in the instant
case. What appears in the record is a letter terminating the services of petitioner due to retrenchment
effective January 20, 1998. Verily, said letter should be interpreted as a non-acceptance of petitioners
resignation effective December 31, 1997. As correctly pointed out by the Labor Arbiter, if respondents
considered petitioner resigned as of December 31, 1997, then there would be no need to retrench him.

The length of service of petitioner, which the NLRC correctly reduced to 8 years, as well as the solidary
liability of respondent corporations are no longer assailed here. Whether petitioner is considered
resigned on December 31, 1997 or retrenched on January 20, 1998, his length of employment reckoned
from August 24, 1989 would still be 8 years. Moreover, respondents did not appeal from the decision of
the NLRC and in fact sought its affirmance in their Opposition to the motion for reconsideration[25] and
Comment to the motion for reconsideration[26] filed before the NLRC and the Court of Appeals,
respectively. So also, petitioner is estopped from claiming that he was illegally dismissed and that his
retrenchment was without basis. His request for benefits granted to retrenched employees during such
time when respondent was in the process of retrenching its employees is tantamount to a recognition of
the existence of a valid cause for retrenchment. What remains to be resolved by the Court is the validity
of the NLRCs deletion/modification of the awards of (1) unpaid salary; (2) vacation leave; (3) car and
insurance policy/premiums; (4) moral and exemplary damages; (5) reimbursement for expenses for legal
services; (6) rental payment; and (7) attorneys fees.

As regards the award of unpaid salary, the NLRC was correct in holding that petitioner is not entitled to
compensation from January 1, 1998 to January 19, 1998, because he was not able to prove that he
rendered services during said period. In the same vein, there is no basis in awarding moral and
exemplary damages, inasmuch as respondents were not shown to have acted in bad faith in initially
refusing to award separation pay equivalent to 1 month salary for every year of service. Respondents
even offered to pay petitioner separation pay, albeit in an amount not acceptable to petitioner. Moral
damages are recoverable only where the act complained of is tainted by bad faith or fraud, or where it is
oppressive to labor, and done in a manner contrary to morals, good customs, or public policy. Exemplary
damages may be awarded only if the act was done in a wanton, oppressive, or malevolent manner.[27]
None of these circumstances exist in the present case.

The NLRC also correctly ruled that the car and insurance benefits are granted only during the course of
employment; hence, they should not be part of petitioners separation package. Likewise, petitioners

82
claim for payment of rental for the use of his house as office of Philmalay should be denied for having
been ventilated in the wrong forum. Not all money claims that may be asserted by an employee against
his employer are within the jurisdiction of the NLRC. Money claims of workers which fall within the
jurisdiction of Labor Arbiters are those which arise out of employer-employee relationship. Obviously,
the demand for rental payment is not a labor dispute; rather, it is based on contractual relations
independent of employer-employee relationship. Hence, the jurisdiction thereon is with the regular
courts.[28]

Since respondents did not appeal from the decision of the NLRC, it is presumed that they are satisfied
with the adjudications therein, including the order of NLRC directing them to provide legal services to
petitioner in the illegal recruitment case filed against the latter while he was still employed by
respondents. This is in accord with the doctrine that a party who has not appealed cannot obtain from
the appellate court any affirmative relief other than the ones granted in the appealed decision.[29]
Nonetheless, respondents cannot be ordered to reimburse the amount of P200,000.00 for the legal
services of the law firm allegedly hired by petitioner because he failed to establish that he indeed hired
the services of a law firm and that he spent P200,000.00 as a consequence thereof.

Petitioner is, however, entitled to the award of vacation leave as part of respondents retrenchment
incentives. In granting sick leave but deleting vacation leave benefits, the NLRC based its ruling on the
affidavit of one Ms. Rowena Lopez, a former personnel of Philmalay, viz:

3. That based on company policy and/or practice the rank-and-file employees are entitled to 15-days
vacation leave and 15-days sick leaves. However, the vacation leave must be availed of within the year
or applied to the remaining period of employment for those who resigned or go on terminal leave. In
case of sick leaves all unused sick leaves are also commutable to cash;

4. That employees who were retrenched are entitled to the following incentives:

(a) One (1) month additional leave with pay effective after their last day of employment to enable them
to look for a new job;

(b) Plus one (1) month separation pay for every year of service; and

83
(c) 15-days vacation leave and 15-days sick leave with pay as stated in paragraph 3 hereof.[30]

The foregoing expressly states that a retrenched employee is entitled to 15-day vacation leave.
Paragraph 4 is the retrenchment package granted to retrenched employees, whereas paragraph 3 refers
to the feasibility of commutation of unused sick and vacation leaves. Except for the sentence entitling
employees to vacation and sick leaves, the last 2 sentences in paragraph 3 have nothing to do with the
retrenchment benefits in paragraph 4. Note that the 15-day vacation and sick leave with pay in
paragraph 4(c) are not qualified by the word unused. The 15-day vacation and sick leaves are granted to
retrenched employees as part of the retrenchment benefits regardless of whether or not they have
unused sick and vacation leaves at the time of the retrenchment. Moreover, the applicability of the said
provisions to petitioner was not disputed by respondents. They even invoked the same in manifesting
conformity to the deletion by the NLRC of the award of 15-day vacation leave for every year of service.
At any rate, any ambiguity therein must be resolved strictly against the respondents, who drafted these
provisions.[31] Hence, petitioner is entitled not only to 15 days sick leave but also to 15 days vacation
leave with pay

The Labor Arbiters computation of petitioners 15-day sick leave pay must be modified. The NLRC, which
affirmed the Labor Arbiters decision, reduced petitioners number of years of service from 9 to 8 years
but it did not make the corresponding adjustment in the determination of petitioners sick leave pay
which used 9 years as the basis in the computation thereof. Accordingly, the awards of 15-day sick leave
and 15-day vacation leave for every year of service must be computed using 8 years as its basis.

Finally, the award of attorneys fees must also be modified. In Traders Royal Bank Employees Union-
Independent v. National Labor Relations Commission,[32] it was held that there are two commonly
accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary concept,
an attorneys fee is the reasonable compensation paid to a lawyer by his client for the legal services he
has rendered to the latter. The basis of this compensation is the fact of his employment by and his
agreement with the client. In its extraordinary concept, attorneys fees are deemed indemnity for
damages ordered by the court to be paid by the losing party in a litigation. The instances where these
may be awarded are those enumerated in Article 2208 of the Civil Code, specifically par. 7 thereof which
pertains to actions for recovery of wages, and is payable not to the lawyer but to the client, unless they
have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.
The extraordinary concept of attorneys fees is the one contemplated in Article 111 of the Labor Code,
which provides:

84
Art. 111. Attorneys fees. (a) In cases of unlawful withholding of wages, the culpable party may be
assessed attorneys fees equivalent to ten percent of the amount of wages recovered

The afore-quoted Article 111 is an exception to the declared policy of strict construction in the awarding
of attorneys fees. Although an express finding of facts and law is still necessary to prove the merit of the
award, there need not be any showing that the employer acted maliciously or in bad faith when it
withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as
in this case.[33]

In carrying out and interpreting the Labor Code's provisions and its implementing regulations, the
employees welfare should be the primordial and paramount consideration. This kind of interpretation
gives meaning and substance to the liberal and compassionate spirit of the law as provided in Article 4
of the Labor Code which states that [a]ll doubts in the implementation and interpretation of the
provisions of [the Labor] Code including its implementing rules and regulations, shall be resolved in
favor of labor, and Article 1702 of the Civil Code which provides that [i]n case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living for the
laborer.[34]

In the case at bar, what was withheld from petitioner was not only his salary, vacation and sick leave
pay, and 13th month pay differential, but also his separation pay. Hence, pursuant to current
jurisprudence, separation pay must be included in the basis for the computation of attorneys fees.
Petitioner is entitled to attorneys fees equivalent to 10% of his total monetary award.[35]

WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The assailed Resolutions
dated January 28, 2002 and July 22, 2002 of the Court of Appeals in CA-G.R. SP No. 67431, are REVERSED
and SET ASIDE. The Decision of the National Labor Relations Commission in NLRC NCR CA 023679-2000,
is MODIFIED. In addition to the awards of underpayment of salary, 13th month pay differential, sick
leave pay and separation pay, respondents are ordered to pay petitioner vacation leave pay and 10%
attorneys fees, the basis of which shall be the total monetary award. Petitioners vacation leave and sick
leave pay shall be computed on the basis of his 8 years of service with respondents. For this purpose,
the case is ordered REMANDED to the Labor Arbiter for the computation of the amounts due petitioner.

SO ORDERED.

85
G & M PHILIPPINES, INC., Petitioner,- versus - ROMIL V. CUAMBOT, Respondent.

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

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision[1] of
the Court of Appeals (CA) in CA-G.R. SP No. 64744, as well as the Resolution[2] dated February 20, 2004
denying the motion for reconsideration thereof.

The antecedent facts are as follows:

On November 7, 1994, respondent Romil V. Cuambot applied for deployment to Saudi Arabia as a car
body builder with petitioner G & M Philippines, Inc., a duly licensed placement and recruitment agency.
Respondents application was duly processed and he later signed a two-year employment contract to
work at the Al Waha Workshop in Unaizah City, Gassim, Kingdom of Saudi Arabia. He left the country on
January 5, 1995. However, respondent did not finish his contract and returned to the Philippines barely
six months later, on July 24, 1995. On July 26, 1995, he filed before the National Labor Relations
Commission (NLRC) a complaint for unpaid wages, withheld salaries, refund of plane ticket and
repatriation bond, later amended to include illegal dismissal, claim for the unexpired portion of his
employment contract, actual, exemplary and moral damages, and attorneys fees. The complaint was
docketed as NLRC-NCR Case No. 00-07-05252-95.

Respondent narrated that he began working for Mohd Al Motairi,[3] the President and General Manager
of the Al Waha Workshop, on January 8, 1995. Along with his Filipino co-workers, he was subjected to
inhuman and unbearable working conditions, to wit:

86
1. [He] was required to work from 7:00 oclock in the morning to 10:00 oclock in the evening
everyday, except Friday, or six (6) hours overtime work daily from the usual eight (8) working hours per
day.

2. [He] was never paid x x x his monthly basic salary of 1,200 [Riyals] including his overtime pay for
the six (6) hours overtime work he rendered every working day during his work in Saudi Arabia except
for the amount of 100 [Riyals] given every month for his meal allowance;

3. [He] was subjected to serious insult by respondent Muthiri everytime he asked or demanded for
his salary; and,

4. [S]ome of complainants letters that were sent by his family were not given by respondent Muthiri
and/or his staff x x x.[4]

When respondent asked Motairi for his salary, he was told that since a huge sum had been paid to the
agency for his recruitment and deployment, he would only be paid after the said amount had already
been recovered. He was also told that his salary was only 800 Saudi Riyals (SAR) per month, in contrast
to the SAR1200 that was promised him under the contract. Motairi warned that he would be sent home
the next time he demanded for his salary. Due to his familys incessant letters asking for financial
support, however, respondent mustered the courage to again demand for his salaries during the second
week of July 1996. True to his word, Motairi ordered him to pack up and leave. He was able to purchase
his plane ticket only through the contributions of his fellow Filipinos. Motairi even accompanied him to
the airport when he bought his plane ticket. In the meantime, his wife had been making inquiries about
him.

To corroborate his claims, respondent submitted the following documents: an undated letter[5] he had
written addressed to the Philippine Labor Attach in Riyadh, with Arabic translation;[6] his wifes letter[7]
dated June 28, 1995 addressed to the Gulangco Monteverde Agency, Manila Head Office, asking for a
favor to help [her] husband to come home as early as possible; a fax message[8] dated July 17, 1995
from a representative of the Land Bank of the Philippines (LBP) to a

counterpart in Riyadh, asking for assistance to locate respondent;[9] and the

87
reply[10] from the Riyadh LBP representative requesting for contact numbers to facilitate
communication with respondent.

Respondent further claimed that his employers actuations violated Articles 83 and 103 of the Labor
Code. While he was entitled to terminate his employment in accordance with Article 285 (b) due to the
treatment he received, he did not exercise this right. He was nevertheless illegally dismissed by his
employer when he tried to collect the salaries due him. Respondent further claimed that the reduction
of his monthly salary from SAR1,200 to SAR800 and petitioners failure to furnish him a copy of the
employment contract before his departure amounted to prohibited practices under Article 34 (i) and (k)
of the Labor Code.

Respondent prayed for the following relief:

WHEREFORE, premises considered, complainant most respectfully prays unto this Honorable Office that
the instant complaint be given due course and that a decision be rendered in his favor and against

respondents G & M (Phils.), Inc., Alwaha (sic) Workshop and/or Muhamd (sic) Muthiri, as follows:

(1) Ordering the respondents to pay, jointly and severally, complainant the unpaid salaries and
overtime pay in the amounts of P61,560.00 and P66,484.80, respectively, including interests, until the
same will be fully paid;

(2) Ordering the respondents to pay, jointly and severally, complainant[s] salary for the unexpired
portion of the contract in the amount of P184,680.00, including interests, until the same will be fully
paid;

(3) Ordering the respondents to pay, jointly and severally, complainant[s] actual expenses which he
incurred in applying for the job, including expenses in leaving for the job, including expenses in leaving
for Saudi Arabia and plane ticket, as well as repatriation bond and incidental expenses in going home to
the Philippines in the amounts of P49,000.00 and P20,000.00, respectively, including interests, until the
same will be fully paid;

88
(4) Ordering the respondents to pay, jointly and severally, complainant moral damages in the
amount of P150,000.00 and exemplary damages in the amount of P150,000.00, including interests, until
the same will be fully paid;

(5) Ordering the respondents to pay, jointly and severally, complainant for and as attorneys fees in
the amount of P68,172.48 or the amount equivalent to 10% of the total amount of the foregoing claims
and damages that may be awarded by the Honorable Office to the complainant.[11]

In its position paper, petitioner alleged that respondent was deployed for overseas work as car body
builder for its Principal Golden Wings Est. for General Services and Recruitment in Saudi Arabia for an
employment period of 24 months, with a monthly salary of US$400.00.[12] It insisted that respondent
was religiously paid his salaries as they fell due. After working for a little over seven months, respondent
pleaded with his employer to be allowed to return home since there were family problems he had to
settle personally. Respondent even submitted a resignation letter[13] dated July 23, 1995.

To support its claim that respondent had been paid his salaries as they fell due, petitioner submitted in
evidence copies of seven payslip[14] authenticated by the Philippine Labor Attach in Riyadh, Saudi
Arabia. Petitioner asserted that since respondent only worked for a little over seven months and did not
finish his contract, he should pay the cost of the plane ticket. It pointed out that according to the
standard employment contract, the employer would provide the employee with a free plane ticket for
the flight home only if the worker finishes his contract.

Respondent countered that his signatures in the purported payslips were forged. He denied having
received his salaries for the said period, except only for the SAR100 as monthly allowance. He pointed
out that the authentication of the alleged pay slips and resignation letter before the labor attach in
Riyadh is immaterial, since the documents themselves were falsified.

Respondent further claimed that petitioner required him to pay a P10,000.00 placement fee and that he
had to borrow P2,000.00 from a relative. He was then told that the amount would be considered as an
advance payment and that the balance would be deducted from his salary. He was not, however, given
any receipt. He insisted that the employment contract which he signed indicated that he was supposed
to receive a monthly salary of SAR1,200 for working eight hours a day, excluding overtime pay. He was
repeatedly promised to be furnished a copy of the contract and was later told that it would be given to
his wife, Minda. However, she was also given the run-around and was told that the contract had already
been given to her husband.

89
To counter the allegation of forgery, petitioner claimed that there was a great possibility that
respondent had changed his signature while abroad so that he could file a complaint for illegal dismissal
upon his return. The argument that the stroke and handwriting on the payslip was written by one and
the same person is mere conjecture, as respondent could have requested someone, i.e., the cashier, to
prepare the resignation letter for him. While it is the employer who fills up the pay slip, respondent
could have asked another employee to prepare the resignation letter, particularly if he (respondent) did
not know how to phrase it himself. Moreover, it could not be presumed that the payslip and resignation
letter were prepared by one and the same person, as respondent is not a handwriting expert. Petitioner
further pointed out that respondent has different signatures, not only in the pleadings submitted before
the Labor Arbiter, but also in respondents personal documents.

On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of respondent on the following
ratiocination:

What convinced this Arbitration Branch about the unreliability of the complainants signature in the
payslip is the close semblance of the handwritings in the payslips and the handwritings in the purported
handwritten resignation of the complainant. It unmistakably appears to this Arbitration Branch that the
payslips as well as the handwritten letter-resignation were prepared by one and the same person. If it
were true that the handwritten letter-resignation was prepared by the complainant, it follows that he
also prepared the payslips because the handwritings in both documents are exactly the same and
identical. But [this] is quite unbelievable that complainant himself as the payee prepared the payslips
with the corresponding entries therein in his own handwriting. Under the circumstances, the only logical
conclusion is that both the payslips and the handwritten letter-resignation were prepared and signed by
one and the same person definitely not the complainant.

With the foregoing findings and conclusions, this Arbitration Branch is of the well-considered view that
complainant was not paid his salaries from January 5, 1995 up to July 23, 1995 and that he was
unjustifiably dismissed from his employment when he repeatedly demanded for his unpaid salaries.
Respondents are, therefore, liable to pay the complainant his salaries from January 5, 1995 up to July
23, 1995 which amount to US$2,640.00 (US$400 x 6.6 mos). Further, respondents are also liable to the
complainant for the latters salaries for the unexpired portion of his contract up to the maximum of three
(3) months pursuant to Section 10 of RA 8042, which amount to US$1,200.00. Respondents must also
refund complainants plane fare for his return flight. And finally, being compelled to litigate his claims, it
is but just and x x x that complainant must be awarded attorneys fees at the rate of ten percent (10%) of
the judgment award.

90
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered ordering the
respondents to pay complainant the aggregate sum of US$3,840.00 or its equivalent in Philippine
Currency at the exchange rate prevailing at the time of payment, and to refund complainants plane fare
for his return flight. Further, respondents are ordered to pay complainant attorneys fees at the rate of
Ten percent (10%) of the foregoing judgment award.[15]

Petitioner appealed the Decision of the Labor Arbiter to the NLRC, alleging that the Labor Arbiter, not
being a handwriting expert, committed grave abuse of discretion amounting to lack of jurisdiction in
finding for respondent. In its Decision[16] dated December 9, 1997, the NLRC upheld this contention and
remanded the case to the Arbitration Branch of origin for referral to the government agency concerned
for calligraphy examination of the questioned documents.[17]

The case was then re-raffled to Labor Arbiter Enrico Angelo Portillo. On September 11, 1998, the parties
agreed to a resetting to enable petitioner to secure the original copies of documents from its foreign
principal. However, on December 9, 1998, the parties agreed to submit the case for resolution based on
the pleadings and on the evidence on record.

This time, the complaint was dismissed for lack of merit. According to Labor Arbiter Portillo, aside from
respondents bare allegations, he failed to substantiate his claim of poor working conditions and long
hours of employment. The fact that he executed a handwritten resignation letter is enough evidence of
the fact that he voluntarily resigned from work. Moreover, respondent failed to submit any evidence to
refute the pay slips duly signed and authenticated by the labor attach in Saudi Arabia, inasmuch as their
probative value cannot be impugned by mere self-serving allegations. The Labor Arbiter concluded that
as between the oral allegations of workers that they were not paid monetary benefits and the
documentary evidence presented by employer, the latter should prevail. [18]

Respondent appealed the decision before the NLRC, alleging that the Labor Arbiter failed to consider the
genuineness of the signature which appears in the purported resignation letter dated July 23, 1995, as
well as those that appear in the seven pay slips. He insisted that these documents should have been
endorsed to the National Bureau of Investigation Questioned Documents Division or the Philippine
National Police Crime Laboratory for calligraphy examination.

The NLRC dismissed the appeal for lack of merit in a Resolution[19] dated December 27, 2000. It held
that the questioned documents could not be endorsed to the agency concerned since mere photocopies
had been submitted in evidence. The records also revealed that petitioner had communicated to the

91
foreign employer abroad, who sent the original copies, but there was no response from respondent. It
also stressed that during the December 9, 1998 hearing, the parties agreed to submit the case for
resolution on the basis of the pleadings and the evidence on record; if respondent had wanted to have
the documents endorsed to the NBI or the PNP, he should have insisted that the documents be
examined by a handwriting expert of the government. Thus, respondent was estopped from assailing
the Labor Arbiters ruling.

Unsatisfied, respondent elevated the matter to the CA via petition for certiorari. He pointed out that he
merely acceded to the submission of the case for resolution due to the inordinate delays in the case.
Moreover, the questioned documents were within petitioners control, and it was petitioner that
repeatedly failed to produce the original copies.

The CA reversed the ruling of the NLRC. According to the appellate court, a visual examination of the
questioned signatures would instantly reveal significant differences in the handwriting movement,
stroke, and structure, as well as the quality of lines of the signatures; Labor Arbiter Portillo committed
patent error in examining the signatures, and it is the decision of Labor Arbiter De Vera which must be
upheld. The CA also pointed out the initial ruling of the NLRC (Second Division) dated December 9, 1997
which set aside the earlier decision of Labor Arbiter De Vera included a special directive to the
Arbitration Branch of origin to endorse the questioned documents for calligraphy examination.
However, respondent Cuambot failed to produce original copies of the documents; hence, Labor Arbiter
Portillo proceeded with the case and ruled in favor of petitioner G.M.Phils. The dispositive portion of the
CA ruling reads:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED. Accordingly, the assailed
Resolutions dated 27 December 2000 and 12 February 2001, respectively, of the NLRC Second Division
are hereby SET ASIDE and the Decision dated 20 February 1997 rendered by Labor Arbiter Jose De Vera
is hereby REINSTATED.[20]

Petitioner filed a motion for reconsideration, which the CA denied for lack of merit in its Resolution[21]
dated February 20, 2004.

Hence, the present petition, where petitioner claims that

92
THE COURT OF APPEALS GRAVELY ERRED ON A MATTER OF LAW IN HOLDING THAT LABOR ARBITER
ENRICO PORTILLO GRAVELY ABUSED HIS DISCRETION WHEN HE HELD THAT THE SIGNATURES
APPEARING ON THE QUESTIONED DOCUMENTS ARE THOSE OF THE PETITIONER.[22]

Petitioner points out that most of the signatures which Labor Arbiter De Vera used as standards for
comparison with the signatures appearing on the questioned documents were those in the pleadings
filed by the respondent long after the questioned documents had been supposedly signed by him. It
claims that respondent affixed his signatures on the pleadings in question and intentionally made them
different from his true signature so that he could later on conveniently impugn their authenticity.
Petitioner claims that had Labor Arbiter De Vera taken pains in considering these circumstances, he
could have determined that respondent may have actually intentionally given a different name and
slightly changed his signature in his application, which name and signature he used when he signed the
questioned letter of resignation and payslips, only to conveniently disown the same when he came back
to the country to file the present case.[23] Thus, according to petitioner, the CA clearly committed a
palpable error of law when it reversed the ruling of the NLRC, which in turn affirmed Labor Arbiter
Portillos decision.

For his part, respondent contends that petitioners arguments were already raised in the pleadings filed
before Labor Arbiter De Vera which had already been passed upon squarely in the Labor Arbiters
Decision of January 30, 1997.

The determinative issues in this case are essentially factual in nature - (a) whether the signatures of
respondent in the payslips are mere forgeries, and (b) whether respondent executed the resignation
letter. Generally, it is not our function to review findings of fact. However, in case of a divergence in the
findings and conclusions of the NLRC on the one hand, and those of the Labor Arbiter and the CA on the
other, the Court may examine the evidence presented by the parties to determine whether or not the
employee was illegally dismissed or voluntarily resigned from employment.[24] The instant case thus
falls within the exception.

We have carefully examined the evidence on record and find that the petition must fail.

In its Decision[25] dated December 9, 1997, the NLRC had ordered the case remanded to the Labor
Arbiter precisely so that the questioned documents purportedly signed/executed by respondent could

93
be subjected to calligraphy examination by experts. It is precisely where a judgment or ruling fails to
make findings of fact that the case may be remanded to the lower tribunal to enable it to determine
them.[26] However, instead of referring the questioned documents to the NBI or the PNP as mandated
by the Commissions ruling, Labor Arbiter Portillo proceeded to rule in favor of petitioner, concluding
that respondents signatures were not forged, and as such, respondents separation from employment
was purely voluntary. In fine, then, the Labor Arbiter gravely abused his discretion when he ruled in
favor of petitioner without abiding by the Commissions directive.

We note, however, that a remand of the case at this juncture would only result in unnecessary delay,
especially considering that this case has been pending since 1995. Indeed, it is this Courts duty to settle,
whenever possible, the entire controversy in a single proceeding, leaving no root or branch to bear the
seeds of future litigation.[27] Hence, the case shall be fully resolved on its merits.

We find that petitioners failure to submit the original copies of the pay slips and the resignation letter
raises doubts as to the veracity of its claim that they were actually signed/penned by respondent. The
failure of a party to produce the original copy of the document which is in issue has been taken against
such party, and has even been considered as a mere bargaining chip, a dilatory tactic so that such party
would be granted the opportunity to adduce controverting evidence.[28] In fact, petitioner did not even
present in evidence the original copy of the employment contract, much less a machine copy, giving
credence to respondents claim that he was not at all given a copy of the employment contract after he
signed it. What petitioner presented was a mere photocopy of the OCW Info Sheet[29] issued by the
Philippine Overseas Employment Administration as well as the Personal Data Sheet[30] which
respondent filled up. It bears stressing that the original copies of all these documents, including the
employment contract, were in the possession of petitioner, or, at the very least, petitioners principal.

Moreover, as correctly noted by the CA, the opinions of handwriting experts, although helpful in the
examination of forged documents because of the technical procedure involved in the analysis, are not
binding upon the courts.[31] As such, resort to these experts is not mandatory or indispensable to the
examination or the comparison of handwriting. A finding of forgery does not depend entirely on the
testimonies of handwriting experts, because the judge must conduct an independent examination of the
questioned signature in order to arrive at a reasonable conclusion as to its authenticity.[32] No less than
Section 22, Rule 132 of the Rules of Court explicitly authorizes the court, by itself, to make a comparison
of the disputed handwriting with writings admitted or treated as genuine by the party against whom the
evidence is offered or proved to be genuine to the satisfaction of the judge. Indeed, the authenticity of
signatures is not a highly technical issue in the same sense that questions concerning, e.g., quantum
physics or topology, or molecular biology, would constitute matters of a highly technical nature. The
opinion of a handwriting expert on the genuineness of a questioned signature is certainly much less
compelling upon a judge than an opinion rendered by a specialist on a highly technical issue.[33]

94
Even a cursory perusal of the resignation letter[34] and the handwritten pay slips will readily show that
they were written by only one person. A mere layman will immediately notice that the strokes and
letters in the documents are very similar, if not identical, to one another. It is also quite apparent from a
comparison of the signatures in the pay slips that they are inconsistent, irregular, with uneven and
faltering strokes.

We also find it unbelievable that after having waited for so long to be deployed to Saudi Arabia and with
the hopes of opportunity to earn a better living within his reach, respondent would just suddenly decide
to abandon his work and go home due to family problems. At the very least, respondent could have at
least specified the reason or elaborated on the details of such an urgent matter so as not to jeopardize
future employment opportunities.

That respondent also filed the complaint immediately gives more credence to his claim that he was
illegally dismissed. He arrived in the Philippines on July 24, 1995, and immediately filed his complaint for
illegal dismissal two days later, on July 26, 1995.

We are not impervious of petitioners claim that respondent could have asked another person to execute
the resignation letter for him. However, petitioner failed to present even an affidavit from a
representative of its foreign principal in order to support this allegation.

Indeed, the rule is that all doubts in the implementation and the interpretation of the Labor Code shall
be resolved in favor of labor,[35] in order to give effect to the policy of the State to afford protection to
labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers, and to assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work.[36] We
reiterate the following pronouncement in Nicario v. National Labor Relations Commission:[37]

It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in the formers favor. The policy is to extend
the doctrine to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection of labor.

95
Moreover, one who pleads payment has the burden of proving it. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and other similar documents which will show
that overtime, differentials, service incentive leave, and other claims of workers have been paid are not
in the possession of the worker but in the custody and absolute control of the employer. Thus, the
burden of showing with legal certainty that the obligation has been discharged with payment falls on the
debtor, in accordance with the rule that one who pleads payment has the burden of proving it.[38] Only
when the debtor introduces evidence that the obligation has been extinguished does the burden shift to
the creditor, who is then under a duty of producing evidence to show why payment does not extinguish
the obligation.[39] In this case, petitioner was unable to present ample evidence to prove its claim that
respondent had received all his salaries and benefits in full.

IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. The Decision of the Court of
Appeals in CA-G.R. SP No. 64744 is AFFIRMED. Costs against the petitioners.

SO ORDERED

[G.R. No. 158311. November 17, 2004]

HUNTINGTON STEEL PRODUCTS, INC. & SERAFIN NG, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, JAIME ORBASE, REGINO JARDIN, PAULINO JAVIERTO, EDGAR JARDIN, RAMON N. BANA,
ANTONIO MAGNO, RICO JARDIN, CELESTINO JARDIN, JR., PEDRO JARDIN, JR., AGUSTIN GASTON,
NAZARIO JAVIERTO, JR., and MARCIANO GLINOGO, respondents.

DECISION

96
QUISUMBING, J.:

For review on certiorari is the Decision,[1] dated January 22, 2003, in CA-G.R. SP No. 72665, and the
Resolution,[2] dated May 14, 2003, denying petitioners Motion for Reconsideration. The Court of
Appeals affirmed the Order dated April 15, 2002 of the National Labor Relations Commission (NLRC)
Second Division reversing the Labor Arbiters Resolution dated June 13, 2001, which had dismissed
herein private respondents complaint for lack of a certificate of non-forum shopping.

The facts of the case are as follows:

The instant petition stemmed from the illegal dismissal complaint with claim for damages initiated by
respondent Jaime Orbase and eleven others against petitioners Huntington Steel Products, Inc. and its
President, Serafin Ng. Private respondents filed an amended complaint to include Everson Metal Works
as a party, being the original employer of private respondents before it changed its business name to
Huntington Steel Products, Inc. Thereafter, private respondents filed their position paper.

Petitioners also filed their Position Paper with Motion to Dismiss assailing the private respondents
failure to comply with the requirements of Revised Circular No. 28-91[3] as implemented by Supreme
Court Administrative Circular No. 04-94.[4] They averred that the Complaint which private respondents
filed in the Arbitration Branch of the NLRC lacked a certification of non-forum shopping. Petitioners
Motion to Dismiss was granted by the Labor Arbiter in his Decision[5] dated June 13, 2001.

Private respondents appealed before the NLRC. On April 15, 2002, the NLRC promulgated an Order
which reversed the Decision of the Labor Arbiter as follows:

We are [of] the considered view therefore that defects should be corrected in the proceedings below,
for which reason, the instant case should be remanded to the Arbitration Branch of origin.

WHEREFORE, the instant case is hereby remanded to the Labor Arbiter of origin for further appropriate
proceedings.

97
SO ORDERED.[6]

Aggrieved, petitioners moved for a reconsideration of the Order, but public respondent in its Resolution
dated July 11, 2002, denied the motion.

Petitioners filed a petition for certiorari before the Court of Appeals, alleging that the NLRC gravely
abused its discretion amounting to a lack or an excess of jurisdiction when the NLRC remanded the case
for further proceedings, in effect reversing the Labor Arbiters Order, dated July 13, 2001. Petitioners
insisted that the requirement of certification of non-forum shopping is mandatory, and non-compliance
with said requirement warrants the dismissal of the case.

On January 22, 2003, the Court of Appeals promulgated its Decision denying the petition, to wit:

WHEREFORE, FOREGOING PREMISES CONSIDERED, this petition is DENIED. The Order dated April 15,
2002 of public respondent in NLRC CA No. 028847-01 (NLRC NCR-00-03-02297-99) entitled Jaime
Orbase, et al. vs. Huntington Steel Product and/or Serafin Ng President is affirmed in toto.

SO ORDERED.[7]

The Court of Appeals reasoned that the NLRC correctly applied Article 221 of the Labor Code.[8] The
appellate court said that decisions in labor cases must be supported by substantial evidence, and
disregarding technical rules of procedure, will not sacrifice the fundamental requisites of due process.[9]

Citing the landmark case of The New Valley Times Press v. NLRC,[10] the Court of Appeals held that
technical rules are not binding in labor cases and are not to be applied strictly if the result would be
detrimental to the working-man. The Court of Appeals declared that private respondents should not be
faulted because in filing their complaint, they merely filled up the blanks in the complaint form provided
for them in the docket section of the Arbitration Branch. The Court of Appeals added that private
respondents should not be punished for whatever defects found in the form provided by the
Commission.[11]

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Dissatisfied, petitioners filed the instant petition praying that we resolve the question:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN

DISREGARDING SUPREME COURT CIRCULAR NO. 04-94.[12]

Simply stated, the issue is whether the case should be dismissed for failure to comply with Supreme
Court Administrative Circular No. 04-94 on certification of non-forum shopping.

Petitioners claim that although technical rules of procedure in labor cases are not to be strictly applied,
such cases must nevertheless be prosecuted in accordance with the prescribed procedure to ensure an
orderly and speedy administration of justice. Petitioners contend that the certification of non-forum
shopping as required by Supreme Court Administrative Circular No. 04-94 is mandatory even in labor
cases. It should accompany pleadings filed before the NLRC, since the NLRC is a quasi-judicial agency.
According to the petitioners, failure to comply with the Circular warrants dismissal because the defect
cannot be cured by amendment of the complaint, and the proper remedy was to file another complaint
instead of an appeal. Although jurisprudence allowed substantial compliance with the requirement, the
inclusion of the statement of non-forum shopping in the respondents position paper, according to
petitioners, was not substantial compliance. Petitioners further contend that the failure to comply with
the requirement rendered the complaint a mere scrap of paper, and the Labor Arbiter could not have
acquired jurisdiction over the case.

Private respondents, for their part, claim that they had complied with the requirement of certification of
non-forum shopping upon filing of their Position Paper. The inclusion of the certificate of non-forum
shopping in the Position Paper was the best way to comply with the required undertaking under the
Circular because the complaint form supplied by the Labor Arbiter did not contain such undertaking.
When they filed the complaint they merely filled up the blanks therein.

We note that the cited complaint was filed before the NLRC Resolution No. 01-02 amended the NLRC
Rules of Procedure.[13] The NLRC Rules of Procedure now requires a declaration of non-forum shopping
in the complaint. But this is not to say that the certificate of non-forum shopping was not required then.
At the time the complaint was filed, the same was subject to Supreme Court Administrative Circular No.
04-94, now Section 5 of Rule 7 of the Rules of Court.[14] We have established in previous cases[15] that
compliance with the Circular was mandatory even in labor cases. In the landmark case of Maricalum
Mining Corp. v. NLRC[16] we held that:

99
The certificate of non-forum shopping as provided by this Court Circular 04-94 is mandatory and should
accompany pleadings filed before the NLRC. Court Circular No. 04-94 is clear and needs no further
interpretation, viz:

the following requirements, in addition to those in pertinent provisions of the Rules of Court and other
existing circulars, shall be strictly complied with in the filing of complaints, petitions, applications or
other initiatory pleadings in all courts and agencies other than the Supreme Court and the Court of
Appeals, and shall be subject to the sanctions provided hereunder:

1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition,
application or other initiatory pleading shall certify under oath in such original pleading, or in a sworn
certificate annexed thereto and simultaneously therewith, to the truth of the following facts and
undertakings: (a) he has not heretofore commenced any other action or proceeding involving the same
issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his
knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or any
other tribunal or agency; (c) if there is any such action or proceeding which is either pending or may
have been terminated, he must state the status thereof; and (d) if he should thereafter learn that a
similar action or proceeding has been filed or is pending before the Supreme Court, the Court of
Appeals, or any other tribunal or agency, he undertakes to report the fact within five (5) days therefrom
to the court or agency wherein the original pleading and sworn certification contemplated herein have
been filed.

....

2. Any violation of this Circular shall be a cause for the dismissal of the complaint, petition, application or
other initiatory pleading, upon motion and after hearing.

The NLRC is a quasi-judicial agency, hence, initiatory pleadings filed before it should be accompanied by
a certificate of non-forum-shopping.

Nevertheless, in Loyola v. Court of Appeals,[17] we held that substantial compliance with the
requirement of certificate of non-forum shopping is sufficient. Here, we find that the certification of

100
non-forum shopping was not filed simultaneously with the initiatory pleading. But we held that the filing
of the certification within the reglementary period of filing the initiatory pleading was substantial
compliance. The fact that the Circular requires strict compliance merely underscores its mandatory
nature that it cannot be dispensed with or its requirements altogether disregarded, but it does not
thereby interdict substantial compliance with its provisions under justifiable circumstances.[18]

Additionally, Supreme Court Administrative Circular No. 04-94, now Section 5, Rule 7 of the Rules of Civil
Procedure, must be construed and applied to achieve its purpose. The Supreme Court promulgated the
Circular to promote and facilitate the orderly administration of justice. It should not be interpreted with
such absolute literalness as to subvert its own ultimate and legitimate objective which is the goal of all
rules of procedure - that is, to achieve substantial justice as expeditiously as possible.[19]

Meanwhile, in the case of Melo v. Court of Appeals,[20] we said that in those cases where we excused
non-compliance with the requirements of Supreme Court Administrative Circular No. 04-94, there were
special circumstances or compelling reasons that made the strict application of said Circular clearly
unjustified. The rule is crystal clear and plainly unambiguous that the certification is a mandatory part of
an initiatory pleading, i.e., the complaint, and its omission may be excused only upon manifest equitable
grounds proving substantial compliance therewith.[21]

In the present case, the respondents reasoned that they failed to comply with the Circular because the
complaint form supplied by the Labor Arbiter did not contain the required undertaking. They simply
filled up the blanks therein. Hence, we agree with the Court of Appeals conclusion that respondents
should not be faulted for not having the certification of non-forum shopping in their complaint.[22]

The strict application of the Circular in the instant case, in our view, would be contrary to the goals of
the Rules of Civil Procedure that is, just, speedy and inexpensive disposition of every action and
proceeding.[23] Technical rules of procedure in labor cases are not to be strictly applied if the result
would be detrimental to the working-man.[24] Thus, the NLRC did not err in ordering that the
corrections be made at the Arbitration Branch, since the NLRC has also the power to order corrections in
case of irregularities in the proceedings before it.[25]

Anent petitioners contention that the Labor Arbiter did not acquire jurisdiction over the case for failure
to include the certificate of non-forum shopping in the complaint, this contention finds no support in
law and in jurisprudence. Supreme Court Administrative Circular No. 04-94 is mandatory but not
jurisdictional, as jurisdiction over the subject or nature of the cause of action is conferred by law.[26]

101
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated January 22, 2003 and its
Resolution dated May 14, 2003 as well as the Order of National Labor Relations Commission (Second
Division) dated April 15, 2002 and its Resolution dated July 11, 2002 are hereby AFFIRMED. Costs against
petitioners.

SO ORDERED.

G.R. No. 146572. January 14, 2005

CIRINEO BOWLING PLAZA, INC., petitioner, vs. GERRY SENSING, BELEN FERNANDEZ, MIRASOL DIAZ,
MARGARITA ABRIL, DARIO BENITEZ, MANUEL BENITEZ, RONILLO TANDOC, EDGAR DIZON, JOVELYN
QUINTO, KAREN REMORAN, JENIFFER RINGOR, DEPARTMENT OF LABOR AND EMPLOYMENT and COURT
of APPEALS, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a special civil action for certiorari filed by petitioner assailing the Resolution[1] dated August
31, 2000 of the Court of Appeals (CA) which dismissed petitioners petition for certiorari; and the
Resolution[2] dated November 10, 2000 which denied petitioners motion for reconsideration.

The antecedent facts are as follows:

On November 27, 1995, Eligio Paolo, Jr., an employee of petitioner, filed a letter complaint with the
Department of Labor and Employment (DOLE for short), Dagupan District Office, Dagupan City,

102
requesting for the inspection/investigation of petitioner for various labor law violations like
underpayment of wages, 13th month pay, non-payment of rest day pay, overtime pay, holiday pay and
service incentive leave pay.[3] Pursuant to the visitorial and enforcement powers of the Secretary of
Labor and Employment, his duly authorized representative under Article 128 of the Labor Code, as
amended, conducted inspections on petitioners establishment the following day. In his inspection
report,[4] Labor and Employment Officer III, Crisanto Rey Dingle, found that petitioner has thirteen[5]
employees and had committed the following violations: underpayment of minimum wage, 13th month
pay, holiday premiums, overtime premiums, and non-payment of rest day. The findings in the inspection
report were explained to petitioners officer-in-charge, Ma. Fe Boquiren, who signed the same.

The first hearing of the case was scheduled on December 27, 1995, but petitioner failed to appear, thus,
the hearing was reset to January 10, 1996. On the date set, Boquiren, as petitioners representative,
appeared with the information that petitioners President/General Manager Luisito Cirineo was sick and
confined in a hospital.

On the January 19, 1996 hearing, Cirineo appeared and asked for more time to settle with his
employees. The case was again set on January 26, 1996 but Cirineo failed to appear.

On April 22, 1996, an Order[6] was issued by the DOLE Regional Office, the dispositive portion of which
reads:

WHEREFORE, premises considered and considering further that the amount computed constitutes part
of the lawful remunerations of thirteen affected employees, respondent is hereby ordered to pay them
the total amount of THREE HUNDRED SEVENTY SEVEN THOUSAND FIVE HUNDRED PESOS AND 58/100.
(P377,500.58), representing their unpaid/underpaid wages, 13th month pay, holiday premiums, rest day
pay and overtime premiums distributed as follows:

NAME AMOUNT

1. Gerry Sensing P 9,505.68

2. Belen Fernandez 14,258.52

3. Mirasol Diaz 12,458.52

4. Margarita Abril 31,557.12

103
5. Lamberto Solano 53,151.12

6. Dario Benitez 53,151.12

7. Manuel Benitez 53,151.12

8. Ronillo Tandoc 36,951.12

9. Edgar Dizon 14,637.78

10. Jovelyn Quinto 22,769.88

11. Karen Remoran 21,387.78

12. Jennifer Ringor 37,304.82

13. Eligio Paolo, Jr. 12,810.00

TOTAL P 373,094.58

and to submit the proof of payment to this Office within ten (10) days from receipt hereof. Otherwise, a
Writ of Execution will be issued to enforce this order.

Respondent is further ORDERED to adjust the salaries of its employees to the applicable daily minimum
wages and to submit the proof thereof within the same period.

SO ORDERED.[7]

copy of which was received by petitioners counsel on May 17, 1996. No motion for reconsideration or
appeal memorandum was filed by petitioner.

On May 27, 1996, petitioners representative, Carmen Zapata, appeared before the DOLE Regional Office
and submitted the quitclaims, waivers and releases of employees-awardees, Lamberto Solano, Jovelyn
Quinto, Manuel Benitez, Edgar Dizon, Ronillo Tandoc, Eligio Paolo, Jr., and Dario Benitez. Later, however,
Benitez, Tandoc, Quinto and Dizon wrote DOLE a letter denying having received any amount from
petitioner. Thus, DOLEs inspector Dingle went to petitioners establishment to confirm the authenticity
of the quitclaims and releases and talked to the employees concerned who stated that they signed the

104
document without knowing its contents but they are willing to settle if they will be given the amount
computed by DOLE.

On June 19, 1996, Luisito Cirineo and a certain Fe Cirineo Octaviano, owner of Esperanza Seafoods
Kitchenette stationed in petitioners establishment, wrote DOLE a letter requesting that the case be
endorsed to the National Labor Relations Commission since the resolution of the case required
evidentiary matters not disclosed or verified in the normal course of inspection. They also submitted
documents to show that petitioner and Esperanza Seafoods Kitchenette are separate and distinct
business entities and that some of the employees-awardees are actually employees of the Esperanza
Seafoods Kitchenette.

On September 12, 1996, DOLE issued its Order[8] stating among others:

Records show that respondent, Luisito Cirineo and his representative appeared before this Office during
the summary investigation of this instant case but they never once mentioned the issue of separate
juridical personalities. Respondent had always been bent on settling the respective claims of all thirteen
(13) concerned employees. In the process, however, he acknowledged being their employer. He cannot
at this juncture therefore say, that some of the awardees in our ORDER are employees of another
business entity. This being the case, we cannot grant his request for indorsement to the NLRC.

WHEREFORE, premises considered, the case of employees Eligio Paolo, Jr. and Lamberto Solano whose
respective claims had been settled by respondent is hereby DISMISSED. The ORDER for the payment of
the monetary claims of the eleven (11) other cash awardees STANDS. Let execution follow immediately.
[9] (Emphasis supplied)

On October 21, 1996, DOLE Regional Director Maximo B. Lim issued a writ of execution.[10] On
November 13, 1996, petitioner filed a motion to quash[11] the writ of execution alleging the following
grounds:

I. The Writ of Execution seeks to satisfy the monetary awards given to employees who are not
employees of Cirineo Bowling Plaza, Inc..

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II. The Writ of Execution seeks to satisfy monetary awards given to employees of Fe Esperanza C.
Octaviano who was not impleaded.

III. The Writ of Execution seeks to satisfy monetary awards wrongfully given to employees employed by
establishments employing less than ten (10) employees, who are not for this reason entitled to holiday
and holiday premium pay, nor to underpayment of wages.

IV. The Writ of Execution seeks to satisfy the award of benefits in excess of the jurisdictional amount
allowed by law.

V. The Writ of Execution seeks to enforce an Order issued beyond the quasi-judicial authority of the
Regional Director[12].

In an Order[13] dated February 7, 1997, DOLE Regional Director Lim denied petitioners motion to quash
the writ of execution.

Petitioner filed its Memorandum of Appeal to the Secretary of Labor and Employment[14] who
dismissed the appeal on the ground that same was filed out of time

However, on March 30, 1999, DOLE Undersecretary Jose Espaol dismissed the appeal and affirmed the
order dated February 7, 1997 of the DOLE Regional Director with the following disquisitions:

In support thereof, respondent alleges that it had only eight (8) employees as the other claimants of
labor benefits . . . are employees of Fe Esperanza Octaviano doing business under the name and style
Esperanza Seafoods Kitchenette. Thus, it points out that:

...

Hence, under the Labor Code, Article 94 thereof the employees of the appellant are not entitled to
holiday pay and holiday premium pay.

106
Under Republic Act 6727 and its Implementing Rules, Chapter 1, Section 1 thereof, establishments
employing less than ten (10) employees are exempted from compliance with minimum wage rates.
Hence, the wages given to respondents do not constitute under payments. As to their claims for
overtime pay and rest day pay, there is no proof that respondents rendered overtime or restday work,
hence they are not entitled to the same. (Cagampanan vs. NLRC, 195 SCRA 533)

We do not agree.

The records show that during the summary investigation respondent never refuted the findings of the
labor inspector particularly the identity of the thirteen (13) concerned employees nor raised the issue of
separate juridical personalities of respondent Cirineo and Esperanza Seafoods Kitchenette. Thus, in the
Order dated 07 February 1997, the Regional Director ruled:

. . . Respondents actuation during and after the summary investigation disclosed that it was bent on
settling all the claims of the claimant-awardees and never did it refute the identity of the concerned
awardees. Otherwise, respondent could have easily raised the issue by admitting evidence such as
payrolls, daily time records and any similar document which could have pinpointed the real employer of
the claimants.

...

The documents submitted to this Office by respondent could be interpreted as a desperate attempt to
mislead this Office and to evade liability.

On the issue of jurisdiction, we rule that the Regional Director has jurisdiction over the instant case.

The old rule limiting the jurisdiction of the Secretary of Labor and Employment or his duly authorized
representatives to money claims not exceeding P5,000.00 has been repealed by the passage of R.A. No.
7730, Section 1 of which reads:

107
Section 1. Paragraph (b) of Article 128 of the Labor Code. As amended, is hereby further amended to
read as follows:

Art. 128. Visitorial and Enforcement Power.

...

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his
duly authorized representative shall have the power to issue compliance orders to give effect to the
labor standards provisions of this Code and other labor legislation based on the finding of the labor
employment and enforcement officer or industrial safety engineers made in the course of inspection.
The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the employer contests the findings
of the labor employment and enforcement officer and raises issues supported by documentary proofs
which were not considered in the course of inspection.

Pursuant to R.A. 7730, the jurisdictional limitations imposed by Article 129 on the visitorial and
enforcement powers of this Office under Article 128 of the Labor Code, have been repealed. The phrase
notwithstanding the provision of Articles 129 and 217 of the Labor Code to the contrary, erases all
doubts as to the amendatory nature of R.A. No. 7730. The amendment, in effect, overturned the rulings
in the Aboitiz and Servandos cases insofar as the restrictive effect of Article 129 on the use of the power
under Article 128 is concerned.

Indeed, the Supreme Court in Nazareno Furniture vs. Hon. Secretary of Labor and Employment and
Tomas Mendoza (G.R. No. 128546, April 30, 1997), already ruled that:

Petitioner is incorrect in stating that R.A. 7730 did not specifically amend Art. 217 of the Labor Code. In
fact, it is plainly stated that the amendment applies notwithstanding the provisions of Articles 129 and
217 to the contrary. Even if Article 217 confers original and exclusive jurisdiction over cases such as the
one subject of this petition, this has been modified by the later enactment of R.A. 7730. . . .[16]

Petitioners motion for reconsideration was denied in a Resolution dated April 18, 2000.[17]

108
Petitioner filed a petition for certiorari with prayer for the issuance of temporary restraining order with
the CA.

On August 31, 2000, the CA dismissed the petition for failure of petitioner to (1) attach a copy of the
letter complaint filed by petitioners employees and the Order dated February 7, 1997 of the DOLE
Regional Director and (2) state the material date when the assailed Orders/Resolutions were received
pursuant to Section 1 of Rule 65 and Section 3 of Rule 46 of the 1997 Rules of Civil Procedure. Petitioner
filed a motion for reconsideration which was also denied by the CA on November 10, 2000, copy of
which was received by petitioner on November 24, 2000.

Petitioner comes to us by way of a petition for certiorari under Rule 65 raising the sole issue:

PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DISMISSED THE INSTANT PETITION AND OUTRIGHT DISMISSAL OF PETITIONERS
MOTION FOR RECONSIDERATION DUE TO MERE TECHNICALITIES.

Respondents did not file their comment on the petition.

We dismiss the petition.

We find no grave abuse of discretion committed by the CA in issuing the assailed resolutions. The CA
dismissed the petition for certiorari for failure of petitioner to attach certain documents and to state the
material date. While petitioner filed its motion for reconsideration, attaching the required documents,
the CA correctly found that it still did not state the material date when it received the DOLEs Resolution
dated April 18, 2000 denying its motion for reconsideration. Thus, without the date of receipt of the
denial of such motion, the CA could not determine whether the petition was filed within the
reglementary period of sixty days for filing the petition for certiorari under Rule 65 of the Rules of Court.
Under Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended by SC Circular No. 39-98, in
original actions for certiorari filed with the CA, the petition must include the following material dates, to
wit:

109
Section 3. Contents and filing of petition; effect of non-compliance with requirements.-

...

In actions filed under Rule 65, the petition shall further indicate the material dates showing when the
notice of the judgment or final order or resolution subject thereof was received, when a motion for new
trial or reconsideration, if any, was filed and when notice of the denial thereof was received.

...

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground
for the dismissal of the petition.

It bears stressing that the timely perfection of an appeal is a mandatory requirement, which cannot be
trifled with as a mere technicality to suit the interest of a party. The rules on periods for filing appeals
are to be observed religiously, and parties who seek to avail themselves of the privilege must comply
with the rules.[18] The failure to perfect an appeal as required by law renders the judgment final and
executory.[19]

While there are exceptional cases where we set aside procedural defects to correct a patent injustice,
there should be an effort on the part of the party invoking liberality to at least explain its failure to
comply with the rules.[20] It appears that petitioners new counsel failed to state the material date
twice, first in its petition filed with the CA and, second, in its motion for reconsideration. Petitioners
explanation focused on the fact that its President, Luisito Cirineo, only learned of the DOLEs denial of its
motion for reconsideration on August 1, 2000 when he came back from a trip from Europe; that efforts
to communicate with its former counsel remained futile. We find such explanation unsatisfactory since
the material dates can easily be verified from the files of the DOLE office.

Even if we disregard technicality, we find the arguments raised by petitioner without merit. As correctly
held by the DOLE Regional Director and sustained by the DOLE Undersecretary, records show that
petitioner never refuted the findings of the labor inspector as to the identity of the thirteen employees
nor raised the issue of separate juridical personalities of petitioner Cirineo and Esperanza Seafoods
Kitchenette during the investigation and on the hearings conducted.

110
Likewise, we sustain the jurisdiction of the DOLE Regional Director. The visitorial and enforcement
powers of the DOLE Regional Director to order and enforce compliance with labor standard laws can be
exercised even where the individual claim exceeds P5,000.00.[21] In Allied Investigation Bureau, Inc. vs.
Secretary of Labor and Employment,[22] we elucidated:

Petitioner argues that the power to adjudicate money claims belongs to the Labor Arbiter who has
exclusive jurisdiction over employees claims where the aggregate amount of the claims of each
employee exceeds P5,000.00; and, that the Labor Arbiter has jurisdiction over all other claims arising
from employer-employee relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00), whether or not accompanied with a
claim for reinstatement.

Petitioners arguments are untenable.

While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to
hear and decide cases where the aggregate money claims of each employee exceeds P5,000.00, said
provisions of law do not contemplate nor cover the visitorial and enforcement powers of the Secretary
of Labor or his duly authorized representatives.

Rather, said powers are defined and set forth in Article 128 of the Labor Code (as amended by R.A. No.
7730) thus:

Art. 128. Visitorial and enforcement power.

(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall
have access to employers records and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant
thereto.

111
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary
or his duly authorized representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the finding of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were
not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under
this article may be appealed to the latter. In case said order involved a monetary award, an appeal by
the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent
to the monetary award in the order appealed from.

...

The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the Labor Code
by the phrase (N)otwithstanding the provisions of Articles 129 and 217 of this Code to the contrary . . .
thereby retaining and further strengthening the power of the Secretary of Labor or his duly authorized
representative to issue compliance orders to give effect to the labor standards provisions of said Code
and other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection.

In the case at bar, the Office of respondent Regional Director conducted inspection visits at petitioners
establishment on February 9 and 14, 1995 in accordance with the above-mentioned provision of law. In
the course of said inspection, several violations of the labor standard provisions of the Labor Code were
discovered and reported by Senior Labor Enforcement Officer Eduvigis A. Acero in his Notice of
Inspection Results. It was on the bases of the aforesaid findings (which petitioner did not contest), that
respondent Regional Director issued the assailed Order for petitioner to pay private respondents the
respective wage differentials due them.

112
Clearly, as the duly authorized representative of respondent Secretary of Labor, and in the lawful
exercise of the Secretarys visitorial and enforcement powers under Article 128 of the Labor Code,
respondent Regional Director had jurisdiction to issue his impugned Order.

In a recent case, the Supreme Court ruled in this wise:

Assailed in this special civil action for certiorari is the Order dated August 1, 1995 issued by public
respondent Regional Director Romeo A. Young of the Department of Labor and Employment (DOLE) in
Case No. NCROO-9503-IS-035, ordering petitioner Lord and Lady Salon to pay private respondent Ateldo
Barroga the sum of P14,099.05 representing his underpaid wages and premium pay for work on
holidays. This suit is an offshoot of the complaint for payment of salary differentials filed by private
respondent against petitioner on March 20, 1995. Upon investigation conducted by public respondents
office, petitioner was found to have committed the following violations: (1) underpayment of wages, (2)
non-implementation of premium pay for worked legal holidays, and (3) non-availability of records at the
time of inspection. Consequent to the parties failure to reach an amicable settlement, public respondent
issued the assailed resolution. Petitioner asserts that public respondent exceeded his jurisdiction in
taking cognizance of the complaint and ordering the payment of P14,099.05 to private respondent
because the award of the latter amount goes over the jurisdictional amount of P5,000.00 for cases filed
before the Regional Director, thus, is properly cognizable by the Labor Arbiter instead.

We dismiss the petition. Pursuant to Section 1 of Republic Act 7730 [Approved on June 2, 1994] which
amended Article 128 (b) of the Labor Code, the Secretary of Labor and Employment or his duly
authorized representative, in the exercise of their visitorial and enforcement powers, are now
authorized to issue compliance orders to give effect to the labor standards provisions of this Code and
other labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection, sans any restriction with respect to the jurisdictional
amount of P5,000.00 provided under Article 129 and Article 217 of the Code.

The instant case therefore falls squarely within the coverage of the aforecited amendment as the
assailed order was issued to enforce compliance with the provisions of the Code with respect to the
payment of proper wages. Hence, petitioners claim of lack of jurisdiction on the part of public
respondent is bereft of merit.[23]

WHEREFORE, the instant petition is DISMISSED for lack of merit.

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SO ORDERED.

SAN MIGUEL CORPORATION,

Petitioner,- versus -NATIONAL LABOR RELATIONS COMMISSION and RAFAEL MALIKSI,

Respondents.

G.R. No. 147566 December 6, 2006

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

DECISION

GARCIA, J.:

114
In this petition for review under Rule 45 of the Rules of Court, petitioner San Miguel Corporation (SMC)
seeks the reversal and setting aside of the Decision[1] dated September 30, 1999 of the Court of Appeals
(CA) in CA-G.R. SP No. 50321, as reiterated in its Resolution[2] of March 20, 2001, affirming in toto an
earlier decision of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 005478-93,
entitled Rafael C. Maliksi v. San Miguel Corporation and/or Philippine Software Services &

Education Center. The affirmed NLRC decision overturned that of the Labor Arbiter and declared the
herein private respondent Rafael Maliksi (Maliksi) a regular employee of the petitioner and ordered the
latter to reinstate him with benefits.

As found by the NLRC and subsequently adopted by the CA, the facts are as follows:

On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel Corporation-Magnolia
Division, herein referred to as SMC and Philippine Software Services and Education Center herein
referred to as PHILSSEC to compel the said respondents to recognize him as a regular employee. He
amended the complaint on 12 November 1990 to include the charge of illegal dismissal because his
services were terminated on 31 October 1990.

The complainants employment record indicates that he rendered service with Lipercon Services from 1
April 1981 to February 1982 as budget head assigned to SMC-Beer Division, then from July 1983 to April
1985 with Skillpower, Inc., as accounting clerk assigned to SMC-Magnolia Division, then from October
1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMC-Magnolia Finance, and from
October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk. The
complainant considered himself as an employee of SMC-Magnolia. Lipercon Services, Skillpower, Inc.
and PHILSSEC are labor-only contractors and any one of which had never been his employer. His
dismissal, according to him, was in retaliation for his filing of the complaint for regularization in service.
His dismissal was illegal there being no just cause for the action. He was not accorded due process
neither was his dismissal reported to the Department of Labor and Employment.

PHILSSEC disclaimed liability. As an entity catering (sic) computer systems and program for business
enterprises, it has contracted with SMC-Magnolia to computerize the latters manual accounting
reporting systems of its provincial sales. PHILSSEC then conducted a three phase analysis of
SMCMagnolia set up: first the computer needs of the firm was (sic) determined; then, the development
of computer systems or program suitable; and, finally, set up the systems and train the employees to
operate the same. In all these phases, PHILSSEC uses its computer system and technology and provided
the necessary manpower to compliment the transfer of the technology to SMC-Magnolia. Complainant
Maliksi was one of those employed by PHILSSEC whose principal function was the manual control of

115
data needed during the computerization. Like all assigned to the project, the complainants work was
controlled by PHILSSEC supervisors, his salary paid by the agency and he reported directly to PHILSSEC.
The computerization project was completed on 31 October 1990, and so, the complainant was
terminated on the said date.

SMC, on the other hand, submitted its position. In the contract SMC entered with PHILSSEC, the latter
undertook to set up the computerization of the provincial sales reporting system of Magnolia Division.
To carry out the task, PHILSSEC utilized 3 computer programmers and the rest were data encoders. The
complainant being one of the compliments (sic) performed the following functions:

xxx xxx xxx

SMC likewise contends that PHILSSEC exercised exclusive managerial prerogative over the complainant
as to hiring, payment of salary, dismissal and most importantly, the control over his work. SMC was
interested only in the result of the work specified in the contract but not as to the means and methods
of accomplishing the same. Moreover, PHILSSEC has substantial capital of its own. It has an IBM system,
3 computers, 17 IBM or IBM-compatible computers; it has a building where the computer training
center and main office are located. What it markets to clients are computer programs and training
systems on computer technology and not the usual labor or manpower supply to establishment
concerns. Moreover, what PHILSSEC set up employing the complainant, among others, has no relation
to the principal business of SMC, which is food and beverage. It was a single relationship between the
people utilized by PHILSSEC and SMC [3]

The Labor Arbiter declared Maliksi a regular employee of PHILSSEC and absolved SMC from liability.

Maliksi appealed to the NLRC. In turn, in a decision dated January 26, 1998, the NLRC reversed that of
the Labor Arbiter by declaring Maliksi

a regular employee of the petitioner and ordering the latter to reinstate him without loss of seniority
rights and with full benefits, to wit:

116
WHEREFORE, as recommended, the decision below is hereby SET ASIDE. Accordingly, judgment is
hereby rendered directing respondent SMC-Magnolia Division to reinstate complainant as a regular
employee without loss of seniority rights and other privileges and to pay complainant full backwages,
inclusive of allowances and other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to time of his actual reinstatement, plus 10% of the total
money award for and attorneys fees.

SO ORDERED.[5]

From the aforementioned decision of the NLRC, SMC went on certiorari to the CA in CA-G.R. SP No.
50321.

As stated at the outset, the CA, in the herein assailed Decision[6] dated September 30, 1999, affirmed in
toto that of the NLRC. In so doing, the CA found SMC to have utilized PHILSSEC, Lipercon Services, Inc.
(Lipercon) and Skillpower, Inc. (Skillpower) as conduits to circumvent Article 280 of the Labor Code,
employing Maliksi as contractual or project employee through these entities, thereby undermining his
right to gain regular employment status under the law. The appellate court echoed the NLRCs
assessment that Maliksis work was necessary or desirable in the business of SMC in its Magnolia
Division, for more than the required one-year period. It affirmed the NLRCs finding that the three (3)
conduit entities adverted to, Lipercon and Skillpower, are labor-only contractors such that Maliksis
previous employment contracts with SMC, through these two entities, are deemed to have been
entered into in violation of labor laws. Consequently, Maliksis employment with SMC became
permanent and regular after the statutory period of one year of service through these entities. The CA
concluded that on account of his past employment contracts with SMC under Lipercon and Skillpower,
Maliksi was already a regular employee of SMC when he entered into SMCs computerization project as
part of the PHILSSEC project complement.

With its motion for reconsideration having been denied by the CA in its Resolution of March 20, 2001,
SMC is now with this Court via the present recourse on the following assigned errors:

117
The Court of Appeals gravely erred in declaring private respondent a regular employee of petitioner
SMC despite its findings that PHILSSEC, the contractor that employed private respondent, is an
independent job contractor.

Corollarily, the declaration of the Honorable Court of Appeals that private respondent is a regular
employee of petitioner SMC proceeds from the erroneous premise that private respondent was already
a regular employee of SMC when he was hired by the independent contractor PHILSSEC. Having been
placed in petitioner SMC by a supposed labor-only contractor, for just five months and for a different
job, three years after his last assignment therein, private respondent had not thereby become a regular
employee of petitioner SMC.

II

The Court of Appeals gravely erred in ultimately resolving the case upon the principle that all doubts
must be resolved in favor of labor; certainly, protection to labor does not imply sanctioning a plain
injustice to the employer, particularly where private respondent was shown to have stated falsehoods
and committed malicious intercalations and misrepresentations.

III

The Court of Appeals gravely erred in declaring that private respondent was not part of the of the
personnel group in the computerization program of petitioner SMC under PHILSSEC.

We DENY.

SMC concedes that Maliksi, before his employment with PHILSSEC, worked in SMC from November 1988
to April 1990, but as employee of Skillpower[7] and that he was previously assigned to SMC between
1981 up to February 1985, for periods spread apart.[8] The Labor Arbiter found, as earlier stated, that
Maliksi rendered service with Lipercon from 1 April 1981 to February 1982 as budget head assigned to
SMC-Beer Division; from July 1983 to April 1985 with Skillpower as accounting clerk assigned to SMC-
Magnolia Division, then from October 1988 to 1989[9] also with Skillpower as acting clerk assigned to

118
SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia
Finance as accounting clerk. In all, it appears that, while under the employ of either Lipercon or
Skillpower, Maliksi has undisputedly rendered service with SMC for at least three years and seven
months.[10]

The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be labor-only
contractors,[11] providing as they do manpower services to the public for a fee. The existence of an
employer-employee relationship is factual and we give due deference to the factual findings of both the
NLRC and the CA that an employer-employee relationship existed between SMC (or its subsidiaries) and
Maliksi. Indeed, having served SMC for an aggregate period of more than three (3) years through
employment contracts with these two labor contractors, Maliksi should be considered as SMCs regular
employee. The hard fact is that he was hired and re-hired by SMC to perform administrative and clerical
work that was necessary to SMCs business on a daily basis. In Bustamante v. National Labor Relations
Commission, [12] we ruled:

In the case at bar, petitioners were employed at various periods from 1985 to 1989 for the same kind of
work they were hired to perform in September 1989. Both the labor arbiter and the respondent NLRC
agree that petitioners were employees engaged to perform activities necessary in the usual business of
the employer. As laborers, harvesters or sprayers in an agricultural establishment which produces high
grade bananas, petitioners tasks are indispensable to the year-round operations of respondent
company. This belies the theory of respondent company that the employment of petitioners was
terminated due to the expiration of their probationary period in June 1990. If at all significant, the
contract for probationary employment was utilized by respondent company as a chicanery to deny
petitioners their status as regular employees and to evade paying them the benefits attached to such
status. Some of the petitioners were hired as far back as 1985, although the hiring was not continuous.
They were hired and re-hired in a span of from two to four years to do the same type of work which
conclusively shows the necessity of petitioners service to the respondent companys business.
Petitioners have, therefore, become regular employees after performing activities which are necessary
in the usual business of their employer. But, even assuming that the activities of petitioners in
respondent companys plantation were not necessary or desirable to its business, we affirm the public
respondents finding that all of the complainants (petitioners) have rendered non-continuous or broken
service for more than one (1) year and are consequently considered regular employees.

We do not sustain public respondents theory that private respondent should not be made to
compensate petitioners for backwages because its termination of their employment was not made in
bad faith. The act of hiring and re-hiring the petitioners over a period of time without considering them
as regular employees evidences bad faith on the part of private respondent. The public respondent
made a finding to this effect when it stated that the subsequent re-hiring of petitioners on a

119
probationary status clearly appears to be a convenient subterfuge on the part of management to
prevent complainants (petitioners) from becoming regular employees. (Emphasis supplied)

It is worth noting that, except for the computerization project of PHILSSEC, petitioner did not make any
insinuation at all that the services of Maliksi with SMC was project-related such that an employment
contract with Lipercon and Skillpower was necessary.

In Madriaga v. Court of Appeals,[13] the Court, confronted with the same issue now being addressed,
declared that regularization of employment

in SMC should extend to those whose situation is similar to the complainants in said case. We wrote:

This is the third time that the parties have invoked the power of this Court to decide the labor dispute
involved in this case. The generative facts of the case are as follows:

On 04 March 1988, the NOWM and a number of workers-complainants filed with the Arbitration Branch
of the NCR, NLRC, Manila, against San Miguel Corporation, Philippine Dairy Products Corporation,
Magnolia Dairy Products, Skillpower Corporation and Lipercon Services, Inc. for illegal dismissal.

xxx xxx xxx

The Voluntary Arbitrator rendered a decision on 29 July 1988, the dispositive of which states:

WHEREFORE, it is hereby declared that complainants are regular employees of SMC and PDPC.
Accordingly, SMC and PDPC are hereby ordered to reinstate the dismissed 85 complainants to their
former positions as their regular employees effective from the date of the filing of their complaints with
full backwages less the daily financial assistance of P30.00 per day each, extended to them by Lipercon
and Skillpower.

Aggrieved by the said decision of the Voluntary Arbitrator, SMC and PDPC filed a petition for certiorari
before the Supreme Court.

It was upon the filing of the said petition for certiorari that the Court had the first opportunity to pass
upon the controversies involved in this case. In a Resolution dated 30 August 1989, the Court dismissed
G.R. No. 85577 entitled, Philippine Dairy Products Corporation and San Miguel Corporation Magnolia
Dairy Products Division v. Voluntary Arbitrator Tito F. Genilo of the Department of Labor and
Employment (DOLE) and the National Organization of Workingmen (NOWM) for lack of merit. The Court
held in full:

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Individual private respondents are xxx [SMC, et al.] laborers supplied to petitioners by Skillpower
Corporation and Lipercon Services, Inc., on the basis of contracts of services. Upon expiration of the said
contracts, individual private respondents were denied entry to petitioners' premises. Individual private
respondents and respondent union thus filed separate complaints for illegal dismissal against petitioners
San Miguel Corp., Skillpower Corporation and Lipercon Services, Inc., in the [NLRC, NCR] After
consolidation and voluntary arbitration, respondent Labor Arbiter Tito F. Genilo rendered a decision xxx
declaring individual private respondents regular employees of petitioners and ordering the latter to
reinstate the former and to pay them backwages. On motion for execution filed by private respondents,
Labor Arbiter Genilo issued on October 20, 1988 an order directing, among others, the regularization of
all the complainants which include those still working and those already terminated. Hence, this petition
for certiorari with injunction.

Petitioners contend that prior to reinstatement, individual private respondents should first comply with
certain requirements, like submission of NBI and police clearances and submission to physical and
medical examinations, since petitioners are deemed to be direct employers and have the right to
ascertain the physical fitness and moral uprightness of its employees by requiring the latter to undergo
periodic examinations, and that petitioners may not be ordered to employ on regular basis the other
workers rendering services to petitioners by virtue of a similar contract of services between petitioners
and Skillpower Corporation and Lipercon Services, Inc. because such other workers were not parties to
or were not impleaded in the voluntary arbitration case.

Considering that the clearances and examinations sought by petitioners from private respondents are
not 'periodic' in nature but are made preconditions for reinstatement, as in fact the petition filed alleged
that reinstatement shall be effective upon compliance with such requirements, (pp. 5-6 thereof) which
should not be the case because this is not a case of initial hiring, the workers concerned having rendered
years of service to petitioners who are considered direct employers, and that regularization is a labor
benefit that should apply to all qualified employees similarly situated and may not be denied merely
because some employees were allegedly not parties to or were not impleaded in the voluntary
arbitration case, even as the finding of Labor Arbiter Genilo is to the contrary, this Court finds no grave
abuse of discretion committed by Labor Arbiter Genilo in issuing the questioned order of October 20,
1988.

ACCORDINGLY, the Court Resolved to Dismiss the petition for lack of merit.

In fine, the Court affirmed the ruling of the Voluntary Arbitrator and declared that therein complainants
are regular employees of San Miguel Corporation (SMC) and PDPC. It must be noted that in the
abovequoted Resolution, the Court extended the benefit of regularization not only to the original
complainants but also to those workers who are similarly situated to therein complainants. Herein
petitioners are among those who are similarly situated.[14] (Emphasis supplied)

We find respondent Maliksi to be similarly situated with those of the complainants in Madriaga. Indeed,
Lipercon and Skillpower have figured in not just a few of our decisions,[15] so much so that we are
inclined to believe that these two were involved in labor-only contracting with respect to Maliksi. We

121
hold that the finding of the NLRC and the CA as to SMCs resorting to labor-only contracting is entitled to
consideration in its full weight.

With respect to PHILSSEC, there was no need for Maliksi to be employed under the formers
computerization program to be considered a regular employee of SMC at the time. Moreover, SMC itself
admits that Maliksis work under the computerization program did not require the operation of a
computer system, such as the software program being developed by PHILSSEC.[16] Given this admission,
we are simply at a loss to understand why Maliksi should be included in the computerization project as a
project employee. Not being a computer expert, Maliksis inclusion in the project was uncalled for. To
our mind, his placement in the project was for the purpose of circumventing labor laws. The evidence
shows that immediately before he entered the PHILSSEC project in October 1989, Maliksi was fresh out
of his employment with SMC (through Skillpower) as acting clerk assigned to SMC-Magnolia Finance
(from October 1988 to 1989).

Maliksis work under the PHILSSEC project was mainly administrative in nature and necessary to the
development of SMCs business. These were:

a. posting manually the daily account balances in the workset;

b. fitting the daily totals into the monthly totals;

c. comparing the manual totals with the computer generated totals;

d. locating the differences between the totals; and,

e. adjusting and correcting errors.

Simply put, the data gathered by SMC on a daily basis through Maliksis work would be submitted for
analysis and evaluation, thereby allowing SMC to make the necessary business decisions that would
enable it to market its products better, or monitor its sales and collection with efficiency. Without the

122
data gatherer or encoder, no analysis could occur. SMC would then, for the most part, be kept in the
dark.

As to the petitioners second assigned error, we hold that there is no need to resolve the present case
under the principle that all doubts should be resolved in favor of the workingman. The perceived doubt
does not obtain in the first place.

We understand Maliksis desperation in making his point clear to SMC, which unduly refuses to
acknowledge his status as a regular employee. Instead, he was juggled from one employment contract
to another in a continuous bid to circumvent labor laws. The act of hiring and re-hiring workers over a
period of time without considering them as regular employees evidences bad faith on the part of the
employer.[17] Where, from the circumstances, it is apparent that periods have been imposed to
preclude the acquisition of tenurial security by the employee, the policy, agreement or practice should
be struck down as contrary to public policy, morals, good customs or public order.[18] In point of law,
any person who willfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall be liable for the damage.[19]

Ways and means contrived by employers to countermand labor laws granting regular employment
status to their workers are numerous and long. For instance, they toss the poor workers from one job
contractor to another, make them go through endless applications, lining up, paperwork,
documentation, and physical examinations; make them sign five- or ten-month-only job contracts, yet
re-hire them after brief rest periods, but not after requiring them to go through the whole application
and selection process once again; prepare and have them sign waivers, quitclaims, and the like; refuse
to issue them identification cards, receipts or any other concrete proof of employment or documentary
proof of payment of their salaries; fail to enroll them for entitlement to social security and other
benefits; give them positions, titles or designations that connote short-term employment.

Others are more creative: they set up distributors or dealers which are, in reality, shell or dummy
companies. In this manner, the mother company avoids the employer-employee relations, and is thus
shielded from liability from employee claims in case of illegal dismissal, closure, unfair labor practices
and the like. In those instances, the poor employees, finding the shell or dummy company to be without
assets, often end up confused and without recourse as to whom to run after. They sue the mother
company which conveniently sets up the defense of absence of employer-employee relations. In San
Miguel Corporation v. MAERC Integrated Services, Inc.,[20] we took note of the practice of hiring
employees through labor contractors that catered exclusively to the employment needs of SMC or its
divisions or other specific business interests, such that after the specific SMC business or division ceases
to do business, the labor contractor likewise ceases its operations.

123
The contrivances may be many and the schemes ingenious and imaginative. But this Court will not
hesitate to put pen to a line and defend the workers right to be secure in his (or her) proprietary right to
regular employment and his right to a secure employment, viz, one that is free from fear and doubt, that
anytime he could be removed, retrenched, his contract not renewed or he might not be re-hired. The
ramifications may seem trivial, but we cannot allow the ordinary Filipino workers right to tenurial
security to be put in jeopardy by recurrent but abhorrent practices that threaten the very lives of those
that depend on him.

Considering, however, the supervening event that SMCs Magnolia Division has been acquired by
another entity, it appears that private respondents reinstatement is no longer feasible. Instead, he
should be awarded separation pay as an alternative.[21] Likewise, owing to petitioners bad faith, it
should be held liable to pay damages for causing undue injury and inconvenience to the private
respondent in its contractual hiring-firing-rehiring scheme.

WHEREFORE, the instant petition is DENIED and the assailed CA decision dated September 30, 1999 is
AFFIRMED, with the MODIFICATION that if the reinstatement of private respondent is no longer
practicable or feasible, then petitioner SMC is ordered to pay him, in addition to the other monetary
awards, separation pay for the period from October 31, 1990 when he was dismissed until he shall have
been actually paid at the rate of one (1) month salary for every year of his employment, with a fraction
of at least six (6) months being considered as one (1) year, or the rate of separation pay awarded by
petitioner to its other regular employees as provided by written agreement, policy or practice,
whichever is higher or most beneficial to private respondent.

LAKAS SA INDUSTRIYA NG KAPATIRANG HALIGI NG ALYANSA-PINAGBUKLOD NG MANGGAGAWANG

PROMO NG BURLINGAME,

124
Petitioner, vs. BURLINGAME CORPORATION,

Respondent.

G.R. No. 162833 June 15, 2007

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

DECISION

QUISUMBING, J.:

This is an appeal to reverse and set aside both the Decision[1] dated August 29, 2003 of the Court of
Appeals and its Resolution[2] dated March 15, 2004 in CA-G.R. SP No. 69639. The appellate court had
reversed the decision[3] dated December 29, 2000 of the Secretary of Labor and Employment which
ordered the holding of a certification election among the rank-and-file promo employees of respondent
Burlingame Corporation.

The facts are undisputed.

On January 17, 2000, the petitioner Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng
Manggagawang Promo ng Burlingame (LIKHA-PMPB) filed a petition for certification election before the
Department of Labor and Employment (DOLE). LIKHA-PMPB sought to represent all rank-and-file promo
employees of respondent numbering about 70 in all. The petitioner claimed that there was no existing
union in the aforementioned establishment representing the regular rank-and-file promo employees. It
prayed that it be voluntarily recognized by the respondent to be the collective bargaining agent, or, in
the alternative, that a certification/consent election be held among said regular rank-and-file promo
employees.

The respondent filed a motion to dismiss the petition. It argued that there exists no employer-employee
relationship between it and the petitioners members. It further alleged that the petitioners members
are actually employees of F. Garil Manpower Services (F. Garil), a duly licensed local employment
agency. To prove such contention, respondent presented a copy of its contract for manpower services
with F. Garil.

On June 29, 2000, Med-Arbiter Renato D. Parungo dismissed[4] the petition for lack of employer-
employee relationship, prompting the petitioner to file an appeal[5] before the Secretary of Labor and
Employment.

On December 29, 2000, the Secretary of Labor and Employment ordered the immediate conduct of a
certification election.[6]

125
A motion for reconsideration of the said decision was filed by the respondent on January 19, 2001, but
the same was denied in the Resolution[7] of February 19, 2002 of the Secretary of Labor and
Employment.

Respondent then filed a complaint with the Court of Appeals, which then reversed[8] the decision of the
Secretary. The petitioner then filed a motion for reconsideration,[9] which the Court of Appeals
denied[10] on March 15, 2004.

Hence the instant petition for review on certiorari.

The issue raised in the petition is:

WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DECLARING THAT THERE IS NO
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONERS MEMBERS AND BURLINGAME BECAUSE F.
GARIL MANPOWER SERVICES IS AN INDEPENDENT CONTRACTOR.[11]

Respondent contends that there is no employer-employee relationship between the parties.[12]

Petitioner, on the other hand, insists that there is.[13]

The resolution of this issue boils down to a determination of the true status of F. Garil is an independent
contractor or a labor-only contractor.

The case of De Los Santos v. NLRC[14] succinctly enunciates the statutory criteria:

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 the business.
[15]

According to Section 5 of DOLE Department Order No. 18-02, Series of 2002:[16]

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared

prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are [is] present:

i) The contractor or sub-contractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business of
the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.

126
The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor
Code, as amended.

Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.

The right to control shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.

Given the above criteria, we agree with the Secretary that F. Garil is not an independent contractor.

First, F. Garil does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an independent contractor. No proof was
adduced to show F. Garils capitalization.

Second, the work of the promo-girls was directly related to the principal business or operation of
Burlingame. Marketing and selling of products is an essential activity to the main business of the
principal.

Lastly, F. Garil did not carry on an independent business or undertake the performance of its service
contract according to its own manner and method, free from the control and supervision of its principal,
Burlingame.

The four-fold test will show that respondent is the employer of petitioners members. The elements to
determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employees conduct. The most important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as to the means and methods to
accomplish it.[17]

A perusal of the contractual stipulations between Burlingame and F. Garil shows the following:

1. The AGENCY shall provide Burlingame Corporation or the CLIENT, with sufficient number of screened,
tested and pre-selected personnel (professionals, highly-skilled, skilled, semi-skilled and unskilled) who
will be deployed in establishment selling products manufactured by the CLIENT.

2. The AGENCY shall be responsible in paying its workers under this contract in accordance with the new
minimum wage including the daily living allowances and shall pay them overtime or remuneration that
which is authorized by law.

3. It is expressly understood and agreed that the worker(s) supplied shall be considered or treated as
employee(s) of the AGENCY. Consequently, there shall be no employer-employee relationship between

127
the worker(s) and the CLIENT and as such, the AGENCY shall be responsible to the benefits mandated by
law.

4. For and in consideration of the service to be rendered by the AGENCY to the CLIENT, the latter shall
during the terms of agreement pay to the AGENCY the sum of Seven Thousand Five Hundred Pesos Only
(P7,500.00) per month per worker on the basis of Eight (8) hours work payable up-to-date, semi-
monthly, every 15th and 30th of each calendar month. However, these rates may be subject to change
proportionately in the event that there will be revisions in the Minimum Wage Law or any law related to
salaries and wages.

5. The CLIENT shall report to the AGENCY any of its personnel assigned to it if those personnel are found
to be inefficient, troublesome, uncooperative and not observing the rules and regulations set forth by
the CLIENT. It is understood and agreed that the CLIENT may request any time the immediate
replacement of any personnel(s) assigned to them.[18]

It is patent that the involvement of F. Garil in the hiring process was only with respect to the recruitment
aspect, i.e. the screening, testing and pre-selection of the personnel it provided to Burlingame. The
actual hiring itself was done through the deployment of personnel to establishments by Burlingame.

The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame
shall pay F. Garil a certain sum per worker on the basis of eight-hour work every 15th and 30th of each
calendar month. This evinces the fact that F. Garil merely served as conduit in the payment of wages to
the deployed personnel. The interpretation would have been different if the payment was for the job,
project, or services rendered during the month and not on a per worker basis. In Vinoya v. National
Labor Relations Commission,[19] we held:

The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under
the Labor Code, do not issue payslips directly to their employees. Under the current practice, a third
person, usually the purported contractor (service or manpower placement agency), assumes the act of
paying the wage. For this reason, the lowly worker is unable to show proof that it was directly paid by
the true employer. Nevertheless, for the workers, it is enough that they actually receive their pay,
oblivious of the need for payslips, unaware of its legal implications. Applying this principle to the case at
bar, even though the wages were coursed through PMCI, we note that the funds actually came from the
pockets of RFC. Thus, in the end, RFC is still the one who paid the wages of petitioner albeit indirectly.
[20]

The contract also provides that any personnel found to be inefficient, troublesome, uncooperative and
not observing the rules and regulations set forth by Burlingame shall be reported to F. Garil and may be
replaced upon request. Corollary to this circumstance would be the exercise of control and supervision
by Burlingame over workers supplied by F. Garil in order to establish the inefficient, troublesome, and
uncooperative nature of undesirable personnel. Also implied in the provision on replacement of
personnel carried upon request by Burlingame is the power to fire personnel.

128
These are indications that F. Garil was not left alone in the supervision and control of its alleged
employees. Consequently, it can be concluded that F. Garil was not an independent contractor since it
did not carry a distinct business free from the control and supervision of Burlingame.

It goes without saying that the contractual stipulation on the nonexistence of an employer-employee
relationship between Burlingame and the personnel provided by F. Garil has no legal effect. While the
parties may freely stipulate terms and conditions of a contract, such contractual stipulations should not
be contrary to law, morals, good customs, public order or public policy. A contractual stipulation to the
contrary cannot override factual circumstances firmly establishing the legal existence of an employer-
employee relationship.

Under this circumstance, there is no doubt that F. Garil was engaged in labor-only contracting, and as
such, is considered merely an agent of Burlingame. In labor-only contracting, the law creates an
employer-employee relationship to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the labor-
only contractor as if such employees had been directly employed by the principal employer.[21] Since F.
Garil is a labor-only contractor, the workers it supplied should be considered as employees of
Burlingame in the eyes of the law.

WHEREFORE, the challenged Decision of the Court of Appeals dated August 29, 2003 and the Resolution
dated March 15, 2004 denying the motion for reconsideration are REVERSED and SET ASIDE. The
decision of the Secretary of Labor and Employment ordering the holding of a certification election
among the rank-and-file promo employees of Burlingame is reinstated.

Costs against respondent.

SO ORDERED.

129
G.R. No. 120466. May 17, 1999]

COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
RAMON B. CANONICATO, respondents.

DECISION

BELLOSILLO, J.:

This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January 1995
decision[1] of the National Labor Relations Commission (NLRC) holding that private respondent Ramon
B. Canonicato is a regular employee of petitioner Coca Cola Bottlers Phils. Inc. (COCA COLA) entitled to
reinstatement and back wages. The NLRC reversed the decision of the Labor Arbiter of 28 April 1994[2]
which declared that no employer-employee relationship existed between COCA COLA and Canonicato
thereby foreclosing entitlement to reinstatement and back wages.

On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod Janitorial Services
(BJS) stipulating[3] among others -

That the First Party (COCA COLA) desires to engage the services of the Second Party (BJS), as an
Independent Contractor, to perform and provide for the maintenance, sanitation and cleaning services
for the areas hereinbelow mentioned, all located within the aforesaid building of the First Party x x x x

1. The scope of work of the Second Party includes all floors, walls, doors, vertical and horizontal areas,
ceiling, all windows, glass surfaces, partitions, furniture, fixtures and other interiors within the
aforestated covered areas.

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2. Except holidays which are rest days, the Second Party will undertake daily the following: 1) Sweeping,
damp-mopping, spot scrubbing and polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to
be used on commodes, urinals and washbasins, water spots on chrome and other fixtures to be
checked; 3) Cleaning of glass surfaces, windows and glass partitions that require daily attention; 4)
Cleaning and dusting of horizontal and vertical surfaces; 5) Cleaning of fixtures, counters, panels and
sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays and trash receptacles; 7) Trash and
rubbish disposal and burning.

In addition, the Second Party will also do the following once a week, to wit: 1) Cleaning, waxing and
polishing of lobbies and offices; 2) Washing of windows, glasses that require cleaning; 3) Thorough
disinfecting and cleaning of toilets and washrooms.

3. The Second Party shall supply the necessary utensils, equipment and supervision, and it shall only
employ the services of fifteen (15) honest, reliable, carefully screened, cooperative and trained
personnel, who are in good faith, in the performance of its herein undertaking x x x x

4. The Second Party hereby guarantees against unsatisfactory workmanship. Minor repair of comfort
rooms are free of charge provided the First Party will supply the necessary materials for such repairs at
its expense. As may be necessary, the Second Party shall also report on such part or areas of the
premises covered by this contract which may require repairs from time to time x x x (italics supplied).

Every year thereafter a service contract was entered into between the parties under similar terms and
conditions until about May 1994.[4]

On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual employee and
assigned him to the bottling crew as a substitute for absent employees. In April 1990 COCA COLA
terminated Canonicato's casual employment. Later that year COCA COLA availed of Canonicato's
services, this time as a painter in contractual projects which lasted from fifteen (15) to thirty (30) days.
[5]

On 1 April 1991 Canonicato was hired as a janitor by BJS[6] which assigned him to COCA COLA
considering his familiarity with its premises. On 5 and 7 March 1992 Canonicato started painting the
facilities of COCA COLA and continued doing so several months thereafter or so for a few days every
time until 6 to 25 June 1993.[7]

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Goaded by information that COCA COLA employed previous BJS employees who filed a complaint
against the company for regularization pursuant to a compromise agreement,[8] Canonicato submitted
a similar complaint against COCA COLA to the Labor Arbiter on 8 June 1993.[9] The complaint was
docketed as RAB Case No. 06-06-10337-93.

Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting 29 June
1993. On 15 July 1993 he sent his sister Rowena to collect his salary from BJS.[10] BJS released his salary
but advised Rowena to tell Canonicato to report for work. Claiming that he was barred from entering the
premises of COCA COLA on either 14 or 15 July 1993, Canonicato met with the proprietress of BJS, Gloria
Lacson, who offered him assignments in other firms which he however refused.[11]

On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as grounds
therefor illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent.[12]
On 28 September 1993 BJS sent him a letter advising him to report for work within three (3) days from
receipt, otherwise, he would be considered to have abandoned his job.[13]

On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee relationship
between COCA COLA and Ramon Canonicato because BJS was Canonicato's real employer; (b) BJS was a
legitimate job contractor, hence, any liability of COCA COLA as to Canonicato's salary or wage
differentials was solidary with BJS in accordance with pars. 1 and 2 of Art. 106, Labor Code; (c) COCA
COLA and BJS must jointly and severally pay Canonicato his wage differentials amounting to P2,776.80
and his 13th month salary of P1,068.00, including ten (10%) percent attorney's fees in the sum of
P384.48. The Labor Arbiter also ordered that all other claims by Canonicato against COCA COLA be
dismissed for lack of employer-employee relationship; that the complaint for illegal dismissal as well as
all the other claims be likewise dismissed for lack of merit; and that COCA COLA and BJS deposit
P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days from
receipt of the decision.[14]

The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the janitorial services
of Canonicato were found to be necessary or desirable in the usual business or trade of COCA COLA. The
NLRC accepted Canonicato's proposition that his work with the BJS was the same as what he did while
still a casual employee of COCA COLA. In so holding the NLRC applied Art. 280 of the Labor Code and
declared that Canonicato was a regular employee of COCA COLA and entitled to reinstatement and
payment of P18,105.10 in back wages.[15]

132
On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack of merit.[16] Hence,
this petition, assigning as errors: (a) NLRC's finding that janitorial services were necessary and desirable
in COCA COLA's trade and business; (b) NLRC's application of Art. 280 of the Labor Code in resolving the
issue of whether an employment relationship existed between the parties; (c) NLRC's ruling that there
was an employer-employee relationship between petitioner and Canonicato despite its virtual
affirmance that BJS was a legitimate job contractor; (d) NLRC's declaration that Canonicato was a regular
employee of petitioner although he had rendered the company only five (5) months of casual
employment; and, (e) NLRC's order directing the reinstatement of Canonicato and the payment to him
of six (6) months back wages.[17]

We find good cause to sustain petitioner. Findings of fact of administrative offices are generally
accorded respect by us and no longer reviewed for the reason that such factual findings are considered
to be within their field of expertise. Exception however is made, as in this case, when the NLRC and the
Labor Arbiter made contradictory findings.

We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable
to the trade or business of petitioner COCA COLA. But this is inconsistent with our pronouncement in
Kimberly Independent Labor Union v. Drilon[18] where the Court took judicial notice of the practice
adopted in several government and private institutions and industries of hiring janitorial services on an
"independent contractor basis." In this respect, although janitorial services may be considered directly
related to the principal business of an employer, as with every business, we deemed them unnecessary
in the conduct of the employer's principal business.[19]

This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate
job contractor so that there can be no doubt as to the existence of an employer-employee relationship
between contractor and the worker. In this situation, the only pertinent question that may arise will no
longer deal with whether there exists an employment bond but whether the employee may be
considered regular or casual as to deserve the application of Art. 280 of the Labor Code.

It is an altogether different matter when the very existence of an employment relationship is in

question. This was the issue generated by Canonicato's application for regularization of his employment
with COCA COLA and the subsequent denial by the latter of an employer-employee relationship with the
applicant. It was error therefore for the NLRC to apply Art. 280 of the Labor Code in determining the
existence of an employment relationship of the parties herein, especially in light of our explicit holding
in Singer Sewing Machine Company v. Drilon[20] that -

133
x x x x [t]he definition that regular employees are those who perform activities which are desirable and
necessary for the business of the employer is not determinative in this case. Any agreement may
provide that one party shall render services for and in behalf of another for a consideration (no matter
how necessary for the latter's business) even without being hired as an employee. This is precisely true
in the case of an independent contractorship as well as in an agency agreement. The Court agrees with
the petitioner's argument that Article 280 is not the yardstick for determining the existence of an
employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain
benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence
of an employment relationship is in dispute.

In determining the existence of an employer-employee relationship it is necessary to determine whether

the following factors are present: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power to dismiss; and, (d) the power to control the employee's conduct.[21] Notably,
these are all found in the relationship between BJS and Canonicato and not between Canonicato and
petitioner COCA COLA. As the Solicitor-General manifested[22]-

In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The
application form and letter submitted by private respondent (Canonicato) to BJS show that he
acknowledged the fact that it was BJS who did the hiring and not petitioner x x x x

BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private
respondent sent his sister to BJS with a note authorizing her to receive his pay.

Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns the janitors to
its clients and transfers them when it sees fit. Since BJS is the one who engages their services, then it
only follows that it also has the power to dismiss them when justified under the circumstances.

Lastly, BJS has the power to control the conduct of the janitors. The supervisors of petitioner, being
interested in the result of the work of the janitors, also gives suggestions as to the performance of the
janitors, but this does not mean that BJS has no control over them. The interest of petitioner is only with
respect to the result of their work. On the other hand, BJS oversees the totality of their performance.

134
The power of the employer to control the work of the employee is said to be the most the most
significant determinant. Canonicato disputed this power of BJS over him by asserting that his
employment with COCA COLA was not interrupted by his application with BJS since his duties before and
after he applied for regularization were the same, involving as they did, working in the maintenance
department and doing painting tasks within its facilities. Canonicato cited the Labor Utilization Reports
of COCA COLA showing his painting assignments. These reports, however, are not expressive of the true
nature of the relationship between Canonicato and COCA COLA; neither do they detract from the fact
that BJS exercised real authority over Canonicato as its employee.

Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by Canonicato
sporadically, either in a few days within a month and only for a few months in a year.[23] This
infrequency or irregularity of assignments countervails Canonicatos submission that he was assigned
specifically to undertake the task of painting the whole year round. If anything, it hews closely to the
assertion of BJS that it assigned Canonicato to these jobs to maintain and sanitize the premises of
petitioner COCA COLA pursuant to its contract of services with the company.[24]

It is clear from these established circumstances that NLRC should have recognized BJS as the employer
of Canonicato and not COCA COLA. This is demanded by the fact that it did not disturb, and therefore it
upheld, the finding of the Labor Arbiter that BJS was truly a legitimate job-contractor and could by itself
hire its own employees. The Commission could not have reached any other legitimate conclusion
considering that BJS satisfied all the requirements of a job-contractor under the law, namely, (a) the
ability to carry on an independent business and undertake the contract work on its own account under
its own responsibility according to its manner and method, free from the control and direction of its
principal or client in all matters connected with the performance of the work except as to the results
thereof; and, (b) the substantial capital or investment in the form of tools, equipment, machinery, work
premises, and other materials which are necessary in the conduct of its business.[25]

It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients like San
Miguel Corporation, Distileria Bago Incorporated, University of Negros Occidental-Recolletos, University
of St. La Salle, Riverside College, College Assurance Plan Phil., Inc., and Negros Consolidated Farmers
Association, Inc.[26] This is proof enough that BJS has the capability to carry on its business of janitorial
services with big establishments aside from petitioner and has sufficient capital or materials necessary
therefor.[27] All told, there being no employer-employee relationship between Canonicato and COCA
COLA, the latter cannot be validly ordered to reinstate the former and pay him back wages.

WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon B.
Canonicato a regular employee of petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and
back wages is REVERSED and SET ASIDE. The decision of the Labor Arbiter of 28 April 1994 finding no

135
employer-employee relationship between petitioner and private respondent but directing petitioner
Coca Cola Bottlers Phils., Inc., instead and Bacolod Janitorial Services to pay jointly and severally Ramon
B. Canonicato P2,776.80 as wage differentials, P1,068.00 as 13th month pay and P384.48 as attorney's
fees, is REINSTATED.

SO ORDERED.

G.R. No. 158255. July 8, 2004

MANILA WATER COMPANY, INC., petitioner, vs. HERMINIO D. PENA, ESTEBAN B. BALDOZA, JORGE D.
CANONIGO, JR., IKE S. DELFIN, RIZALINO M. INTAL, REY T. MANLEGRO, JOHN L. MARTEJA, MARLON B.
MORADA, ALLAN D. ESPINA, EDUARDO ONG, AGNESIO D. QUEBRAL, EDMUNDO B. VICTA, VICTOR C.
ZAFARALLA, EDILBERTO C. PINGUL and FEDERICO M. RIVERA, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition assails the decision[1] of the Court of Appeals dated November 29, 2002, in CA-G.R. SP No.
67134, which reversed the decision of the National Labor Relations Commission and reinstated the
decision of the Labor Arbiter with modification.

Petitioner Manila Water Company, Inc. is one of the two private concessionaires contracted by the
Metropolitan Waterworks and Sewerage System (MWSS) to manage the water distribution system in
the East Zone of Metro Manila, pursuant to Republic Act No. 8041, otherwise known as the National
Water Crisis Act of 1995. Under the Concession Agreement, petitioner undertook to absorb former
employees of the MWSS whose names and positions were in the list furnished by the latter, while the
employment of those not in the list was terminated on the day petitioner took over the operation of the
East Zone, which was on August 1, 1997. Private respondents, being contractual collectors of the MWSS,
were among the 121 employees not included in the list; nevertheless, petitioner engaged their services
without written contract from August 1, 1997 to August 31, 1997. Thereafter, on September 1, 1997,
they signed a three-month contract to perform collection services for eight branches of petitioner in the
East Zone.[2]

Before the end of the three-month contract, the 121 collectors incorporated the Association Collectors
Group, Inc. (ACGI),[3] which was contracted by petitioner to collect charges for the Balara Branch.
Subsequently, most of the 121 collectors were asked by the petitioner to transfer to the First Classic
Courier Services, a newly registered corporation. Only private respondents herein remained with ACGI.

136
Petitioner continued to transact with ACGI to do its collection needs until February 8, 1999, when
petitioner terminated its contract with ACGI.[4]

Private respondents filed a complaint for illegal dismissal and money claims against petitioner,
contending that they were petitioners employees as all the methods and procedures of their collections
were controlled by the latter.

On the other hand, petitioner asserts that private respondents were employees of ACGI, an independent
contractor. It maintained that it had no control and supervision over private respondents manner of
performing their work except as to the results. Thus, petitioner did not have an employer-employee
relationship with the private respondents, but only a service contractor-client relationship with ACGI.

On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the dismissal of private
respondents illegal. He held that private respondents were regular employees of petitioner not only
because the tasks performed by them were controlled by it but, also, the tasks were obviously necessary
and desirable to petitioners principal business. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered, finding that complainants were
employees of respondent [petitioner herein], that they were illegally dismissed, and respondent
[petitioner herein] is hereby ordered to pay their separation pay based on the following computed
amounts:

HERMINIO D. PENA P15,000.00

ESTEBAN BALDOZA P12,000.00

JORGE D. CANONIGO, JR. P16,000.00

IKE S. DELFIN P12,000.00

RIZALINO M. INTAL P16,000.00

REY T. MANLEGRO P16,000.00

JOHN L. MARTEJA P12,000.00

MARLON B. MORADA P16,000.00

137
ALLAN D. ESPINA P14,000.00

EDUARDO ONG P15,000.00

AGNESIO D. QUEBRAL P16,000.00

EDMUNDO B. VICTA P13,000.00

VICTOR P. ZAFARALLA P15,000.00

EDILBERTO C. PINGUL P19,500.00

FEDERICO M. RIVERA P15,000.00

-------------------------------

TOTAL P222,500.00

Respondent [petitioner herein] is further directed to pay ten (10%) percent of the total award as
attorneys fee or the sum of P22,250.00.

SO ORDERED.[5]

Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter and ruled that the
documentary evidence, e.g., letters and memoranda by the petitioner to ACGI regarding the poor
performance of the collectors, did not constitute proof of control since these documents merely
identified the erring collectors; the appropriate disciplinary actions were left to the corporation to
impose.[6] Further, there was no evidence showing that the incorporation of ACGI was irregular.

Private respondents filed a petition for certiorari with the Court of Appeals, contending that the NLRC
acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the
decision of the Labor Arbiter.

The Court of Appeals reversed the decision of the NLRC and reinstated with modification the decision of
the Labor Arbiter.[7] It held that petitioner deliberately prevented the creation of an employment
relationship with the private respondents; and that ACGI was not an independent contractor. It likewise
denied petitioners motion for reconsideration.[8]

138
Hence, this petition for review raising the following errors:

THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION AND RESOLUTION
COMMITTED GRAVE REVERSIBLE ERRORS:

A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE DUE COURSE TO RESPONDENTS
PETITION FOR CERTIORARI UNDER RULE 65 OF THE RULES OF COURT, NOTWITHSTANDING THE ABSENCE
OF ANY PROOF OF GRAVE ABUSE OF DISCRETION ON THE PART OF THE NATIONAL LABOR RELATIONS
COMMISSION WHEN IT RENDERED THE DECISION ASSAILED BY HEREIN RESPONDENTS.

B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED BY THE PETITIONER COMPANY AND
RULING THAT THE PETITIONERS DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS WITHOUT
MERIT.

C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED RESPONDENTS TO INCORPORATE THE

ASSOCIATED COLLECTORS GROUP, INC. [ACGI] NOTWITHSTANDING ABSENCE OF ANY SPECIFIC
EVIDENCE IN SUPPORT OF THE SAME.

D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH NOTWITHSTANDING ABSENCE OF ANY

SPECIFIC EVIDENCE IN SUPPORT OF THE SAME, AND AWARDING MORAL AND EXEMPLARY DAMAGES TO
HEREIN RESPONDENTS.[9]

The pivotal issue to be resolved in this petition is whether or not there exists an employer-employee
relationship between petitioner and private respondents. Corollary thereto is the issue of whether or
not private respondents were illegally dismissed by petitioner.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a
question of fact.[10] As a rule, the Supreme Court is not a trier of facts, and this applies with greater
force in labor cases. Hence, factual findings of quasi-judicial bodies like the NLRC, particularly when they
coincide with those of the Labor Arbiter and if supported by substantial evidence, are accorded respect
and even finality by this Court.[11] However, a disharmony between the factual findings of the Labor

139
Arbiter and the National Labor Relations Commission opens the door to a review thereof by this Court.
Factual findings of administrative agencies are not infallible and will be set aside when they fail the test
of arbitrariness. Moreover, when the findings of the National Labor Relations Commission contradict
with those of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into the
records of the case and reexamine the questioned findings.[12]

The resolution of the foregoing issues initially boils down to a determination of the true status of ACGI,
i.e., whether it is an independent contractor or a labor-only contractor.

Petitioner asserts that ACGI, a duly organized corporation primarily engaged in collection services, is an
independent contractor which entered into a service contract for the collection of petitioners accounts
starting November 30, 1997 until the early part of February 1999. Thus, it has no employment
relationship with private respondents, being employees of ACGI.

The existence of an employment relationship between petitioner and private respondents cannot be
negated by simply alleging that the latter are employees of ACGI as an independent contractor, it being
crucial that ACGIs status, whether as labor-only contractor or independent contractor, be measured in
terms of and determined by the criteria set by statute.

The case of De los Santos v. NLRC[13] succinctly enunciates this statutory criteria

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 the business.

Labor-only contracting as defined in Section 5, Department Order No. 18-02, Rules Implementing
Articles 106-109 of the Labor Code[14] refers to an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform job, work or service for a principal, and any of the
following elements is present:

140
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business of
the principal; or

(ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.

Given the above criteria, we agree with the Labor Arbiter that ACGI was not an independent contractor.

First, ACGI does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an independent contractor. While it has
an authorized capital stock of P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be
considered substantial capitalization. The 121 collectors subscribed to four shares each and paid only
the amount of P625.00 in order to comply with the incorporation requirements.[15] Further, private
respondents reported daily to the branch office of the petitioner because ACGI has no office or work
premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Pea.
[16] Moreover, in dealing with the consumers, private respondents used the receipts and identification
cards issued by petitioner.[17]

Second, the work of the private respondents was directly related to the principal business or operation
of the petitioner. Being in the business of providing water to the consumers in the East Zone, the
collection of the charges therefor by private respondents for the petitioner can only be categorized as
clearly related to, and in the pursuit of the latters business.

Lastly, ACGI did not carry on an independent business or undertake the performance of its service
contract according to its own manner and method, free from the control and supervision of its principal,
petitioner. Prior to private respondents alleged employment with ACGI, they were already working for
petitioner, subject to its rules and regulations in regard to the manner and method of performing their
tasks. This form of control and supervision never changed although they were already under the
seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods and distribution of
books to the collectors;[18] it required private respondents to report daily and to remit their collections
on the same day to the branch office or to deposit them with Bank of the Philippine Islands; it monitored
strictly their attendance as when a collector cannot perform his daily collection, he must notify
petitioner or the branch office in the morning of the day that he will be absent; and although it was ACGI

141
which ultimately disciplined private respondents, the penalty to be imposed was dictated by petitioner
as shown in the letters it sent to ACGI specifying the penalties to be meted on the erring private
respondents.[19] These are indications that ACGI was not left alone in the supervision and control of its
alleged employees. Consequently, it can be concluded that ACGI was not an independent contractor
since it did not carry a distinct business free from the control and supervision of petitioner.

Under this factual milieu, there is no doubt that ACGI was engaged in labor-only contracting, and as
such, is considered merely an agent of the petitioner. In labor-only contracting, the statute creates an
employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.[20] Since ACGI is only a labor-only contractor, the workers it
supplied should be considered as employees of the petitioner.

Even the four-fold test will show that petitioner is the employer of private respondents. The elements to
determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employees conduct. The most important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as to the means and methods to
accomplish it.[21]

We agree with the Labor Arbiter that in the three stages of private respondents services with the
petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2) from September 1, 1997 to November
30, 1997; and (3) from December 1, 1997 to February 8, 1999, the latter exercised control and
supervision over the formers conduct.

Petitioner contends that the employment of private respondents from August 1, 1997 to August 30,
1997 was only temporary and done to accommodate their request to be absorbed since petitioner was
still undergoing a transition period. It was only when its business became settled that petitioner
employed private respondents for a fixed term of three months.

Although petitioner was not obliged to absorb the private respondents, by engaging their services,
paying their wages in the form of commission, subjecting them to its rules and imposing punishment in
case of breach thereof, and controlling not only the end result but the manner of achieving the same as
well, an employment relationship existed between them.

142
Notably, private respondents performed activities which were necessary or desirable to its principal
trade or business. Thus, they were regular employees of petitioner, regardless of whether the
engagement was merely an accommodation of their request, pursuant to Article 280 of the Labor Code
which reads:

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.

As such regular employees, private respondents are entitled to security of tenure which may not be
circumvented by mere stipulation in a subsequent contract that their employment is one with a fixed
period. While this Court has upheld the legality of fixed-term employment, where from the
circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down or disregarded as contrary to public policy and
morals.[22]

In the case at bar, we find that the term fixed in the subsequent contract was used to defeat the tenurial
security which private respondents already enjoy. Thus, we concur with the Labor Arbiter, as affirmed by
the Court of Appeals, when it held that:

The next question if whether, with respect to the period, the individual contracts are valid. Not all
contracts of employment fixing a period are invalid. Under Article 280, the evil sought to be prevented is
singled out: agreements entered into precisely to circumvent security of tenure. It has no application
where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without
any force, duress or improper pressure being brought upon the employee and absent any circumstances
vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each
other on more or less terms with no moral dominance whatever being exercised by the former over the
latter. That is the doctrine in Brent School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in
question were prepared by MWC in the form of the letter addressed to complainants. The letter-
contract is dated September 1, 1997, when complainants were already working for MWC as collectors.
With their employment as their means of survival, there was no room then for complainants to disagree

143
with the presented letter-contracts. Their choice then was not to negotiate for the terms of the contract
but to lose or not to lose their employment employment which they already had at that time. The choice
is obvious, as what they did, to sign the ready made letter-contract to retain their employment, and
survive. It is a defiance of the teaching in Brent School, Inc. v. Zamora if this Office rules that the
individual contracts in question are valid, so, in deference to Brent School ruling, this Office rules they
are null and void.[23]

In view of the foregoing, we hold that an employment relationship exists between petitioner and private
respondents. We now proceed to ascertain whether private respondents were dismissed in accordance
with law.

As private respondents employer, petitioner has the burden of proving that the dismissal was for a
cause allowed under the law and that they were afforded procedural due process.[24] Petitioner failed
to discharge this burden by substantial evidence as it maintained the defense that it was not the
employer of private respondents. Having established that the schemes employed by petitioner were
devious attempts to defeat the tenurial rights of private respondents and that it failed to comply with
the requirements of termination under the Labor Code, the dismissal of the private respondent is
tainted with illegality.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work is entitled to
reinstatement without loss of seniority rights and other privileges, and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. However, if
reinstatement is no longer possible, the employer has the alternative of paying the employee his
separation pay in lieu of reinstatement.[25]

This Court however cannot sustain the award of moral and exemplary damages in favor of private
respondents. Such an award cannot be justified solely upon the premise that the employer dismissed his
employee without just cause or due process. Additional facts must be pleaded and proved to warrant
the grant of moral damages under the Civil Code. The act of dismissal must be attended with bad faith,
or fraud, or was oppressive to labor or done in a manner contrary to morals, good customs or public
policy and, of course, that social humiliation, wounded feelings, or grave anxiety resulted therefrom.
Similarly, exemplary damages are recoverable only when the dismissal was effected in a wanton,
oppressive or malevolent manner.[26] Those circumstances have not been adequately established.

However, private respondents are entitled to attorneys fees as they were compelled to litigate with
petitioners and incur expenses to enforce and protect their interests.[27] The award by the Labor
Arbiter of P22,250.00 as attorneys fees to private respondents, being reasonable, is sustained.

144
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated November 29, 2002, in
CA-G.R. SP No. 67134, reversing the decision of the National Labor Relations Commission and reinstating
the decision of the Labor Arbiter is AFFIRMED with the MODIFICATION that the awards of P10,000.00 as
moral damages and P5,000.00 as exemplary damages are DELETED for lack of evidentiary basis.

SO ORDERED.

G.R. No. 149011. June 28, 2005

SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-
ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A.
ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS,
EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C.
BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD,
RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO
CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P.
DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A.
DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L.
DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L.
HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO,
JONATHAN T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS
POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E.
MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO,
WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C.
PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G.
RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V.
SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE,
WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON,
ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C.
VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents.

DECISION

CARPIO-MORALES, J.:

145
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area
Manager for Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose Cooperative
(Sunflower), represented by the Chairman of its Board of Directors Roy G. Asong, entered into a one-
year Contract of Services[1] commencing on January 1, 1993, to be renewed on a month to month basis
until terminated by either party. The pertinent provisions of the contract read:

1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-
exclusive basis for a period of one year the following services for the Bacolod Shrimp Processing Plant:

A. Messengerial/Janitorial

B. Shrimp Harvesting/Receiving

C. Sanitation/Washing/Cold Storage[2]

2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall
employ the necessary personnel and provide adequate equipment, materials, tools and apparatus, to
efficiently, fully and speedily accomplish the work and services undertaken by the cooperative. xxx

3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the
following rates per activity:

A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos
Only (P19,500.00)

B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per person/activity

whichever is higher, with provisions as follows:

P25.00 Fixed Fee per person

Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.

This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.

146
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.

One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on
the end of each month. The cooperative shall pay taxes, fees, dues and other impositions that shall
become due as a result of this contract.

The cooperative shall have the entire charge, control and supervision of the work and services herein
agreed upon. xxx

4. There is no employer-employee relationship between the company and the cooperative, or the
cooperative and any of its members, or the company and any members of the cooperative. The
cooperative is an association of self-employed members, an independent contractor, and an
entrepreneur. It is subject to the control and direction of the company only as to the result to be
accomplished by the work or services herein specified, and not as to the work herein contracted. The
cooperative and its members recognize that it is taking a business risk in accepting a fixed service fee to
provide the services contracted for and its realization of profit or loss from its undertaking, in relation to
all its other undertakings, will depend on how efficiently it deploys and fields its members and how they
perform the work and manage its operations.

5. The cooperative shall, whenever possible, maintain and keep under its control the premises where
the work under this contract shall be performed.

6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its
member-workers or otherwise in the direction and control thereof. The determination of the wages,
salaries and compensation of the member-workers of the cooperative shall be within its full control. It is
further understood that the cooperative is an independent contractor, and as such, the cooperative
agrees to comply with all the requirements of all pertinent laws and ordinances, rules and regulations.
Although it is understood and agreed between the parties hereto that the cooperative, in the
performance of its obligations, is subject to the control or direction of the company merely as a (sic)
result to be accomplished by the work or services herein specified, and not as to the means and
methods of accomplishing such result, the cooperative hereby warrants that it will perform such work or
services in such manner as will be consistent with the achievement of the result herein contracted for.

xxx

147
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all
benefits, premiums and protection in accordance with the provisions of the labor code, cooperative
code and other applicable laws and decrees and the rules and regulations promulgated by competent
authorities, assuming all responsibility therefor.

The cooperative further undertakes to submit to the company within the first ten (10) days of every
month, a statement made, signed and sworn to by its duly authorized representative before a notary
public or other officer authorized by law to administer oaths, to the effect that the cooperative has paid
all wages or salaries due to its employees or personnel for services rendered by them during the month
immediately preceding, including overtime, if any, and that such payments were all in accordance with
the requirements of law.

xxx

12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of
one (1) year commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a
month-to-month basis until terminated by either party by sending a written notice to the other at least
thirty (30) days prior to the intended date of termination.

xxx[3] (Underscoring supplied)

Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at
SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by
the parties every month after its expiration on January 1, 1994 and private respondents continued to
perform their tasks until September 11, 1995.

In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI,
Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery of all
benefits and privileges enjoyed by SMC rank and file employees.

148
Private respondents subsequently filed on September 25, 1995 an Amended Complaint[4] to include
illegal dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp Processing
Plant on September 15, 1995[5] which resulted in the termination of their services.

SMC filed a Motion for Leave to File Attached Third Party Complaint[6] dated November 27, 1995 to
implead Sunflower as Third Party Defendant which was, by Order[7] of December 11, 1995, granted by
Labor Arbiter Ray Alan T. Drilon.

In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the
Department of Labor and Employment (DOLE) a Notice of Closure[8] of its aquaculture operations
effective on even date, citing serious business losses.

By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents complaint for
lack of merit, ratiocinating as follows:

We sustain the stand of the respondent SMC that it could properly exercise its management prerogative
to contract out the preparation and processing aspects of its aquaculture operations. Judicial notice has
already been taken regarding the general practice adopted in government and private institutions and
industries of hiring independent contractors to perform special services. xxx

xxx

Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under
specific conditions and we do not see how this activity could not be legally undertaken by an
independent service cooperative like the third-party respondent herein.

There is no basis to the demand for regularization simply on the theory that complainants performed
activities which are necessary and desirable in the business of respondent. It has been held that the
definition of regular employees as those who perform activities which are necessary and desirable for
the business of the employer is not always determinative because any agreement may provide for one
(1) party to render services for and in behalf of another for a consideration even without being hired as
an employee.

149
The charge of the complainants that third-party respondent is a mere labor-only contractor is a
sweeping generalization and completely unsubstantiated. xxx In the absence of clear and convincing
evidence showing that third-party respondent acted merely as a labor only contractor, we are firmly
convinced of the legitimacy and the integrity of its service contract with respondent SMC.

In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely
dictated by economic factors which was (sic) mainly serious business losses. The law recognizes the right
of the employer to close his business or cease his operations for bonafide reasons, as much as it
recognizes the right of the employer to terminate the employment of any employee due to closure or
cessation of business operations, unless the closing is for the purpose of circumventing the provisions of
the law on security of tenure. The decision of respondent SMC to close its Bacolod Shrimp Processing
Plant, due to serious business losses which has (sic) clearly been established, is a management
prerogative which could hardly be interfered with.

xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were
accordingly terminated following the legal requisites prescribed by law. The closure, however, in so far
as the complainants are concerned, resulted in the termination of SMCs service contract with their
cooperative xxx[9] (Underscoring supplied)

Private respondents appealed to the NLRC.

By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third
party respondent Sunflower was an independent contractor in light of its observation that [i]n all the
activities of private respondents, they were under the actual direction, control and supervision of third
party respondent Sunflower, as well as the payment of wages, and power of dismissal.[10]

Private respondents Motion for Reconsideration[11] having been denied by the NLRC for lack of merit by
Resolution of September 10, 1999, they filed a petition for certiorari[12] before the Court of Appeals
(CA).

Before the CA, SMC filed a Motion to Dismiss[13] private respondents petition for non-compliance with
the Rules on Civil Procedure and failure to show grave abuse of discretion on the part of the NLRC.

150
SMC subsequently filed its Comment[14] to the petition on March 30, 2000.

By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found
for private respondents, disposing as follows:

WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and
SETTING ASIDE both the 29 December 1998 decision and 10 September 1999 resolution of the National
Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well as
the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the
respondent, San Miguel Corporation, to GRANT petitioners: (a) separation pay in accordance with the
computation given to the regular SMC employees working at its Bacolod Shrimp Processing Plant with
full backwages, inclusive of allowances and other benefits or their monetary equivalent, from 11
September 1995, the time their actual compensation was withheld from them, up to the time of the
finality of this decision; (b) differentials pays (sic) effective as of and from the time petitioners acquired
regular employment status pursuant to the disquisition mentioned above, and all such other and further
benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law,
beginning such time up to their termination from employment on 11 September 1995; and ORDERING
private respondent SMC to PAY unto the petitioners attorneys fees equivalent to ten (10%) percent of
the total award.

No pronouncement as to costs.

SO ORDERED.[15] (Underscoring supplied)

Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned:

Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a
clear intent to abstain from establishing an employer-employee relationship between SMC and
[Sunflower] or the latters members, the extent to which the parties successfully realized this intent in
the light of the applicable law is the controlling factor in determining the real and actual relationship
between or among the parties.

151
xxx

With respect to the power to control petitioners conduct, it appears that petitioners were under the
direct control and supervision of SMC supervisors both as to the manner they performed their functions
and as to the end results thereof. It was only after petitioners lodged a complaint to have their status
declared as regular employees of SMC that certain members of [Sunflower] began to countersign
petitioners daily time records to make it appear that they (petitioners) were under the control and
supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx

Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that
SMC would never have allowed the petitioners to work within its premises, using its own facilities,
equipment and tools, alongside SMC employees discharging similar or identical activities unless it
exercised a substantial degree of control and supervision over the petitioners not only as to the manner
they performed their functions but also as to the end results of such functions.

xxx

xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors.
[Sunflower] and the petitioners did not have substantial capital or investment in the form of tools,
equipment, implements, work premises, et cetera necessary to actually perform the service under their
own account, responsibility, and method. The only work premises maintained by [Sunflower] was a
small office within the confines of a small carinderia or refreshment parlor owned by the mother of its
chair, Roy Asong; the only equipment it owned was a typewriter (rollo, pp. 525-525) and, the only assets
it provided SMC were the bare bodies of its members, the petitioners herein (rollo, p. 523).

In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the
control and supervision of SMC both as to the manner and method in discharging their functions and as
to the results thereof.

Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners,
janitors, messengers and shrimp harvesters, packers and handlers were directly related to the
aquaculture business of SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by the renewal
of the service contract from January 1993 to September 1995, a period of close to three (3) years.

152
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and
raises the suspicion that the non-exclusive service contract between SMC and [Sunflower] was designed
to evade the obligations inherent in an employer-employee relationship (See Rhone-Poulenc
Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).

Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its
[Sunflower] retained counsel are both partners of the local counsel of SMC (rollo, p. 9).

xxx

With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an
agent of SMC, facilitating the manpower requirements of the latter, the real employer of the petitioners.
We simply cannot allow these two entities through the convenience of a non-exclusive service contract
to stipulate on the existence of employer-employee relation. Such existence is a question of law which
cannot be made the subject of agreement to the detriment of the petitioners (Tabas vs. California
Manufacturing, Inc., 169 SCRA 497, 500).

xxx

There being a finding of labor-only contracting, liability must be shouldered either by SMC or
[Sunflower] or shared by both (See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC however
should be held solely liable for [Sunflower] became non-existent with the closure of the aquaculture
business of SMC.

Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement
is no longer feasible. Consistent with the pronouncement in Bustamante, et al., vs. NLRC, G.R. No.
111651, 28 November 1996, petitioners are thus entitled to separation pay (in the computation similar
to those given to regular SMC employees at its Bacolod Shrimp Processing Plant) with full backwages,
inclusive of allowances and other benefits or their monetary equivalent, from the time their actual
compensation was withheld from them up to the time of the finality of this decision. This is without
prejudice to differentials pays (sic) effective as of and from the time petitioners acquired regular
employment status pursuant to the discussion mentioned above, and all such other and further benefits

153
as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning
such time up to their termination from employment on 11 September 1995.[16] (Emphasis and
underscoring supplied)

SMCs Motion for Reconsideration[17] having been denied for lack of merit by Resolution of July 11,
2001, it comes before this Court via the present petition for review on certiorari assigning to the CA the
following errors:

THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS
PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.

II

THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS
IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN
A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT.

III

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.

IV

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED
TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS
BUSINESS LOSSES.[18] (Underscoring supplied)

154
SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only
three out of the ninety seven named petitioners signed the verification and certification against forum-
shopping.

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or
petitioners in a case and the signature of only one of them is insufficient,[19] this Court has stressed that
the rules on forum shopping, which were designed to promote and facilitate the orderly administration
of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective.[20] Strict compliance with the provisions regarding the certificate of non-forum
shopping merely underscores its mandatory nature in that the certification cannot be altogether
dispensed with or its requirements completely disregarded.[21] It does not, however, thereby interdict
substantial compliance with its provisions under justifiable circumstances.[22]

Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision
Homeowners Association,[23] this Court held:

Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group,
represented by their homeowners association president who was likewise one of the plaintiffs, Mr.
Samaon M. Buat. Respondents raised one cause of action which was the breach of contractual
obligations and payment of damages. They shared a common interest in the subject matter of the case,
being the aggrieved residents of the poorly constructed and developed Emily Homes Subdivision. Due to
the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could validly sign the
certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it is highly
impractical to require all the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in
order not to defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the
certificate provided that xxx the plaintiffs share a common interest in the subject matter of the case or
filed the case as a collective, raising only one common cause of action or defense.[24] (Emphasis and
underscoring supplied)

Given the collective nature of the petition filed before the appellate court by herein private
respondents, raising one common cause of action against SMC, the execution by private respondents
Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private respondents of the
certificate of non-forum shopping constitutes substantial compliance with the Rules.[25] That the three
indeed represented their co-petitioners before the appellate court is, as it correctly found, subsequently

155
proven to be true as shown by the signatures of the majority of the petitioners appearing in their
memorandum filed before Us.[26]

Additionally, the merits of the substantive aspects of the case may also be deemed as special
circumstance or compelling reason to take cognizance of a petition although the certification against
forum shopping was not executed and signed by all of the petitioners.[27]

SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied
by copies of all pleadings and documents relevant and pertinent thereto in contravention of Section 1,
Rule 65 of the Rules of Court.[28]

This Court is not persuaded. The records show that private respondents appended the following
documents to their petition before the appellate court: the September 23, 1997 Decision of the Labor
Arbiter,[29] their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed before the
NLRC,[30] the December 29, 1998 NLRC Decision,[31] their Motion for Reconsideration dated March 26,
1999 filed with the NLRC[32] and the September 10, 1999 NLRC Resolution.[33]

It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting
documents are sufficient to make out a prima facie case.[34] It discerns whether on the basis of what
have been submitted it could already judiciously determine the merits of the petition.[35] In the case at
bar, the CA found that the petition was adequately supported by relevant and pertinent documents.

At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a
certificate of non-forum shopping in the following cases: (1) where a rigid application will result in
manifest failure or miscarriage of justice; (2) where the interest of substantial justice will be served; (3)
where the resolution of the motion is addressed solely to the sound and judicious discretion of the
court; and (4) where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.[36]

Rules of procedure should indeed be viewed as 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 eschewed.[37]

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SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the
labor arbiter and the NLRC as findings of facts of quasi-judicial bodies like the NLRC are accorded great
respect and finality, and that this principle acquires greater weight and application in the case at bar as
the labor arbiter and the NLRC have the same factual findings.

The general rule, no doubt, is that findings of facts of an administrative agency which has acquired
expertise in the particular field of its endeavor are accorded great weight on appeal.[38] The rule is not
absolute and admits of certain well-recognized exceptions, however. Thus, when the findings of fact of
the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based
on a misapprehension of facts, the appellate court may make an independent evaluation of the facts of
the case.[39]

SMC further faults the appellate court in giving due course to private respondents petition despite the
fact that the complaint filed before the labor arbiter was signed and verified only by private respondent
Winifredo Talite; that private respondents position paper[40] was verified by only six[41] out of the
ninety seven complainants; and that their Joint-Affidavit[42] was executed only by twelve[43] of the
complainants.

Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not
have been considered by the appellate court in establishing the claims of those who did not sign the
same, citing this Courts ruling in Southern Cotabato Development and Construction, Inc. v. NLRC.[44]

SMCs position does not lie.

A perusal of the complaint shows that the ninety seven complainants were being represented by their
counsel of choice. Thus the first sentence of their complaint alleges: xxx complainants, by counsel and
unto this Honorable Office respectfully state xxx. And the complaint was signed by Atty. Jose Max S.
Ortiz as counsel for the complainants. Following Section 6, Rule III of the 1990 Rules of Procedure of the
NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized
by private respondents in filing the complaint.

That the verification wherein it is manifested that private respondent Talite was one of the complainants
and was causing the preparation of the complaint with the authority of my co-complainants indubitably
shows that Talite was representing the rest of his co-complainants in signing the verification in

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accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC
Rules, which states:

Section 7. Authority to bind party. Attorneys and other representatives of parties shall have authority to
bind their clients in all matters of procedure; but they cannot, without a special power of attorney or
express consent, enter into a compromise agreement with the opposing party in full or partial discharge
of a clients claim. (Underscoring supplied)

As regards private respondents position paper which bore the signatures of only six of them, appended
to it was an Authority/Confirmation of Authority[45] signed by the ninety one others conferring
authority to their counsel to file RAB Case No. 06-07-10316-95, entitled Winifredo Talite et al. v. San
Miguel Corporation presently pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC
Regional Arbitration Branch No. VI in Bacolod City and appointing him as their retained counsel to
represent them in the said case.

That there has been substantial compliance with the requirement on verification of position papers
under Section 3, Rule V of the 1990 NLRC Rules of Procedure[46] is not difficult to appreciate in light of
the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules
which reads:

Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be non-litigious in nature.
Subject to the requirements of due process, the technicalities of law and procedure and the rules
obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may avail himself of all
reasonable means to ascertain the facts of the controversy speedily, including ocular inspection and
examination of well-informed persons. (underscoring supplied)

As regards private respondents Joint-Affidavit which is being assailed in view of the failure of some
complainants to affix their signatures thereon, this Court quotes with approval the appellate courts
ratiocinations:

A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the
whole text of paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads:

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Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their
affidavits nor appear during trial and in whose favor no other independent evidence was adduced, no
award for back wages could have been validly and properly made for want of factual basis. There is no
showing at all that any of the affidavits of the thirty-four (34) complainants were offered as evidence for
those who did not submit their affidavits, or that such affidavits had any bearing at all on the rights and
interest of the latter. In the same vein, private respondents position paper was not of any help to these
delinquent complainants.

The implication is that as long as the affidavits of the complainants were offered as evidence for those
who did not submit theirs, or the affidavits were material and relevant to the rights and interest of the
latter, such affidavits may be sufficient to establish the claims of those who did not give their affidavits.

Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants
(petitioners herein) would readily reveal that the affidavit was offered as evidence not only for the
signatories therein but for all of the complainants. (These ninety-seven (97) individuals were previously
identified during the mandatory conference as the only complainants in the proceedings before the
labor arbiter) Moreover, the affidavit touched on the common interest of all of the complainants as it
supported their claim of the existence of an employer-employee relationship between them and
respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the
complainants.[47] (Emphasis supplied, underscoring in the original)

In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not
control proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins:

ART. 221. Technical rules not binding and prior resort to amicable settlement. In any proceeding before
the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity
shall not be controlling and it is the spirit and intention of this Code that the Commission and its
members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of law or procedure, all in the interest
of due process. xxx

As such, their application may be relaxed to serve the demands of substantial justice.[48]

On the merits, the petition just the same fails.

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SMC insists that private respondents are the employees of Sunflower, an independent contractor. On
the other hand, private respondents assert that Sunflower is a labor-only contractor.

Article 106 of the Labor Code provides:

ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under the Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such 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.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department
Order No. 18, distinguishes between legitimate and labor-only contracting:

160
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job,
work or service.

Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business of
the principal, or

ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended.

Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.

The right to control shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.

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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 results of the work.[49]

In legitimate labor contracting, the law creates an employer-employee relationship for a limited
purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly
and severally liable with the job contractor, only for the payment of the employees wages whenever the
contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim
made by the employees.[50]

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive

purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.[51]

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the
existence of an employer-employee relationship between SMC and private respondents. The language
of a contract is not, however, determinative of the parties relationship; rather it is the totality of the
facts and surrounding circumstances of the case.[52] A party cannot dictate, by the mere expedient of a
unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor
or job contractor, it being crucial that its character be measured in terms of and determined by the
criteria set by statute.[53]

SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it
had no substantial capital.[54]

While indeed Sunflower was issued Certificate of Registration No. IL0-875[55] on February 10, 1992 by
the Cooperative Development Authority, this merely shows that it had at least P2,000.00 in paid-up
share capital as mandated by Section 5 of Article 14[56] of Republic Act No. 6938, otherwise known as
the Cooperative Code, which amount cannot be considered substantial capitalization.

162
What appears is that Sunflower does not have substantial capitalization or investment in the form of
tools, equipment, machineries, work premises and other materials to qualify it as an independent
contractor.

On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized
by private respondents in carrying out their tasks were owned and provided by SMC. Consider the
following uncontroverted allegations of private respondents in the Joint Affidavit:

[Sunflower], during the existence of its service contract with respondent SMC, did not own a single
machinery, equipment, or working tool used in the processing plant. Everything was owned and
provided by respondent SMC. The lot, the building, and working facilities are owned by respondent
SMC. The machineries and equipments (sic) like washer machine, oven or cooking machine, sizer
machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all
owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also owned by
respondent SMC. The gloves and boots used by the complainants were also owned by respondent SMC.
Even the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain
removers, lysol and the like used by the complainants assigned as cleaners were all owned and provided
by respondent SMC.

Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries,
or facilities used in said prawn processing

xxx

The alleged office of [Sunflower] is found within the confines of a small carinderia or refreshment (sic)
owned by the mother of the Cooperative Chairman Roy Asong.

xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. [57]

And from the job description provided by SMC itself, the work assigned to private respondents was
directly related to the aquaculture operations of SMC. Undoubtedly, the nature of the work performed
by private respondents in shrimp harvesting, receiving and packing formed an integral part of the shrimp

163
processing operations of SMC. As for janitorial and messengerial services, that they are considered
directly related to the principal business of the employer[58] has been jurisprudentially recognized.

Furthermore, Sunflower did not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the control and supervision of its
principal, SMC, its apparent role having been merely to recruit persons to work for SMC.

Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that
their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca,
Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC exercised the
power of control and supervision over its employees.[59] And control of the premises in which private
respondents worked was by SMC. These tend to disprove the independence of the contractor.[60]

More. Private respondents had been working in the aqua processing plant inside the SMC compound
alongside regular SMC shrimp processing workers performing identical jobs under the same SMC
supervisors.[61] This circumstance is another indicium of the existence of a labor-only contractorship.
[62]

And as private respondents alleged in their Joint Affidavit which did not escape the observation of the
CA, no showing to the contrary having been proffered by SMC, Sunflower did not cater to clients other
than SMC,[63] and with the closure of SMCs Bacolod Shrimp Processing Plant, Sunflower likewise ceased
to exist. This Courts ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.[64] is thus
instructive.

xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically
meet the pressing needs of SMC which was then having labor problems in its segregation division, none
of its workers was also ever assigned to any other establishment, thus convincing us that it was created
solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and
SMC followed MAERCs cessation of operations, the loss of jobs for the whole MAERC workforce and the
resulting actions instituted by the workers.[65] (Underscoring supplied)

All the foregoing considerations affirm by more than substantial evidence the existence of an employer-
employee relationship between SMC and private respondents.

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Since private respondents who were engaged in shrimp processing performed tasks usually necessary or
desirable in the aquaculture business of SMC, they should be deemed regular employees of the
latter[66] and as such are entitled to all the benefits and rights appurtenant to regular employment.[67]
They should thus be awarded differential pay corresponding to the difference between the wages and
benefits given them and those accorded SMCs other regular employees.

Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court
quotes with approval the appellate courts ruling thereon:

Those performing janitorial and messengerial services however acquired regular status only after
rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial and
messengerial services are considered directly related to the aquaculture business of SMC, they are
deemed unnecessary in the conduct of its principal business; hence, the distinction (See Coca Cola
Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v. NLRC,
supra, p. 359).[68]

The law of course provides for 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.[69]

As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall
under the second category and are thus entitled to differential pay and benefits extended to other SMC
regular employees from the day immediately following their first year of service.[70]

Regarding the closure of SMCs aquaculture operations and the consequent termination of private
respondents, Article 283 of the 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 losses 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

165
workers and the Department 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 to 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. (Underscoring supplied)

In the case at bar, a particular department under the SMC group of companies was closed allegedly due
to serious business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the
company itself as SMC has not totally ceased operations but is still very much an on-going and highly
viable business concern.[71]

Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is,
however, subject to faithful compliance with the substantive and procedural requirements laid down by
law and jurisprudence.[72]

For retrenchment to be considered valid the following substantial requirements must be met: (a) the
losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses
apprehended must be reasonably imminent such as can be perceived objectively and in good faith by
the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the
expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought
to be forestalled, must be proved by sufficient and convincing evidence.[73]

In the discharge of these requirements, it is the employer who has the onus, being in the nature of an
affirmative defense.[74]

Normally, the condition of business losses is shown by audited financial documents like yearly balance
sheets, profit and loss statements and annual income tax returns. The financial statements must be
prepared and signed by independent auditors failing which they can be assailed as self-serving
documents.[75]

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In the case at bar, company losses were duly established by financial documents audited by Joaquin
Cunanan & Co. showing that the aquaculture operations of SMCs Agribusiness Division accumulated
losses amounting to P145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center
in Negros Occidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its
San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.

SMC has thus proven substantial business reverses justifying retrenchment of its employees.

For termination due to retrenchment to be valid, however, the law requires that written notices of the
intended retrenchment be served by the employer on the worker and on the DOLE at least one (1)
month before the actual date of the retrenchment,[76] in order to give employees some time to prepare
for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the
alleged cause of termination.[77]

Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn
Manager Ponciano Capay that effective the following day or on September 11, 1995, they were no
longer to report for work as SMC would be closing its operations.[78]

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the
employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal
process was initiated by the employers exercise of his management prerogative, as opposed to a
dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction
to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated
by an act imputable to the employee.[79]

In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private
respondent as nominal damages.

The grant of separation pay as an incidence of termination of employment due to retrenchment to

prevent losses is a statutory obligation on the part of the employer and a demandable right on the part
of the employee. Private respondents should thus be awarded separation pay equivalent to at least one
(1) month pay or to at least one-half month pay for every year of service, whichever is higher, as
mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC

167
employees that were terminated as a result of the retrenchment, depending on which is most beneficial
to private respondents.

Considering that private respondents were not illegally dismissed, however, no backwages need be
awarded. It is well settled that backwages may be granted only when there is a finding of illegal
dismissal.[80] The appellate court thus erred in awarding backwages to private respondents upon the
authority of Bustamante v. NLRC,[81] what was involved in that case being one of illegal dismissal.

With respect to attorneys fees, in actions for recovery of wages or where an employee was forced to
litigate and thus incurred expenses to protect his rights and interests,[82] a maximum of ten percent
(10%) of the total monetary award[83] by way of attorneys fees is justifiable under Article 111 of the
Labor Code,[84] Section 8, Rule VIII, Book III of its Implementing Rules,[85] and paragraph 7, Article 2208
of the Civil Code.[86] Although an express finding of facts and law is still necessary to prove the merit of
the award, there need not be any showing that the employer acted maliciously or in bad faith when it
withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as
in this case.[87]

Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to
Rule VIII-A, Section 19[88] of the Omnibus Rules Implementing the Labor Code, Sunflower is held
solidarily liable with SMC for all the rightful claims of private respondents.

WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated
July 11, 2001 of the Court of Appeals are AFFIRMED with MODIFICATION.

Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to
jointly and severally pay each private respondent differential pay from the time they became regular
employees up to the date of their termination; separation pay equivalent to at least one (1) month pay
or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article
283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that
were terminated as a result of the retrenchment, depending on which is most beneficial to private
respondents; and ten percent (10%) attorneys fees based on the herein modified award.

Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of
P50,000.00, representing nominal damages for non-compliance with statutory due process.

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The award of backwages is DELETED.

SO ORDERED.

G.R. No. 143604. June 20, 2003]

PRISCO LANZADERAS, SAMUEL SADICON, ANGELO MABANTA, VICENTE GIBERSON, LONGINO

NAMBATAC, ELENO ACERON, and SALVADOR VIRTUDAZO, petitioners, vs. AMETHYST SECURITY AND
GENERAL SERVICES, INC. (Formerly CALMAR SECURITY AGENCY), RESIN INDUSTRIAL CHEMICAL CORP.,
ENGR. ROBERTO TOGLE, Resident Manager, AND/OR PHIL. IRON CONSTRUCTION AND MARINE WORKS,
INC., respondents.

DECISION

QUISUMBING, J.:

This petition for review assails the resolutions dated January 05, 2000[1] and May 19, 2000,[2] of the
Court of Appeals in CA-G.R. SP No. 56347. Said resolutions had dismissed the petition under Rule 43 of
the 1997 Rules of Civil Procedure, earlier filed by petitioners in the appellate court to challenge the
resolution dated March 19, 1999[3] of the National Labor Relations Commission in NLRC CA No. M-
004619-98.

Petitioners were the complainants in RAB CASES NO. 10-03-00233-98, 10-03-00234-98, and 10-04-
00254-98. These were consolidated cases for alleged illegal dismissal with money claims against sister
companies Resin Industrial Chemical Corp., (RICC) and Philippine Iron Construction and Marine Works,
Inc., (PICMW) and their security services provider, Amethyst Security and General Services Inc. (formerly
Calmar Security Agency). The Labor Arbiter in a decision[4] dated November 27, 1998 found in favor of
complainants (herein petitioners). Respondents herein filed their appeal with the NLRC. And the NLRC in
a resolution[5] dated March 19, 1999 reversed and set aside the ruling of the Labor Arbiter. Then in a
resolution[6] dated October 29, 1999, the NLRC denied herein petitioners motion for reconsideration.

The factual antecedents of the instant petition, as culled from the records of the case, are as follows:

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Respondent RICC is engaged in the manufacture of industrial glue at Nahalinan, Jasaan, Misamis
Oriental. It leased a portion of its compound to its sister company, PICMW, which operated a
shipbuilding and repair facility. To secure their properties and personnel, RICC and PICMW entered into
separate service contracts for detailing of security guards with respondent Amethyst Security. Amethyst
had been RICC/PICMWs security contractor since 1968.

One of the conditions of the service contracts between Amethyst and RICC/PICMW was for Amethyst to
supply the latter companies with security guards who must be between 25 to 45 years of age. The
aforesaid condition was maintained with every renewal of the service contracts.[7] Per payrolls
submitted by Amethyst, the petitioners who signed therein were paid the minimum wage and benefits
provided for by law, to wit: regular wage, nightshift differentials, 5-day incentive leave pay, cost of living
allowance, overtime pay, and holiday pay.[8]

When RICC/PICMW renewed their service contract with Amethyst in January 1998, respondent RICC in a
letter dated January 15, 1998, reminded Amethyst of their stipulated age limit for the latters guards
detailed at the RICC/PICMW compound.[9] This prompted respondent Amethyst to issue an order on
January 23, 1998, directing all security guards to submit copies of their respective Birth Certificates. On
January 30, 1998, petitioners who were at that time over 45 years of age received Memorandum/Relief
Orders[10] relieving them from their existing postings as security guards of Amethyst with RICC/PICMW,
effective February 1, 1998. Petitioners were instructed to report to the main office of Amethyst for
reassignment. The order further stated that the failure of petitioners to comply with the directive would
be construed as a manifestation of their lack of interest to continue working as security personnel and
Amethyst would consider them absent without official leave (AWOL).[11]

On April 21, 1998, Amethyst issued a Detail Order informing petitioners that it had been able to
renegotiate their assignments with RICC/PICMW. They were ordered to report to one Jose Pitas,
Detachment Head of RICC/PICMW for their new assignment as firewatch guards. Petitioners were again
warned that failure to report to Pitas on May 1, 1998, would mean that they were no longer interested
in working as security guards and would be considered AWOL.[12] According to respondent Amethyst, it
gave petitioners the option to either continue working for PICMW as firewatchers or be transferred to
Cagayan de Oro for new assignments. The respondents alleged that the petitioners chose neither option
but instead failed to report for work on February 1, 1998. Thereafter, petitioners filed on March 23,
1998 and April 2, 1998, their separate complaints for illegal dismissal.[13]

On November 27, 1998, the Labor Arbiter ruled that the petitioners had been constructively dismissed
from their employment. He stated that the change of assignments from security guards to firewatch

170
guards was tantamount to a demotion, as the latter posting was of a lower category with corresponding
diminution in pay. He also opined that although no employer-employee relationship existed between
petitioners and respondents RICC/PICMW, the latter were considered indirect employers of petitioners,
and thus, solidarily liable with respondent security agency pursuant to Article 107[14] of the Labor Code.
[15] The decretal portion of the Labor Arbiters decision reads:

WHEREFORE, judgment is hereby rendered:

1. declaring complainants Prisco Lanzaderas, Samuel Sadicon, Angelo Mabanta, Eleno Aceron, Vicente
Giberson, Longino Mambatac, and Salvador Virtudazo, illegally dismissed from their respective jobs;

2. directing respondents Amethyst Security and General Services, Inc., (Formerly Calmar Security
Agency), Philippine Iron Construction and Marine Works, Inc. (PICMW) and Resin Industrial Chemical
Corporation, to pay the above named complainants jointly and severally, the total sum of One Million
Two Hundred Fifty One Thousand Six Hundred Sixty Four Pesos and 41/100 (P1,251,664.41) representing
complainants total awarded monetary benefits.

Complainants other claims are dismissed for lack of merit.

SO ORDERED.[16]

The respondents appealed to the NLRC alleging grave abuse of discretion on the part of the Labor
Arbiter. The NLRC reversed and set aside the decision of the Labor Arbiter on the ground that the relief
of the petitioners from their posts was a legitimate exercise of business prerogative by RICC/PICMW.
According to the NLRC, such exercise cannot be challenged for being malicious, capricious, or illegal. The
NLRC resolution limited the monetary award to petitioners for salary differential, thus:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET ASIDE.
Respondents are hereby ordered to pay jointly and severally complainants salary differential for the
period from December 18, 1997 to January 31, 1998 as follows:

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Prisco Lanzaderas - P289.86

Samuel Sedicon - 289.86

Angelo Mabanta - 289.86

Vicente Giberson - 366.24

Longino Mambatac - 366.24

Salvador Virtudazo - 366.24

Eleno Aceron - 366.24

________

P2,334.54

SO ORDERED.[17]

The petitioners moved for reconsideration, but this was denied by the NLRC in its resolution dated
October 29, 1999. The NLRC pointed out that the grounds for reconsideration raised by the petitioners
involved the very issues already passed upon on appeal.

The petitioners elevated the matter to the Court of Appeals under Rule 43 of the 1997 Rules of Civil
Procedure, as CA-G.R. SP No. 56347.

172
In a resolution dated January 5, 2000, the Court of Appeals dismissed the petition outright for the
following reasons:

1. Error in the choice of remedy. In St. Martin Funeral Home vs. NLRC and Bienvenido Aricayos, G.R. No.
130866, September 16, 1998, the Supreme Court ruled that all references in the amended Sec. 9 of B.P.
No. 129 to suppose(d) appeals from the NLRC to the Supreme Court must be interpreted and hereby
declared to mean and refer to petitions for certiorari under Rule 65 and all such petitions should be
initially filed with the Court of Appeals as the appropriate forum for the relief desired. In the instant
case, petitioners assigned four (4) alleged errors allegedly committed by the 5th Division of the NLRC (p.
7 of Petition). Nowhere is there an allegation or claim in the petition as required by Rule 65 that the
respondent NLRC had acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law.

2. Failure to state the material dates showing that the petition was filed on time, including the date
when the motion for reconsideration was filed. As it is, there is no way to determine the period of
interruption and the remaining period within which to file the petition in accordance with Section 4 Rule
65, as amended by Supreme Court Circular No. 39-98 on Bar Matter No. 803 which took effect on
September 1, 1998. This if We liberally consider the present petition as one for certiorari, which [it] is
not.

3. There is non-submission, as accompanying documents to support the petition, the motion for
reconsideration filed and copies of all pleadings and documents relevant and pertinent thereto as
required by the Rules. [Emphasis supplied]

SO ORDERED.[18]

Petitioners moved for reconsideration, but on May 19, 2000, it was denied in this wise:

[T]he Court Resolved to DENY the aforesaid motion for reconsideration, as the decision or final
resolution or order of the National Labor Relations Commission is not a proper subject of appeal to this
Court except by petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Thus, Rule 43
does not apply to judgments or final orders of the NLRC and may only be brought to this Court under
Rule 65. Nor can the petition at bench be treated as a petition for certiorari under the most liberal policy

173
since it does not comply with the requirements specified in said Rule 65. To rule otherwise would render
Section 5 (f), Rule 56, 1997 Rules of Civil Procedure, inutile. [Emphasis supplied]

SO ORDERED. [19]

Hence this petition for review, which raises the following issues for our resolution:

1. WHETHER OR NOT THE PETITION FOR REVIEW CAN BE TREATED AS A PETITION FOR CERTIORARI
UNDER RULE 65 TO ENABLE THE PETITIONERS TO OBTAIN A FAIR, EXPEDITIOUS AND REASONABLE
DETERMINATION OF THEIR RIGHTS INSTEAD OF SUBJECTING THEM TO RIGID AND TECHNICAL RULE ON
APPEAL OF THE RULES OF COURT.

2. WHETHER OR NOT THE PETITION FOR REVIEW OF THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION FILED WITH THE COURT OF APPEALS INSTEAD OF PETITION FOR CERTIORARI UNDER RULE
65 CAN BE AMENDED WITHIN A PERIOD OF SIXTY (60) DAYS TO CONFORM TO PETITION FOR
CERTIORARI UNDER RULE 65 AS REQUIRED IN THE ST. MARTIN FUNERAL HOMES CASE.

3. WHETHER OR NOT THE DISMISSAL OF THE PETITION FOR REVIEW BY THE HONORABLE COURT AND
THE DENIAL OF THE MOTION FOR RECONSIDERATION PURELY ON TECHNICALITIES CONFORMS TO THE
LIBERAL POSTURE ADOPTED BY THE HONORABLE SUPREME COURT IN A LONG LINE OF CASES TO
DISREGARD TECHNICALITIES SO THAT CASES MAY BE DECIDED ON THE MERITS.

4. WHETHER OR NOT THE TERMINATION OF PETITIONERS SERVICES BY THE RESPONDENTS BY VIRTUE OF

THE CONTRACT OF SECURITY SERVICES AND THE SUBSEQUENT ASSIGNMENT AS FIREWATCH AT PICMW
CONSTITUTES CONSTRUCTIVE DISMISSAL.[20]

Simply stated, the issues in this petition now are (1) whether the Court of Appeals erred in dismissing
the petition filed under Rule 43 of the Rules of Court for being the wrong mode of appeal pursuant to
the provision of Sec. 5 (f)[21] of Rule 56 of the Revised Rules of Court, and (2) whether petitioners were
constructively dismissed, thus, entitling them to their claims and other monetary benefits.

174
On the first issue, it appears that there was a serious procedural lapse when petitioners filed an appeal
with the Court of Appeals. Section 2 of Rule 43 of the 1997 Rules of Civil Procedure[22] expressly
provides that it shall not apply to judgments or final orders issued under the Labor Code of the
Philippines. A cursory look at Rule 43 could have averted this lapse. To our mind, an appeal from a
decision of the NLRC to the Court of Appeals may be done only by way of special civil action for
certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Having opted for the wrong mode,
petitioners appeal was properly denied.

Petitioners now urge this Court to ignore technicalities and brush aside the procedural requirements so
this case may be decided on the merits. Although technical rules of procedure are not ends in
themselves, they are necessary, however, for an effective and expeditious administration of justice. It is
settled that a party who seeks to avail of certiorari must observe the rules thereon and non-observance
of said rules may not be brushed aside as mere technicality.[23] While litigation is not a game of
technicalities, and that the rules of procedure should not be enforced strictly at the cost of substantial
justice, still it does not follow that the Rules of Court may be ignored at will and at random to the
prejudice of the orderly presentation, assessment and just resolution of the issues.[24] Procedural rules
should not be belittled or dismissed simply because they may have resulted in prejudice to a partys
substantial rights. Like all rules, they are required to be followed except only for compelling reasons.[25]

On the postulate that dismissal of appeals based on mere technicalities[26] is frowned upon, petitioners
would have us treat their petition filed under Rule 43 as having been filed under Rule 65, or otherwise
allow them to amend their petition to conform to said rule. They invoke the case of Tuazon v. Court of
Appeals[27] where a special civil action for certiorari was filed with the Court of Appeals under Rule 65
when it should have been filed as a petition for review.

In Tuazon, we ruled that the allegation lack of jurisdiction and grave abuse of discretion amounting to
lack of jurisdiction, and there is no other plain, speedy or adequate remedy in the petition filed with the
Court of Appeals to be mere surplusage. Thus, it could not detract from a consideration of the petition
as one for review under Section 22[28] of the Judiciary Reorganization Act of 1980, Section 22 (b) of the
Interim Rules and Circular 2-90.[29] The petition filed in Tuazon complied with the requirements of a
petition for review, albeit captioned as one for certiorari, but with the cited surplusage. Tuazon clearly
shows the Court looks beyond the form and considers substance as circumstances warrant.

Resort to judicial review of the decisions of the NLRC, a quasi-judicial body, under Rule 65 of the Rules of
Court is confined only to issues of want or excess of jurisdiction and grave abuse of discretion resulting
thereto, on the part of the tribunal rendering them.[30] In the instant case, the petitioners a quo failed

175
to allege before the appellate court grave abuse of discretion resulting thereto, thus amounting to lack
or excess of jurisdiction on the part of the NLRC. That failure was fatal to the petitioners cause. Their
appeal was properly denied, hence their present petition lacks merit, and ought to be likewise denied.

Moreover, on the second issue, which we now consider only for the purpose of resolving this matter
completely, petitioners aver that the age requirement for posting of guards at RICC/PICMW was a new
provision in the service contract. This averment is inaccurate. Admittedly, the security services contract
between Amethyst (formerly Calmar) Security Agency and RICC/PICMW had continuously been renewed
since 1968 and featured the particular provision on the age limit (not exceeding 45 years) of the security
guards with each renewal.[31] Petitioners could not claim ignorance of the said provision. They could
not claim to be have been caught by surprise when Amethyst relieved them from their posting at
RICC/PICMW due to their failure to meet the stipulated age limits. Petitioners acted in bad faith when
they tried to mislead Amethyst as to their respective actual age.

Lastly, petitioners claims of constructive dismissal could not be sustained. Their averments fall short of
what this Court considers as constructive dismissal. Petitioners could not fairly claim involuntary
resignation on the ground that their continued employment was rendered impossible, unreasonable or
unlikely.[32] Neither could they show persuasively that their transfer or assignment from security guards
to firewatch guards involved diminution in pay or demotion in rank. Nor was there a clear showing of an
act of clear discrimination, insensibility or disdain by their employer - Amethyst - that made their
employment so unbearable that it could foreclose any option by them except to forego their continued
employment.[33]

The condition imposed by respondent RICC/PICMW, as a principal or client of the contractor Amethyst,
regarding the age requirement of the security guards to be designated in its compound, is a valid
contractual stipulation. It is an inherent right of RICC/PICMW, as the principal or client, to specify the
qualifications of the guards who shall render service pursuant to a service contract. It stands to reason
that in a service contract, the client may require from the service contractor that the personnel assigned
to the client should meet certain standards and possess certain qualifications, conformably to the clients
needs.

Security of tenure, although provided in the Constitution,[34] does not give an employee an absolute
vested right in a position as would deprive the company of its prerogative to change their assignment or
transfer them where they will be most useful. When a transfer is not unreasonable, nor inconvenient,
nor prejudicial to an employee; and it does not involve a demotion in rank or diminution of his pay,

176
benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.

Case law recognizes the employers right to transfer or assign employees from one area of operation to
another,[36] or one office to another or in pursuit of its legitimate business interest, provided there is no
demotion in rank or diminution of salary, benefits and other privileges and not motivated by
discrimination or made in bad faith, or effected as a form of punishment or demotion without sufficient
cause.[37] This matter is a prerogative inherent in the employers right to effectively control and manage
the enterprise.[38]

We note that Amethyst gave petitioners an option as to their new deployment. They could stay on with
RICC/PICMW as firewatch guards, pursuant to negotiated agreement between Amethyst and
RICC/PICMW to accommodate the displaced security guards. Or they could be transferred to another
locality, Cagayan de Oro City, but in the same role as security guards. Petitioners, however, refused to
report to Amethyst headquarters, despite knowledge that they were being called to receive instructions
regarding new deployment. Petitioners action not to report for work is a form of defiant action that
petitioners failed to justify. Even if it could be argued that their collective action stemmed from their
resentment against the age rule being enforced by Amethyst, we find nothing in the circumstances of
this case to show sufficient reason to excuse petitioners failure to heed managements exercise of a
management prerogative.

Thus, we agree with respondents that there is no reason to hold Amethyst liable for violations claimed
by petitioners. It follows also that we find no ground to hold co-respondents RICC/PICMW liable, except
for salary differential ordered in the NLRC decision. The only time the indirect employer may be made
solidarily liable with the contractor is when the contractor fails to pay his employees their wages and
other benefits claimed.

WHEREFORE, the petition is DENIED. The assailed resolutions of the Court of Appeals in CA-G.R. SP No.
56347 are AFFIRMED. As ordered in the NLRC decision dated November 27, 1998, respondents must pay
jointly and severally petitioners salary differential only for the period December 18, 1997 to January 31,
1998, as follows: P289.86 each to petitioners Prisco Lanzaderas, Samuel Sadicon, and Angelo Mabanta;
and P366.24 each to petitioners Vicente Giberson, Longino Nambatac, Salvador Virtudazo, and Eleno
Aceron. No pronouncement as to costs.

SO ORDERED.

177
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. ROLANDO MONTEVERDE y CONE alias "EDUARDO
MASCARIÑAS", Accused-Appellant.

DECISION

PARAS, J.:

This is an appeal interposed by defendant Rolando Monteverde from the judgment of the CFI of
Zamboanga City, in Criminal Case No. 1661 (185-111-79) finding him and his co-accused Reynaldo
Codera, Jr. guilty of the crime of Robbery with Rape and sentencing them to death.

According to the spouses, Tomas and Teresita, at about 1:00 in the morning of December 29, 1976, the
appellant and co-accused Reynaldo destroyed the window of their house. Teresita stood up and lighted
a kerosene lamp, at which instance the couple saw Reynaldo at the window pointing a gun at them. He
forced them to open the door. Once inside, he hogtied Tomas, gagged him and placed him under the
bed. With the use of a gun and a knife, the appellant and Reynaldo intimidated Teresita and raped her
three times (twice by the former and once by the latter). At about 4:00 in the same morning, they
ransacked the house and left with their loot valued at P300.00 plus cash money of P15.00. Teresita and
her husband immediately reported the matter to the police. Upon examination, the medico-legal officer
issued a medical certificate with the following findings: that Teresita was already 2 months pregnant
when she was sexually abused and that there were no external signs of physical injuries. Said medical
certificate, however, was not properly identified in court because the physician was not presented
during the trial. On March 27, 1977, the victims-spouses went to the police station for identification of
arrested suspects. The spouses immediately identified Reynaldo as one of the two culprits who had
committed the crimes. Teresita also unhesitatingly pointed to Rolando in a picture shown to her, as the

178
very same person who is the other culprit. In a sworn statement before the NBI, Reynaldo admitted that
he and appellant planned the robbery. However, he was not cross-examined because pending trial, he
escaped. The appellant put up alibi as his defense and claimed that he was elsewhere with relatives and
friends when the incident took place. Finding the straightforward and substantiated testimonies of the
spouses credible, the trial court convicted the appellant and Reynaldo as charged and sentenced them
to death. The appellant, however, assails the spouses’ credibility, and claims that: (a) the medical
certificate does not show signs of physical injuries and spermatozoa; (2) said medical certificate and
even his co-accused’s confession are inadmissible against him, for being hearsay; (3) recidivism cannot
be considered against him because it was not alleged in the information; and (4) the lower court’s
proceedings are void because the amended information does not contain a certification.

The appeal lacks merit. The fact that the medical certificate shows no external signs of physical injuries
and spermatozoa on the victim does not negate the commission of rape. (People v. Bawit, L-48116,
February 20, 1981; People v. Dadaeg, L-37798, July 15, 1985, 137 SCRA 500).

While the medical certificate as well as the questioned extrajudicial confession may be incomplete or
defective, neither is indispensable to prove the crime of rape. In previous cases, medical examination
was held to be merely corroborative. (People v. Pielago, Et Al., L-42256, December 19, 1985; People v.
Opena, L-34954, February 20, 1981, 102 SCRA 755). In a prosecution for rape, the accused may be
convicted even on the sole basis of the complainant’s testimony, if credible. (People v. Aragona, L-
43752, September 19, 1985, 138 SCRA 569). In the case at bar, We find no cogent reason to disturb the
trial court’s findings on the credibility of the spouses. Having heard the witnesses and observed their
deportment during the trial, the trial court is in a good position to decide the question. Indeed, the
spouses’ direct and substantiated testimonies are more credible than the appellant’s general denial and
uncorroborated testimony. Considering that the spouses have no motive to charge the appellant falsely,
especially with such a grave offense, his defense of alibi is unavailing because the spouses positively
identified him. (People v. Arbois, L-36936, August 5, 1985, 138 SCRA 24; People v. Estante, L-30354, July
30, 1979, 92 SCRA 122; People v. Cabeltes, L-38145-48, June 29, 1979, 91 SCRA 208; People v. Chavez, L-
38603, September 30, 1982, 117 SCRA 221).

The trial court properly appreciated recidivism as an aggravating circumstance although not alleged in
the information because the same was proved by evidence. (People v. Perez, L-50044, July 31, 1981, 106
SCRA 436; People v. Entes, L-50632, February 24, 1981, 103 SCRA 162).

Finally, We wish to state that while generally, a preliminary investigation is mandatory and a
certification that such investigation was held is required, still this rule does not apply if the issue is raised
only after conviction. Thus, it has been held that after a plea of not guilty to the information, an accused
is deemed to have foregone the right of preliminary investigation and to have abandoned the right to

179
question any irregularity that surrounds it (See Zacarias v. Cruz, 30 SCRA 728, People v. Beltran, 32 SCRA
71. See also People v. Arbola, L-16936, Aug. 5, 1985).

Judgment of conviction is AFFIRMED, with the modification that due to the lack of the necessary votes,
the death penalty is reduced to reclusion perpetua with costs against the accused.

SO ORDERED.

[G.R. No. 125903. November 15, 2000]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROMULO SAULO, AMELIA DE LA CRUZ, and
CLODUALDO DE LA CRUZ, accused.

ROMULO SAULO, accused-appellant.

DECISION

GONZAGA-REYES, J.:

Accused-appellant, together with Amelia de la Cruz and Clodualdo de la Cruz, were charged with
violation of Article 38 (b) of the Labor Code[1] for illegal recruitment in large scale in an information
which states

CRIM. CASE NO. Q-91-21911

The undersigned Assistant City Prosecutor accuses ROMULO SAULO, AMELIA DE LA CRUZ and
CLODUALDO DE LA CRUZ, of the crime of ILLEGAL RECRUITMENT IN LARGE SCALE (ART. 38(b) in relation
to Art. 39(a) of the Labor Code of the Philippines, as amended by P.D. No. 2018, committed as follows:

That on or about the period comprised from April 1990 to May 1990 in Quezon City, Philippines, and
within the jurisdiction of the Honorable Court, the above-named accused, conspiring together,
confederating with and mutually helping one another, by falsely representing themselves to have the
capacity to contract, enlist and recruit workers for employment abroad, did, then and there, wilfully,
unlawfully and feloniously for a fee, recruit and promise employment/job placement abroad to
LEODEGARIO MAULLON, BENY MALIGAYA and ANGELES JAVIER, without first securing the required
license or authority from the Department of Labor and Employment, in violation of said law.

180
That the crime described above is committed in large scale as the same was perpetrated against three
(3) persons individually or as [a] group penalized under Articles 38 and 39 as amended by PD 2018 of the
Labor Code (P.D. 442).

CONTRARY TO LAW.[2]

In addition, accused were charged with three counts of estafa (Criminal Case Nos. Q-91-21908, Q-91-
21909 and Q-91-21910). Except for the names of the complainants, the dates of commission of the
crime charged, and the amounts involved, the informations[3] were identical in their allegations

CRIM. CASE NO. Q-91-21908

The undersigned Assistant City Prosecutor accuses ROMULO SAULO, AMELIA DE LA CRUZ AND
CLODUALDO DE LA CRUZ of the crime of ESTAFA (Art. 315, par. 2 (a) RPC), committed as follows:

That on or about the period comprised from April 1990 to May 1990, in Quezon City, Philippines, and
within the jurisdiction of this Honorable Court, the above-named accused, conspiring together,
confederating with and mutually helping one another, with intent of gain, by means of false pretenses
and/or fraudulent acts executed prior to or simultaneously with the commission of the fraud, did, then
and there wilfully, unlawfully and feloniously defraud one BENY MALIGAYA, in the following manner, to
wit: on the date and in the place aforementioned, accused falsely pretended to the offended party that
they had connection and capacity to deploy workers for overseas employment and that they could
secure employment/placement for said Beny Maligaya and believing said misrepresentations, the
offended party was later induced to give accused, as in fact she did give the total amount of P35,000.00,
Philippine Currency, and once in possession of the said amount and far from complying with their
commitment and despite repeated demands made upon them to return said amount, did, then and
there wilfully, unlawfully and feloniously and with intent to defraud, misappropriate, misapply and
convert the same to their own personal use and benefit, to the damage and prejudice of said offended
party in the aforementioned amount and in such amount as may be awarded under the provisions of
the Civil Code.

CONTRARY TO LAW.

181
Upon arraignment, accused-appellant pleaded not guilty to all the charges against him. Meanwhile
accused Amelia de la Cruz and Clodualdo de la Cruz have remained at large.

During trial, the prosecution sought to prove the following material facts and circumstances surrounding
the commission of the crimes:

Benny Maligaya, having learned from a relative of accused-appellant that the latter was recruiting
workers for Taiwan, went to accused-appellants house in San Francisco del Monte, Quezon City,
together with Angeles Javier and Amelia de la Cruz, in order to discuss her chances for overseas
employment. During that meeting which took place sometime in April or May, 1990, accused-appellant
told Maligaya that she would be able to leave for Taiwan as a factory worker once she gave accused-
appellant the fees for the processing of her documents. Sometime in May, 1990, Maligaya also met with
Amelia de la Cruz and Clodualdo de la Cruz at their house in Baesa, Quezon City and they assured her
that they were authorized by the Philippine Overseas Employment Administration (POEA) to recruit
workers for Taiwan. Maligaya paid accused-appellant and Amelia de la Cruz the amount of P35,000.00,
which is evidenced by a receipt dated May 21, 1990 signed by accused-appellant and Amelia de la Cruz
(Exhibit A in Crim. Case No. Q-91-21908). Seeing that he had reneged on his promise to send her to
Taiwan, Maligaya filed a complaint against accused-appellant with the POEA.[4]

Angeles Javier, a widow and relative by affinity of accused-appellant, was told by Ligaya, accused-
appellants wife, to apply for work abroad through accused-appellant. At a meeting in accused-appellants
Quezon City residence, Javier was told by accused-appellant that he could get her a job in Taiwan as a
factory worker and that she should give him P35,000.00 for purposes of preparing Javiers passport.
Javier gave an initial amount of P20,000.00 to accused-appellant, but she did not ask for a receipt as she
trusted him. As the overseas employment never materialized, Javier was prompted to bring the matter
before the POEA.[5]

On April 19, 1990, Leodigario Maullon, upon the invitation of his neighbor Araceli Sanchez, went to
accused-appellants house in order to discuss his prospects for gaining employment abroad. As in the
case of Maligaya and Javier, accused-appellant assured Maullon that he could secure him a job as a
factory worker in Taiwan if he paid him P30,000.00 for the processing of his papers. Maullon paid
P7,900.00 to accused-appellants wife, who issued a receipt dated April 21, 1990 (Exhibit A in Crim. Case
No. Q-91-21910). Thereafter, Maullon paid an additional amount of P6,800.00 in the presence of
accused-appellant and Amelia de la Cruz, which payment is also evidenced by a receipt dated April 25,
1990 (Exhibit B in Crim. Case No. Q-91-21910). Finally, Maullon paid P15,700.00 to a certain Loreta
Tumalig, a friend of accused-appellant, as shown by a receipt dated September 14, 1990 (Exhibit C in

182
Crim. Case No. Q-91-21910). Again, accused-appellant failed to deliver on the promised employment.
Maullon thus filed a complaint with the POEA.[6]

The prosecution also presented a certification dated July 26, 1994 issued by the POEA stating that
accused are not licensed to recruit workers for overseas employment (Exhibit A in Crim. Case No. Q-91-
21911).[7]

In his defense, accused-appellant claimed that he was also applying with Amelia de la Cruz for overseas
employment. He asserts that it was for this reason that he met all three complainants as they all went
together to Amelia de la Cruz house in Novaliches, Quezon City sometime in May, 1990 in order to
follow up their applications. Accused-appellant flatly denied that he was an overseas employment
recruiter or that he was working as an agent for one. He also denied having received any money from
any of the complainants or having signed any of the receipts introduced by the prosecution in evidence.
It is accused-appellants contention that the complainants were prevailed upon by accused-appellants
mother-in-law, with whom he had a misunderstanding, to file the present cases against him.[8]

The trial court found accused-appellant guilty of three counts of estafa and of illegal recruitment in large
scale. It adjudged:

WHEREFORE, this Court finds the accused Romulo Saulo:

A. In Criminal Case No. Q-91-21908, guilty beyond reasonable doubt of Estafa under Article 315,
paragraph 2(a) of the Revised Penal Code as amended, without any mitigating or aggravating
circumstances, and this Court hereby sentences the accused Romulo Saulo to suffer the indeterminate
penalty of imprisonment of three (3) years, four (4) months and one (1) day of prision correccional as
minimum to seven (7) years and one (1) day of prision mayor as maximum, and to indemnify the
complainant Beny Maligaya in the amount of P35,000.00, with interest thereon at 12% per annum until
the said amount is fully paid, with costs against the said accused.

B. In Criminal Case No. Q-91-21909, guilty beyond reasonable doubt of Estafa under Article 315,
paragraph 2(a) of the Revised Penal Code as amended, without any mitigating or aggravating
circumstances, and this Court hereby sentences the accused Romulo Saulo to suffer the indeterminate
penalty of imprisonment of two (2) years, four (4) months and one (1) day of prision correccional as
minimum to six (6) years and one (1) day of prision mayor as maximum, and to indemnify the

183
complainant Angeles Javier in the amount of P20,000.00 with interest thereon at 12% per annum until
the said amount is fully paid, with costs against said accused.

C. In Criminal Case No. Q-91-21910, guilty beyond reasonable doubt of Estafa under Article 315,
paragraph 2(a) of the Revised Penal Code as amended, without any mitigating or aggravating
circumstances, and this Court hereby sentences the accused Romulo Saulo to suffer the indeterminate
penalty of imprisonment of two (2) years, four (4) months and one (1) day of prision correccional as
minimum to six (6) years and one (1) day of prision mayor as maximum, and to indemnify the
complainant Leodigario Maullon in the amount of P30,400.00 with interest thereon at 12% per annum
until the said amount is fully paid, with costs against said accused.

D. In Criminal Case No. Q-91-21911, guilty beyond reasonable doubt of Illegal Recruitment in Large Scale
as defined and punished under Article 38 (b) in relation to Article 39 (a) of the Labor Code of the
Philippines as amended, and this Court sentences the accused Romulo Saulo to suffer the penalty of life
imprisonment and to pay a fine of One Hundred Thousand Pesos (P100,000.00).

Being a detention prisoner, the accused Romulo Saulo shall be entitled to the benefits of Article 29 of
the Revised Penal Code as amended.

SO ORDERED.[9]

The Court finds no merit in the instant appeal.

The essential elements of illegal recruitment in large scale, as defined in Art. 38 (b) of the Labor Code
and penalized under Art. 39 of the same Code, are as follows:

(1) the accused engages in the recruitment and placement of workers, as defined under Article 13 (b) or
in any prohibited activities under Article 34 of the Labor Code;

184
(2) accused has not complied with the guidelines issued by the Secretary of Labor and Employment,
particularly with respect to the securing of a license or an authority to recruit and deploy workers,
whether locally or overseas; and

(3) accused commits the same against three (3) or more persons, individually or as a group.[10]

Under Art. 13 (b) of the Labor Code, recruitment and placement refers to any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract
services, promising or advertising for employment, locally or abroad, whether for profit or not; Provided,
That any person or entity which, in any manner, offers or promises for a fee employment to two or more
persons shall be deemed engaged in recruitment and placement.

After a careful and circumspect review of the records, the Court finds that the trial court was justified in
holding that accused-appellant was engaged in unlawful recruitment and placement activities. The
prosecution clearly established that accused-appellant promised the three complainants - Benny
Maligaya, Angeles Javier and Leodigario Maullon employment in Taiwan as factory workers and that he
asked them for money in order to process their papers and procure their passports. Relying completely
upon such representations, complainants entrusted their hard-earned money to accused-appellant in
exchange for what they would later discover to be a vain hope of obtaining employment abroad. It is not
disputed that accused-appellant is not authorized[11] nor licensed[12] by the Department of Labor and
Employment to engage in recruitment and placement activities. The absence of the necessary license or
authority renders all of accused-appellants recruitment activities criminal.

Accused-appellant interposes a denial in his defense, claiming that he never received any money from
the complainants nor processed their papers. Instead, accused-appellant insists that he was merely a co-
applicant of the complainants and similarly deceived by the schemes of Amelia and Clodualdo de la Cruz.
He contends that the fact that Benny Maligaya and Angleles Javier went to the house of Amelia and
Clodualdo de la Cruz in Novaliches, Quezon City, to get back their money and to follow-up their
application proves that complainants knew that it was the de la Cruz who received the processing fees,
and not accused-appellant. Further, accused-appellant argues that complainants could not have
honestly believed that he could get them their passports since they did not give him any of the
necessary documents, such as their birth certificate, baptismal certificate, NBI clearance, and marriage
contract.

185
Accused-appellants asseverations are self-serving and uncorroborated by clear and convincing evidence.
They cannot stand against the straightforward and explicit testimonies of the complainants, who have
identified accused-appellant as the person who enticed them to part with their money upon his
representation that he had the capability of obtaining employment for them abroad. In the absence of
any evidence that the prosecution witnesses were motivated by improper motives, the trial courts
assessment of the credibility of the witnesses shall not be interfered with by this Court.[13]

The fact that accused-appellant did not sign all the receipts issued to complainants does not weaken the
case of the prosecution. A person charged with illegal recruitment may be convicted on the strength of
the testimonies of the complainants, if found to be credible and convincing.[14] The absence of receipts
to evidence payment does not warrant an acquittal of the accused, and it is not necessarily fatal to the
prosecutions cause.[15]

Accused-appellant contends that he could not have committed the crime of illegal recruitment in large
scale since Nancy Avelino, a labor and employment officer at the POEA, testified that licenses for
recruitment and placement are issued only to corporations and not to natural persons. This argument is
specious and illogical. The Labor Code states that any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be deemed engaged in recruitment and
placement.[16] Corrolarily, a nonlicensee or nonholder of authority is any person, corporation or entity
which has not been issued a valid license or authority to engage in recruitment and placement by the
Secretary of Labor, or whose license or authority has been suspended, revoked, or canceled by the POEA
or the Secretary.[17] It also bears stressing that agents or representatives appointed by a licensee or a
holder of authority but whose appointments are not previously authorized by the POEA fall within the
meaning of the term nonlicensee or nonholder of authority.[18] Thus, any person, whether natural or
juridical, that engages in recruitment activities without the necessary license or authority shall be
penalized under Art. 39 of the Labor Code.

It is well established in jurisprudence that a person may be charged and convicted for both illegal
recruitment and estafa. The reason for this is that illegal recruitment is a malum prohibitum, whereas
estafa is malum in se, meaning that the criminal intent of the accused is not necessary for conviction in
the former, but is required in the latter.[19]

The elements of estafa under Art. 315, paragraph 2 (a), of the Revised Penal Code are: (1) that the
accused has defrauded another by abuse of confidence or by deceit, and (2) that damage or prejudice
capable of pecuniary estimation is caused to the offended party or third person.[20] The trial court was
correct in holding accused-appellant liable for estafa in the case at bench. Owing to accused-appellants

186
false assurances that he could provide them with work in another country, complainants parted with
their money, to their damage and prejudice, since the promised employment never materialized.

Under Art. 315 of the Revised Penal Code, the penalty for the crime of estafa is as follows:

1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if
the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if such amount
exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period,
adding one year for each additional 10,000 pesos; but the total penalty which may be imposed shall not
exceed twenty years. In such cases, and in connection with the accessory penalties which may be
imposed under the provisions of this Code, the penalty shall be termed prision mayor or reclusion
temporal, as the case may be.

xxx xxx xxx

Under the Indeterminate Sentence Law, the maximum term of the penalty shall be that which, in view
of the attending circumstances, could be properly imposed under the Revised Penal Code, and the
minimum shall be within the range of the penalty next lower to that prescribed for the offense. Since
the penalty prescribed by law for the estafa charge against accused-appellant is prision correccional
maximum to prision mayor minimum, the penalty next lower in degree is prision correccional minimum
to medium. Thus, the minimum term of the indeterminate sentence should be anywhere within six (6)
months and one (1) day to four (4) years and two (2) months.

In fixing the maximum term, the prescribed penalty of prision correccional maximum to prision mayor
minimum should be divided into three equal portions of time, each of which portion shall be deemed to
form one period, as follows

Minimum Period : From 4 years, 2 months and 1 day to 5 years, 5 months and 10 days

Medium Period : From 5 years, 5 months and 11 days to 6 years, 8 months and 20 days

187
Maximum Period : From 6 years, 8 months and 21 days to 8 years

pursuant to Article 65, in relation to Article 64, of the Revised Penal Code.

When the amounts involved in the offense exceeds P22,000, the penalty prescribed in Article 315 of the
Revised Penal Code shall be imposed in its maximum period, adding one year for each additional
P10,000.00, although the total penalty which may be imposed shall not exceed twenty (20) years.[21]

Accordingly, the following penalties shall be imposed upon accused-appellant:

In Criminal Case No. Q-91-21908 where accused-appellant defrauded Benny Maligaya in the amount of
P35,000.00, one year for the additional amount of P13,000.00 in excess of P22,000.00 provided for in
Article 315 shall be added to the maximum period of the prescribed penalty of prision correccional
maximum to prision mayor minimum. Thus, accused-appellant shall suffer the indeterminate penalty of
four (4) years, and two (2) months of prision correccional medium, as minimum to nine (9) years of
prision mayor as maximum.[22] Accused-appellant shall also pay Benny Maligaya P35,000.00 by way of
actual damages.

In Criminal Case No. Q-91-21909 where accused-appellant defrauded Angeles Javier in the amount of
P20,000.00, accused-appellant shall suffer the indeterminate penalty of one (1) year, eight (8) months
and twenty-one (21) days of prision correccional minimum to five (5) years, five (5) months and eleven
(11) days of prision correccional maximum. Accused-appellant shall also pay Angeles Javier P20,000.00
by way of actual damages.

In Criminal Case No. Q-91-21910 where accused-appellant defrauded Leodigario Maullon in the amount
of P30,400.00, accused-appellant shall suffer the indeterminate penalty of four (4) years and two (2)
months of prision correccional medium, as minimum to eight (8) years of prision mayor, as maximum.
[23] Accused-appellant shall also pay Leodigario Maullon P30,400.00 by way of actual damages.

In addition, for the crime of illegal recruitment in large scale (Criminal Case No. Q-91-21911) and
pursuant to Article 39 (a) of the Labor Code, accused-appellant shall suffer the penalty of life
imprisonment and a fine of One Hundred Thousand Pesos (P100,000.00).

188
WHEREFORE, the March 6, 1996 Decision of the trial court finding accused-appellant guilty beyond
reasonable doubt of the crime of illegal recruitment in large scale and estafa is hereby AFFIRMED
subject to the following modifications:

In Criminal Case No. Q-91-21908 where accused-appellant defrauded Benny Maligaya in the amount of
P35,000.00, one year for the additional amount of P13,000.00 in excess of P22,000.00 provided for in
Article 315 shall be added to the maximum period of the prescribed penalty of prision correccional
maximum to prision mayor minimum. Thus, accused-appellant shall suffer the indeterminate penalty of
four (4) years, and two (2) months of prision correccional medium, as minimum to nine (9) years of
prision mayor as maximum. Accused-appellant shall also pay Benny Maligaya P35,000.00 by way of
actual damages.

In Criminal Case No. Q-91-21909 where accused-appellant defrauded Angeles Javier in the amount of
P20,000.00, accused-appellant shall suffer the indeterminate penalty of one (1) year, eight (8) months
and twenty-one (21) days of prision correccional minimum to five (5) years, five (5) months and eleven
(11) days of prision correccional maximum. Accused-appellant shall also pay Angeles Javier P20,000.00
by way of actual damages.

In Criminal Case No. Q-91-21910 where accused-appellant defrauded Leodigario Maullon in the amount
of P30,400.00, accused-appellant shall suffer the indeterminate penalty of four (4) years and two (2)
months of prision correccional medium, as minimum to eight (8) years of prision mayor, as maximum.
Accused-appellant shall also pay Leodigario Maullon P30,400.00 by way of actual damages.

In addition, for the crime of illegal recruitment in large scale (Criminal Case No. Q-91-21911) and
pursuant to Article 39 (a) of the Labor Code, accused-appellant shall suffer the penalty of life
imprisonment and a fine of One Hundred Thousand Pesos (P100,000.00).

Costs against accused-appellant.

SO ORDERED.

189
G.R. No. 143726. February 23, 2004

PEOPLE OF THE PHILIPPINES, appellee, vs. LETICIA SAGAYAGA, ALMA SO, VICENTE SO YAN HAN and
ORLANDO BURGOS, accused.

LETICIA SAGAYAGA, appellant.

DECISION

CALLEJO, SR., J.:

This is an appeal from the Decision[1] of the Regional Trial Court of Manila, Branch 35, convicting the
appellant Leticia Sagayaga of large scale illegal recruitment as defined in Section 6, Republic Act No.
8042 and sentencing her to suffer life imprisonment.

The Indictment

The appellant was charged with large scale illegal recruitment in an Information, the accusatory portion
of which reads:

That during the period from October 1997 to December 1997 and sometime prior or subsequent
thereto, in the City of Manila, Philippines, and within the jurisdiction of this Honorable Court, above-
named accused, conspiring, confederating and helping each other and representing themselves to have
the power, capacity and lawful authority to deploy complainants as factory workers in Taiwan, did then
and there willfully, unlawfully and feloniously recruit and promise employment to ELMER JANER, ERIC
FAROL and ELMER RAMOS for and in consideration of amounts ranging from P70,000.00 to P75,000.00
which they paid to said accused, without the latter having deployed and/or reimbursed complainants of
their payments despite demands, to the damage and prejudice of said complainants.

CONTRARY TO LAW.[2]

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Only the appellant was arrested, duly arraigned, and, with the assistance of counsel, pleaded not guilty
to the crime charged. The other accused remained at large.

The Case for the Prosecution

As culled by the Office of the Solicitor General, the facts which triggered the case in the trial court are as
follows:

Re: Elmer Janer

Sometime in the last week of October 1997, Elmer Janer went to the office of Alvis Placement Service
Corporation located at AP Building 1563 F. Agoncillo St., corner Pedro Gil St., Ermita, Manila, to apply for
overseas employment as factory worker in Taiwan (pp. 4, 5 and 14, TSN, September 7, 1999). Appellant
Leticia Sagayaga, after personally receiving Elmers application, required him to submit the necessary
documents (p. 5, TSN, September 7, 1999).

Appellant further asked Elmer to pay seventy-five thousand pesos (P75,000.00) as placement fee (Id.).
Elmer paid the said fee to appellant in three (3) installments, the first, on November 5, 1997, in the
amount of twenty-five thousand pesos (P25,000.00); the second, on November 13, 1997, in the amount
of five thousand pesos (P5,000.00); and the third, on November 19, 1997, in the amount of forty-five
thousand pesos (P45,000.00). All the payments were made inside Alvis Placement Agency (p. 6, id.).

As required, Elmer also had his medical examination at the Angeles Medical Clinic, the result of which
confirmed that he was fit to work (p. 9, Ibid.). Thereafter, he was told to wait for the arrival of the
employer. After seven (7) months, no employer arrived. Tired of waiting, Elmer demanded that he be
refunded of his money (Id.). Despite appellants promises to pay, Elmer was not refunded of his money.

Exasperated, Elmer asked appellant for a promissory note, which appellant executed, promising to pay
Elmer seventy-five thousand (P75,000.00) on May 6, 1998 (pp. 10 and 11, TSN, September 7, 1999). In
said promissory note, appellant designated herself as the assistant general manager of the placement
agency (Id.). When appellant failed to refund the amount to Elmer on the date stated in the promissory
note, the latter went to the Philippine Overseas Employment Administration (POEA) and filed a sworn
complaint against appellant (p. 11, TSN, September 7, 1999).

191
Re: Testimony of Eric Farol

On November 20, 1997, Eric Farol first met appellant at Alvis Placement Service Corporation when he
applied for an overseas job in Taiwan as a plastic factory worker (pp. 3-4, TSN, September 20, 1999).
Appellant and her co-accused Vicente So Yan Han discussed with Eric about the latters job application
(Id.). They required Eric to submit to them his passport, National Bureau of Investigation (NBI) clearance,
medical clearance and to pay seventy-five thousand pesos (P75,000.00) as placement fee (Id.). Eric
submitted all the aforestated requirements and paid the seventy-five thousand pesos to appellant in
two (2) installments, for which the latter issued receipts affixing her signature thereon (pp. 5-9, TSN,
September 20, 1999). Appellant then promised Eric that he will be leaving for Taiwan before Christmas
of 1997. Failing to fulfill her promise, appellant and Vicente So Yan Han told Eric to wait up to the month
of January 1998 (pp. 10 and 11, Ibid.). When appellant failed to comply with her commitment to send
Eric to Taiwan in January 1998, Eric demanded from appellant the refund of his money (pp. 11 and 12,
Ibid.). Appellant then issued to him a check dated February 5, 1998, affixing her signature thereon, for
the amount of seventy-two thousand five hundred pesos (P72,500.00). But when Eric presented the
check to the drawee bank for payment, the same was dishonored by reason: ACCOUNT CLOSED (pp. 11-
14, TSN, September 20, 1999).

Insistent that he be refunded of his money, Vicente So Yan Han gave him cash amounts on different
dates: February 6, 1998 - - five thousand pesos; February 7, 1998 - - five thousand pesos; and February
17, 1998 - - one thousand pesos (pp. 14-18, TSN, September 20, 1999). Eric was told to return on April 4,
1998 for the full payment of the refund. However, when Eric went back on the first week of April,
appellant gave him a letter that the full refund of his money would be given on April 30, 1998 (p. 19,
Ibid). Eric returned to appellant on April 30, 1998, but still, appellant failed to refund the money (p. 20,
Id.).

On May 8, 1998, Eric filed a complaint against appellant and Vicente So Yan Han at the POEA (pp. 20-21,
TSN, September 20, 1999).

Re: Elmer Ramos

Om September 27, 1997, Elmer Ramos went to the office of Alvis Placement Services Corporation to
apply for overseas employment as factory worker in Taiwan (pp. 8 and 9, TSN, September 27, 1999).

192
Initially, he took up his application with Vicente So Yan Han who required him to submit his passport,
NBI and medical clearances and to pay seventy thousand pesos (P70,000.00) as placement fee (pp. 10
and 11, TSN, September 27, 1999). Elmer submitted the aforestated requirements and paid the
placement fee in two (2) installments: twenty thousand pesos (P20,000.00) - - paid to appellant and
Vicente So Yan Han on October 22, 1997; and fifty thousand pesos (P50,000.00) - - paid to Vicente So
Yan Han on November 12, 1997 (pp. 11-15, TSN, September 27, 1999). Vicente So Yan Han then assured
Elmer that he would be included for deployment in the first batch on the first week of December 1997
which, however, did not materialize (pp. 19 and 20, TSN, September 27, 1997). Elmer decided to
withdraw his application. The documents submitted were returned to Elmer but not the placement fee
he paid (pp. 21 and 22, TSN, September 27, 1999). Instead, appellant issued a check dated February 5,
1998 for the amount of seventy thousand pesos (P70,000.00) (p. 22, Id.). When Elmer encashed the
check with the bank, it was dishonored by reason: closed account (p. 23, Ibid.).

On May 6, 1998, Elmer went back to the office of Alvis Placement Service Corporation to demand the
refund of his money. Elmer discussed the matter with appellant, but the latter failed to return Elmers
money. The next day (May 7, 1998), Elmer went to the POEA and filed a sworn complaint against
appellant and Vicente So Yan Han (pp. 25 and 26, TSN, September 27, 1999). On May 9, 1998, Elmer
again tried to get a refund from appellant, but the latter only issued a promissory note assuring Elmer
payment of the seventy thousand pesos on May 14 and 15, 1998 at 3:00 oclock in the afternoon (pp. 27
and 28, Ibid.). On May 15, 1998, appellant gave Elmer the amount of only five thousand pesos
(P5,000.00) (p. 29, Ibid.).[3]

The Case for the Appellant

The appellant restates her case as follows:

On different dates in 1997, the three (3) complaining witnesses in this case (Elmer Ramos, Elmer Janer
and Eric Farol) filed separate applications for job placement as factory workers in Taiwan with ALvis
Placement Services Corporation, with business address at Rm. 507, AP Bldg., 1563 F. Agoncillo cor.
Pedro Gil Sts., Ermita, Manila[,] where the appellant Leticia Sagayaga was then working as corporate
treasurer.

Elmer Ramos filed his application sometime in September 1997 with the corporation, through accused-
at-large Vicente So Yan Han. It was the same Vicente So Yan Han who asked him to submit the required
documents (NBI and medical clearances, etc.), and to pay the amount of P70,000.00 as placement fee.

193
He submitted the required documents, and paid the placement fee in two (2) installments as follows:
P20,000.00 was paid by him on 22 October 1997 to appellant Letecia Sagayaga and Vicente So Yan Han
on the office of the corporation; and P50,000.00 was paid by him on 12 November 1997 to Vicente So
Yan Han. Then So Yan Han informed him that he would be deployed in Taiwan in the first week of
December 1997. The promised deployment or job placement never came. He then decided to withdraw
his application and get back the documents he submitted and the money he had paid. He was issued a
check for the fee he had paid but the check was dishonored by the bank for the reason account closed.
Failing to get his money ba[c]k, he filed a complaint with the Philippine Overseas Employment
Administration where he executed a Sinumpaang Salaysay on 7 May 1998.

Elmer Janer filed his job placement application with Alvis Placement Services Corporation in the last
week of October 1997. Similarly, he was required to submit the necessary documents and to pay the
amount of P75,000.00 as placement fee. He submitted the requisite documents and paid the placement
in three (3) installments, as follows: He paid P25,000.00 on 5 November 1997; P5,000.00 on 13
November 1997; and P45,000.00 on 19 November 1997. Thereafter, he was asked to wait for 7 months
for his employer to arrive. No employer arrive[d]. He decided to withdraw his application and asked to
be reimbursed the money he had paid. Appellant Leticia Sagayaga gave him instead a promissory note
indicating that the amount of P75,000.00 will be paid to Elmer Janer on 6 May 1998. When no payment
was made to him as promised, he filed a complaint with the Philippine Overseas Employment
Administration and where he executed a Sinumpaang Salaysay on 13 May 1998.

Eric Farol filed his job placement application with Alvis Placement Services Corporation on 20 November
1997. After submitting the required documents, he paid the placement fee of P75,000.00 in two (2)
installments as follows: He paid the first installment of P15,000.00 on 12 December 1997; and the
balance of P60,000.00 was paid by him on 16 December 1997. The appellant Leticia Sagayaga promised
that he would be able to leave for Taiwan before Christmas of 1997. When he was not able to leave for
Taiwan before the end of 1997, he was asked to wait until January 1998. When he failed to leave as
promised, he decided to withdraw his application and asked that he be refunded the amount of
P75,000.00 he had paid as placement fee. The check given to him by the appellant bounced for the
reason account closed. Forthwith, Vicente So Yan Han paid him on different dates the amounts of
P5,000.00 on 6 February 1998, another P5,000.00 on 7 February 1998, and P1,000.00 on 17 February
1998. And as he was not refunded the full amount of the fee paid by him, he filed a complaint with the
Philippine Overseas Employment Administration and executed a Sinumpaang Salaysay on 7 May 1998.

As supplied by the unrebutted testimony of the appellant, the persons who had effective and actual
control, management and direction of the business and transactions of Alvis Placement Services
Corporation were the accused-spouses Vicente So Yan Han and Alma So. As Treasurer of the
corporation, her duties were limited to receiving money or fees paid to the agency by applicants and to

194
deposit the same in the bank in the name and for the account of the corporation. Although she
(appellant) received money from the complainants Elmer Janer and Eric Farol, the same was deposited
by her with the bank under the account of the corporation. And if ever she signed promissory notes in
behalf of the corporation and issued checks to the complainants, she did so upon the instruction and
assurance of accused-spouses So Yan Han and Alma So that said notes and checks would have sufficient
funds on their due dates. And said checks and notes were never paid because the accused-spouses
disappeared and left for unknown addresses.[4]

After trial, the trial court rendered judgment convicting the appellant of the crime charged, the
dispositive portion of which reads:

WHEREFORE, judgment is rendered pronouncing accused LETICIA SAGAYAGA guilty beyond reasonable
doubt of illegal recruitment in large scale and sentencing said accused to suffer the penalty of LIFE
IMPRISONMENT and to pay a fine of P750,000.00, and the costs.

The accused is further ordered to refund to Elmer Janer the sum of P75,000.00; to Eric V. Farol the
amount of P61,500.00; and to Elmer Ramos the amount of P65,000.00.

SO ORDERED.[5]

The appellant assails the decision of the trial court contending that:

-I-

THE LOWER COURT SERIOUSLY ERRED IN HOLDING THAT NO WEIGHT CAN BE GIVEN TO THE
CONTENTION OF THE ACCUSED THAT SHE IS NOT CRIMINALLY LIABLE BECAUSE SHE HAD NO
PARTICIPATION IN THE OPERATION OF THE ALVIS PLACEMENT SERVICE CORPORATION, AND SHE HAD
NO KNOWLEDGE ABOUT ITS RECRUITMENT ACTIVITIES.

- II -

195
THE LOWER COURT SERIOUSLY ERRED IN HOLDING THAT AS TREASURER OF ALVIS PLACEMENT SERVICE
CORPO[R]ATION, THE ACCUSED-APPELLANT WAS IN CHARGE (OF) THE MANAGEMENT AND CONTROL
OF THE FINANCIAL AFFAIRS AND RESOURCES OF THE CORPORATION.

- III -

THE LOWER COURT SERIOUSLY ERRED IN HOLDING THAT AS THE VICE-PRESIDENT/TREASURER AND
ASSISTANT GENERAL MANAGER OF ALVIS PLACEMENT SERVICE CORPORATION, THE ACCUSED-
APPELLANT WAS A TOP RANKING OFFICER OF SAID CORPORATION, WITH AUTHORITY TO PARTICIPATE
DIRECTLY IN THE CONTROL, MANAGEMENT OR DIRECTION OF ITS BUSINESS AFFAIRS.

- IV -

THE LOWER COURT SERIOUSLY ERRED IN HOLDING THAT ACCUSED-APPELLANT WAS GUILTY OF ILLEGAL
RECRUITMENT IN LARGE SCALE AND IN SENTENCING HER TO SUFFER THE PENALTY OF LIFE
IMPRISONMENT.[6]

The appellant avers that she is not criminally liable for the crime charged because the prosecution failed
to prove that she had a direct or actual control, management or direction of the business and
recruitment activities of the Alvis Placement Services Corporation (APSC). She asserts that she had no
knowledge of the recruitment activities of APSC and had no participation whatsoever in its operation. In
dealing with the private complainants, she was merely performing routinary office work as a mere
employee. Her participation as an employee of APSC with respect to the employment application of
Elmer Ramos for Taiwan was to receive his placement fee of P20,000.00. Hence, the appellant avers, she
cannot be held criminally liable for illegal recruitment in large scale. If, at all, she can be held liable only
with respect to the employment applications of Janer and Farol. Thus, according to the appellant, the
trial court erred in sentencing her to life imprisonment.

The appeal has no merit.

Under Section 6 (m) of Rep. Act No. 8042,[7] illegal recruitment may be committed by any person,
whether a non-licensee, non-holder of authority, licensee or holder of authority, thus:

196
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place
without the workers fault....[8]

Under the last paragraph of the said section, those criminally liable are the principals, accomplices and
accessories. In case of a juridical person, the officers having control, management or direction of the
business shall be criminally liable.

In this case, the appellant, as shown by the records of the POEA, was both the APSC Vice-President-
Treasurer and the Assistant General Manager. She was a high corporate officer who had direct
participation in the management, administration, direction and control of the business of the
corporation. As the trial court aptly declared in its decision:

Again, no weight can be given to the contention of the accused. The terms control, management or
direction used in the last paragraph of Section 6 of Republic Act No. 8042 broadly cover all phases of
business operation. They include the aspects of administration, marketing and finances, among others.

From the records of the POEA, the accused appears as the Vice President (V.P.)/Treasurer of the Alvis
Placement Service Corporation (Exhibit A). Moreover, in the promissory note dated April 30, 1998
(Exhibit K), which the accused issued to Elmer Janer, she designated her position in the said corporation
as its Asst. General Manager (Exhibit K-1). Undoubtedly, the positions of vice-president, treasurer, and
assistant general manager are high ranking corporate positions in any corporate body. These positions
invest on the incumbent the authority of managing, controlling and directing the corporate affairs.

The claim of the accused that her designation in the certification of the POEA (Exhibit A) as the vice-
president of Alvis Placement Service Corporation has surprised her because, according to her, the vice-
president was Vicente So Yan Han (TSN, Mar. 13, 2000, pp. 16-17), hardly inspires belief. If this were
true, she would have no difficulty in securing from the POEA an authenticated copy of the list of all
officials of the corporation which they were required to file with the said Office. For no stated reason,
however, the defense omitted to secure such list and submit it to this Court.

197
At any rate, the accused has expressly admitted in the course of her testimony that she was at the time
the Treasurer of their recruitment agency. As such she was in charge of the management and control of
the financial affairs and resources of the corporation. She was in charge of collecting all its receivables,
safely keeping them, and disbursing them. She testified that it was part of her duties to receive and
collect the monies paid by applicants (TSN, Mar. 13, 2000, p. 5). Her disbursing authority has been
clearly demonstrated by her co-signing the checks Exhibits D-2 and G.[9]

The appellant is guilty of illegal recruitment as a principal by direct participation, having dealt directly
with the private complainants. In fact, she received their placement fees and even signed, in her
capacity as the Assistant General Manager of the APSC, the promissory note on May 6, 1998 in favor of
private complainant Elmer Janer, obliging the APSC to pay to him the amount of P75,000.00. However,
despite the private complainants demands, their placement fees were not reimbursed in full. In People
vs. Cabais,[10] we held thus:

Accused-appellant contends that she was not involved in recruitment but was merely an employee of a
recruitment agency. An employee of a company or corporation engaged in illegal recruitment may be
held liable as principal, together with his employer, if it is shown that he actively and consciously
participated in illegal recruitment. Recruitment is any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or
advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or
entity which, in any manner, offers or promises for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement[11]

In this case, the overwhelming evidence on record indubitably shows that the appellant engaged in
illegal recruitment. As aptly ruled by the trial court:

The first line of defense invoked by the accused to exonerate herself of the criminal charge is clearly and
conclusively without merit. There is no dispute about the fact that the three complainants engaged (sic)
the Alvis Placement Service Corporation, a recruitment agency duly authorized by the POEA wherein the
accused was one of its top officers, to deploy them as factory workers in Taiwan. Admittedly, they
incurred expenses, designated as placement fees, in connection with their documentation and
processing for purposes of their de[pl]oyment. Elmer Janer paid to the accused, who received the
payment, the total amount of P75,000.00 for his placement fee (Exhibit J; TSN, Sept. 7, 1999, pp. 6-8).
Eric Farol paid also to the accused a similar amount for the same purpose (Exhibit E; TSN, Sept. 20, 1999,
pp. 5-8). Elmer Ramos paid to the agency the sum of P70,000.00 of which P20,000.00 was received by
the accused, and the balance of P50,000.00 was received by Vicente So Yan Han (Exhibit F; TSN, Sept.

198
27, 1999, pp. 10-18). In the course of her testimony, the accused admitted that she received these
payments by the complainants of their placement fees.

However, the expected deployment of the complainants as factory workers in Taiwan, or even
elsewhere, did not take place, without any fault on their part. There is absolutely no evidence reflecting
that the failure to deploy them was imputable to their faults.

The evidence has satisfactorily established that the complainants have not been reimbursed the full
amount of their placement fees, notwithstanding their persistent demands. Not a single peso of his
placement fee was returned to Elmer Janer. Instead, on April 30, 1998, the accused executed a
promissory note (Exhibit K) in behalf of the Alvis Placement Service Corporation, undertaking to pay
Elmer Janer the amount of P75,000.00 on May 6, 1998. However, the amount covered by the
promissory note was not paid (TSN, Sept. 7, 1999, p. 11).

On the other hand, although Eric Farol and Elmer Ramos were reimbursed of P11,000.00 and P5,000.00
in cash, respectively, and the balance of their placement fees were covered by checks (Exhibits D-2 and
G), these transactions did not relieve the accused of her criminal liability. The reimbursement
contemplated by paragraph (m) of Section 6 of Republic Act No. 8042 is full reimbursement of the
expenses incurred by the worker in connection with the documentation and processing of his
deployment. To rule otherwise would be offensive to the administration of justice, as illegal recruiters
could easily escape criminal liability with impunity by simply returning an insignificant portion of the
amount they collected from the worker. The checks drawn and issued by the accused to these two
complainants, however, did not produce the effect of payment, for they were both dishonored by the
drawee bank on the ground of closed account. Pursuant to the second paragraph of Article 1249 of the
Civil Code, (t)he delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when through the
fault of the creditor they have been impaired.[12]

The appellants bare denial of her involvement in the management, administration, control and
operation of APSC cannot prevail over her judicial admissions, the positive testimonies of the private
complainants and the documentary evidence adduced by the prosecution.

Section 6 of Rep. Act No. 8042 provides that illegal recruitment shall be considered an offense involving
economic sabotage if committed in large scale, viz, committed against three (3) or more persons
individually or as a group, the imposable penalty for which is life imprisonment and a fine of not less

199
than P500,000.00 nor more than P1,000,000.00.[13] In this case, there are three private complainants,
namely, Elmer Janer, Eric Farol and Elmer Ramos. The trial court, thus, correctly convicted the appellant
of large scale illegal recruitment and sentenced her to suffer life imprisonment.

IN LIGHT OF ALL THE FOREGOING, the appeal is DENIED. The Decision of the Regional Trial Court of
Manila, Branch 35, is AFFIRMED. Costs against the appellant.

SO ORDERED.

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G.R. NO. 148137. January 16, 2003

PEOPLE OF THE PHILIPPINES, appellee, vs. DOMINGA CORRALES FORTUNA, appellant.

DECISION

VITUG, J.:

On 29 September 1998, Dominga Corrales Fortuna, herein appellant, was charged with illegal
recruitment in large scale under Section 6, paragraph (m), of Republic Act No. 8042, said to have been
committed thusly:

That sometime in the month of July, 1998, in the City of Cabanatuan, Republic of the Philippines and
within the jurisdiction of this Honorable Court, the above-named accused who is neither a licensee nor
holder of authority in the overseas private recruitment or placements activities, did then and there,
willfully, unlawfully and feloniously undertake a recruitment activity by inducing and convincing
REBECCA P. DE LEON, ANNIE M. NUQUE, NENITA A. ANDASAN, ANGELYN N. MAGPAYO, LINA N. GANOT
and EDGARDO C. SALVADOR, that she could secure for them a job in Taiwan, and as a result of such
enticement, said Rebecca P. De Leon, Annie M. Nuque, Nenita A. Andasan, Angolan N. Magpayo, Lina N.
Ganot and Edgardo C. Salvador, who were interested to have such employment, gave and delivered to
the accused the total sum of THIRTY TWO THOUSAND FOUR HUNDRED PESOS (P32,400.00), Philippine
Currency, representing medical fees in connection thereof, to the latters damage and prejudice as they
were not able to get a job in Taiwan through no fault of their own as promised by the accused, who
likewise failed to reimburse to herein complainants the aforementioned amount despite repeated
demands; that considering that there are six (6) or more complainants prejudiced by the unlawful acts
of the accused, the same is deemed committed in large scale and considered an offense involving
economic sabotage.[1]

When arraigned on 29 February 2000, appellant Dominga Fortuna, with the assistance of counsel,
pleaded not guilty to the crime charged; trial then ensued.

Taking the witness stand for the prosecution were private complainants Lina Ganot, Nenita Andasan and
Angelyn Magpayo.

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Lina N. Ganot, Angelyn N. Magpayo, Nenita A. Andasan, Rebecca P. De Leon, Annie M. Nuque and
Edgardo L. Salvador met Dominga Fortuna y Corrales in a seminar on Tupperware products being then
promoted for sale in Cabanatuan City. Fortuna took the occasion to converse with private complainants,
along with some of the attendees, offering job placements in Taiwan. Convinced that Fortuna could
actually provide them with jobs abroad, private complainants, on 06 July 1998, each gave her the
amount of P5,400.00 to take care of the processing fee for medical examination and other expenses for
securing their respective passports. On 13 July 1998, private complainants took the medical examination
in Manila. Weeks went by but the promised departure had not materialized. Suspecting that something
was not right, they finally demanded that Fortuna return their money. Fortuna, in the meanwhile, went
into hiding. After having later learned that Fortuna had neither a license nor an authority to undertake
recruiting activities, Angelyn Magpayo filed a complaint which, in due time, ultimately resulted in the
indictment of Fortuna for illegal recruitment. During the preliminary investigation, as well as later at the
trial, Fortuna gave assurance to have the money she had received from private complainants returned
to them but, except for the amount of P1,250.00 paid to Angelyn Magpayo, Fortuna was unable to make
good her promise.

Dominga Fortuna, in her testimony, admitted having attended the seminar on June 1998 where she then
met Annie Nuque, Rebecca De Leon, Nenita Andasan, Edgardo Salvador, Angelyn Magpayo and Lina
Ganot. During the seminar, she purchased Tupperware products from private complainants after she
was convinced to be their sub-agent. Initially, she was able to remit payments to private complainants
on her sales but, when she failed to make subsequent remittances, she was threatened with criminal
prosecution. In order to settle the matter, she executed separate promissory notes. When she again
failed to pay, private complainants filed the case for illegal recruitment against her. Originally, there
were six private complainants but eventually only three of them pursued the case because the others
were finally able to leave for abroad.

In its decision, dated 02 January 2001, the Regional Trial Court, Branch 27, Cabanatuan City, held
Dominga Corrales Fortuna guilty of Illegal Recruitment in Large Scale. The trial court held:

WHEREFORE, the Court finds the accused Dominga Fortuna GUILTY beyond reasonable doubt of Illegal
Recruitment in Large Scale and hereby imposes upon her the penalty of life imprisonment and a fine of
Five Hundred Thousand (P500,000.00) pesos, as the same involves economic sabotage.

She is likewise ordered to reimburse five thousand four hundred (P5,400.00) each to Lina Ganot, Nenita
Andasan representing the amount they gave to the accused as processing fee and the amount of four
thousand one hundred fifty (P4,150.00) pesos in favor of Angelyn Magpayo, as there was a partial

202
restitution during the trial of the original five thousand four hundred (P5,400.00) pesos she delivered to
the accused.[2]

Seeking a reversal of her conviction, appellant Fortuna, in her assignment of errors, would now have the
Court conclude that -

I. The court a quo erred in convicting the accused-appellant on an information wherein the facts alleged
therein do not constitute an offense;

II. The court a quo erred in finding that accused-appellant violated Section 6, par. (m) of R.A. 8042 when
it did not reimburse the alleged amounts received from private complainants;

III. The court a quo erred standing its finding that the accused-appellant was guilty of illegal recruitment.
[3]

The appeal is bereft of merit.

The crime of illegal recruitment is committed when, among other things, a person who, without being
duly authorized according to law, represents or gives the distinct impression that he or she has the
power or the ability to provide work abroad convincing those to whom the representation is made or to
whom the impression is given to thereupon part with their money in order to be assured of that
employment.[4]

Verily, the testimony presented at the trial by the complaining witnesses adequately established the
commission of the offense.

Testimony of complainant Lina Ganot

Q. Mrs. Witness, where were you in the month of June, 1998?

203
A. At Macatbong, Cabanatuan City, sir.

Q. Were you gainfully employed at that time?

A. No, sir.

Q. On that particular month, June, 1998, having been unemployed at that time, was there ever an
occasion that you tried to look for a job?

A. Yes, sir, I [tried] to look for a job.

Q. Was there ever an occasion that you tried to be a seller of Tupperware products?

A. Yes, sir.

Q. Please tell us in connection with this intention of yours to sell Tupperware products, did you ever
attend a seminar?

A. Yes, sir.

Q. Where?

A. At Burgos Avenue, Cabanatuan City, sir.

Q. Have you ever come across this particular name Dominga Corrales Fortuna?

204
A. Yes, sir.

Q. And where were you able to meet this particular person?

A. At the seminar of the Tupperware, sir.

Q. What transpired with respect to this particular meeting?

A. She recruited us and told us that she will give us good jobs, sir.

COURT

Q. Where is she now?

A. There, sir (witness pointing to a person who, when asked, answered by the name of Dominga Corrales
Fortuna).

FISCAL

Q. How was this accused able to relate to you that job placement will be available for you in Taiwan?

A. She told me [to give] her P5,400.00 for processing fee and she went to our house and I gave the said
amount, sir.

Q. Upon hearing this particular proposition, what was your reaction?

205
A. I believe[d] and I thought that I [could] really work, sir.

Q. Aside from the processing fee of P5,400.00, were there any other financial matter that was given by
you?

A. None, sir; when we went to Manila, we shouldered our expenses.

Q. When did you go to Manila?

A. July 13, 1998, sir.

Q. What was the purpose why you went there?

A. For medical purpose, according to her, sir.

Q. And who was with you?

A. The accused, sir.

Q. Aside from you and the accused, were there any other persons?

A. We were accompanied by my co-complainants, sir, aside from the accused.[5]

Testimony of Angelyn Magpayo -

206
COURT:

Q. Do you know the accused?

A. Yes, Your Honor.

Q. Point to her now.

A. Shes the one, sir. (Witness pointing to a person whom when asked of her name answered Dominga
Fortuna y Corrales.)

Q. How did you come to know her?

A. I came to know her during the seminar of Tupperware, Your Honor.

FISCAL MACARAIG:

Q. Why did you have to attend this seminar in the selling of Tupperware?

A. As an additional business, sir.

Q. Could you please tell us, where this seminar [was] being held at that time?

A. At Burgos St., Cabanatuan City, sir.

Q. And when did you meet the accused for the first time?

207
A. At the seminar in Tupperware, sir.

Q. Could you please tell us what transpired during the first meeting with the accused?

A. She introduced herself to us, sir.

Q. Afterwards, what happened next?

A. She conversed with us and asked if we want[ed] to work outside the Philippines, sir.

Q. And what was your response to the offer of the accused?

A. I said I [was] willing because I already have a passport, sir.

Q. Aside from that particular question, what other matters that you and the accused talked [about]?

A. She asked me if I [had] P5,400.00 for the processing of necessary papers, sir.

Q. And what was your response to this question?

A. I said I will raise [the] money, sir.

Q. [Were] you able to raise [the] money?

208
A. Yes, sir.

Q. When was the appointed time that you [would] have to hand or give the money to the accused?

A. July 6, 1998, sir.

Q. And were you able to actually give the money, the P5,400.00?

A. Yes, sir.

Q. Was there a receipt of this particular payment?

A. None, sir.

Q. Could you please tell us why there was no receipt for this particular payment?

A. Because I trusted her, sir.

Q. And after the payment of P5,400.00 what happened next?

A. She brought us to Manila for medical purposes, sir.

Q. And what happened thereafter?

A. I was not able to get the result of the medical examination, sir.

209
Q. By the way, what country was mentioned to you by the accused where you were going to work?

A. Taiwan, sir.

Q. And were you able to go to Taiwan?

A. No, sir.

Q. Could you please tell us why there was a failure in going to Taiwan?

A. After the medical examination, she never showed herself, sir.[6]

Testimony of Nenita Andasan -

Q. Do you know a certain Dominga Fortuna y Corrales?

A. Yes, sir.

Q. In what capacity were you able to know this Dominga Fortuna?

A. During the seminar of Tupperware, sir.

Q. And what is this seminar all about?

210
A. About selling Tupperware products, sir.

Q. And where was this seminar of Tupperware held?

A. At Burgos Avenue, Cabanatuan City, sir.

Q. Do you know who [was] the one conducting this seminar?

A. No, sir.

Q. Why did you attend this particular seminar of Tupperware products?

A. Because I was invited, sir.

Q. How many persons attended that seminar?

A. I cannot recall how many persons there were, sir.

Q. When was this seminar held?

A. In the month of June, 1998, sir.

Q. June of what year?

A. 1998, sir.

211
Q. You mentioned awhile ago that it was during the seminar of Tupperware products that you were able
to meet Dominga Fortuna, will you please tell us what transpired during that particular meeting?

A. We [had] conversation and then she asked us if we wanted to go abroad, sir.

Q. Who was the one [who] asked you that?

A. The accused Dominga Fortuna, sir.

Q. And what was your particular response?

A. I said to her yes, sir, because I want[ed] to have a job.

Q. Were you the only one [who] was present at the seminar of Tupperware that was offered this job?

A. Also my co-complainants, sir.

Q. What happened afterwards, after you told her that you were interested in working abroad?

A. We set the date in order to fix our papers, sir.

Q. By the way, were those the only matters told to you by the accused at that point in time?

A. She also told us to prepare money needed for that, sir.

212
Q. And how much would that money be to be prepared by you?

A. P5,400.00, sir.

Q. And did she tell you what this P5,400.00 is all about?

A. For processing of papers needed, sir.

Q. And when was the time that you had to actually pay or tender this P5,400.00?

A. In July, 1998, sir.

Q. Were you able to comply with this particular requirement?

A. Yes, sir.

Q. And when did you actually comply with this requirement?

A. On July 6, 1998, sir.

Q. To whom did you personally tender this P5,400.00?

A. In the house of Mrs. Ganot, sir.

Q. And where is the house of this Mrs. Ganot?

213
A. At Macatbong, Cabanatuan City, sir.

Q. By the way, who is this Mrs. Ganot?

A. She is the one heading us, sir,

Q. Do you have knowledge whether this Mrs. Ganot [was] also interested in working abroad?

A. Yes, sir.

Q. How many were you who were present when you actually tendered the P5,400.00?

A. We were six (6), sir.

Q. Do you know the names of the others?

A. Yes, sir.

Q. Will you please tell us the names of those other persons who were present when you actually tender
the P5,400.00 to the accused?

A. Rebecca de Leon, Annie Nuque, Nenita Andasan, Angelyn Magpayo, Lina Ganot and Edgardo Salvador,
sir.

Q. At that point in time after you had given the amount of P5,400.00 to the accused, was there an
official receipt that was issued or given to you by the accused?

214
A. None, sir.

Q. Do you know of any reason why there was no receipt?

A. Because we trusted her, sir, because we were barriomates.

Q. At that point in time that you actually handed the P5,400.00, where was Dominga Fortuna?

A. She was present, sir.

Q. Did she tell you anything before and after the giving of this P5,400.00?

A. She said that we will be going to Manila to process our papers and passport and we will have a
medical examination, sir.[7]

The narration made by the complaining witnesses does appear to be straightforward, credible and
convincing, and there scarcely is any reason for ignoring the trial court in its evaluation of their
credibility. Indeed, the trial court has additionally observed:

x x x. There is no showing that any of the complainants had ill-motives against accused Dominga Fortuna
other than to bring her to the bar of justice. Furthermore, appellant was a stranger to private
complainants before the recruitment. It is contrary to human nature and experience for persons to
conspire and accuse a stranger of such a serious crime like this that would take the latters liberty and
send him or her to prison. Against the prosecutions overwhelming evidence, accused could only offer a
bare denial and an obviously concocted story.

Doctrinally, the assessment made on testimonial evidence by the trial judge is accorded the highest
respect for it is he who has the distinct opportunity to directly perceive the demeanor of witnesses and

215
personally ascertain their reliability. The rule has been said that a person charged with illegal
recruitment may be convicted on the strength of the testimony of the complainants, if found to be
credible and convincing, and that the absence of receipts to evidence payment to the recruiter would
not warrant an acquittal, a receipt not being fatal to the prosecution's cause.[8]

The pertinent provisions of Republic Act No. 8042 state:

SEC. 6. Definition. For purposes of this act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract of
services, promising or advertising for employment abroad, whether for profit or not, when undertaken
by a non-license or non-holder of authority contemplated under Article 13(f) of Presidential Decree No.
442, as amended, otherwise known as the Labor Code of the Philippines: Provided, that any such non-
licensee or non-holder who, in any manner, offers or promises for a fee employment abroad to two or
more persons shall be deemed so engaged.

x x x x x x x x x.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring or confederating with one another. It is deemed committed in large scale if
committed against three (3) or more persons individually or as a group.

Sec. 7. Penalties.

(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less
than six (6) years and one (1) day but not more than twelve (12) years and a fine of not less than Two
hundred thousand pesos (P200,000.00) nor more than Five hundred thousand pesos (P500,000.00).

(b) The penalty of life imprisonment and a fine of not less than Five hundred thousand pesos
(P500,000.00) nor more than One million pesos (P1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.

216
Provided, however, That the maximum penalty shall be imposed if the person illegally recruited is less
than eighteen (18) years of age or committed by a non-licensee or non-holder of authority.

This Court finds the information which has charged appellant with the offense of Illegal Recruitment in
Large Scale, defined and penalized in Republic Act No. 8042, to be sufficient in form and substance.
While the information cited Section 6, paragraph (m), of Republic Act No. 8042, its factual averments,
however, are sufficient to constitute the crime of Illegal Recruitment in Large Scale under the
aforequoted provisions of the law. It is not the specific designation of the offense in the information that
controls but it is the allegations therein contained directly apprising the accused of the nature and cause
of the accusation against him that matter.[9] The requisites constituting the offense of Illegal
Recruitment in Large Scale have sufficiently been proven by the prosecution. First, appellant,
undeniably, has not been duly licensed to engage in recruitment activities; second, she has engaged in
illegal recruitment activities, offering private complainants employment abroad for a fee; and third, she
has committed the questioned illegal recruitment activities against three or more persons. Illegal
recruitment in large scale (when committed against three or more persons), like illegal recruitment
committed by a syndicate (when carried out by a group of three or more persons), would be deemed
constitutive of economic sabotage[10] carrying a penalty, under section 7, paragraph (b), of Republic Act
8042, of life imprisonment and a fine of not less than five hundred thousand (P500,000.00) pesos nor
more than one million (P1,000,000.00) pesos. The sentence imposed by the trial court thus accords with
the penalty prescribed by law.

A word in passing. No two cases are exactly alike; almost invariably, surrounding circumstances vary
from case to case. It is this reality that must have compelled the adoption by the Revised Penal Code of
the scheme of graduated penalties providing, correspondingly, for the circumstances that affect criminal
liability. The system allows the judge to have a good latitude in the sentencing process. Indeed, in other
jurisdictions, a bifurcated proceeding is prescribed in order to help make certain that the penalty is
commensurate to the wrong done. Under this procedure, the guilt and the innocence of the accused is
first determined and then, after a verdict of plea or guilt, a pre-sentence hearing is conducted where the
judge or a jury would hear argument and receive additional evidence on such matters as the nature of
the offense, manner of its commission, the milieu of time and place, as well as the education, religion,
physical and mental state of the accused, along with still other conditions or circumstances, that may
find relevance in either mitigating or aggravating the punishment to be meted,[11] all calculated to
enhance a fair judgment. Statutory provisions for a single penalty, like those prescribed in Republic Act
No. 8042, virtually ignore these safeguards that help obviate the danger of imposing either too great or
too little a punishment for the offense.

It is in the above light and given the factual circumstances of the case at bar, that Congress might see it
fit to revisit Republic Act No. 8042 towards adopting the provisions of the Revised Penal Code on

217
penalties, including its traditional nomenclatures, that could pave the way for the proper appreciation of
the various circumstances long tested that affect criminal liability. Meanwhile, the Court respectfully
recommends to the President of the Philippines a possible commutation of sentence.

WHEREFORE, the appealed decision of the Regional Trial Court, Cabanatuan City, in Criminal Case No.
8589 for Illegal Recruitment in Large Scale against appellant Dominga Corrales is AFFIRMED.

Let copies of this decision be forwarded to the Office of the President and to the Congress of the
Philippines.

SO ORDERED.

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