51. G.R. No.

121791 December 23, 1998

ENRIQUE
SALAFRANCA, petitioner,
vs.
PHILAMLIFE (PAMPLONA) VILLAGE HOMEOWNERS ASSOCIATION, INC.,
BONIFACIO DAZO and THE SECOND DIVISION, NATIONAL LABOR RELATIONS
COMMISSION (NLRC), respondents.

ROMERO, J.:
Petitioner Enrique Salafranca started working with the private respondent Philamlife
Village Homeowners Association on May 1, 1981 as administrative officer for a period
of six months. From this date until December 31, 1983, petitioner was reappointed to
his position three more times. 1 As administrative officer, petitioner was generally
responsible for the management of the village's day to day activities. 2 After petitioner's
term of employment expired on December 31, 1983, he still continued to work in the
same capacity, albeit, without the benefit of a renewed contract.
Sometime in 1987, private respondent decided to amend its by-laws. Included therein
was a provision regarding officers, specifically, the position of administrative officer
under which said officer shall hold office at the pleasure of the Board of Directors. In
view of this development, private respondent, on July 3, 1987, informed the petitioner
that his term of office shall be coterminus with the Board of Directors which appointed
him to his position. Furthermore, until he submits a medical certificate showing his
state of health, his employment shall be on a month-to-month basis. 3 Oddly,
notwithstanding the failure of herein petitioner to submit his medical certificate, he
continued working until his termination in December 1992. 4 Claiming that his services
had been unlawfully and unceremoniously dispensed with, petitioner filed a complaint
for illegal dismissal with money claims and for damages. 5
After the submission by the parties of their respective position papers and other
pleadings, the Labor Arbiter rendered a decision 6 ordering private respondent to pay
the petitioner the amount of P257,833.33 representing his backwages, separation pay
and 13th month pay. In justifying the award, the Labor Arbiter elucidated:
Respondents' contention that complainant's term of employment
was co-terminus with the term of Office of the Board of Directors,
is wanting in merit. Records show that complainant had been
hired in 1981 while the Amendment of the respondents' By-Laws
making the position of an Administrative Officer co-terminus with

the term of the Board of Directors was made in 1987. Evidently,

the said Amendment would not be applicable to the case of
complainant who had become a regular employee long time
before the Amendment took place. Moreover, the Amendment
should be applied prospectively and not retroactively.
On appeal by the private respondent, the NLRC reversed the decision of the Labor
Arbiter and rendered a new one7 reducing petitioner's monetary award to only one-half
(1/2) month pay for every year of service representing his retirement pay. In other
words, the NLRC viewed the dismissal of the petitioner as a valid act by the private
respondent.
The fact that he continued to perform the function of the office of
administrative officer without extension or re-appointment
thereafter, to our mind, did not in any way make his employment
permanent as in fact, he was even reminded of the nature of his
position by then president of the association Jaime Y. Ladao in a
letter of 3 July 1987. His reply to the aforesaid letter, claiming his
employment regular, and viz a viz, referring to submit his medical
certificate, notwithstanding, to our mind, merely underscored the
need to define his position as, in fact, the Association's Rules and
Regulations were amended if but to put to rest the tenural (sic)
limit of the office of the Administrative Officer in accordance with
its earlier intention, that it is co-terminus with that of the members
of the Board of Directors.
WHEREFORE, the decision appealed from is hereby set aside.
Respondents are hereby ordered to pay herein appellee one half
(1/2) month pay for every year of service representing his
retirement pay.
In view of the sudden turn of events, petitioner has elevated the case to this Court
assigning the following errors: 8
1. The NLRC gravely abused its discretion when it ruled that the
employment of the Petitioner is not purely based on
considerations of Employer-Employee relationship.
2. Petitioner was illegally dismissed by private respondents.

As to the first assigned error by the petitioner, we need not dwell on this at length. We
agree with the Solicitor General's observation that an employer-employee relationship
exists between the petitioner and the private respondent. 9
xxx xxx xxx
The first element is present in this case. Petitioner was hired as
Administrative Officer by respondents. In fact, he was extended
successive appointments by respondents.
The second element is also present since it is not denied that
respondent PVHA paid petitioner a fixed salary for his services.
As to the third element, it can be seen from the Records that
respondents had the power of dismissal over petitioner. In their
letter dated December 7, 1992, respondents informed petitioner
that they had decided to discontinue his services. In their Position
Paper submitted to the Labor Arbiter, respondents stated that
petitioner "was dismissed for cause." (p. 17, Record).
With respect to the fourth and most important element,
respondents controlled the work of petitioner not only with respect
to the ends to be achieved but also the means used in reaching
such ends.
Relative to the second assigned error of the petitioner, both the Solicitor General and
the private respondent take the stance that petitioner was not illegally dismissed. 10 On
this aspect, we disagree with their contentions.
On the outset, there is no dispute that petitioner had already attained the status of a
regular employee, as evidenced by his eleven years of service with the private
respondent. Accordingly, petitioner enjoys the right to security of tenure 11 and his
services may be terminated only for causes provided by law. 12
Viewed in this light, while private respondent has the right to terminate the services of
petitioner, this is subject to both substantive and procedural grounds. 13 The
substantive causes for dismissal are those provided in Articles 282 and 283 of the,
Labor Code, 14 while the procedural grounds refer to the observance of the
requirement of due process. 15 In all these instances, it is the private respondent,
being the employer, who must prove the validity of the dismissal. 16

Having reviewed the records of this case carefully, we conclude that private
respondent utterly failed to substantiate petitioner's dismissal, rendering the latter's
termination illegal. At the risk of being redundant, it must be stressed that these
requirements are mandatory and non-compliance therewith renders any judgment
reached by the management void and inexistent. 17
While private respondent imputes "gross negligence," and "serious misconduct" as the
causes of petitioner's dismissal, 18 not a shred of evidence was offered in support
thereof, other than bare and uncorroborated allegations. The facts and circumstances
regarding such alleged infractions were never explained, While it is true that private
respondent, through its president Bonifacio Dazo, executed an affidavit narrating the
alleged violations of the petitioner, 19 these were never corroborated by concrete or
competent evidence. It is settled that no undue importance should be given to a sworn
statement or affidavit as a piece of evidence because, being taken ex-parte, an
affidavit is almost always incomplete and inaccurate. 20 Furthermore, it must be noted
that when petitioner was terminated in 1992, these alleged infractions were never
raised nor communicated to him. In fact, these were only revealed after the complaint
was filed by the petitioner in 1993. Why there was a delay was never adequately
explained by private respondent.
Likewise, we note that Dazo himself was not presented as a witness to give the
petitioner an opportunity to cross-examine him and propound clarificatory questions
regarding matters averred in his affidavit. All told, the foregoing lapses and the belated
submission of the affidavit, cast doubt as to the credibility of the allegations. In sum,
the dismissal of the petitioner had no factual basis whatsoever. The rule is that
unsubstantiated accusations without more, are not tantamount to guilt. 21
As regards the issue of procedural due process, private respondent justifies its noncompliance therewith in this wise:
The Association Officers, being his peers and friends had a
problem however in terminating his services. He had been found
to have committed infractions as previously enumerated. PVHA
could have proceeded with a full-blown investigation to hear these
charges, but the ordeal might break the old man's heart as this
will surely affect his standing in the community. So they decided
to make their move as discreetly (but legally) as possible to save
the petitioner's reputation. Terminating him in accordance with the
provision of the by-laws of the Association without pointing out his
numerous faults and malfeasance in office and with one-half
month pay for every year of service in accordance with the
Retirement Law was the best and only alternative.

We are not impressed. The reasoning advanced by the private respondent is as

puerile as it is preposterous.

attempt to circumvent petitioner's right to security of tenure as a regular employee

guaranteed under the Labor Code. 28

The essence of due process is to afford the party an opportunity to be heard and
defend himself, to cleanse his name and reputation from any taint. It includes the twin
requirements of notice and hearing. 22 This concept evolved from the basic tenet that
one's employment or profession is a property right protected by the constitutional
guaranty of due process of law. 23 Hence, an individual's separation from work must be
founded on clearly-established facts, not on mere conjectures and suspicions. 24

Interestingly, the Solicitor General is of the view that what actually transpired was that
petitioner was retired from his employment, considering the fact that in 1992 he was
already 70 years old and not terminated. 29

In light of the foregoing, private respondent's arguments are clearly baseless and
without merit. In truth, instead of protecting petitioner's reputation, private respondent
succeeded in doing exactly the opposite it condemned the petitioner without even
hearing his side. It is stating the obvious that dismissal, being the ultimate penalty that
can be meted out to an employee, should be based on a clear or convincing
ground. 25 As such, a decision to terminate an employee without fully apprising him of
the facts, on the pretext that the twin requirements of notice and hearing are
unnecessary or useless, is an invalid and obnoxious exercise of management
prerogative.
Furthermore, private respondent, in an effort to validate the dismissal of the petitioner,
posits the theory that the latter's position is coterminus with that of the Village's Board
of Directors, as provided for in its amended by-laws. 26
Admittedly, the right to amend the by-laws lies solely in the discretion of the employer,
this being in the exercise of management prerogative or business judgment. However
this right, extensive as it may be, cannot impair the obligation of existing contracts or
rights.
Prescinding from these premises, private respondent's insistence that it can legally
dismiss petitioner on the ground that his tenure has expired is untenable. To reiterate,
petitioner, being a regular employee, is entitled to security of tenure, hence, his
services may only be terminated for causes provided by law. 27 A contrary
interpretation would not find justification in the laws or the Constitution. If we were to
rule otherwise, it would enable an employer to remove any employee from his
employment by the simple expediency of amending its by-laws and providing that
his/her position shall cease to exist upon the occurrence of a specified event.
If private respondent wanted to make the petitioner's position co-terminus with that of
the Board of Directors, then the amendment must be effective after petitioner's stay
with the private respondent, not during his term. Obviously, the measure taken by the
private respondent in amending its by-laws is nothing but a devious, but crude,

While there seems to be a semblance of plausibility in this contention for the matter of
extension of service of such employee or official is addressed to the sound discretion
of the employer, still we have no doubt that this was just a mere after-thought a
dismissal disguised as retirement.
In the proceedings before the Labor Arbiter, it is noteworthy that private respondent
never raised the issue of compulsory retirement, 30 as a cause for terminating
petitioner's service. In its appeal before the NLRC, this ground was never discussed.
In fact, private respondent, in justifying the termination of the petitioner, still anchored
its claim on the applicability of the amended by-laws. This omission is fatal to private
respondent's cause, for the rule is well-settled that matters, theories or arguments not
brought out in the proceedings below will ordinarily not be considered by a reviewing
court, as they cannot be raised for the first time on appeal. 31
Undaunted, private respondent now asserts that the instant petition was filed out of
time, 32 considering that the assailed NLRC decision was received on June 28, 1995
while this petition was filed on September 20, 1995. At this juncture, we take this
opportunity to state that under the 1997 Rules of Civil Procedure, a petition
for certiorari must now be instituted within sixty days of receipt of the assailed
judgment, order or resolution. 33 However, since this case arose in 1995 and the
aforementioned rule only took effect on July 1, 1997 then the old rule is applicable.
Since prior to the effectivity of the new rule, a special civil action of certiorari should be
instituted within a period of three months, 34 the instant petition which was filed on
September 20, 1995 or two months and twenty-two days thereafter, was still within the
reglementary period.
With respect to the issue of the monetary award to be given to the petitioner, private
respondent argues that he deserves only retirement pay and nothing more. This
position would have been tenable had petitioner not been illegally dismissed.
However, since we have already ruled petitioner's dismissal as without just cause and
lacking due process, the award of backwages and reinstatement is proper. 35
In this particular case, reinstatement is no longer feasible since petitioner was already
70 years old at the time he was removed from his employment. As a substitute

thereof, separation pay is generally awarded, 36 the amount of which must be

equivalent to one-month salary for every year of service. 37
With respect to the amount of backwages which, incidentally is different from
separation pay, 38 it now settled that an illegally dismissed employee is entitled to its
full payment as long as the cause of action accrued after March 21,
1989. 39Considering that petitioner was terminated from the service on December 9,
1992, which is after March 21, 1989, he is entitled to full backwages from the time of
the illegal dismissal without any, qualification or deduction. 40
As regards the issue of retirement pay, private respondent asserts that the correct
amount should be one-half (1/2) month salary for every year of service. This time we
agree with private respondent's contention. The pertinent law is Article 287 of the
Labor Code, as amended by Republic Act No. 7641, which reads:
Art. 287. Retirement. Any employee may be retired upon
reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall he entitled to receive
such retirement benefits as he may have earned under existing
laws and any collective bargaining agreement and other
agreements:Provided, however, That an employee's retirement
benefits under any collective bargaining and other agreements
shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an
employee upon reaching the age of sixty (60) years or more, but
not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years
in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary
for every year of service, a fraction of al least six (6) months being
considered as one whole year.

Sec. 1 of Presidential Decree No. 851 is hereby modified to the

extent that all employers are hereby required to pay all their rank
and file employees a 13th month pay not later than December 24
of every year.
Clearly, therefore, the foregoing exempts managerial employees from this benefit. Of
course, this does not preclude an employer from granting other bonuses, in lieu of the
13th month pay, to managerial employees in its discretion.
Finally, we cannot simply ignore private respondent's malicious scheme to remove
petitioner from his position which is contrary to good customs and effected in an
oppressive manner, thus warranting an award of moral and exemplary damages to the
petitioner. 41 Moreover, since petitioner was forced to litigate and incur expenses to
protect his right and interests, he is entitled to attorney's fees. 42
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The NLRC
decision dated June 15, 1995 is hereby REVERSED and SET ASIDE. Private
respondent Philamlife Village Homeowners Association is ORDERED: (1) to pay
petitioner Enrique Salafranca separation pay equivalent to one month salary for every
year of service; (2) to pay his full backwages in accordance with our ruling
in Bustamante v. NLRC; 43 (3) to pay his retirement pay in accordance with Article 287
of the Labor Code, as amended by Republic Act No. 7641, (4) to pay moral and
exemplary damages in the amount of twenty thousand (P20,000.00) pesos and ten
thousand (P10,000.00) pesos, respectively; 44 and (5) to pay ten (10%) percent of the
total amount due to petitioner, as attorney's fees. Consequently, the respondent NLRC
is ORDERED to COMPUTE the total monetary benefits awarded in accordance with
this decision and to submit its compliance thereon within thirty (30) days from notice of
this decision.
SO ORDERED.

52. G.R. No. 118746 September 7, 1995

xxx xxx xxx
With respect to the issue that petitioner, being a managerial employee, is not entitled
to thirteenth month pay, Memorandum Order No. 28, as implemented by the Revised
Guidelines on the Implementation of the 13th Month Pay Law dated November 16,
1987, provides:

ATTY.
WILFREDO
TAGANAS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MELCHOR ESCULTURA, ET
AL., respondents.

RESOLUTION

FRANCISCO, J.:
Petitioner Atty. Wilfredo E. Taganas represented herein private respondents in a labor
suit for illegal dismissal, underpayment and non-payment of wages, thirteenth-month
pay, attorney's fees and damages conditioned upon a contingent fee arrangement
granting the equivalent of fifty percent of the judgment award plus three hundred
pesos appearance fee per hearing. 1 The Labor Arbiter ruled in favor of private
respondents and ordered Ultra Clean Services (Ultra) and the Philippine Tuberculosis
Society, Inc., (PTSI) respondents therein, jointly and severally to reinstate herein
private respondents with full backwages, to pay wage differentials, emergency cost of
living allowance, thirteenth-month pay and attorney's fee, but disallowed the claim for
damages for lack of basis. 2 This decision was appealed by Ultra and PTSI to the
National Labor Relations Commission (NLRC), and subsequently by PTSI to the Court
but to no avail. During the execution stage of the decision, petitioner moved to enforce
his attorney's charging lien. 3 Private respondents, aggrieved for receiving a reduced
award due to the attorney's charging lien, contested the validity of the contingent fee
arrangement they have with petitioner, albeit four of the fourteen private respondents
have expressed their conformity thereto. 4
Finding the arrangement excessive, the Labor Arbiter ordered the reduction of
petitioner's contingent fee from fifty percent of the judgment award to ten percent,
except for the four private respondents who earlier expressed their
conformity. 5 Petitioner appealed to NLRC which affirmed with modification the Labor
Arbiter's order by ruling that the ten percent contingent fee should apply also to the
four respondents even if they earlier agreed to pay a higher percentage. 6Petitioner's
motion for reconsideration was denied, hence this petition for certiorari.
The sole issue in this petition is whether or not the reduction of petitioner's contingent
fee is warranted. Petitioner argues that respondent NLRC failed to apply the pertinent
laws and jurisprudence on the factors to be considered in determining whether or not
the stipulated amount of petitioner's contingent fee is fair and reasonable. Moreover,
he contends that the invalidation of the contingent fee agreement between petitioner
and his clients was without any legal justification especially with respect to the four
clients who manifested their conformity thereto. We are not persuaded.
A contingent fee arrangement is an agreement laid down in an express contract
between a lawyer and a client in which the lawyer's professional fee, usually a fixed
percentage of what may be recovered in the action is made to depend upon the

success of the litigation. 7 This arrangement is valid in this jurisdiction. 8 It is, however,
under the supervision and scrutiny of the court to protect clients from unjust
charges. 9 Section 13 of the Canons of Professional Ethics states that "[a] contract for
a contingent fee, where sanctioned by law, should be reasonable under all the
circumstances of the case including the risk and uncertainty of the compensation, but
should always be subject to the supervision of a court, as to its reasonableness".
Likewise, Rule 138, Section 24 of the Rules of Court provides:
Sec. 24. Compensation of attorneys; agreement as to fees. An
attorney shall be entitled to have and recover from his client no
more than a reasonable compensation for his services, with a
view to the importance of the subject-matter of the controversy,
the extent of the services rendered, and the professional standing
of the attorney. No court shall be bound by the opinion of
attorneys as expert witnesses as to the proper compensation but
may disregard such testimony and base its conclusion on its own
professional knowledge. A written contract for services shall
control the amount to be paid therefor unless found by the court
to be unconscionable or unreasonable.
When it comes, therefore, to the validity of contingent fees, in large measure
it depends on the reasonableness of the stipulated fees under the
circumstances of each case. The reduction of unreasonable attorney's fees
is within the regulatory powers of the courts. 10
We agree with the NLRC's assessment that fifty percent of the judgment award as
attorney's fees is excessive and unreasonable. The financial capacity and economic
status of the client have to be taken into account in fixing the reasonableness of the
fee. 11 Noting that petitioner's clients were lowly janitors who receive miniscule salaries
and that they were precisely represented by petitioner in the labor dispute for
reinstatement and claim for backwages, wage differentials, emergency cost of living
allowance, thirteenth-month pay and attorney's fees to acquire what they have not
been receiving under the law and to alleviate their living condition, the reduction of
petitioner's contingent fee is proper. Labor cases, it should be stressed, call for
compassionate justice.
Furthermore, petitioner's contingent fee falls within the purview of Article 111 of the
Labor Code. This article fixes the limit on the amount of attorney's fees which a
lawyer, like petitioner, may recover in any judicial or administrative proceedings since
the labor suit where he represented private respondents asked for the claim and
recovery of wages. In fact, We are not even precluded from fixing a lower amount than
the ten percent ceiling prescribed by the article when circumstances warrant

it. 12 Nonetheless, considering the circumstances and the able handling of the case,
petitioner's fee need not be further reduced.
The manifestation of petitioner's four clients indicating their conformity with the
contingent fee contract did not make the agreement valid. The contingent fee contract
being unreasonable and unconscionable the same was correctly disallowed by public
respondent NLRC even with respect to the four private respondents who agreed to
pay higher percentage. Petitioner is reminded that as a lawyer he is primarily an
officer of the court charged with the duty of assisting the court in administering
impartial justice between the parties. When he takes his oath, he submits himself to
the authority of the court and subjects his professional fees to judicial control. 13
WHEREFORE, finding no grave abuse of discretion the assailed NLRC decision is
hereby affirmed in toto.

53. G.R. No. 111474 August 22, 1994

FIVE
J
TAXI
and/or
JUAN
S.
ARMAMENTO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and
GILBERTO SABSALON,respondents.
Edgardo G. Fernandez for petitioners.
R E SO L U T I O N

REGALADO, J.:

find therein a need to clarify some issues the resolution of which are important to
small wage earners such as taxicab drivers. As we have heretofore repeatedly
demonstrated, this Court does not exist only for the rich or the powerful, with their
reputed monumental cases of national impact. It is also the Court of the poor or the
underprivileged, with the actual quotidian problems that beset their individual lives.
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the
petitioners as taxi drivers 2 and, as such, they worked for 4 days weekly on a 24-hour
shifting schedule. Aside from the daily "boundary" of P700.00 for air-conditioned taxi
or P450.00 for non-air-conditioned taxi, they were also required to pay P20.00 for car
washing, and to further make a P15.00 deposit to answer for any deficiency in their
"boundary," for every actual working day.
In less than 4 months after Maldigan was hired as an extra driver by the petitioners,
he already failed to report for work for unknown reasons. Later, petitioners learned
that he was working for "Mine of Gold" Taxi Company. With respect to Sabsalon, while
driving a taxicab of petitioners on September 6, 1983, he was held up by his armed
passenger who took all his money and thereafter stabbed him. He was hospitalized
and after his discharge, he went to his home province to recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the
same terms and conditions as when he was first employed, but his working schedule
was made on an "alternative basis," that is, he drove only every other day. However,
on several occasions, he failed to report for work during his schedule.
On September 22, 1991, Sabsalon failed to remit his "boundary" of P700.00 for the
previous day. Also, he abandoned his taxicab in Makati without fuel refill worth
P300.00. Despite repeated requests of petitioners for him to report for work, he
adamantly refused. Afterwards it was revealed that he was driving a taxi for "Bulaklak
Company."

Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action
for certiorari to annul the decision 1 of respondent National Labor Relations
Commission (NLRC) ordering petitioners to pay private respondents Domingo
Maldigan and Gilberto Sabsalon their accumulated deposits and car wash payments,
plus interest thereon at the legal rate from the date of promulgation of judgment to the
date of actual payment, and 10% of the total amount as and for attorney's fees.

Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily
cash deposits for 2 years, but herein petitioners told him that not a single centavo was
left of his deposits as these were not even enough to cover the amount spent for the
repairs of the taxi he was driving. This was allegedly the practice adopted by
petitioners to recoup the expenses incurred in the repair of their taxicab units. When
Maldigan insisted on the refund of his deposit, petitioners terminated his services.
Sabsalon, on his part, claimed that his termination from employment was effected
when he refused to pay for the washing of his taxi seat covers.

We have given due course to this petition for, while to the cynical the de
minimis amounts involved should not impose upon the valuable time of this Court, we

On November 27, 1991, private respondents filed a complaint with the Manila
Arbitration Office of the National Labor Relations Commission charging petitioners

with illegal dismissal and illegal deductions. That complaint was dismissed, the labor
arbiter holding that it took private respondents two years to file the same and such
unreasonable delay was not consistent with the natural reaction of a person who
claimed to be unjustly treated, hence the filing of the case could be interpreted as a
mere afterthought.
Respondent NLRC concurred in said findings, with the observation that private
respondents failed to controvert the evidence showing that Maldigan was employed by
"Mine of Gold" Taxi Company from February 10, 1987 to December 10, 1990; that
Sabsalon abandoned his taxicab on September 1, 1990; and that they voluntarily left
their jobs for similar employment with other taxi operators. It, accordingly, affirmed the
ruling of the labor arbiter that private respondents' services were not illegally
terminated. It, however, modified the decision of the labor arbiter by ordering
petitioners to pay private respondents the awards stated at the beginning of this
resolution.
Petitioners' motion for reconsideration having been denied by the NLRC, this petition
is now before us imputing grave abuse of discretion on the part of said public
respondent.

necessary or desirable as determined by the Secretary of Labor in

appropriate rules and regulations.
It can be deduced therefrom that the said article provides the rule on deposits for loss
or damage to tools, materials or equipments supplied by the employer. Clearly, the
same does not apply to or permit deposits to defray any deficiency which the taxi
driver may incur in the remittance of his "boundary." Also, when private respondents
stopped working for petitioners, the alleged purpose for which petitioners required
such unauthorized deposits no longer existed. In other case, any balance due to
private respondents after proper accounting must be returned to them with legal
interest.
However, the unrebutted evidence with regard to the claim of Sabsalon is as follows:
YEAR DEPOSITS SHORTAGES VALES
1987 P 1,403.00 P 567.00 P 1,000.00
1988 720.00 760.00 200.00

This Court has repeatedly declared that the factual findings of quasi-judicial agencies
like the NLRC, which have acquired expertise because their jurisdiction is confined to
specific matters, are generally accorded not only respect but, at times, finality if such
findings are supported by substantial evidence. 3 Where, however, such conclusions
are not supported by the evidence, they must be struck down for being whimsical and
capricious and, therefore, arrived at with grave abuse of discretion. 4
Respondent NLRC held that the P15.00 daily deposits made by respondents to defray
any shortage in their "boundary" is covered by the general prohibition in Article 114 of
the Labor Code against requiring employees to make deposits, and that there is no
showing that the Secretary of Labor has recognized the same as a "practice" in the
taxi industry. Consequently, the deposits made were illegal and the respondents must
be refunded therefor.
Article 114 of the Labor Code provides as follows:
Art. 114. Deposits for loss or damage. No employer shall
require his worker to make deposits from which deductions shall
be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when
the employer is engaged in such trades, occupations or business
where the practice of making deposits is a recognized one, or is

1989 686.00 130.00 1,500.00

1990 605.00 570.00
1991 165.00 2,300.00

P 3,579.00 P 4,327.00 P
2,700.00
The foregoing accounting shows that from 1987-1991, Sabsalon was able to withdraw
his deposits through vales or he incurred shortages, such that he is even indebted to
petitioners in the amount of P3,448.00. With respect to Maldigan's deposits, nothing
was mentioned questioning the same even in the present petition. We accordingly
agree with the recommendation of the Solicitor General that since the evidence shows
that he had not withdrawn the same, he should be reimbursed the amount of his
accumulated cash deposits. 5

On the matter of the car wash payments, the labor arbiter had this to say in his
decision: "Anent the issue of illegal deductions, there is no dispute that as a matter of
practice in the taxi industry, after a tour of duty, it is incumbent upon the driver to
restore the unit he has driven to the same clean condition when he took it out, and as
claimed by the respondents (petitioners in the present case), complainant(s) (private
respondents herein) were made to shoulder the expenses for washing, the amount
doled out was paid directly to the person who washed the unit, thus we find nothing
illegal in this practice, much more (sic) to consider the amount paid by the driver as
illegal deduction in the context of the law." 6 (Words in parentheses added.)

AMALGAMATED LABORERS' ASSOCIATION and/or FELISBERTO M. JAVIER for

himself
and
as
General
President,
ATTY.
JOSEUR.
CARBONELL,
ET
AL., petitioners,
vs.
HON. COURT OF INDUSTRIAL RELATIONS AND ATTY. LEONARDO C.
FERNANDEZ, respondents.

Consequently, private respondents are not entitled to the refund of the P20.00 car
wash payments they made. It will be noted that there was nothing to prevent private
respondents from cleaning the taxi units themselves, if they wanted to save their
P20.00. Also, as the Solicitor General correctly noted, car washing after a tour of duty
is a practice in the taxi industry, and is, in fact, dictated by fair play.

SANCHEZ, J.:

On the last issue of attorney's fees or service fees for private respondents' authorized
representative, Article 222 of the Labor Code, as amended by Section 3 of
Presidential Decree No. 1691, states that non-lawyers may appear before the NLRC
or any labor arbiter only (1) if they represent themselves, or (2) if they represent their
organization or the members thereof. While it may be true that Guillermo H. Pulia was
the authorized representative of private respondents, he was a non-lawyer who did
not fall in either of the foregoing categories. Hence, by clear mandate of the law, he is
not entitled to attorney's fees.
Furthermore, the statutory rule that an attorney shall be entitled to have and recover
from his client a reasonable compensation for his services 7 necessarily imports the
existence of an attorney-client relationship as a condition for the recovery of attorney's
fees, and such relationship cannot exist unless the client's representative is a lawyer. 8
WHEREFORE, the questioned judgment of respondent National Labor Relations
Commission is hereby MODIFIED by deleting the awards for reimbursement of car
wash expenses and attorney's fees and directing said public respondent to order and
effect the computation and payment by petitioners of the refund for private respondent
Domingo Maldigan's deposits, plus legal interest thereon from the date of finality of
this resolution up to the date of actual payment thereof.
SO ORDERED.

54. G.R. No. L-23467

March 27, 1968

Jose
Ur.
Carbonell
for
and
in
his
own
behalf
Leonardo C. Fernandez for and in his own behalf as respondent.

as

petitioner.

Controversy over attorneys' fees for legal services rendered in CIR Case No.
70-ULP-Cebu.
The background facts are as follows:
On May 30, 1956, Florentino Arceo and 47 others together with their union,
Amalgamated Laborers' Association, and/or Felisberto Javier, general president of
said union, lodged a complaint 1 in the Court of Industrial Relations (CIR), for unfair
labor practices specified in Sec. 4(a) 1, 2, 3 and 4 of the Industrial Peace Act. Made
respondents were their former employer, Binalbagan Sugar Central Company, Inc.
(Biscom), Rafael Jalandoni, its president and general manager; Gonzalo Guillen, its
chief engineer and general factory superintendent; and Fraternal Labor Organization
and/or Roberto Poli, its president.
Failing in their attempts to dismiss the complaint (motions to dismiss dated June
30, 1956 and July 6, 1956), 2respondents Biscom, Jalandoni, and Guillen, on July 9,
1957, answered and counterclaimed. Respondents Fraternal Labor Union and Poli
also filed their answer dated July 12, 1957.
With the issues joined, the case on the merits was heard before a trial
commissioner.
At the hearings, only ten of the forty-eight complainant laborers appeared and
testified. Two of these ten were permanent (regular) employees of respondent
company; the remaining eight were seasonal workers. The regular employees were
Arsenio Reyes and Fidel Magtubo. Seasonal workers were Catalino Bangoy, Juan
Fernandez, Jose Garlitos, Dionisio Pido, Santiago Talagtag, Dominador Tangente,
Felimon Villaluna and Brigido Casas.

On November 13, 1962, CIR, thru Associate Judge Arsenio I. Martinez,

rendered judgment, which provides,inter alia, that the two regular employees (Reyes
and Magtubo) be reinstated "to their former positions, without loss of seniority and
other benefits which should have accrued to them had they not been illegally
dismissed, with full back wages from the time of their said dismissals up to the time of
their actual reinstatements, minus what they have earned elsewhere in the meantime"
and that the eight seasonal workers "be readmitted to their positions as seasonal
workers of respondent company (Biscom), with back wages as seasonal workers from
the time they were not rehired at the start of the 1955-1956 milling season on October
1, 1955 up to the time they are actually reinstated, less the amount earned elsewhere
during the period of their lay-off."
Respondents Biscom, Jalandoni and Guillen appealed direct to this Court. 3 On
March 28, 1963, this Court dismissed the appeal, without costs. Ground: Petitioners
therein did not seek reconsideration of CIR's decision of November 13, 1962. The
judgment became final.
Upon the ten complainants' motion to name an official computer to determine
the actual money due them, CIR, on June 4, 1963, directed the Chief Examiner of its
Examining Division to go to the premises of Biscom and compute the back wages due
the ten complainants.
On August 9, 1963, the Chief Examiner reported that the total net back wages
due the ten complainants were P79,755.22. Biscom and the complainants moved for
reconsideration: Biscom on August 17, 1963; complainants on September 24, 1963.
In the interim, Atty. Leonardo C. Fernandez (a respondent herein) filed on July
15, 1963 in the same case CIR Case No. 70-ULP-Cebu a "Notice of Attorney's
Lien." He alleged therein that he had been the attorney of record for the laborers in
CIR Case No. 70-ULP-Cebu "since the inception of the preliminary hearings of said
case up to the Supreme Court on appeal, as chief counsel thereof"; that he "had
actually rendered legal services to the laborers who are subject of this present
litigation [CIR Case No. 70-ULP-Cebu] since the year 1956, more or less"; that the
laborers "have voluntarily agreed to give [him], representing his attorney's fees on
contingent basis such amounts equivalent to 25% thereof which agreement is
evidenced by a Note"; and that the 25% attorney's fee so contracted is "reasonable
and proper taking into consideration the length of services he rendered and the nature
of the work actually performed by him."
On September 25, 1963, Atty. Fernandez filed an "Amended Notice of
Attorney's Lien," which in part reads:

3. That the laborers, subject of this present litigation, sometime on February

3, 1956, had initially voluntarily agreed to give Undersigned Counsel herein,
representing his Attorney's fees on contingent basis, such amounts as
equivalent to Thirty Per Cent (30%) of whatever money claims that may be
adjudicated by this Honorable Court, copy of said Agreement, in the local
Visayan dialect and a translation of the same in the English language are
hereto attached as annexes "A" "A-1" hereof;
4. That subsequently thereafter, when the above-entitled Case was already
decided in their favor, Arsenio Reyes, in behalf of his co-laborers who are
also Complainants in this Case begged from the Undersigned Counsel
herein that he reduce his attorney's fees to Twenty-Five Per Cent (25%)
only for the reason that they have to share and satisfy also Atty. Jose Ur.
Carbonell in the equivalent amount of Five Per Cent (5%) although the
latter's actual services rendered was so insignificant thereof;
5. That because of the pleadings of said Arsenio Reyes, who is the
President of said Union, the Undersigned Counsel herein finally agreed and
consented that his attorney's fees be reduced to only Twenty-Five Per Cent
(25%) instead of Thirty Per Cent (30%) as originally agreed upon in 1956.
On October 7, 1963, Atty. Jose Ur. Carbonell (a petitioner herein) filed in court a
document labelled "Discharge" informing CIR of the discharge, release and dismissal
thru a union board resolution (attached thereto as Annex A thereof) of Atty.
Leonardo C. Fernandez as one of the lawyers of the complainants in CIR Case No.
70-ULP-Cebu, effective February 28, 1963.
On October 14, 1963, Atty. Fernandez replied. He averred that the grounds for
his discharge specified in the board resolution were "malicious and motivated by
greed and ungratefulness" and that the unjustifiable discharge did not affect the
already stipulated contract for attorneys' fees.
On March 19, 1964, CIR Judge Arsenio I. Martinez resolved Biscom's and
complainants' motions for resonsideration objecting to the Chief Examiner's Report
and also respondent Fernandez' Amended Notice of Attorney's Lien. Judge Martinez'
order reads in part:
(b) Respondent company is further directed to deposit the amount
representing 25% of P79,755.22 with the Cashier of this Court, as attorney's
fees;
xxx

xxx

xxx

(d) The amount representing attorney's fees to be deposited by the

respondent company is hereby awarded and granted to Atty. Leonardo C.
Fernandez, and he may collect the same from the Cashier of the Court
upon the finality of this order, subject to existing auditing procedures; ....
Biscom complied with the order of deposit. 4
On April 10, 1964, Atty. Carbonell moved to reconsider the March 19, 1964
order with respect to the award of attorneys' fees. Amongst his grounds are that CIR
has no jurisdiction to determine the matter in question, and that the award of 25% as
attorneys' fees to Atty. Fernandez is excessive, unfair and illegal. This motion was
denied on April 28, 1964 by CIR en banc.
On June 9, 1964, a motion for reconsideration of the April 28, 1964 resolution
was filed by Atty. Carbonell. This was amplified by a similar motion filed on June 11,
1964.
On June 25, 1964, two things happened: First. CIR en banc denied the motion
of June 11, 1964. Second. On Atty. Fernandez' motion, Judge Martinez authorized the
Cashier of the court to disburse to Fernandez the amount of P19,938.81 representing
attorneys' fees and deducting therefrom all legal fees incident to such deposit.
Petitioners herein, Atty. Carbonell, Amalgamated Laborers' Association, and the
ten employees, appealed from the June 25, 1964 resolution of CIR, direct to this
Court.
1. Petitioners press upon this Court the view that CIR is bereft of authority to
adjudicate contractual disputes over attorneys' fees. Their reasons: (1) a dispute
arising from contracts for attorneys' fees is not a labor dispute and is not one among
the cases ruled to be within CIR's authority; and (2) to consider such a dispute to be a
mere incident to a case over which CIR may validly assume jurisdiction is to disregard
the special and limited nature of said court's jurisdiction.
These arguments are devoid of merit.
The present controversy over attorneys' fees is but an epilogue or a tail-end
feature of the main case, CIR No. 70-ULP-Cebu, which undoubtedly is within CIR's
jurisdiction. And, it has been held that "once the Court of Industrial Relations has
acquired jurisdiction over a case under the law of its creation, it retains that jurisdiction
until the case is completely decided, including all the incidents related
thereto." 5 Expressive of the rule on this point is this

4. It is well settled that:

A grant of jurisdiction implies the necessary and usual
incidental powers essential to effectuate it, and every regularly
constituted court has power to do all things reasonably necessary
for the administration of justice within the scope of its jurisdiction,
and for the enforcement of its judgments and mandates, even
though the court may thus be called upon to decide matters which
would not be within its cognizance as original causes of action.
While a court may be expressly granted the incidental
powers necessary to effectuate its jurisdiction, a grant of
jurisdiction, in the absence of prohibitive legislation, implies the
necessary and usual incidental powers essential to effectuate it
(In re Stinger's Estate, 201 P. 693), and, subject to existing laws
and constitutional provisions, every regularly constituted court has
power to do all things that are reasonably necessary for the
administration of justice within the scope of its jurisdiction, and for
the enforcement of its judgments and mandates. So demands,
matters, or questions ancillary or incidental to, or growing out of,
the main action, and coming within the above principles, may be
taken cognizance of by the court and determined, since such
jurisdiction is in aid of its authority over the principal matter, even
though the Court may thus be, called on to consider and decide
matters, which as original causes of action, would not be within its
cognizance (Bartholomew vs. Shipe, 251 S.W. 1031), (21 C.J.S.
pp. 136-138.)
Thus, in Gomez vs. North Camarines Lumber Co., L-11945, August
18, 1958, and Serrano vs. Serrano, L-19562, May 23, 1964, we held that
the court having jurisdiction over the main cause of action, may grant the
relief incidental thereto, even if they would otherwise, be outside its
competence. 6
To direct that the present dispute be lodged in another court as petitioners
advocate would only result in multiplicity of suits, 7 a situation abhorred by the rules.
Thus it is, that usually the application to fix the attorneys' fees is made before the court
which renders the judgment. 8 And, it has been observed that "[a]n approved
procedure, where a charging lien has attached to a judgment or where money has
been paid into court, is for the attorney to file an intervening petition and have the
amount and extent of his lien judicially determined." 9 Appropriately to be recalled at
this point, is the recent ruling in Martinez vs. Union de Maquinistas, 1967A Phild. 142,
144, January 30, 1967, where, speaking thru Mr. Justice Arsenio P. Dizon, explicit

pronouncement was made by this Court that: "We are of the opinion that since the
Court of Industrial Relations obviously had jurisdiction over the main cases, ... it
likewise had full jurisdiction to consider and decide all matters collateral thereto, such
as claims for attorney's feesmade by the members of the bar who appeared
therein." 10
2. The parties herein join hands in one point - the ten (10) successful
complainants in C.I.R Case No. 70-ULP-Cebu should pay as attorneys' fees 30% of
the amount adjudicated by the court in the latter's favor (P79,755.22).

president is not the attorney for the laborers. He may seek compensation only as such
president. An agreement whereby a union president is allowed to share in attorneys'
fees is immoral. Such a contract we emphatically reject. It cannot be justified.
4. A contingent fee contract specifying the percentage of recovery an attorney is
to receive in a suit "should be reasonable under all the circumstances of the case,
including the risk and uncertainty of the compensation, but should always be subject
to the supervision of a court, as to its reasonableness." 11
Lately, we said: 12

They are at odds, however, on how to split the fees.

Respondent Atty. Fernandez claims twenty-five per cent (25%) of the 30%
attorneys' fees. He explains that upon the plea of Arsenio Reyes, union president and
one of the 10 successful complainants, he had to reduce his fees to 25% since "they
have to share and satisfy also Atty. Jose Ur. Carbonell in the equivalent amount of
Five Per Cent (5%)." Atty. Fernandez exhibited a contract purportedly dated February
3, 1956 before the 48 employees have even filed their complaint in CIR. The
stipulated fee is 30% of whatever amount the ten might recover. Strange enough, this
contract was signed only by 8 of the 10 winning claimants. What happened to the
others? Why did not the union intervene in the signing of this contract? Petitioners
dispute said contract. They say that Atty. Fernandez required the ten to sign the
contract only after the receipt of the decision.
Petitioners, on the other hand, contend that the verbal agreement entered into
by the union and its officers thru its President Javier and said two lawyers, Atty.
Carbonell and Atty. Fernandez, is that the 30% attorneys' fees, shall be divided
equally ("share and share alike") amongst Atty. Carbonell, Atty. Fernandez and
Felisberto Javier, the union president.
After hearing, CIR Associate Judge Arsenio I. Martinez awarded 25% attorneys'
fees to respondent Atty. Fernandez. CIR noted that "the active conduct and
prosecution of the above-entitled case was done by Atty. Fernandez up to the appeal
in the Supreme Court," and that petitioner Atty. Carbonell manifested that "Atty.
Leonardo C. Fernandez was the counsel mainly responsible for the conduct of the
case." It noted, too, that petitioner Atty. Carbonell did not file any notice of Attorney's
Lien.
3. We strike down the alleged oral agreement that the union president should
share in the attorneys' fees. Canon 34 of Legal Ethics condemns this arrangement in
terms clear and explicit. It says: "No division of fees for legal services is proper, except
with another lawyer, based upon a division of service or responsibility." The union

The principle that courts should reduce stipulated attorney's fees

whenever it is found under the circumstances of the case that the same is
unreasonable, is now deeply rooted in this jurisdiction....
xxx

xxx

xxx

Since then this Court has invariably fixed counsel fees on a quantum
meruit basis whenever the fees stipulated appear excessive,
unconscionable, or unreasonable, because a lawyer is primarily a court
officer charged with the duty of assisting the court in administering impartial
justice between the parties, and hence, the fees should be subject to judicial
control. Nor should it be ignored that sound public policy demands that
courts disregard stipulations for counsel fees, whenever they appear to be a
source of speculative profit at the expense of the debtor or mortgagor.
See, Gorospe, et al. v. Gochangco, L-12735, October 30, 1959. And it is not
material that the present action is between the debtor and the creditor, and
not between attorney and client. As courts have power to fix the fee as
between attorney and client, it must necessarily have the right to say
whether a stipulation like this, inserted in a mortgage contract, is
valid. Bachrach v. Golingco, 39 Phil. 138.
In the instant case, the stipulated 30% attorneys' fee is excessive and
unconscionable. With the exception of Arsenio Reyes who receives a monthly salary
of P175, the other successful complainants were mere wage earners paid a daily rate
of P4.20 to P5.00. 13 Considering the long period of time that they were illegally and
arbitrarily deprived of their just pay, these laborers looked up to the favorable money
judgment as a serum to their pitiful economic malaise. A thirty per cent (30%) slice
therefrom immensely dilutes the palliative ingredient of this judicial antidote.
The ten complainants involved herein are mere laborers. It is not far-fetched to
assume that they have not reached an educational attainment comparable to that of

petitioner Carbonell or respondent Fernandez who, on the other hand, are lawyers.
Because of the inequality of the situation between laborers and lawyers, courts should
go slow in awarding huge sums by way of attorneys' fees based solely on
contracts. 14 For, as in the present case, the real objective of the CIR judgment in CIR
Case No. 70-ULP-Cebu is to benefit the complaint laborers who were unjustifiedly
dismissed from the service. While it is true that laborers should not be allowed to
develop that atavistic proclivity to bite the hands that fed them, still lawyers should not
be permitted to get a lion's share of the benefits due by reason of a worker's labor.
What is to be paid to the laborers is not windfall but a product of the sweat of their
brow. Contracts for legal services between laborer and attorney should then be
zealously scrutinized to the end that a fair share of the benefits be not denied the
former.
5. An examination of the record of the case will readily show that an award of
twenty-five per cent (25%) attorneys' fees reasonably compensates the whole of the
legal services rendered in CIR Case No. 70-ULP-Cebu. This fee must be shared by
petitioner Atty. Carbonell and respondent Atty. Fernandez. For, after all, they are the
counsel of record of the complainants. Respondent Atty. Fernandez cannot deny this
fact. The pleadings filed even at the early stages of the proceedings reveal the
existence of an association between said attorneys. The pleadings were filed under
the name of "Fernandez & Carbonell." This imports a common effort of the two. It
cannot be denied though that most of those pleadings up to judgment were signed for
Fernandez & Carbonell by respondent Fernandez.
We note that a break-up in the professional tie-up between Attorneys
Fernandez and Carbonell began when petitioner Atty. Carbonell, on November 26,
1962, complained to CIR that respondent Atty. Fernandez "failed to communicate with
him nor to inform him about the incidents of this case." He there requested that he be
furnished "separately copies of the decision of the court and other pleadings and
subsequent orders as well as motions in connection with the case."
Subsequent pleadings filed in the case unmistakably show the widening rift in
their professional relationship. Thus, on May 23, 1963, a "Motion to Name and
Authorize Official Computer" was filed with CIR. On the same day, a "Motion to Issue
Writ of Execution" was also registered in the same court. Although filed under the
name of "Carbonell & Fernandez," these pleadings were signed solely by petitioner
Atty. Carbonell.
On September 16, 1963, an "Opposition to respondent Biscom's Motion for
Reconsideration" was filed by petitioner Atty. Carbonell. On September 24, 1963, he
filed a "Motion for Clarification" of the November 13, 1962 judgment of CIR regarding
the basic pay of Arsenio Reyes and Fidel Magtubo. On September 24, 1963, he also
filed a "Motion to Reconsider Report of Chief Examiner." These, and other pleadings

that were filed later were signed solely by petitioner Atty. Carbonell, not in the name of
"Carbonell & Fernandez." While it was correctly observed by CIR that a good portion
of the court battle was fought by respondent Atty. Fernandez, yet CIR cannot close its
eyes to the legal services also rendered by Atty. Carbonell. For, important and
numerous, too, were his services. And, they are not negligible. The conclusion is
inevitable that petitioner Atty. Carbonell must have a share in the twenty-five per cent
(25%) attorneys' fees awarded herein. As to how much, this is a function pertaining to
CIR.
6. We note that CIR's cashier was authorized on June 25, 1964 to disburse to
Atty. Leonardo C. Fernandez the sum of P19,938.81 which is 25% of the amount
recovered. In the event payment actually was made, he should be required to return
whatever is in excess of the amount to which he is entitled in line with the opinion
expressed herein. 15
IN VIEW OF THE FOREGOING, the award of twenty five per cent (25%)
attorneys' fees solely to respondent Atty. Fernandez contained in CIR's order of March
19, 1964 and affirmed by said court's en banc resolutions of April 28, 1964 and June
25, 1964, is hereby set aside; and the case is hereby remanded to the Court of
Industrial Relations with instructions to conduct a hearing on, and determine, the
respective shares of Attorney Leonardo C. Fernandez and Attorney Jose Ur. Carbonell
in the amount of P19,938.81 herein awarded as attorneys' fees or both. No costs. So
ordered.

55. G.R. No. 118506 April 18, 1997

NORMA
vs.
NATIONAL
LABOR
RELATIONS
SUPREME, respondents.

MABEZA, petitioner,
COMMISSION,

PETER

NG/HOTEL

KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent National
Labor Relations Commission dated April 28, 1994 vividly illustrates why courts should
be ever vigilant in the preservation of the constitutionally enshrined rights of the
working class. Without the protection accorded by our laws and the tempering of

courts, the natural and historical inclination of capital to ride roughshod over the rights
of labor would run unabated.

(Sgd.)
(Sgd.)
(Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

The facts of the case at bar, culled from the conflicting versions of petitioner and
private respondent, are illustrative.

(Sgd.)
(Sgd.)
(Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and
her co-employees at the Hotel Supreme in Baguio City were asked by the hotel's
management to sign an instrument attesting to the latter's compliance with minimum
wage and other labor standard provisions of law. 1 The instrument provides: 2

(Sgd.)
JONATHAN PICART JOSE DIZON

(Sgd.)

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City,
Philippines.

JOINT AFFIDAVIT
Asst. City Prosecutor
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY,
MACARIA JUGUETA, ADELAIDA NONOG, NORMA MABEZA,
JONATHAN PICART and JOSE DIZON, all of legal ages (sic),
Filipinos and residents of Baguio City, under oath, depose and
say:
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme
situated at No. 416 Magsaysay Ave., Baguio City.
2. That the said Hotel is separately operated from the Ivy's Grill
and Restaurant;
3. That we are all (8) employees in the hotel and assigned in each
respective shifts;
4. That we have no complaints against the management of the
Hotel Supreme as we are paid accordingly and that we are
treated well.
5. That we are executing this affidavit voluntarily without any force
or intimidation and for the purpose of informing the authorities
concerned and to dispute the alleged report of the Labor
Inspector of the Department of Labor and Employment conducted
on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this
7th day of May, 1991 at Baguio City, Philippines.

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear
to the veracity and contents of the affidavit as instructed by management. The affidavit
was nevertheless submitted on the same day to the Regional Office of the Department
of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole
purpose of refuting findings of the Labor Inspector of DOLE (in an inspection of
respondent's establishment on February 2, 1991) apparently adverse to the private
respondent. 3
After she refused to proceed to the City Prosecutor's Office on the same day the
affidavit was submitted to the Cordillera Regional Office of DOLE petitioner avers
that she was ordered by the hotel management to turn over the keys to her living
quarters
and
to
remove
her
belongings
from
the
hotel
premises. 4 According to her, respondent strongly chided her for refusing to proceed to
the City Prosecutor's Office to attest to the affidavit. 5 She thereafter reluctantly filed a
leave of absence from her job which was denied by management. When she
attempted to return to work on May 10, 1991, the hotel's cashier, Margarita Choy,
informed her that she should not report to work and, instead, continue with her
unofficial leave of absence. Consequently, on May 13, 1991, three days after her
attempt to return to work, petitioner filed a complaint for illegal dismissal before the
Arbitration Branch of the National Labor Relations Commission CAR Baguio City. In
addition to her complaint for illegal dismissal, she alleged underpayment of wages,
non-payment of holiday pay, service incentive leave pay, 13th month pay, night
differential and other benefits. The complaint was docketed as NLRC Case No. RABCAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal

dismissal, private respondent Peter Ng alleged before Labor Arbiter Pati that petitioner
"surreptitiously left (her job) without notice to the management" 6 and that she actually
abandoned her work. He maintained that there was no basis for the money claims for
underpayment and other benefits as these were paid in the form of facilities to
petitioner and the hotel's other employee. 7Pointing to the Affidavit of May 7, 1991, the
private respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after the
original complaint for illegal dismissal was filed, private respondent raised a new
ground, loss of confidence, which was supported by a criminal complaint for Qualified
Theft he filed before the prosecutor's office of the City of Baguio against petitioner on
July 4, 1991. 8

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL

LABOR RELATIONS COMMISSION COMMITTED A PATENT
AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER THAT THE
ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN
AFTERTHOUGHT ON THE PART OF THE RESPONDENTEMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL
OF THE COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL
LABOR RELATIONS COMMISSION COMMITTED A PATENT
AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ADOPTING THE RULING OF THE LABOR
ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES
AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED
SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS
TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE
PAYMENT OF WAGES AND BENEFITS;

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's
complaint on the ground of loss of confidence. His disquisitions in support of his
conclusion read as follows:
It appears from the evidence of respondent that complainant
carted away or stole one (1) blanket, 1 piece bedsheet, 1 piece
thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10"
pages 12-14 TSN, December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a
criminal complaint against complainant for qualified theft and
perjury. The fiscal's office finding a prima facie evidence that
complainant committed the crime of qualified theft issued a
resolution for its filing in court but dismissing the charge of perjury
(Exhibit "4" for respondent and Exhibit "B-7" for complainant). As
a consequence, complainant was charged in court for the said
crime (Exhibit "5" for respondent and Exhibit "B-6" for the
complainant).
With these pieces of evidence, complainant committed serious
misconduct against her employer which is one of the just and
valid grounds for an employer to terminate an employee (Article
282 of the Labor Code as amended). 9
On
April
28,
1994,
respondent
NLRC
promulgated
its
assailed
Resolution 10 affirming the Labor Arbiter's decision. The resolution substantially
incorporated the findings of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the
instant special civil action for certiorari under Rule 65 of the Rules of Court on the
following grounds: 12

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL

LABOR RELATIONS COMMISSION COMMITTED A PATENT
AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO CONSIDER THE EVIDENCE
ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING
UNFAIR
LABOR
PRACTICE
COMMITTED
BY
THE
RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995
rejects private respondent's principal claims and defenses and urges this Court to set
aside the public respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of proof to show
that the dismissal is for just cause, the failure of which would mean that the dismissal
is not justified and the employee is entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner abandoned
her job when she failed to return to work on May 8, 1991. Additionally, in order to
strengthen his contention that there existed sufficient cause for the termination of
petitioner, he belatedly included a complaint for loss of confidence, supporting this

with charges that petitioner had stolen a blanket, a bedsheet and two towels from the
hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the
Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which
private respondent anchored his claim that petitioner "abandoned" her job were not
enough to constitute just cause to sanction the termination of her services under
Article 283 of the Labor Code. For abandonment to arise, there must be concurrence
of two things: 1) lack of intention to work; 16 and 2) the presence of overt acts
signifying the employee's intention not to work. 17
In the instant case, respondent does not dispute the fact that petitioner tried to file a
leave of absence when she learned that the hotel management was displeased with
her refusal to attest to the affidavit. The fact that she made this attempt clearly
indicates not an intention to abandon but an intention to return to work after the period
of her leave of absence, had it been granted, shall have expired.
Furthermore, while absence from work for a prolonged period may suggest
abandonment in certain instances, mere absence of one or two days would not be
enough to sustain such a claim. The overt act (absence) ought
to unerringly point to the fact that the employee has no intention to return to
work, 18 which is patently not the case here. In fact, several days after she had been
advised to take an informal leave, petitioner tried to resume working with the hotel, to
no avail. It was only after she had been repeatedly rebuffed that she filed a case for
illegal dismissal. These acts militate against the private respondent's claim that
petitioner abandoned her job. As the Solicitor General in his manifestation observed:
Petitioner's absence on that day should not be construed as
abandonment of her job. She did not report because the cashier
told her not to report anymore, and that private respondent Ng did
not want to see her in the hotel premises. But two days later or on
the 10th of May, after realizing that she had to clarify her
employment status, she again reported for work. However, she
was prevented from working by private respondents. 19
We now come to the second cause raised by private respondent to support his
contention that petitioner was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to provide
employers with a blank check for terminating their employees. Such a vague, allencompassing pretext as loss of confidence, if unqualifiedly given the seal of approval
by this Court, could readily reduce to barren form the words of the constitutional

guarantee of security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust and confidence
or to those situations where the employee is routinely charged with the care and
custody of the employer's money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees or effectively recommend such managerial actions;
and to the second class belong cashiers, auditors, property custodians, etc., or those
who, in the normal and routine exercise of their functions, regularly handle significant
amounts of money or property. Evidently, an ordinary chambermaid who has to sign
out for linen and other hotel property from the property custodian each day and who
has to account for each and every towel or bedsheet utilized by the hotel's guests at
the end of her shift would not fall under any of these two classes of employees for
which loss of confidence, if ably supported by evidence, would normally apply.
Illustrating this distinction, this Court in Marina Port Services, Inc. vs. NLRC, 20 has
stated that:
To be sure, every employee must enjoy some degree of trust and
confidence from the employer as that is one reason why he was
employed in the first place. One certainly does not employ a
person he distrusts. Indeed, even the lowly janitor must enjoy that
trust and confidence in some measure if only because he is the
one who opens the office in the morning and closes it at night and
in this sense is entrusted with the care or protection of the
employer's property. The keys he holds are the symbol of that
trust and confidence.
By the same token, the security guard must also be considered as
enjoying the trust and confidence of his employer, whose property
he is safeguarding. Like the janitor, he has access to this property.
He too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only
with the physical task of protecting that property. The employer's
trust and confidence in him is limited to that ministerial function.
He is not entrusted, in the Labor Arbiter's words, with the duties of
safekeeping and safeguarding company policies, management
instructions, and company secrets such as operation devices. He
is not privy to these confidential matters, which are shared only in
the higher echelons of management. It is the persons on such
levels who, because they discharge these sensitive duties, may
be considered holding positions of trust and confidence. The
security guard does not belong in such category. 21

More importantly, we have repeatedly held that loss of confidence should not be
simulated in order to justify what would otherwise be, under the provisions of law, an
illegal dismissal. "It should not be used as a subterfuge for causes which are illegal,
improper and unjustified. It must be genuine, not a mere afterthought to justify an
earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of qualified theft
charges against petitioner long after the latter exposed the hotel's scheme (to avoid its
obligations as employer under the Labor Code) by her act of filing illegal dismissal
charges against the private respondent would hardly warrant serious consideration of
loss of confidence as a valid ground for dismissal. Notably, the Solicitor General has
himself taken a position opposite the public respondent and has observed that:
If petitioner had really committed the acts charged against her by
private respondents (stealing supplies of respondent hotel),
private respondents should have confronted her before dismissing
her on that ground. Private respondents did not do so. In fact,
private respondent Ng did not raise the matter when petitioner
went to see him on May 9, 1991, and handed him her application
for leave. It took private respondents 52 days or up to July 4,
1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.
The manipulations of private respondents should not be
countenanced. 23
Clearly, the efforts to justify petitioner's dismissal on top of the private respondent's
scheme of inducing his employees to sign an affidavit absolving him from possible
violations of the Labor Code taints with evident bad faith and deliberate malice
petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or not the dismissal by
the private respondent of petitioner constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the
employer is alleged is whether or not the employer has exerted pressure, in the form
of restraint, interference or coercion, against his employee's right to institute concerted
action for better terms and conditions of employment. Without doubt, the act of
compelling employees to sign an instrument indicating that the employer observed
labor standards provisions of law when he might have not, together with the act of

terminating or coercing those who refuse to cooperate with the employer's scheme
constitutes unfair labor practice. The first act clearly preempts the right of the hotel's
workers to seek better terms and conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that "[t]his
actuation . . . is analogous to the situation envisaged in paragraph (f) of Article 248 of
the Labor Code" 24 which distinctly makes it an unfair labor practice "to dismiss,
discharge or otherwise prejudice or discriminate against an employee for having given
or being about to give testimony" 25 under the Labor Code. For in not giving positive
testimony in favor of her employer, petitioner had reserved not only her right to dispute
the claim and proffer evidence in support thereof but also to work for better terms and
conditions of employment.
For refusing to cooperate with the private respondent's scheme, petitioner was
obviously held up as an example to all of the hotel's employees, that they could only
cause trouble to management at great personal inconvenience. Implicit in the act of
petitioner's termination and the subsequent filing of charges against her was the
warning that they would not only be deprived of their means of livelihood, but also
possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of quasi-judicial
agencies when the same are ably supported by the evidence on record. However,
where such conclusions are based on a misperception of facts or where they patently
fly in the face of reason and logic, we will not hesitate to set aside those conclusions.
Going into the issue of petitioner's money claims, we find one more salient reason in
this case to set things right: the labor arbiter's evaluation of the money claims in this
case incredibly ignores existing law and jurisprudence on the matter. Its blatant onesidedness simply raises the suspicion that something more than the facts, the law and
jurisprudence may have influenced the decision at the level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim
that the reason the monetary benefits received by petitioner between 1981 to 1987
were less than minimum wage was because petitioner did not factor in the meals,
lodging, electric consumption and water she received during the period in her
computations. 26Granting that meals and lodging were provided and indeed constituted
facilities, such facilities could not be deducted without the employer complying first
with certain legal requirements. Without satisfying these requirements, the employer
simply cannot deduct the value from the employee's ages. First, proof must be shown
that such facilities are customarily furnished by the trade. Second, the provision of
deductible facilities must be voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value. 27

These requirements were not met in the instant case. Private respondent "failed to
present any company policy or guideline to show that the meal and lodging . . . (are)
part of the salary;" 28 he failed to provide proof of the employee's written authorization;
and, he failed to show how he arrived at the valuations. 29
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in
his decision were figures furnished by the private respondent's own accountant,
without corroborative evidence. On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to produce payroll records,
receipts and other relevant documents, where he could have, as has been pointed out
in the Solicitor General's manifestation, "secured certified copies thereof from the
nearest regional office of the Department of Labor, the SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and water consumed by the
petitioner were not facilities but supplements. A benefit or privilege granted to an
employee for the convenience of the employer is not a facility. The criterion in making
a distinction between the two not so much lies in the kind (food, lodging) but the
purpose. 31Considering, therefore, that hotel workers are required to work different
shifts and are expected to be available at various odd hours, their ready availability is
a necessary matter in the operations of a small hotel, such as the private respondent's
hotel.
It is therefore evident that petitioner is entitled to the payment of the deficiency in her
wages equivalent to the fullwage applicable from May 13, 1988 up to the date of her
illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave pay, emergency
cost of living allowance, night differential pay, and 13th month pay for the periods
alleged by the petitioner as the private respondent has never been able to adduce
proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to the time of filing the
case on May 13, 1988 are barred by prescription as P.D. 442 (as amended) and its
implementing rules limit all money claims arising out of employer-employee
relationship to three (3) years from the time the cause of action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed from work
normally should be reinstated without loss of seniority rights and other privileges.
Owing to the strained relations between petitioner and private respondent, allowing
the former to return to her job would only subject her to possible harassment and
future embarrassment. In the instant case, separation pay equivalent to one month's

salary for every year of continuous service with the private respondent would be
proper, starting with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our
decision
in Osmalik
Bustamante,
et
al. vs. National
Labor
Relations
Commission, 33 petitioner is entitled to full backwages from the time of her illegal
dismissal up to the date of promulgation of this decision without qualification or
deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the
employee sought to be terminated from employment with two written notices before
the same may be legally effected. The first is a written notice containing a statement of
the cause(s) for dismissal; the second is a notice informing the employee of the
employer's decision to terminate him stating the basis of the dismissal. During the
process leading to the second notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance of counsel if he so
desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's
dismissal, it is noteworthy that the private respondent never even bothered to inform
petitioner of the charges against her. Neither was petitioner given the opportunity to
explain the loss of the articles. It was only almost two months after petitioner had filed
a complaint for illegal dismissal, as an afterthought, that the loss was reported to the
police and added as a supplemental answer to petitioner's complaint. Clearly, the
dismissal of petitioner without the benefit of notice and hearing prior to her termination
violated her constitutional right to due process. Under the circumstance an award of
One Thousand Pesos (P1,000.00) on top of payment of the deficiency in wages and
benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor
Relations Commission dated April 24, 1994 is REVERSED and SET ASIDE, with
costs. For clarity, the economic benefits due the petitioner are hereby summarized as
follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of
petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same
period;
3) Separation pay equal to one month's salary for every year of petitioner's continuous
service with the private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's

illegal dismissal up to the date of promulgation of this decision pursuant to our ruling
in Bustamante vs. NLRC. 34

firm shall have secured additional operating funds from abroad. Benjamin Yu actually
managed the operations and finances of the business; he had overall supervision of
the workers at the marble quarry in Bulacan and took charge of the preparation of
papers relating to the exportation of the firm's products.

5) P1,000.00.
ORDERED.

56. G.R. No. 97212 June 30, 1993

BENJAMIN
YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS
COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU
SHIAN JENG and CHEN HO-FU, respondents.
Jose C. Guico for petitioner.
Wilfredo Cortez for private respondents.

FELICIANO, J.:
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership with the firm
name of "Jade Mountain Products Company Limited" ("Jade Mountain"). The
partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora
Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all
citizens of the Republic of China (Taiwan), as limited partners. The partnership
business consisted of exploiting a marble deposit found on land owned by the Sps.
Ricardo and Guillerma Cruz, situated in Bulacan Province, under a Memorandum
Agreement dated 26 June 1984 with the Cruz spouses. 1 The partnership had its main
office in Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as
Assistant General Manager with a monthly salary of P4,000.00. According to petitioner
Yu, however, he actually received only half of his stipulated monthly salary, since he
had accepted the promise of the partners that the balance would be paid when the

Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea
Bendal and Rhodora Bendal sold and transferred their interests in the partnership to
private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a limited
partner, also sold and transferred his interest in the partnership to Willy Co. Between
Mr. Emmanuel Zapanta and himself, private respondent Willy Co acquired the great
bulk of the partnership interest. The partnership now constituted solely by Willy Co
and Emmanuel Zapanta continued to use the old firm name of Jade Mountain, though
they moved the firm's main office from Makati to Mandaluyong, Metropolitan Manila. A
Supplement to the Memorandum Agreement relating to the operation of the marble
quarry was entered into with the Cruz spouses in February of 1988. 2 The actual
operations of the business enterprise continued as before. All the employees of the
partnership continued working in the business, all, save petitioner Benjamin Yu as it
turned out.
On 16 November 1987, having learned of the transfer of the firm's main office from
Makati to Mandaluyong, petitioner Benjamin Yu reported to the Mandaluyong office for
work and there met private respondent Willy Co for the first time. Petitioner was
informed by Willy Co that the latter had bought the business from the original partners
and that it was for him to decide whether or not he was responsible for the obligations
of the old partnership, including petitioner's unpaid salaries. Petitioner was in fact not
allowed to work anymore in the Jade Mountain business enterprise. His unpaid
salaries remained unpaid. 3
On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal and
recovery of unpaid salaries accruing from November 1984 to October 1988, moral and
exemplary damages and attorney's fees, against Jade Mountain, Mr. Willy Co and the
other private respondents. The partnership and Willy Co denied petitioner's charges,
contending in the main that Benjamin Yu was never hired as an employee by the
present or new partnership. 4
In due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that
petitioner had been illegally dismissed. The Labor Arbiter decreed his reinstatement
and awarded him his claim for unpaid salaries, backwages and attorney's fees. 5
On appeal, the National Labor Relations Commission ("NLRC") reversed the decision
of the Labor Arbiter and dismissed petitioner's complaint in a Resolution dated 29
November 1990. The NLRC held that a new partnership consisting of Mr. Willy Co and

Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new
partnership had not retained petitioner Yu in his original position as Assistant General
Manager, and that there was no law requiring the new partnership to absorb the
employees of the old partnership. Benjamin Yu, therefore, had not been illegally
dismissed by the new partnership which had simply declined to retain him in his
former managerial position or any other position. Finally, the NLRC held that Benjamin
Yu's claim for unpaid wages should be asserted against the original members of the
preceding partnership, but these though impleaded had, apparently, not been served
with summons in the proceedings before the Labor Arbiter. 6

Article 1830 of the same Code must also be noted:

Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx xxx xxx
(b) by the express will of
any partner, who must
act in good faith, when
no definite term or
particular undertaking is
specified;

Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us
to set aside and annul the Resolution of the NLRC as a product of grave abuse of
discretion amounting to lack or excess of jurisdiction.
The basic contention of petitioner is that the NLRC has overlooked the principle that a
partnership has a juridical personality separate and distinct from that of each of its
members. Such independent legal personality subsists, petitioner claims,
notwithstanding changes in the identities of the partners. Consequently, the
employment contract between Benjamin Yu and the partnership Jade Mountain could
not have been affected by changes in the latter's membership. 7

xxx xxx xxx

(2) in contravention of
the agreement between
the partners, where the
circumstances do not
permit
a
dissolution
under
any
other
provision
of
this
article, by the express
will of any partner at any
time;

Two (2) main issues are thus posed for our consideration in the case at bar: (1)
whether the partnership which had hired petitioner Yu as Assistant General Manager
had been extinguished and replaced by a new partnerships composed of Willy Co and
Emmanuel Zapanta; and (2) if indeed a new partnership had come into existence,
whether petitioner Yu could nonetheless assert his rights under his employment
contract as against the new partnership.
In respect of the first issue, we agree with the result reached by the NLRC, that is, that
the legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired petitioner in 1984 and the
emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable law in this connection of which the NLRC seemed quite unaware
is found in the Civil Code provisions relating to partnerships. Article 1828 of the Civil
Code provides as follows:
Art. 1828. The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding
up of the business. (Emphasis supplied)

xxx xxx xxx

(Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests
(amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel
Zapanta. The record does not show what happened to the remaining 18% of the
original partnership interest. The acquisition of 82% of the partnership interest by new
partners, coupled with the retirement or withdrawal of the partners who had originally
owned such 82% interest, was enough to constitute a new partnership.

The occurrence of events which precipitate the legal consequence of dissolution of a

partnership do not, however, automatically result in the termination of the legal
personality of the old partnership. Article 1829 of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but continues
until the winding up of partnership affairs is completed.
In the ordinary course of events, the legal personality of the expiring partnership
persists for the limited purpose of winding up and closing of the affairs of the
partnership. In the case at bar, it is important to underscore the fact that the business
of the old partnership was simply continued by the new partners, without the old
partnership undergoing the procedures relating to dissolution and winding up of its
business affairs. In other words, the new partnership simply took over the business
enterprise owned by the preceeding partnership, and continued using the old name of
Jade Mountain Products Company Limited, without winding up the business affairs of
the old partnership, paying off its debts, liquidating and distributing its net assets, and
then re-assembling the said assets or most of them and opening a new business
enterprise. There were, no doubt, powerful tax considerations which underlay such an
informal approach to business on the part of the retiring and the incoming partners. It
is not, however, necessary to inquire into such matters.
What is important for present purposes is that, under the above described
situation, not only the retiring partners (Rhodora Bendal, et al.) but also the new
partnership itself which continued the business of the old, dissolved, one, are liable for
the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, 8 the
Court held that under facts very similar to those in the case at bar, a withdrawing
partner remains liable to a third party creditor of the old partnership. 9 The liability of
the new partnership, upon the other hand, in the set of circumstances obtaining in the
case at bar, is established in Article 1840 of the Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved
partnership are also creditors of the person or partnership
continuing the business:
(1) When any new partner is admitted into an existing partnership,
or when any partner retires and assigns (or the representative of
the deceased partner assigns) his rights in partnership property to
two or more of the partners, or to one or more of the partners and
one or more third persons, if the business is continued without
liquidation of the partnership affairs;

(2) When all but one partner retire and assign (or the
representative of a deceased partner assigns) their rights in
partnership property to the remaining partner, who continues the
business without liquidation of partnership affairs, either alone or
with others;
(3) When any Partner retires or dies and the business of the
dissolved partnership is continued as set forth in Nos. 1 and 2 of
this Article, with the consent of the retired partners or the
representative of the deceased partner, but without any
assignment of his right in partnership property;
(4) When all the partners or their representatives assign their
rights in partnership property to one or more third persons who
promise to pay the debts and who continue the business of the
dissolved partnership;
(5) When any partner wrongfully causes a dissolution and
remaining partners continue the businessunder the provisions of
article 1837, second paragraph, No. 2, either alone or with
others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining
partners continue the business either alone or with others without
liquidation of the partnership affairs;
The liability of a third person becoming a partner in
partnership continuing the business, under this article, to
creditors of the dissolved partnership shall be satisfied out of
partnership property only, unless there is a stipulation to
contrary.

the
the
the
the

When the business of a partnership after dissolution is continued

under any conditions set forth in this article the creditors of the
retiring or deceased partner or the representative of the deceased
partner, have a prior right to any claim of the retired partner or the
representative of the deceased partner against the person or
partnership continuing the business on account of the retired or
deceased partner's interest in the dissolved partnership or on
account of any consideration promised for such interest or for his
right in partnership property.

Nothing in this article shall be held to modify any right of creditors

to set assignment on the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the
new Jade Mountain which continued the business of the old one without liquidation of
the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner
Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-avis any claim of any retired or previous partner insofar as such retired partner's
interest in the dissolved partnership is concerned. It is not necessary for the Court to
determine under which one or mare of the above six (6) paragraphs, the case at bar
would fall, if only because the facts on record are not detailed with sufficient precision
to permit such determination. It is, however, clear to the Court that under Article 1840
above, Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other
claims relating to his employment with the previous partnership, against the new Jade
Mountain.
It is at the same time also evident to the Court that the new partnership was entitled to
appoint and hire a new general or assistant general manager to run the affairs of the
business enterprise take over. An assistant general manager belongs to the most
senior ranks of management and a new partnership is entitled to appoint a top
manager of its own choice and confidence. The non-retention of Benjamin Yu as
Assistant General Manager did not therefore constitute unlawful termination, or
termination without just or authorized cause. We think that the precise authorized
cause for termination in the case at bar was redundancy. 10 The new partnership had
its own new General Manager, apparently Mr. Willy Co, the principal new owner
himself, who personally ran the business of Jade Mountain. Benjamin Yu's old position
as Assistant General Manager thus became superfluous or redundant. 11 It follows that
petitioner Benjamin Yu is entitled to separation pay at the rate of one month's pay for
each year of service that he had rendered to the old partnership, a fraction of at least
six (6) months being considered as a whole year.
While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu
in its employ, we consider that Benjamin Yu was very shabbily treated by the new
partnership. The old partnership certainly benefitted from the services of Benjamin Yu
who, as noted, previously ran the whole marble quarrying, processing and exporting
enterprise. His work constituted value-added to the business itself and therefore, the
new partnership similarly benefitted from the labors of Benjamin Yu. It is worthy of
note that the new partnership did not try to suggest that there was any cause

consisting of some blameworthy act or omission on the part of Mr. Yu which compelled
the new partnership to terminate his services. Nonetheless, the new Jade Mountain
did not notify him of the change in ownership of the business, the relocation of the
main office of Jade Mountain from Makati to Mandaluyong and the assumption by Mr.
Willy Co of control of operations. The treatment (including the refusal to honor his
claim for unpaid wages) accorded to Assistant General Manager Benjamin Yu was so
summary and cavalier as to amount to arbitrary, bad faith treatment, for which the new
Jade Mountain may legitimately be required to respond by paying moral damages.
This Court, exercising its discretion and in view of all the circumstances of this case,
believes that an indemnity for moral damages in the amount of P20,000.00 is proper
and reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal
rate of six percent (6%) per annum on the amount of unpaid wages, and of his
separation pay, computed from the date of promulgation of the award of the Labor
Arbiter. Finally, because the new Jade Mountain compelled Benjamin Yu to resort to
litigation to protect his rights in the premises, he is entitled to attorney's fees in the
amount of ten percent (10%) of the total amount due from private respondent Jade
Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE
COURSE, the Comment filed by private respondents is treated as their Answer to the
Petition for Certiorari, and the Decision of the NLRC dated 29 November 1990 is
hereby NULLIFIED and SET ASIDE. A new Decision is hereby ENTERED requiring
private respondent Jade Mountain Products Company Limited to pay to petitioner
Benjamin Yu the following amounts:
(a) for unpaid wages which, as found by the
Labor Arbiter, shall be computed at the rate of
P2,000.00 per month multiplied by thirty-six
(36) months (November 1984 to December
1987) in the total amount of P72,000.00;
(b) separation pay computed at the rate of
P4,000.00 monthly pay multiplied by three (3)
years of service or a total of P12,000.00;
(c) indemnity for moral damages in the
amount of P20,000.00;
(d) six percent (6%) per annum legal interest
computed on items (a) and (b) above,

commencing on 26 December 1989 and until

fully paid; and
(e) ten percent (10%) attorney's fees on the
total amount due from private respondent
Jade Mountain.
Costs against private respondents.
SO ORDERED.

57. G.R. No. 110358 November 9, 1994

QUINTIN ROBLEDO, MARIO SINLAO, LEONARDO SAAVEDRA, VICENTE
SECAPURI,
DANIEL
AUSTRIA,
ET
AL., petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, BACANI SECURITY AND
ALLIED SERVICES CO., INC., AND BACANI SECURITY AND PROTECTIVE
AGENCY AND/OR ALICIA BACANI, respondents.
Benjamin C. Pineda for petitioners.
Villanueva, Ebora & Caa for private respondents.

MENDOZA, J.:
This is a petition for review of the decision of the First Division 1 of the National Labor
Relations Commission, setting aside the decision of the Labor Arbiter which held
private respondents jointly and severally liable to the petitioners for overtime and legal
holiday pay.
The facts of this case are as follows:

Petitioners were former employees of Bacani Security and Protective Agency (BSPA,
for brevity). They were employed as security guards at different times during the
period 1969 to December 1989 when BSPA ceased to operate.
BSPA was a single proprietorship owned, managed and operated by the late Felipe
Bacani. It was registered with the Bureau of Trade and Industry as a business name in
1957. Upon its expiration, the registration was renewed on July 1, 1987 for a term of
five (5) years ending 1992.
On December 31, 1989, Felipe Bacani retired the business name and BSPA ceased to
operate effective on that day. At that time, respondent Alicia Bacani, daughter of Felipe
Bacani, was BSPA's Executive Directress.
On January 15, 1990 Felipe Bacani died. An intestate proceeding was instituted for
the settlement of his estate before the Regional Trial Court, National Capital Region,
Branch 155, Pasig, Metro Manila.
Earlier, on October 26, 1989, respondent Bacani Security and Allied Services Co., Inc.
(BASEC, for brevity) had been organized and registered as a corporation with the
Securities and Exchange Commission. The following were the incorporators with their
respective shareholdings:
ALICIA
BACANI

25,250
LYDIA
BACANI

25,250
AMADO P. ELEDA 25,250
VICTORIA B. AURIGUE 25,250
FELIPE BACANI 20,000 shares

shares
shares
shares
shares

The primary purpose of the corporation was to "engage in the business of providing
security" to persons and entities. This was the same line of business that BSPA was
engaged in. Most of the petitioners, after losing their jobs in BSPA, were employed in
BASEC.
On July 5, 1990, some of the petitioners filed a complaint with
the Department of Labor and Employment, National Capital Region, for underpayment
of wages and nonpayment of overtime pay, legal holiday pay, separation pay and/or
retirement/resignation benefits, and for the return of their cash bond which they posted
with BSPA. Made respondents were BSPA and BASEC. Petitioners were
subsequently joined by the rest of the petitioners herein who filed supplementary
complaints.

On March 1, 1992, the Labor Arbiter rendered a decision upholding the right of the
petitioners. The dispositive portion of his decision reads:
CONFORMABLY WITH THE FOREGOING, the judgment is
hereby rendered finding complainants entitled to their money
claims as herein above computed and to be paid by all the
respondents hereinin solidum except BSPA which has already
been retired from business.
Respondents are further ordered to pay attorney's fees equivalent
to five (5) percent of the awarded money claims.
All other claims are hereby dismissed for lack of merit.
SO ORDERED.
On appeal the National Labor Relations Commission reversed. In a decision dated
March 30, 1993, the NLRC's First Division declared the Labor Arbiter without
jurisdiction and instead suggested that petitioners file their claims with the Regional
Trial Court, Branch 155, Pasig, Metro Manila, where an intestate proceeding for the
settlement of Bacani's estate was pending. Petitioners moved for a reconsideration
but their motion was denied for lack of merit. Hence this petition for review.
No appeal lies to review decisions of the NLRC. Nonetheless the petition in this case
was treated as a special civil action of certiorari to determine whether the NLRC did
not commit a grave abuse of its discretion in reversing the Labor Arbiter's decision.
The issues in this case are two fold: first, whether Bacani Security and Allied Services
Co. Inc. (BASEC) and Alicia Bacani can be held liable for claims of petitioners against
Bacani Security and Protective Agency (BSPA) and,second, if the claims were the
personal liability of the late Felipe Bacani, as owner of BSPA, whether the Labor
Arbiter had jurisdiction to decide the claims.
Petitioners contend that public respondent erred in setting aside the Labor Arbiter's
judgment on the ground that BASEC is the same entity as BSPA the latter being
owned and controlled by one and the same family, namely the Bacani family. For this
reason they urge that the corporate fiction should be disregarded and BASEC should
be held liable for the obligations of the defunct BSPA.
We find the petition to be without merit.

As correctly found by the NLRC, BASEC is an entity separate and distinct from that of
BSPA. BSPA is a single proprietorship owned and operated by Felipe Bacani. Hence
its debts and obligations were the personal obligations of its owner. Petitioners' claim
which are based on these debts and personal obligations, did not survive the death of
Felipe Bacani on January 15, 1990 and should have been filed instead in the intestate
proceedings involving his estate.
Indeed, the rule is settled that unless expressly assumed labor contracts are not
enforceable against the transferee of an enterprise. The reason for this is that labor
contracts are in personam. 2 Consequently, it has been held that claims for backwages
earned from the former employer cannot be filed against the new owners of an
enterprise. 3 Nor is the new operator of a business liable for claims for retirement pay
of employees. 4
Petitioners claim, however, that BSPA was intentionally retired in order to allow
expansion of its business and even perhaps an increase in its capitalization for credit
purpose. According to them, the Bacani family merely continued the operation of
BSPA by creating BASEC in order to avoid the obligations of the former. Petitioners
anchor their claim on the fact that Felipe Bacani, after having ceased to operate
BSPA, became an incorporator of BASEC together with his wife and daughter.
Petitioners urge piercing the veil of corporate entity in order to hold BASEC liable for
BSPA's obligations.
The doctrine of piercing the veil of corporate entity is used whenever a court finds that
the corporate fiction is being used to defeat public convenience, justify wrong, protect
fraud, or defend crime, or to confuse legitimate issues, or that a corporation is the
mere alter ego or business conduit of a person or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation. 5 It is apparent,
therefore, that the doctrine has no application to this case where the purpose is not to
hold the individual stockholders liable for the obligations of the corporation but, on the
contrary, to hold the corporation liable for the obligations of a stockholder or
stockholders. Piercing the veil of corporate entity means looking through the corporate
form to the individual stockholders composing it. Here there is no reason to pierce the
veil of corporate entity because there is no question that petitioners' claims, assuming
them to be valid, are the personal liability of the late Felipe Bacani. It is immaterial that
he was also a stockholder of BASEC.
Indeed, the doctrine is stood on its head when what is sought is to make a corporation
liable for the obligations of a stockholder. But there are several reasons why BASEC is
not liable for the personal obligations of Felipe Bacani. For one, BASEC came into
existence before BSPA was retired as a business concern. BASEC was incorporated
on October 26, 1989 and its license to operate was released on May 28, 1990, while

BSPA ceased to operate on December 31, 1989. Before, BSPA was retired, BASEC
was already existing. It is, therefore, not true that BASEC is a mere continuity of
BSPA.
Second, Felipe Bacani was only one of the five (5) incorporators of BASEC. He owned
the least number of shares in BASEC, which included among its incorporators
persons who are not members of his family. That his wife Lydia and daughter Alicia
were also incorporators of the same company is not sufficient to warrant the
conclusion that they hold their shares in his behalf.
Third, there is no evidence to show that the assets of BSPA were transferred to
BASEC. If BASEC was a mere continuation of BSPA, all or at least a substantial part
of the latter's assets should have found their way to BASEC.

SO ORDERED.

58. G.R. No. 117932 July 20, 1995

AVON
DALE
vs.
NATIONAL LABOR RELATIONS
AL., respondents.

GARMENTS,
COMMISSION,

INC., petitioner,
LILIA

DUMANTAY,

ET

RESOLUTION
Neither can respondent Alicia Bacani be held liable for BSPA's obligations. Although
she was Executive Directress of BSPA, she was merely an employee of the BSPA,
which was a single proprietorship.
Now, the claims of petitioners are actually money claims against the estate of Felipe
Bacani. They must be filed against his estate in accordance with Sec. 5 of Rule 86
which provides in part:
Sec. 5. Claims which must be filed under the notice. If not filed,
barred; exceptions. All claims for money against the decedent,
arising from contract, express or implied, whether the same be
due, not due, or contingent, all claims for funeral expenses and
expenses for the last sickness of the decedent, and judgment for
money against the decedent, must be filed within the time limited
in the notice; otherwise they are barred forever, except that they
may be set forth as counterclaims in any action that the executor
or administrator may bring against the claimants . . .
The rationale for the rule is that upon the death of the defendant, a testate or intestate
proceeding shall be instituted in the proper court wherein all his creditors must appear
and file their claims which shall be paid proportionately out of the property left by the
deceased. The objective is to avoid duplicity of procedure. Hence the ordinary actions
must be taken out from the ordinary courts. 6 Under Art. 110 of the Labor Code, money
claims of laborers enjoy preference over claims of other creditors in case of
bankruptcy or liquidation of the employer's business.
WHEREFORE, the petition for certiorari is DISMISSED.

FRANCISCO, J.:
This special civil action for certiorari seeks to set aside the decision of the National
Labor Relations Commission, dated August 31, 1994, in NLRC CA 005068-93, for
allegedly having been rendered with grave abuse of discretion.
Private respondents were employees of petitioner Avon Dale Garments, Inc. and its
predecessor-in-interest, Avon Dale Shirt Factory. Following a dispute brought about by
the rotation of workers, a compromise agreement was entered into between petitioner
and private respondents wherein the latter were terminated from service and given
their corresponding separation pay.
However, upon refusal of the petitioner to include in the computation of private
respondents' separation pay the period during which the latter were employed by Avon
Dale Shirt Factory, private respondents filed a complaint with the labor arbiter claiming
a deficiency in their separation pay (docketed as NLRC-NCR-00-02-00810-93).
According to private respondents, their previous employment with petitioner's
predecessor-in-interest, Avon Dale Shirt Factory, should be credited in computing their
separation pay considering that Avon Dale Shirt factory was not dissolved and they
were not in turn hired as new employees by Avon Dale Garments, Inc.
In its decision dated May 14, 1993, the labor arbiter dismissed private respondents'
complaint and held that Avon Dale Shirt Factory and Avon Dale Garments, Inc. are not

one and the same entity as the former was in fact dissolved on December 27, 1978,
when it filed its Articles of Dissolution with the Securities and Exchange Commission. 1

business venture, at same address 6, and even continued to hire the same employees
(herein private respondents).

Private respondents appealed to the NLRC and the latter reversed the decision of the
labor arbiter after finding that upon dissolution of Avon Dale Shirt Factory, Inc., there
was no showing that its terminated employees, as creditors insofar as their separation
pay were concerned, were ever paid. Thus, petitioner Avon Dale Garments, Inc., as
successor-in-interest, was held liable for private respondents' unpaid claim. 2

Thus, conformably with established jurisprudence, the two entities cannot be deemed
as separate and distinct where there is a showing that one is merely the continuation
of the other. 7 In fact, even a change in the corporate name does not make a new
corporation, whether effected by a special act or under a general law, it has no effect
on the identity of the corporation, or on its property, rights, or liabilities. 8 Respondent
NLRC therefore, did not commit any grave abuse of discretion in holding that
petitioner should likewise include private respondents' employment with Avon Dale
Shirt Factory in computing private respondents' separation pay as petitioner failed to
substantiate its claim that it is a distinct entity.

The instant petition is now brought before us by petitioner Avon Dale Garments, Inc.,
anchored on the sole ground that, as a separate and distinct entity, it should not be
held liable for private respondents' separation pay from Avon Dale Shirt Factory.
Pending resolution of the instant petition, counsel for private respondents, instead of
filing a comment to the petition, filed a Manifestation indicating that the parties have
already reached an amicable settlement on December 27, 1994, wherein private
respondents were paid their corresponding separation pay, after which, they executed
a waiver and quitclaim. 3 It appeared however, upon verification by the Office of the
Solicitor General, that the aforementioned compromise agreement was executed
between the parties without the knowledge and participation of the NLRC. 4

ACCORDINGLY, the instant petition is hereby DISMISSED.

The established rule is that compromise agreements involving labor standard cases,
like the one entered into by the parties herein, must be reduced in writing and signed
in the presence of the Regional Director or his duly authorized representative.
Otherwise, they are not deemed to be duly executed. 5 For this reason, the
compromise agreement submitted by private respondents' counsel cannot be
recognized by this court for being improperly executed.

59. G.R. No. 161115

Nevertheless, we find the petition to be without merit as the assailed decision is in

complete accord with the law and evidence on record.
Petitioner failed to establish that Avon Dale Garments, Inc., is a separate and distinct
entity from Avon Dale Shirt Factory, absent any showing that there was indeed an
actual closure and cessation of the operations of the latter. The mere filing of the
Articles of Dissolution with the Securities and Exchange Commission, without more, is
not enough to support the conclusion that actual dissolution of an entity in fact took
place.
On the contrary, the prevailing circumstances in this case indicated that petitioner
company is not distinct from its predecessor Avon Dale Shirt Factory, but in fact
merely continued the operations of the latter under the same owners, the same

SO ORDERED.

November 30, 2006

DOLE
PHILIPPINES,
INC., Petitioner,
vs.
MEDEL ESTEVA, HENRY SILVA, GILBERT CABILAO, LORENZO GAQUIT,
DANIEL PABLO, EDWIN CAMILO, BENJAMIN SAKILAN, RICHARD PENUELA,
ARMANDO PORRAS, EDUARDO FALDAS, NILO DONDOYANO, MIGUEL DIAZ,
ROMEL BAJO, ARTEMIO TENERIFE, EDDIE LINAO, JERRY LIGTAS, SAMUEL
RAVAL, WILFREDO BLANDO, LORENZO MONTERO, JR., JAIME TESIPAO,
GEORGE DERAL, ERNESTO ISRAEL, JR., AGAPITO ESTOLOGA, JOVITO
DAGUIO, ARSENIO LEONCIO, MARLON BLANDO, JOSE OTELO CASPILLO,
ARNOLD LIZADA, JERRY DEYPALUBOS, STEVEN MADULA, ROGELIO
CABULAO, JR., ALVIN COMPOC, EUGENIO BRITANA, RONNIE GUELOS,
EMMANUEL JIMENA, GERMAN JAVA, JESUS MEJICA, JOEL INVENTADO,
DOMINGO JABULGO, RAMIL ENAD, RAYMUNDO YAMON, RITCHIE
MELENDRES, JACQUEL ORGE, RAMON BARCELONA, ERWIN ESPIA, NESTOR
DELIDELI, JR., ALLAN GANE, ROMEO PORRAS, RITCHIE BOCOG, JOSELITO
ACEBES, DANNY TORRES, JIMMY NAVARRO, RALPH PEREZ, SONNY SESE,
RONALD RODRIQUES, ROBERTO ALLANEC, ERNIE GIGANTANA, NELSON
SAMSON, REDANTE DAVILA, EDDIE BUSLIG, ALLAN PINEDA, JESUS
BELGERA, VICENTE LABISTE, CARMENCITA FELISILDA, GEORGE DERLA,

RUBEN TORMON, NEIL TAJALE, ORLANDO ESPENILLA, RITCHEL MANEJAR,

JOEL QUINTANA, ERWIN ALDE, JOEL CATALAN, ELMER TIZON, ALLAN
ESPADA, EUGENE BRETANA, RAMIL ENAD, RENE INGALLA, STEVEN
MADULLA, RANDY REBUTAZO, NEIL BAGATILLA, ARSENIO LEONCIO,
ROLANDO VILLEGAS and JUSLIUS TESIPAO, herein represented by MEDEL
ESTEVA, Authorized Representative,Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the revised
Rules of Civil Procedure seeking the reversal of the Decision, 1 dated 20 May 2002,
and the Amended Decision,2 dated 27 November 2003, both rendered by the Court of
Appeals in CA-G.R. SP No. 63405, which declared herein petitioner Dole Philippines,
Inc. as the employer of herein respondents, Medel Esteva and 86 others; found
petitioner guilty of illegal dismissal; and ordered petitioner to reinstate respondents to
their former positions and to pay the latter backwages.
The antecedent facts of the case are recounted as follows:
Petitioner is a corporation duly organized and existing in accordance with Philippine
laws, engaged principally in the production and processing of pineapple for the export
market.3 Its plantation is located in Polomolok, South Cotabato.4

1.1 Assist the COMPANY in its daily operations;

1.2 Perform odd jobs as may be assigned.
2. That both parties shall observe the following terms and conditions as stipulated, to
wit:
2.1 CONTRACTOR must carry on an independent legitimate business, and
must comply with all the pertinent laws of the government both local and
national;
2.2 CONTRACTOR must provide all hand tools and equipment necessary in
the performance of their work.
However, the COMPANY may allow the use of its fixed equipment as a
casual facility in the performance of the contract;
2.3 CONTRACTOR must comply with the attached scope of work,
specifications, and GMP and safety practices of the company;
2.4 CONTRACTOR must undertake the contract work under the following
manner:
a. on his own account;

Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO).

CAMPCO was organized in accordance with Republic Act No. 6938, otherwise known
as the Cooperative Code of the Philippines, and duly-registered with the Cooperative
Development Authority (CDA) on 6 January 1993. 5 Members of CAMPCO live in
communities surrounding petitioners plantation and are relatives of petitioners
employees.

b. under his own responsibility;

c. according to his manner and method, free from the control and
direction of the company in all matters connected with the
performance of the work except as to the result thereof;

On 17 August 1993, petitioner and CAMPCO entered into a Service Contract. 6 The
Service Contract referred to petitioner as "the Company," while CAMPCO was "the
Contractor." Relevant portions thereof read as follows

3. CONTRACTOR must pay the prescribed minimum wage, remit SSS/MEDICARE

premiums to proper government agencies, and submit copies of payroll and proof of
SSS/MEDICARE remittances to the COMPANY;

1. That the amount of this contract shall be or shall not exceed TWO HUNDRED
TWENTY THOUSAND ONLY (P220,000.00) PESOS, terms and conditions of
payment shall be on a per job basis as specified in the attached schedule of rates; the
CONTRACTOR shall perform the following services for the COMPANY;

4. This contract shall be for a specific period of Six (6) months from July 1 to
December 31, 1993; x x x.
Pursuant to the foregoing Service Contract, CAMPCO members rendered services to
petitioner. The number of CAMPCO members that report for work and the type of

service they performed depended on the needs of petitioner at any given time.
Although the Service Contract specifically stated that it shall only be for a period of six
months, i.e., from 1 July to 31 December 1993, the parties had apparently extended or
renewed the same for the succeeding years without executing another written
contract. It was under these circumstances that respondents came to work for
petitioner.
Investigation by DOLE
Concomitantly, the Sangguniang Bayan of Polomolok, South Cotabato, passed
Resolution No. 64, on 5 May 1993, addressed to then Secretary Ma. Nieves R.
Confessor of the Department of Labor and Employment (DOLE), calling her attention
to the worsening working conditions of the petitioners workers and the organization of
contractual workers into several cooperatives to replace the individual labor-only
contractors that used to supply workers to the petitioner. Acting on the said
Resolution, the DOLE Regional Office No. XI in Davao City organized a Task Force
that conducted an investigation into the alleged labor-only contracting activities of the
cooperatives in Polomolok.7
On 24 May 1993, the Senior Legal Officer of petitioner wrote a letter addressed to
Director Henry M. Parel of DOLE Regional Office No. XI, supposedly to correct the
misinformation that petitioner was involved in labor-only contracting, whether with a
cooperative or any private contractor. He further stated in the letter that petitioner was
not hiring cooperative members to replace the regular workers who were separated
from service due to redundancy; that the cooperatives were formed by the immediate
dependents and relatives of the permanent workers of petitioner; that these
cooperatives were registered with the CDA; and that these cooperatives were
authorized by their respective constitutions and by-laws to engage in the job
contracting business.8
The Task Force submitted a report on 3 June 1993 identifying six cooperatives that
were engaged in labor-only contracting, one of which was CAMPCO. The DOLE
Regional Office No. XI held a conference on 18 August 1993 wherein the
representatives of the cooperatives named by the Task Force were given the
opportunity to explain the nature of their activities in relation to petitioner.
Subsequently, the cooperatives were required to submit their position papers and
other supporting documents, which they did on 30 August 1993. Petitioner likewise
submitted its position paper on 15 September 1993.9
On 19 October 1993, Director Parel of DOLE Regional Office No. XI issued an
Order10 in which he made the following findings

Records submitted to this Office show that the six (6) aforementioned cooperatives
are all duly registered with the Cooperative Development Authority (CDA). These
cooperatives were also found engaging in different activities with DOLE PHILIPPINES,
INC. a company engaged in the production of pineapple and export of pineapple
products. Incidentally, some of these cooperatives were also found engaging in
activities which are directly related to the principal business or operations of the
company. This is true in the case of the THREE (3) Cooperatives, namely;
Adventurers Multi Purpose Cooperative, Human Resource Multi Purpose Cooperative
and Cannery Multi Purpose Cooperative.
From the foregoing findings and evaluation of the activities of Adventurers Multi
Purpose Cooperative, Human Resource Multi Purpose Cooperative and Cannery Multi
Purpose Cooperative, this Office finds and so holds that they are engaging in Labor
Only Contracting Activities as defined under Section 9, Rule VIII, Book III of the rules
implementing the Labor Code of the Philippines, as amended which we quote:
"Section 9 Labor Only Contracting a) Any person who undertakes to supply workers
to an employer shall be deemed to be engaged in labor-only contracting where such
person:
1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or operation of
the employer to which workers are habitually employed.
b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him."
WHEREFORE, premises considered, ADVENTURERS MULTI PURPOSE
COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE COOPERATIVE and
CANNERY MULTI PURPOSE COOPERATIVE are hereby declared to be engaged in
labor only contracting which is a prohibited activity. The same cooperatives are
therefore ordered to cease and desist from further engaging in such activities.
The three (3) other cooperatives, namely Polomolok Skilled Workers Multi Purpose
Cooperative, Unified Engineering and Manpower Service Multi Purpose Cooperative
and Tibud sa Katibawasan Multi Purpose Cooperative whose activities may not be

directly related to the principal business of DOLE Philippines, Inc. are also advised not
to engage in labor only contracting with the company.
All the six cooperatives involved appealed the afore-quoted Order to the Office of the
DOLE Secretary, raising the sole issue that DOLE Regional Director Director Parel
committed serious error of law in directing the cooperatives to cease and desist from
engaging in labor-only contracting. On 15 September 1994, DOLE Undersecretary
Cresencio B. Trajano, by the authority of the DOLE Secretary, issued an
Order11 dismissing the appeal on the basis of the following ratiocination
The appeal is devoid of merit.
The Regional Director has jurisdiction to issue a cease and desist order as provided
by Art. 106 of the Labor Code, as amended, to wit:
"Art. 106. Contractor or subcontractor. x x x

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 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 findings of the labor employment and enforcement officer
and raises issues supported by documentary proof 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
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash 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."

xxxx
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In
so prohibiting or restricting, he may make appropriate distinctions between labor only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code (Emphasis supplied)
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the forms 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 the employer. In such cases, the person or the 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."
in relation to Article 128(b) of the Labor Code, as amended by Republic Act No. 7730,
which reads:
"Art. 128. Visitorial and Enforcement Power.

The records reveal that in the course of the inspection of the premises of Dolefil, it
was found out that the activities of the members of the [cooperatives] are necessary
and desirable in the principal business of the former; and that they do not have the
necessary investment in the form of tools and equipments. It is worthy to note that the
cooperatives did not deny that they do not have enough capital in the form of tools
and equipment. Under the circumstances, it could not be denied that the
[cooperatives] are considered as labor-only contractors in relation to the business
operation of DOLEFIL, INC.
Thus, Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code, provides that:
"Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the

person acting as a contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
x x x x"
Violation of the afore-quoted provision is considered a labor standards violation and
thus, within the visitorial and enforcement powers of the Secretary of Labor and
Employment (Art. 128).
The Regional Directors authority to issue a cease and desist order emanates from
Rule I, Section 3 of the Rules on Disposition of Labor Standard Cases in the Regional
Offices, to wit:
"Section 3. Authorized representative of the Secretary of Labor and Employment.
The Regional Directors shall be the duly authorized representatives of the Secretary
of Labor and Employment in the administration and enforcement of the labor
standards within their respective territorial jurisdiction."
The power granted under Article 106 of the Labor Code to the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor to protect the rights of
workers established under the Code is delegated to the Regional Directors by virtue of
the above-quoted provision.
The reason why "labor-only" contracting is prohibited under the Labor Code is that it
encourages circumvention of the provisions of the Labor Code on the workers right to
security of tenure and to self-organization.
WHEREFORE, the respondents Appeal is hereby DISMISSED for lack of merit. The
Order of the Regional Director, Regional Office No. XI, Davao City, is AFFIRMED.
After the motion for reconsideration of the foregoing Order was denied, no further
motion was filed by the parties, and the Order, dated 15 September 1994, of DOLE
Undersecretary Trajano became final and executory. A Writ of Execution 12 was issued
by DOLE Regional Office No. XI only on 27 July 1999, years after the issuance of the
order subject of the writ. The DOLE Regional Office No. XI was informed that
CAMPCO and two other cooperatives "continued to operate at DOLE Philippines, Inc.
despite the cease and desist Order" it had issued. It therefore commanded the Sheriff
to proceed to the premises of CAMPCO and the two other cooperatives and
implement its Order dated 19 October 1993.

Respondents Complaint before the NLRC

Respondents started working for petitioner at various times in the years 1993 and
1994, by virtue of the Service Contract executed between CAMPCO and petitioner. All
of the respondents had already rendered more than one year of service to petitioner.
While some of the respondents were still working for petitioner, others were put on
"stay home status" on varying dates in the years 1994, 1995, and 1996 and were no
longer furnished with work thereafter. Together, respondents filed a Complaint, 13 on 19
December 1996, with the National Labor Relations Commission (NLRC), for illegal
dismissal, regularization, wage differentials, damages and attorneys fees.
In their Position Paper,14 respondents reiterated and expounded on the allegations
they previously made in their Complaint
Sometime in 1993 and 1994, [herein petitioner] Dolefil engaged the services of the
[herein respondents] through Cannery Multi-purpose Cooperative. A cooperative which
was organized through the initiative of Dolefil in order to fill in the vacuum created as a
result of the dismissal of the regular employees of Dolefil sometime in 1990 to 1993.
The [respondents] were assigned at the Industrial Department of respondent Dolefil.
All tools, implements and machineries used in performing their task such as: can
processing attendant, feeder of canned pineapple at pineapple processing, nata
de coco processing attendant, fruit cocktail processing attendant, and etc. were
provided by Dolefil. The cooperative does not have substantial capital and does not
provide the [respondents] with the necessary tools to effectively perform their
assigned task as the same are being provided by Dolefil.
The training and instructions received by the [respondents] were provided by Dolefil.
Before any of the [respondents] will be allowed to work, he has to undergo and pass
the training prescribed by Dolefil. As a matter of fact, the trainers are employees of
Dolefil.
The [respondents] perform their assigned task inside the premises of Dolefil. At the job
site, they were given specific task and assignment by Dolefils supervisors assigned to
supervise the works and efficiency of the complainants. Just like the regular
employees of Dolefil, [respondents] were subjected to the same rules and regulations
observe [sic] inside company premises and to some extent the rules applied to the
[respondents] by the company through its officers are even stricter.
The functions performed by the [respondents] are the same functions discharged by
the regular employees of Dolefil. In fact, at the job site, the [respondents] were mixed

with the regular workers of Dolefil. There is no difference in so far as the job
performed by the regular workers of Dolefil and that of the [respondents].
Some of the [respondents] were deprived of their employment under the scheme of
"stay home status" where they were advised to literally stay home and wait for further
instruction to report anew for work. However, they remained in this condition for more
than six months. Hence, they were constructively or illegally dismissed.
Respondents thus argued that they should be considered regular employees of
petitioner given that: (1) they were performing jobs that were usually necessary and
desirable in the usual business of petitioner; (2) petitioner exercised control over
respondents, not only as to the results, but also as to the manner by which they
performed their assigned tasks; and (3) CAMPCO, a labor-only contractor, was merely
a conduit of petitioner. As regular employees of petitioner, respondents asserted that
they were entitled to security of tenure and those placed on "stay home status" for
more than six months had been constructively and illegally dismissed. Respondents
further claimed entitlement to wage differential, moral damages, and attorneys fees.
In their Supplemental Position Paper,15 respondents presented, in support of their
Complaint, the Orders of DOLE Regional Director Parel, dated 19 October 1993, and
DOLE Undersecretary Trajano, dated 15 September 1994, finding that CAMPCO was
a labor-only contractor and directing CAMPCO to cease and desist from any further
labor-only contracting activities.
Petitioner, in its Position Paper16 filed before the NLRC, denied that respondents were
its employees.
Petitioner explained that it found the need to engage external services to augment its
regular workforce, which was affected by peaks in operation, work backlogs,
absenteeism, and excessive leaves. It used to engage the services of individual
workers for definite periods specified in their employment contracts and never
exceeding one year. However, such an arrangement became the subject of a labor
case,17 in which petitioner was accused of preventing the regularization of such
workers. The Labor Arbiter who heard the case, rendered his Decision 18 on 24 June
1994 declaring that these workers fell squarely within the concept of seasonal workers
as envisaged by Article 280 of the Labor Code, as amended, who were hired by
petitioner in good faith and in consonance with sound business practice; and
consequently, dismissing the complaint against petitioner. The NLRC, in its
Resolution,19 dated 14 March 1995, affirmed in toto the Labor Arbiters Decision and
further found that the workers were validly and legally engaged by petitioner for "term
employment," wherein the parties agreed to a fixed period of employment, knowingly
and voluntarily, without any force, duress or improper pressure being brought to bear

upon the employees and absent any other circumstance vitiating their consent. The
said NLRC Resolution became final and executory on 18 June 1996. Despite the
favorable ruling of both the Labor Arbiter and the NLRC, petitioner decided to
discontinue such employment arrangement. Yet, the problem of petitioner as to
shortage of workforce due to the peaks in operation, work backlogs, absenteeism, and
excessive leaves, persisted. Petitioner then found a solution in the engagement of
cooperatives such as CAMPCO to provide the necessary additional services.
Petitioner contended that respondents were owners-members of CAMPCO; that
CAMPCO was a duly-organized and registered cooperative which had already grown
into a multi-million enterprise; that CAMPCO was engaged in legitimate jobcontracting with its own owners-members rendering the contract work; that under the
express terms and conditions of the Service Contract executed between petitioner (the
principal) and CAMPCO (the contractor), the latter shall undertake the contract work
on its own account, under its own responsibility, and according to its own manner and
method free from the control and direction of the petitioner in all matters connected
with the performance of the work, except as to the result thereof; and since CAMPCO
held itself out to petitioner as a legitimate job contractor, respondents, as ownersmembers of CAMPCO, were estopped from denying or refuting the same.
Petitioner further averred that Department Order No. 10, amending the rules
implementing Books III and VI of the Labor Code, as amended, promulgated by the
DOLE on 30 May 1997, explicitly recognized the arrangement between petitioner and
CAMPCO as permissible contracting and subcontracting, to wit
Section 6. Permissible contracting and subcontracting. Subject to the conditions set
forth in Section 3(d) and (e) and Section 5 hereof, the principal may engage the
services of a contractor or subcontractor for the performance of any of the following;
(a) Works or services temporarily or occasionally needed to meet abnormal
increase in the demand of products or services, provided that the normal
production capacity or regular workforce of the principal cannot reasonably
cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for
undertakings requiring expert or highly technical personnel to improve the
management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new
products, only for the duration of the introductory or promotional period;

(d) Works or services not directly related or not integral to the main business
or operation of the principal, including casual work, janitorial, security,
landscaping, and messengerial services, and work not related to
manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturers products which
does not involve the act of selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual, or
peculiar skills, expertise, tools or equipment the performance of which is
beyond the competence of the regular workforce or production capacity of
the principal; and
(g) Unless a reliever system is in place among the regular workforce,
substitute services for absent regular employees, provided that the period of
service shall be coextensive with the period of absence and the same is
made clear to the substitute employee at the time of engagement. The
phrase "absent regular employees" includes those who are serving
suspensions or other disciplinary measures not amounting to termination of
employment meted out by the principal, but excludes those on strike where
all the formal requisites for the legality of the strike have been prima facie
complied with based on the records filed with the National Conciliation and
Mediation Board.
According to petitioner, the services rendered by CAMPCO constituted permissible job
contracting under the afore-quoted paragraphs (a), (c), and (g), Section 6 of DOLE
Department Order No. 10, series of 1997.
After the parties had submitted their respective Position Papers, the Labor Arbiter
promulgated its Decision20 on 11 June 1999, ruling entirely in favor of petitioner,
ratiocinating thus
After judicious review of the facts, narrated and supporting documents adduced by
both parties, the undersigned finds [and] holds that CAMPCO is not engaged in laboronly contracting.
Had it not been for the issuance of Department Order No. 10 that took effect on June
22, 1997 which in the contemplation of Law is much later compared to the Order
promulgated by the Undersecretary Cresencio Trajano of Department of [L]abor and
Employment, the undersigned could safely declared [sic] otherwise. However, owing
to the principle observed and followed in legal practice that the later law or
jurisprudence controls, the reliance to Secretary Trajanos order is overturned.

Labor-only contracting as amended by Department [O]rder No. 10 is defined in this

wise:
"Labor-only contracting is prohibited under this Rule is an arrangement where the
contractor or subcontractor merely recruits, supplied [sic] or places workers to perform
a job, work or service for a principal, and the following elements are present:
i) The contractor or sub-contractor does not have substantial capital or
investment to actually perform the job, work, or service under its own
account & responsibility, and
ii) 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."
Verification of the records reveals that per Annexes "J" and "K" of [herein petitioner
DolePhils] position paper, which are the yearly audited Financial Statement and
Balance Sheet of CAMPCO shows [sic] that it has more than substantial capital or
investment in order to qualify as a legitimate job contractor.
We likewise recognize the validity of the contract entered into and between CAMPCO
and [petitioner] for the former to assists [sic] the latter in its operations and in the
performance of odd jobs such as the augmentation of regular manning particularly
during peaks in operation, work back logs, absenteeism and excessive leave
availment of respondents regular employees. The rule is well-settled that labor laws
discourage interference with an employers judgment in the conduct of his business.
Even as the law is solicitors [sic] of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose
cannot be denied (Yuco Chemical Industries vs. Ministry of [L]abor, GR No. 75656,
May 28, 1990).
CAMPCO being engaged in legitimate contracting, cannot therefore declared [sic] as
guilty of labor-only contracting which [herein respondents] want us to believe.
The second issue is likewise answered in the negative. The reason is plain and
simple[,] section 12 of Department [O]rder No. 10 states:
"Section 12. Employee-employer relationship. Except in cases provided for in Section
13, 14, 15 & 17, the contractor or subcontractor shall be considered the employer of
the contractual employee for purposes of enforcing the provisions of the Code."

The Resolution of NLRC 5th division, promulgated on March 14, 1 1995 [sic]
categorically declares:
"Judging from the very nature of the terms and conditions of their hiring, the
Commission finds the complainants to have been engaged to perform work, although
necessary or desirable to the business of respondent company, for a definite period or
what is community called TERM EMPLOYMENT. It is clear from the evidence and
record that the nature of the business and operation of respondent company has its
peaks and valleys and therefore, it is not difficult to discern, inclement weather, or high
availment by regular workers of earned leave credits, additional workers categorized
as casuals, or temporary, are needed to meet the exigencies." (Underlining in the
original)
The validity of fixed-period employment has been consistently upheld by the Supreme
[C]ourt in a long line of cases, the leading case of which is Brent School, Inc. vs.
Zamora & Alegre, GR No. 48494, February 5, 1990. Thus at the end of the contract
the employer-employee relationship is terminated. It behooves upon us to rule that
herein complainants cannot be declared regular rank and file employees of the
[petitioner] company.
Anent the third issue, [respondents] dismally failed to provide us the exact figures
needed for the computation of their wage differentials. To simply alleged [sic] that one
is underpaid of his wages is not enough. No bill of particulars was submitted.
Moreover, the Order of RTWPB Region XI, Davao City dated February 21, 1996
exempts [petitioner] company from complying Wage Order No. 04 [sic] in so far as
such exemption applies only to workers who are not covered by the Collective
Bargaining Agreement, for the period January 1 to December 31, 1995,. [sic] In so far
as [respondents] were not privies to the CBA, they were the workers referred to by
RTWPBs Order. [H]ence, [respondents] claims for wage differentials are hereby
dismissed for lack of factual basis.
We find no further necessity in delving into the issues raised by [respondents]
regarding moral damages and attorneys fees for being moot and academic because
of the findings that CAMPCO does not engaged [sic] in labor-only contracting and that
[respondents] cannot be declared as regular employees of [petitioner].
WHEREFORE, premises considered, judgment is hereby rendered in the aboveentitled case, dismissing the complaint for lack of merit.
Respondents appealed the Labor Arbiters Decision to the NLRC, reiterating their
position that they should be recognized as regular employees of the petitioner since
CAMPCO was a mere labor-only contractor, as already declared in the previous

Orders of DOLE Regional Director Parel, dated 19 October 1993, and DOLE
Undersecretary Trajano, dated 15 September 1994, which already became final and
executory. The NLRC, in its Resolution,21 dated 29 February 2000, dismissed the
appeal and affirmed the Labor Arbiters Decision, reasoning as follows
We find no merit in the appeal.
The concept of conclusiveness of judgment under the principle of "res judicata" means
that where between the first case wherein judgment is rendered and the second case
wherein such judgment is invoked, there is identity of parties, but there is no identity of
cause of action, the judgment is conclusive in the second case, only as to those
matters actually and directly controverted and determined and not as to matters
merely involved therein (Viray, etc. vs. Marinas, et al., 49 SCRA 44). There is no
denying that the order of the Department of Labor and Employment, Regional Office
No. XI in case No. RI100-9310-RI-355, which the complainants perceive to have
sealed the status of CAMPCO as labor-only contractor, proceeded from the visitorial
and enforcement power of the Department Secretary under Article 128 of the Labor
Code. Acting on reports that the cooperatives, including CAMPCO, that operated and
offered services at [herein petitioner] company were engaging in labor-only contracting
activities, that Office conducted a routinary inspection over the records of said
cooperatives and consequently, found the latter to be engaging in labor-only
contracting activities. This being so, [petitioner] company was not a real party-ininterest in said case, but the cooperatives concerned. Therefore, there is no identity of
parties between said case and the present case which means that the afore-said
ruling of the DOLE is not binding and conclusive upon [petitioner] company.
It is not correct, however, to say, as the Labor Arbiter did, that the afore-said ruling of
the Department of Labor and Employment has been overturned by Department Order
No. 10. It is a basic principle that "once a judgment becomes final it cannot be
disturbed, except for clerical errors or when supervening events render its execution
impossible or unjust" (Sampaguita Garmens [sic] Corp. vs. NLRC, G. R. No.
102406, June 7, 1994). Verily, the subsequent issuance of Department Order No. 10
cannot be construed as supervening event that would render the execution of said
judgment impossible or unjust. Department Order No. 10 refers to the ramification of
some provisions of the Rules Implementing Articles 106 and 109 of the Labor Code,
without substantially changing the definition of "labor-only" or "job contracting.
Well-settled is the rule that to qualify as an independent job contractor, one has either
substantial capital "or" investment in the form of tools, equipment and machineries
necessary to carry out his business (see Virginia Neri, et al. vs. NLRC, et al., G.R.
Nos. 97008-89, July 23, 1993). CAMPCO has admittedly a paid-up capital of
P4,562,470.25 and this is more than enough to qualify it as an independent job
contractor, as aptly held by the Labor Arbiter.

WHEREFORE, the appeal is DISMISSED for lack of merit and the appealed decision
is AFFIRMED.
Petition for Certiorari with the Court of Appeals
Refusing to concede defeat, respondents filed with the Court of Appeals a Petition
for Certiorari under Rule 65 of the revised Rules of Civil Procedure, asserting that the
NLRC acted without or in excess of its jurisdiction and with grave abuse of discretion
amounting to lack of jurisdiction when, in its Resolution, dated 29 February 2000, it (1)
ruled that CAMPCO was a bona fide independent job contractor with substantial
capital, notwithstanding the fact that at the time of its organization and registration with
CDA, it only had a paid-up capital of P6,600.00; and (2) refused to apply the doctrine
of res judicata against petitioner. The Court of Appeals, in its Decision, 22 dated 20 May
2002, granted due course to respondents Petition, and set aside the assailed NLRC
Decision. Pertinent portions of the Court of Appeals Decision are reproduced below
In the case at bench, it was established during the proceedings before the [NLRC] that
CAMPCO has a substantial capital. However, having a substantial capital does not per
se qualify CAMPCO as a job contractor. In order to be considered an independent
contractor it is not enough to show substantial capitalization or investment in the form
of tools, equipment, machinery and work premises. The conjunction "and," in defining
what a job contractor is, means that aside from having a substantial capital or
investment in the form of tools, equipment, machineries, work premise, and other
materials which are necessary in the conduct of his business, the contractor must be
able to prove that it also 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. [Herein petitioner DolePhil] has failed to prove, except for the substantial
capital requirement, that CAMPCO has met the other requirements. It was not
established that CAMPCO is engaged or carries on an independent business. In the
performance of the respective tasks of workers deployed by CAMPCO with
[petitioner], it was not established that CAMPCO undertook the contract of work it
entered with [petitioner] under its own account and its own responsibility. It is
[petitioner] who provides the procedures to be followed by the workers in the
performance of their assigned work. The workers deployed by CAMPCO to [petitioner]
performed activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed since [petitioner] admitted that
these workers were engaged to perform the job of other regular employees who
cannot report for work.
Moreover, [NLRC] likewise gravely erred in not giving weight to the Order dated 19
October 1993 issued by the Office of the Secretary of the Department of Labor and

Employment, through Undersecretary Cresencio Trajano, which affirmed the findings

of the Department of Labor and Employment Regional Office, Region XI, Davao City
that Cannery Multi-Purpose Cooperative is one of the cooperatives engaged in laboronly contracting activities.
In the exercise of the visitorial and enforcement power of the Department of Labor and
Employment, an investigation was conducted among the cooperatives organized and
existing in Polomolok, South Cotabato, relative to labor-only contracting activities. One
of the cooperatives investigated was Cannery Multi-Purpose Cooperative. After the
investigation, the Department of Labor and Employment, Regional Office No. XI,
Davao City, through its Regional Director, issued the Order dated 19 October 1993,
stating:
"WHEREFORE, premises considered, ADVENTURERS MULTI PURPOSE
COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE SKILLED COOPERATIVE
and CANNERY MULTI PURPOSE COOPERATIVE are hereby declared to be
engaged in labor only contracting which is a prohibited activity. The same
cooperatives are therefore ordered to cease and desist from further engaging in such
activities.
xxxx
SO ORDERED."
Cannery Multi Purpose Cooperative, together with the other cooperatives declared as
engaged in labor-only contracting activity, appeal the above-findings to the Secretary
of the Department of Labor and Employment. Their appeal was dismissed for lack of
merit as follows:: [sic]
xxxx
[NLRC] held that CAMPCO, being not a real party-in interest in the above-case, the
said ruling is not binding and conclusive upon [petitioner]. This Court, however, finds
the contrary.
CAMPCO was one of the cooperatives investigated by the Department of Labor and
Employment, Regional Office No. XI, Davao City, pursuant to Article 128 of the Labor
Code. It was one of the appellants before the Secretary of the Department of Labor
questioning the decision of the Regional Director of DOLE, Regional Office No. XI,
Davao City. This Court noted that in the proceedings therein, and as mentioned in the
decision rendered by Undersecretary Cresencio B. Trajano of the Department of

Labor and Employment, Manila, regarding the cooperatives appeal thereto, the
parties therein, including Cannery Multi-Purpose Cooperative, submitted to the said
office their position papers and Articles of Cooperatives and Certification of
Registrations [sic] on 30 August 1993. This is a clear indicia that CAMPCO
participated in the proceedings therein. [NLRC], therefore, committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it held that CAMPCO was
never a party to the said case.
[Petitioner] invokes Section 6 of Department Order No. 10, series of 1997, issued by
the Department of Labor and Employment which took effect on 22 June 1997. The
said section identified the circumstances which are permissible job contracting, to wit:
xxxx
[Petitioners] main contention is based on the decisions rendered by the labor arbiter
and [NLRC] which are both anchored on Department Order No. 10 issued by the
Department of Labor and Employment. The said department order provided for
several flexible working relations between a principal, a contractor or subcontractor
and the workers recruited by the latter and deployed to the former. In the case at
bench, [petitioner] posits that the engagement of [petitioner] of the workers deployed
by CAMPCO was pursuant to D.O. No. 10, Series of 1997.

However, the Court cannot declare that [herein respondents] are regular employees of
[petitioner]. x x x
xxxx
In the case at bench, although [respondents] were engaged to perform activities which
are usually necessary or desirable in the usual business or trade of private
respondent, it is apparent, however, that their services were engaged by [petitioner]
only for a definite period. [Petitioners] nature of business and operation has its peaks.
In order to meet the demands during peak seasons they necessarily have to engage
the services of workers to work only for a particular season. In the case of
[respondents], when they were deployed by CAMPCO with [petitioner] and were
assigned by the latter at its cannery department, they were aware that they will be
working only for a certain duration, and this was made known to them at the time they
were employed, and they agreed to the same.
xxxx

xxxx

The non-rehiring of some of the petitioners who were allegedly put on a "floating
status is an indication that their services were no longer needed. They attained their
"floating status" only after they have finished their contract of employment, or after the
duration of the season that they were employed. The decision of [petitioner] in not
rehiring them means that their services were no longer needed due to the end of the
season for which they were hired. And this Court reiterates that at the time they were
deployed to [petitioners] cannery division, they knew that the services they have to
render or the work they will perform are seasonal in nature and consequently their
employment is only for the duration of the season.

Under Department Order No. 3, series of 2001, some contracting and outsourcing
arrangements are no longer legitimate modes of employment relation. Having revoked
Department Order No. 10, series of 1997, [petitioner] can no longer support its
argument by relying on the revoked department order.

ACCORDINGLY, in view of the foregoing, the instant petition for certiorari is

hereby GRANTED DUE COURSE. The decision dated 29 February 2000 and
Resolution dated 19 December 2000 rendered by [NLRC] are hereby SET ASIDE. In
place thereof, it is hereby rendered that:

Considering that [CAMPCO] is not a job contractor, but one engaged in labor-only
contracting, CAMPCO serves only as an agent of [petitioner] pursuant to par. (b) of
Sec. 9, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor
Code, stating,

1. Cannery Multi-Purpose Cooperative is a labor-only contractor as defined

under the Labor Code of the Philippines and its implementing rules and
regulations; and that

However, on 8 May 2001, the Department of Labor and Employment issued

Department Order No. 3, series of 2001, revoking Department Order No. 10, series of
1997. The said department order took effect on 29 May 2001.

xxxx

2. DOLE Philippines Incorporated is merely an agent or intermediary of

Cannery Multi-Purpose Cooperative.
All other claims of [respondents] are hereby DENIED for lack of basis.

Both petitioner and respondents filed their respective Motions for Reconsideration of
the foregoing Decision, dated 20 May 2002, prompting the Court of Appeals to
promulgate an Amended Decision on 27 November 2003, in which it ruled in this wise:
This court examined again the documentary evidence submitted by the [herein
petitioner] and we rule not to disturb our findings in our Decision dated May 20, 2002.
It is our opinion that there was no competent evidence submitted that would show that
CAMPCO is engaged to perform a specific and special job or service which is one of
the strong indicators that an entity is an independent contractor. The articles of
cooperation and by-laws of CAMPCO do not show that it is engaged in performing a
specific and special job or service. What is clear is that it is a multi-purpose
cooperative organized under RA No. 6938, nothing more, nothing less.
As can be gleaned from the contract that CAMPCO entered into with the [petitioner],
the undertaking of CAMPCO is to provide [petitioner] with workforce by assisting the
company in its daily operations and perform odd jobs as may be assigned. It is our
opinion that CAMPCO merely acted as recruitment agency for [petitioner]. CAMPCO
by supplying manpower only, clearly conducted itself as labor-only" contractor. As can
be gleaned from the service contract, the work performed by the [herein respondents]
are directly related to the main business of the [petitioner]. Clearly, the requisites of
"labor-only" contracting are present in the case at bench.
In view of the above ruling, we find it unnecessary to discuss whether the Order of
Undersecretary Trajano finding that CAMPCO is a "labor-only" contractor is a
determining factor or constitutes res judicata in the case at bench. Our findings that
CAMPCO is a "labor-only" contractor is based on the evidence presented vis--vis the
rulings of the Supreme Court on the matter.
Since, the argument that the [petitioner] is the real employer of the [respondents], the
next question that must be answered is what is the nature of the employment of the
petitioners?
xxxx
The afore-quoted [Article 280 of the Labor Code, as amended] provides for two kinds
of employment, namely: (1) regular (2) casual. In our Decision, we ruled that the
[respondents] while performing work necessary and desirable to the business of the
[petitioner] are seasonal employees as their services were engaged by the [petitioner]
for a definite period or only during peak season.

be excluded from those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must have also been
employedonly for the duration of one season. It is undisputed that the [respondents]
services were engaged by the [petitioner] since 1993 and 1994. The instant complaint
was filed in 1996 when the [respondents] were placed on floating status. Evidently,
[petitioner] employed the [respondents] for more than one season. Therefore, the
general rule on regular employment is applicable. The herein petitioners who
performed their jobs in the workplace of the [petitioner] every season for several
years, are considered the latters regular employees for having performed works
necessary and desirable to the business of the [petitioner]. The [petitioners] eventual
refusal to use their serviceseven if they were ready, able and willing to perform their
usual duties whenever these were availableand hiring other workers to perform the
tasks originally assigned to [respondents] amounted to illegal dismissal of the latter.
We thus, correct our earlier ruling that the herein petitioners are seasonal workers.
They are regular employees within the contemplation of Article 280 of the Labor Code
and thus cannot be dismissed except for just or authorized cause. The Labor Code
provides that when there is a finding of illegal dismissal, the effect is that the employee
dismissed shall be reinstated to his former position without loss of seniority rights with
backwages from the date of his dismissal up to his actual reinstatement.
This court however, finds no basis for the award of damages and attorneys fees in
favor of the petitioners.
WHEREFORE, the Decision dated May 20, 2002 rendered by this Court is
hereby AMENDED as follows:
1) [Petitioner] DOLE PHILIPPINES is hereby declared the employer of the
[respondents].
2) [Petitioner] DOLE PHILIPPINES is hereby declared guilty of illegal
dismissal and ordered to immediately reinstate the [respondents] to their
former position without loss of seniority rights and other benefits, and to pay
each of the [respondents] backwages from the date of the filing of illegal
dismissal on December 19, 1996 up to actual reinstatement, the same to be
computed by the labor arbiter.
3) The claims for damages and attorneys fees are hereby denied for lack of
merit.
No costs.23

In the most recent case of Hacienda Fatima v. National Federation of Sugarcane

Workers Food and General Trade, the Supreme Court ruled that for employees to

The Petition at Bar

Aggrieved by the Decision, dated 20 May 2002, and the Amended Decision, dated 27
November 2003, of the Court of Appeals, petitioner filed the instant Petition for Review
on Certiorari under Rule 45 of the revised Rules of Civil Procedure, in which it made
the following assignment of errors

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN NOT RULING THAT RESPONDENTS, BY ACTIVELY REPRESENTING
THEMSELVES AND WARRANTING THAT THEY ARE ENGAGED IN
LEGITIMATE JOB CONTRACTING, ARE BARRED BY THE EQUITABLE
PRINCIPLE OF ESTOPPEL FROM ASSERTING THAT THEY ARE
REGULAR EMPLOYEES OF PETITIONER.

I.
THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL
COURSE OF JUDCIAL PROCEEDINGS WHEN IT MADE ITS OWN
FACTUAL FINDINGS AND DISREGARDED THE UNIFORM AND
CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE
NLRC, WHICH MUST BE ACCORDED GREAT WEIGHT, RESPECT AND
EVEN FINALITY. IN SO DOING, THE COURT OF APPEALS EXCEEDED
ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF
COURT.

V.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
RULING THAT CAMPCO IS ENGAGED IN THE PROHIBITED ACT
OF"LABOR-ONLY
CONTRACTING" DESPITE
THERE
BEING
SUBSTANTIAL EVIDENCE TO THE CONTRARY.

II.

VI.

THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE

IN A WAY NOT IN ACCORD WITH THE CONSTITUTION, LAW,
APPLICABLE RULES AND REGULATIONS AND DECISIONS OF THE
SUPREME COURT IN NOT HOLDING THAT DEPARTMENT ORDER NO.
10, SERIES OF 1997 IS THE APPLICABLE REGULATION IN THIS CASE.
IN GIVING RETROACTIVE APPLICATION TO DEPARTMENT ORDER NO.
3, SERIES OF 2001, THE COURT OF APPEALS VIOLATED THE
CONSTITUTIONAL PROVISION AGAINST IMPAIRMENT OF CONTRACTS
AND DEPRIVED PETITIONER OF THE DUE PROCESS OF THE LAW.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
RULING THAT PETITIONER IS THE EMPLOYER OF RESPONDENTS
AND THAT PETITIONER IS GUILTY OF ILLEGAL DISMISSAL.24

III.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
GIVING WEIGHT TO THE ORDER DATED 19 OCTOBER 1993 ISSUED
BY THE OFFICE OF SECRETARY OF LABOR, WHICH AFFIRMED THE
FINDINGS OF THE DOLE REGIONAL OFFICE (REGION XI, DAVAO CITY)
THAT CAMPCO IS ONE OF THE COOPERATIVES ENGAGED IN LABORONLY CONTRACTING ACTIVITIES.
IV.

This Courts Ruling

I
Anent the first assignment of error, petitioner argues that judicial review under Rule 65
of the revised Rules of Civil Procedure is limited only to issues concerning want or
excess or jurisdiction or grave abuse of discretion. The special civil action
for certiorari is a remedy designed to correct errors of jurisdiction and not mere errors
of judgment. It is the contention of petitioner that the NLRC properly assumed
jurisdiction over the parties and subject matter of the instant case. The errors assigned
by the respondents in their Petition for Certiorari before the Court of Appeals do not
pertain to the jurisdiction of the NLRC; they are rather errors of judgment supposedly
committed by the the NLRC, in its Resolution, dated 29 February 2000, and are thus
not the proper subject of a petition forcertiorari. Petitioner also posits that the Petition
for Certiorari filed by respondents with the Court of Appeals raised questions of fact
that would necessitate a review by the appellate court of the evidence presented by
the parties before the Labor Arbiter and the NLRC, and that questions of fact are not a
fit subject for a special civil action forcertiorari.

It has long been settled in the landmark case of St. Martin Funeral Home v.
NLRC,25 that the mode for judicial review over decisions of the NLRC is by a petition
for certiorari under Rule 65 of the revised Rules of Civil Procedure. The different
modes of appeal, namely, writ of error (Rule 41), petition for review (Rules 42 and 43),
and petition for review on certiorari (Rule 45), cannot be availed of because there is
no provision on appellate review of NLRC decisions in the Labor Code, as
amended.26 Although the same case recognizes that both the Court of Appeals and
the Supreme Court have original jurisdiction over such petitions, it has chosen to
impose the strict observance of the hierarchy of courts. Hence, a petition
for certiorari of a decision or resolution of the NLRC should first be filed with the Court
of Appeals; direct resort to the Supreme Court shall not be allowed unless the redress
desired cannot be obtained in the appropriate courts or where exceptional and
compelling circumstances justify an availment of a remedy within and calling for the
exercise by the Supreme Court of its primary jurisdiction.
The extent of judicial review by certiorari of decisions or resolutions of the NLRC, as
exercised previously by the Supreme Court and, now, by the Court of Appeals, is
described in Zarate v. Olegario,27 thus
The rule is settled that the original and exclusive jurisdiction of this Court to review a
decision of respondent NLRC (or Executive Labor Arbiter as in this case) in a petition
for certiorari under Rule 65 does not normally include an inquiry into the correctness
of its evaluation of the evidence. Errors of judgment, as distinguished from errors of
jurisdiction, are not within the province of a special civil action for certiorari, which is
merely confined to issues of jurisdiction or grave abuse of discretion. It is thus
incumbent upon petitioner to satisfactorily establish that respondent Commission or
executive labor arbiter acted capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy, in order that the
extraordinary writ of certiorari will lie. By grave abuse of discretion is meant such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction,
and it must be shown that the discretion was exercised arbitrarily or despotically.
For certiorari to lie, there must be capricious, arbitrary and whimsical exercise of
power, the very antithesis of the judicial prerogative in accordance with centuries of
both civil law and common law traditions.
The Court of Appeals, therefore, can grant the Petition for Certiorari if it finds that the
NLRC, in its assailed decision or resolution, committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily disregarding evidence which is material or
decisive of the controversy; and the Court of Appeals can not make this determination
without looking into the evidence presented by the parties. Necessarily, the appellate
court can only evaluate the materiality or significance of the evidence, which is alleged
to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.

As this Court elucidated in Garcia v. National Labor Relations Commission28 -[I]n Ong v. People, we ruled that certiorari can be properly resorted to where the
factual findings complained of are not supported by the evidence on record. Earlier,
in Gutib v. Court of Appeals, we emphasized thus:
[I]t has been said that a wide breadth of discretion is granted a court of justice in
certiorari proceedings. The cases in which certiorari will issue cannot be defined,
because to do so would be to destroy its comprehensiveness and usefulness. So wide
is the discretion of the court that authority is not wanting to show that certiorari is more
discretionary than either prohibition or mandamus. In the exercise of our
superintending control over inferior courts, we are to be guided by all the
circumstances of each particular case "as the ends of justice may require." So it is that
the writ will be granted where necessary to prevent a substantial wrong or to do
substantial justice.
And in another case of recent vintage, we further held:
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of discretion on
the part of the labor tribunal. Hence, the Court refrains from reviewing factual
assessments of lower courts and agencies exercising adjudicative functions, such as
the NLRC. Occasionally, however, the Court is constrained to delve into factual
matters where, as in the instant case, the findings of the NLRC contradict those of the
Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings. As a corollary, this Court
is clothed with ample authority to review matters, even if they are not assigned as
errors in their appeal, if it finds that their consideration is necessary to arrive at a just
decision of the case. The same principles are now necessarily adhered to and are
applied by the Court of Appeals in its expanded jurisdiction over labor cases elevated
through a petition for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the ruling of the NLRC.
II
The second assignment of error delves into the significance and application to the
case at bar of the two department orders issued by DOLE. Department Order No. 10,
series of 1997, amended the implementing rules of Books III and VI of the Labor
Code, as amended. Under this particular DOLE department order, the arrangement
between petitioner and CAMPCO would qualify as permissible contracting.

Department Order No. 3, series of 2001, revoked Department Order No. 10, series of
1997, and reiterated the prohibition on labor-only contracting.
Attention is called to the fact that the acts complained of by the respondents occurred
well before the issuance of the two DOLE department orders in 1997 and 2001. The
Service Contract between DOLE and CAMPCO was executed on 17 August 1993.
Respondents started working for petitioner sometime in 1993 and 1994. While some
of them continued to work for petitioner, at least until the filing of the Complaint, others
were put on "stay home status" at various times in 1994, 1995, and 1996.
Respondents filed their Complaint with the NLRC on 19 December 1996.
A basic rule observed in this jurisdiction is that no statute, decree, ordinance, rule or
regulation shall be given retrospective effect unless explicitly stated. 29 Since there is
no provision at all in the DOLE department orders that expressly allowed their
retroactive application, then the general rule should be followed, and the said orders
should be applied only prospectively.
Which now brings this Court to the question as to what was the prevailing rule on
labor-only contracting from 1993 to 1996, the period when the occurrences subject of
the Complaint before the NLRC took place.
Article 106 of the Labor Code, as amended, permits legitimate job contracting, but
prohibits labor-only contracting. The said provision reads
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract
with another person for the performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
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 this Code. In
so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal
business of such employer. In such 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.
To implement the foregoing provision of the Labor Code, as amended, Sections 8 and
9, Rule VIII, Book III of the implementing rules, in force since 1976 and prior to their
amendment by DOLE Department Order No. 10, series of 1997, provided as follows
Sec. 8. Job contracting. There is job contracting permissible under the Code if the
following conditions are met;
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor
shall determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.
Since these statutory and regulatory provisions were the ones in force during the
years in question, then it was in consideration of the same that DOLE Regional
Director Parel and DOLE Undesrsecretary Trajano issued their Orders on 19
September 1993 and 15 September 1994, respectively, both finding that CAMPCO
was engaged in labor-only contracting. Petitioner, in its third assignment of error,
questions the weight that the Court of Appeals gave these orders in its Decision, dated
20 May 2002, and Amended Decision, dated 27 November 2003.
III
The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of
DOLE Undersecretary Trajano, dated 15 September 1994, were issued pursuant to
the visitorial and enforcement power conferred by the Labor Code, as amended, on
the DOLE Secretary and his duly authorized representatives, to wit
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 pursuant thereto.
(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 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 findings 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
involves 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. (Emphasis supplied.)
Before Regional Director Parel issued his Order, dated 19 September 1993, a Task
Force investigated the operations of cooperatives in Polomolok, South Cotabato, and
submitted a report identifying six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. In a conference before the DOLE Regional
Office, the cooperatives named by the Task Force were given the opportunity to
explain the nature of their activities in relation to petitioner; and, the cooperatives, as
well as petitioner, submitted to the DOLE Regional Office their position papers and
other supporting documents to refute the findings of the Task Force. It was only after
these procedural steps did Regional Director Parel issued his Order finding that three
cooperatives, including CAMPCO, were indeed engaged in labor-only contracting and
were directed to cease and desist from further engaging in such activities. On appeal,
DOLE Undersecretary Trajano, by authority of the DOLE Secretary, affirmed Regional
Director Parels Order. Upon denial of the Motion for Reconsideration filed by the
cooperatives, and no further appeal taken therefrom, the Order of DOLE
Undersecretary Trajano, dated 15 September 1994, became final and executory.
Petitioner avers that the foregoing Orders of the authorized representatives of the
DOLE Secretary do not constituteres judicata in the case filed before the NLRC. This
Court, however, believes otherwise and finds that the final and executory Orders of the
DOLE Secretary or his authorized representatives should bind the NLRC.
It is obvious that the visitorial and enforcement power granted to the DOLE Secretary
is in the nature of a quasi-judicial power. Quasi-judicial power has been described by
this Court in the following manner
Quasi-judicial or administrative adjudicatory power on the other hand is the power of
the administrative agency to adjudicate the rights of persons before it. It is the power
to hear and determine questions of fact to which the legislative policy is to
apply and to decide in accordance with the standards laid down by the law itself
in enforcing and administering the same law. The administrative body exercises its
quasi-judicial power when it performs in a judicial manner an act which is essentially of
an executive or administrative nature, where the power to act in such manner is
incidental to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-judicial functions the
administrative officers or bodies are required to investigate facts or ascertain the
existence of facts, hold hearings, weigh evidence, and draw conclusions from

them as basis for their official action and exercise of discretion in a judicial
nature. Since rights of specific persons are affected it is elementary that in the proper
exercise of quasi-judicial power due process must be observed in the conduct of the
proceedings.30 (Emphasis supplied.)
The DOLE Secretary, under Article 106 of the Labor Code, as amended, exercise
quasi-judicial power, at least, to the extent necessary to determine violations of labor
standards provisions of the Code and other labor legislation. He can issue compliance
orders and writs of execution for the enforcement of his orders. As evidence of the
importance and binding effect of the compliance orders of the DOLE Secretary, Article
128 of the Labor Code, as amended, further provides
ART. 128. Visitorial and enforcement power.

Section 49, Rule 39 of the Revised Rules of Court lays down the dual aspects of res
judicata in actions in personam. to wit:
"Effect of judgment. - The effect of a judgment or final order rendered by a court or
judge of the Philippines, having jurisdiction to pronounce the judgment or order, may
be as follows:
xxxx
(b) In other cases the judgment or order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by title subsequent to
the commencement of the action or special proceeding, litigating for the same thing
and under the same title and in the same capacity;

xxxx
(d) It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise
render ineffective the orders of the Secretary of Labor or his duly authorized
representatives issued pursuant to the authority granted under this article, and no
inferior court or entity shall issue temporary or permanent injunction or restraining
order or otherwise assume jurisdiction over any case involving the enforcement orders
issued in accordance with this article.
The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of
DOLE Undersecretary Trajano, dated 15 September 1994, consistently found that
CAMPCO was engaging in labor-only contracting. Such finding constitutes res
judicata in the case filed by the respondents with the NLRC.
It is well-established in this jurisdiction that the decisions and orders of administrative
agencies, rendered pursuant to their quasi-judicial authority, have upon their finality,
the force and binding effect of a final judgment within the purview of the doctrine of res
judicata. The rule of res judicata, which forbids the reopening of a matter once
judicially determined by competent authority, applies as well to the judicial and quasijudicial acts of public, executive or administrative officers and boards acting within
their jurisdiction as to the judgments of courts having general judicial powers. The
orderly administration of justice requires that the judgments or resolutions of a court or
quasi-judicial body must reach a point of finality set by the law, rules and regulations,
so as to write finis to disputes once and for all. This is a fundamental principle in the
Philippine justice system, without which there would be no end to litigations.31
Res judicata has dual aspects, "bar by prior judgment" and "conclusiveness of
judgment." This Court has previously clarified the difference between the two

(c) In any other litigation between the same parties or their successors in interest, that
only is deemed to have been adjudged in a former judgment which appears upon its
face to have been so adjudged, or which was actually and necessarily included
therein or necessary thereto."
Section 49(b) enunciates the first concept of res judicata known as "bar by prior
judgment," whereas, Section 49(c) is referred to as "conclusiveness of judgment."
There is "bar by former judgment" when, between the first case where the judgment
was rendered, and the second case where such judgment is invoked, there is identity
of parties, subject matter and cause of action. When the three identities are present,
the judgment on the merits rendered in the first constitutes an absolute bar to the
subsequent action. But where between the first case wherein Judgment is rendered
and the second case wherein such judgment is invoked, there is only identity of
parties but there is no identity of cause of action, the judgment is conclusive in the
second case, only as to those matters actually and directly controverted and
determined, and not as to matters merely involved therein. This is what is termed
"conclusiveness of judgment."
The second concept of res judicata, conclusiveness of judgment, is the one applicable
to the case at bar.
The same parties who participated in the proceedings before the DOLE Regional
Office are the same parties involved in the case filed before the NLRC. CAMPCO, on
behalf of its members, attended the conference before the DOLE Regional Office;
submitted its position paper; filed an appeal with the DOLE Secretary of the Order of

DOLE Regional Director Parel; and moved for reconsideration of the subsequent
Order of DOLE Undersecretary Trajano. Petitioner, although not expressly named as a
respondent in the DOLE investigation, was a necessary party thereto, considering that
CAMPCO was rendering services to petitioner solely. Moreover, petitioner participated
in the proceedings before the DOLE Regional Office, intervening in the matter through
a letter sent by its Senior Legal Officer, dated 24 May 1993, and submitting its own
position paper.
While the causes of action in the proceedings before the DOLE and the NLRC differ,
they are, in fact, very closely related. The DOLE Regional Office conducted an
investigation to determine whether CAMPCO was violating labor laws, particularly,
those on labor-only contracting. Subsequently, it ruled that CAMPCO was indeed
engaging in labor-only contracting activities, and thereafter ordered to cease and
desist from doing so. Respondents came before the NLRC alleging illegal dismissal by
the petitioner of those respondents who were put on "stay home status," and seeking
regularization of respondents who were still working for petitioner. The basis of their
claims against petitioner rests on the argument that CAMPCO was a labor-only
contractor and, thus, merely an agent or intermediary of petitioner, who should be
considered as respondents real employer. The matter of whether CAMPCO was a
labor-only contractor was already settled and determined in the DOLE proceedings,
which should be conclusive and binding upon the NLRC. What were left for the
determination of the NLRC were the issues on whether there was illegal dismissal and
whether respondents should be regularized.
This Court also notes that CAMPCO and DOLE still continued with their Service
Contract despite the explicit cease and desist orders rendered by authorized DOLE
officials. There is no other way to look at it except that CAMPCO and DOLE acted in
complete defiance and disregard of the visitorial and enforcement power of the DOLE
Secretary and his authorized representatives under Article 128 of the Labor Code, as
amended. For the NLRC to ignore the findings of DOLE Regional Director Parel and
DOLE Undersecretary Trajano is an unmistakable and serious undermining of the
DOLE officials authority.
IV
In petitioners fourth assignment of error, it points out that the Court of Appeals erred
in not holding respondents estopped from asserting that they were regular employees
of petitioner since respondents, as owners-members of CAMPCO, actively
represented themselves and warranted that they were engaged in legitimate job
contracting.
This Court cannot sustain petitioners argument.

It is true that CAMPCO is a cooperative composed of its members, including

respondents. Nonetheless, it cannot be denied that a cooperative, as soon as it is
registered with the CDA, attains a juridical personality of its own, 32separate and
distinct from its members; much in the same way that a corporation has a juridical
personality separate and distinct from its stockholders, known as the doctrine of
corporate fiction. The protection afforded by this doctrine is not absolute, but the
exception thereto which necessitates the piercing of the corporate veil can only be
made under specified circumstances. In Traders Royal Bank v. Court of Appeals,33 this
Court ruled that
Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is
merely an equitable remedy, and maybe awarded only in cases when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud or defend
crime or where a corporation is a mere alter ego or business conduit of a person.
Piercing the veil of corporate entity requires the court to see through the protective
shroud which exempts its stockholders from liabilities that ordinarily, they could be
subject to, or distinguishes one corporation from a seemingly separate one, were it not
for the existing corporate fiction. But to do this, the court must be sure that the
corporate fiction was misused, to such an extent that injustice, fraud, or crime was
committed upon another, disregarding, thus, his, her, or its rights. It is the corporate
entity which the law aims to protect by this doctrine.
Using the above-mentioned guidelines, is petitioner entitled to a piercing of the
"cooperative identity" of CAMPCO? This Court thinks not.
It bears to emphasize that the piercing of the corporate veil is an equitable remedy,
and among the maxims of equity are: (1) he who seeks equity must do equity, and (2)
he who comes into equity must come with clean hands. Hence, a litigant may be
denied relief by a court of equity on the ground that his conduct has been inequitable,
unfair, dishonest, fraudulent, or deceitful as to the controversy in issue.34
Petitioner does not come before this Court with clean hands. It is not an innocent party
in this controversy.
Petitioner itself admitted that it encouraged and even helped the establishment of
CAMPCO and the other cooperatives in Polomolok, South Cotabato. These
cooperatives were established precisely to render services to petitioner. It is highly
implausible that the petitioner was lured into entering into the Service Contract with
CAMPCO in 1993 on the latters misrepresentation and false warranty that it was an
independent job contractor. Even if it is conceded that petitioner was indeed
defrauded into believing that CAMPCO was an independent contractor, then the

DOLE proceedings should have placed it on guard. Remember that petitioner

participated in the proceedings before the DOLE Regional Office, it cannot now claim
ignorance thereof. Furthermore, even after the issuance of the cease and desist order
on CAMPCO, petitioner still continued with its prohibited service arrangement with the
said cooperative. If petitioner was truly defrauded by CAMPCO and its members into
believing that the cooperative was an independent job contractor, the more logical
recourse of petitioner was to have the Service Contract voided in the light of the
explicit findings of the DOLE officials that CAMPCO was engaging in labor-only
contracting. Instead, petitioner still carried on its Service Contract with CAMPCO for
several more years thereafter.
V
As previously discussed, the finding of the duly authorized representatives of the
DOLE Secretary that CAMPCO was a labor-only contractor is already conclusive. This
Court cannot deviate from said finding.
This Court, though, still notes that even an independent review of the evidence on
record, in consideration of the proper labor statutes and regulations, would result in
the same conclusion: that CAMPCO was engaged in prohibited activities of labor-only
contracting.
The existence of an independent and permissible contractor relationship is generally
established by the following criteria: whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the performance of a specified
piece of work; the control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the contractor's workers; the
control of the premises; the duty to supply the premises tools, appliances, materials
and labor; and the mode, manner and terms of payment.35
While there is present in the relationship of petitioner and CAMPCO some factors
suggestive of an independent contractor relationship (i.e., CAMPCO chose who
among its members should be sent to work for petitioner; petitioner paid CAMPCO the
wages of the members, plus a percentage thereof as administrative charge; CAMPCO
paid the wages of the members who rendered service to petitioner), many other
factors are present which would indicate a labor-only contracting arrangement
between petitioner and CAMPCO.36
First, although petitioner touts the multi-million pesos assets of CAMPCO, it
does well to remember that such were amassed in the years following its
establishment. In 1993, when CAMPCO was established and the Service

Contract between petitioner and CAMPCO was entered into, CAMPCO only
had P6,600.00 paid-up capital, which could hardly be considered
substantial.37 It only managed to increase its capitalization and assets in the
succeeding years by continually and defiantly engaging in what had been
declared by authorized DOLE officials as labor-only contracting.
Second, CAMPCO did not carry out an independent business from
petitioner. It was precisely established to render services to petitioner to
augment its workforce during peak seasons. Petitioner was its only client.
Even as CAMPCO had its own office and office equipment, these were
mainly used for administrative purposes; the tools, machineries, and
equipment actually used by CAMPCO members when rendering services to
the petitioner belonged to the latter.
Third, petitioner exercised control over the CAMPCO members, including
respondents. Petitioner attempts to refute control by alleging the presence
of a CAMPCO supervisor in the work premises. Yet, the mere presence
within the premises of a supervisor from the cooperative did not necessarily
mean that CAMPCO had control over its members. Section 8(1), Rule VIII,
Book III of the implementing rules of the Labor Code, as amended, required
for permissible job contracting that the contractor undertakes the contract
work on his account, under his own responsibility, according to his own
manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except
as to the results thereof. As alleged by the respondents, and unrebutted by
petitioner, CAMPCO members, before working for the petitioner, had to
undergo instructions and pass the training provided by petitioners
personnel. It was petitioner who determined and prepared the work
assignments of the CAMPCO members. CAMPCO members worked within
petitioners plantation and processing plants alongside regular employees
performing identical jobs, a circumstance recognized as an indicium of a
labor-only contractorship.38
Fourth, CAMPCO was not engaged to perform a specific and special job or
service. In the Service Contract of 1993, CAMPCO agreed to assist
petitioner in its daily operations, and perform odd jobs as may be assigned.
CAMPCO complied with this venture by assigning members to petitioner.
Apart from that, no other particular job, work or service was required from
CAMPCO, and it is apparent, with such an arrangement, that CAMPCO
merely acted as a recruitment agency for petitioner. Since the undertaking
of CAMPCO did not involve the performance of a specific job, but rather the
supply of manpower only, CAMPCO clearly conducted itself as a labor-only
contractor.39

Lastly, CAMPCO members, including respondents, performed activities

directly related to the principal business of petitioner. They worked as can
processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing
attendant, and etc., functions which were, not only directly related, but were
very vital to petitioners business of production and processing of pineapple
products for export.
The findings enumerated in the preceding paragraphs only support what DOLE
Regional Director Parel and DOLE Undersecretary Trajano had long before
conclusively established, that CAMPCO was a mere labor-only contractor.
VI
The declaration that CAMPCO is indeed engaged in the prohibited activities of laboronly contracting, then consequently, an employer-employee relationship is deemed to
exist between petitioner and respondents, since CAMPCO shall be considered as a
mere agent or intermediary of petitioner.
Since respondents are now recognized as employees of petitioner, this Court is
tasked to determine the nature of their employment. In consideration of all the
attendant circumstances in this case, this Court concludes that respondents are
regular employees of petitioner.
Article 280 of the Labor Code, as amended, reads
ART. 280. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary and 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 engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if its is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.

This Court expounded on the afore-quoted provision, thus

The primary standard, therefore, of determining a regular employment is the
reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The test is whether the former
is usually necessary or desirable in the usual business or trade of the employer. The
connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. Also, if the
employee has been performing the job for at least one year, even if her performance
is not continuous or merely intermittent, the law deems the repeated and continuing
need for its performance as sufficient evidence of the necessity if not indispensability
of the activity to the business. Hence, the employment is also considered regular, but
only with respect to such activity and while such activity exists.40
In the instant Petition, petitioner is engaged in the manufacture and production of
pineapple products for export.1wphi1Respondents rendered services as processing
attendant, feeder of canned pineapple and pineapple processing, nata de coco
processing attendant, fruit cocktail processing attendant, and etc., functions they
performed alongside regular employees of the petitioner. There is no doubt that the
activities performed by respondents are necessary or desirable to the usual business
of petitioner.
Petitioner likewise want this Court to believe that respondents employment was
dependent on the peaks in operation, work backlogs, absenteeism, and excessive
leaves. However, bearing in mind that respondents all claimed to have worked for
petitioner for over a year, a claim which petitioner failed to rebut, then respondents
continued employment clearly demonstrates the continuing necessity and
indispensability of respondents employment to the business of petitioner.
Neither can this Court apply herein the ruling of the NLRC in the previous case
involving petitioner and the individual workers they used to hire before the advent of
the cooperatives, to the effect that the employment of these individual workers were
not regular, but rather, were valid "term employments," wherein the employer and
employee knowingly and voluntarily agreed to employment for only a limited or
specified period of time. The difference between that case and the one presently
before this Court is that the members of CAMPCO, including respondents, were not
informed, at the time of their engagement, that their employment shall only be for a
limited or specified period of time. There is absence of proof that the respondents
were aware and had knowingly and voluntarily agreed to such term employment.
Petitioner did not enter into individual contracts with the CAMPCO members, but
executed a Service Contract with CAMPCO alone. Although the Service Contract of
1993 stated that it shall be for a specific period, from 1 July to 31 December 1993,
petitioner and CAMPCO continued the service arrangement beyond 1993. Since there

was no written renewal of the Service Contract, 41 there was no further indication that
the engagement by petitioner of the services of CAMPCO members was for another
definite or specified period only.
Respondents, as regular employees of petitioner, are entitled to security of tenure.
They could only be removed based on just and authorized causes as provided for in
the Labor Code, as amended, and after they are accorded procedural due process.
Therefore, petitioners acts of placing some of the respondents on "stay home status"
and not giving them work assignments for more than six months were already
tantamount to constructive and illegal dismissal.42
In summary, this Court finds that CAMPCO was a labor-only contractor and, thus,
petitioner is the real employer of the respondents, with CAMPCO acting only as the
agent or intermediary of petitioner. Due to the nature of their work and length of their
service, respondents should be considered as regular employees of petitioner.
Petitioner constructively dismissed a number of the respondents by placing them on
"stay home status" for over six months, and was therefore guilty of illegal dismissal.
Petitioner must accord respondents the status of regular employees, and reinstate the
respondents who it constructively and illegally dismissed, to their previous positions,
without loss of seniority rights and other benefits, and pay these respondents
backwages from the date of filing of the Complaint with the NLRC on 19 December
1996 up to actual reinstatement.
WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the
Amended Decision, dated 27 November 2003, rendered by the Court of Appeals in
CA-G.R. SP No. 63405 is AFFIRMED.
Costs against the petitioner.
SO ORDERED.

60. G.R. No. 96169 September 24, 1991

EMPLOYERS
CONFEDERATION
OF
THE
PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION
CONGRESS OF THE PHILIPPINES, respondents.

Sycip Salazar, Hernandez & Gatmaitan for petitioner.

Gilbert P. Lorenzo for private respondent.

SARMIENTO, J.:p
The petition is given due course and the various pleadings submitted being sufficient
to aid the Court in the proper resolution of the basic issues raised in this case, we
decide it without further ado.
The Employers Confederation of the Philippines (ECOP) is questioning the validity of
Wage Order No. NCR-01-A dated October 23, 1990 of the Regional Tripartite Wages
and Productivity Board, National Capital Region, promulgated pursuant to the
authority of Republic Act No. 6727, "AN ACT TO RATIONALIZE WAGE POLICY
DETERMINATION BY ESTABLISHING THE MECHANISM AND PROPER
STANDARDS THEREFORE, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND
INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126, AND 127 INTO,
PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE KNOWN AS THE
LABOR CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING
WAGE INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND
FOR OTHER PURPOSES," was approved by the President on June 9, 1989. Aside
from providing new wage rates, 1 the "Wage Rationalization Act" also provides, among
other things, for various Regional Tripartite Wages and Productivity Boards in charge
of prescribing minimum wage rates for all workers in the various regions 2 and for a
National Wages and Productivity Commission to review, among other functions, wage
levels determined by the boards. 3
On October 15, 1990, the Regional Board of the National Capital Region issued Wage
Order No. NCR-01, increasing the minimum wage by P17.00 daily in the National
Capital Region. 4 The Trade Union Congress of the Philippines (TUCP) moved for
reconsideration; so did the Personnel Management Association of the Philippines
(PMAP). 5ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending Wage
Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all workers and
employees in the private sector in the National Capital Region
already receiving wages above the statutory minimum wage rates

up to one hundred and twenty-five pesos (P125.00) per day shall

also receive an increase of seventeen pesos (P17.00) per day.
ECOP appealed to the National Wages and Productivity Commission. On November
6, 1990, the Commission promulgated an Order, dismissing the appeal for lack of
merit. On November 14, 1990, the Commission denied reconsideration.
The Orders of the Commission (as well as Wage Order No. NCR-01-A) are the subject
of this petition, in which. ECOP assails the board's grant of an "across-the-board"
wage increase to workers already being paid more than existing minimum wage rates
(up to P125. 00 a day) as an alleged excess of authority, and alleges that under the
Republic Act No. 6727, the boards may only prescribe "minimum wages," not
determine "salary ceilings." ECOP likewise claims that Republic Act No. 6727 is meant
to promote collective bargaining as the primary mode of settling wages, and in its
opinion, the boards can not preempt collective bargaining agreements by establishing
ceilings. ECOP prays for the nullification of Wage Order No. NCR 01-A and for the
"reinstatement" of Wage Order No. NCR-01.
The Court directed the Solicitor General to comment on behalf of the Government,
and in the Solicitor General's opinion, the Board, in prescribing an across-the-board
hike did not, in reality, "grant additional or other benefits to workers and employees,
such as the extension of wage increases to employees and workers already receiving
more than minimum wages ..." 6 but rather, fixed minimum wages according to the
"salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative function, and Republic Act No.
6727 delegated to the regional boards no more "than the power to grant minimum
wage adjustments" 7 and "in the absence of clear statutory authority," 8 the boards may
no more than adjust "floor wages." 9
The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended
to correct "wage distortions" and the salary-ceiling method (of determining wages) is
meant, precisely, to rectify wage distortions. 10
The Court is inclined to agree with the Government. In the National Wages and
Productivity Commission's Order of November 6, 1990, the Commission noted that the
determination of wages has generally involved two methods, the "floor-wage" method
and the "salary-ceiling" method. We quote:
Historically, legislation involving the adjustment of the minimum
wage made use of two methods. The first method involves the
fixing of determinate amount that would be added to the prevailing

statutory minimum wage. The other involves "the salary-ceiling

method" whereby the wage adjustment is applied to employees
receiving a certain denominated salary ceiling. The first method
was adopted in the earlier wage orders, while the latter method
was used in R.A. Nos. 6640 and 6727. Prior to this, the salaryceiling method was also used in no less than eleven issuances
mandating the grant of cost-of-living allowances (P.D. Nos. 525,
1123, 1614, 1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5
and 6). The shift from the first method to the second method was
brought about by labor disputes arising from wage distortions, a
consequence of the implementation of the said wage orders.
Apparently, the wage order provisions that wage distortions shall
be resolved through the grievance procedure was perceived by
legislators as ineffective in checking industrial unrest resulting
from wage order implementations. With the establishment of the
second method as a practice in minimum wage fixing, wage
distortion disputes were minimized. 11
As the Commission noted, the increasing trend is toward the second mode, the salarycap method, which has reduced disputes arising from wage distortions (brought about,
apparently, by the floor-wage method). Of course, disputes are appropriate subjects of
collective bargaining and grievance procedures, but as the Commission observed and
as we are ourselves agreed, bargaining has helped very little in correcting wage
distortions. Precisely, Republic Act No. 6727 was intended to rationalize wages, first,
by providing for full-time boards to police wages round-the-clock, and second, by
giving the boards enough powers to achieve this objective. The Court is of the opinion
that Congress meant the boards to be creative in resolving the annual question of
wages without labor and management knocking on the legislature's door at every turn.
The Court's opinion is that if Republic No. 6727 intended the boards alone to set floor
wages, the Act would have no need for a board but an accountant to keep track of the
latest consumer price index, or better, would have Congress done it as the need
arises, as the legislature, prior to the Act, has done so for years. The fact of the matter
is that the Act sought a "thinking" group of men and women bound by statutory
standards. We quote:
ART. 124. Standards / Criteria for Minimum Wage Fixing. The
regional minimum wages to be established by the Regional Board
shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees within
the framework of the national economic and social development
program. In the determination of such regional minimum wages,

the Regional Board shall, among other relevant factors, consider

the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;

demands" in regulating property and property relations; 16 (3) the Charter urges
Congress to give priority to the enactment of measures, among other things, to diffuse
the wealth of the nation and to regulate the use of property; 17 (4) the Charter
recognizes the "just share of labor in the fruits of production;" 18 (5) under the Labor
Code, the State shall regulate the relations between labor and management; 19 (6)
under Republic Act No. 6727 itself, the State is interested in seeing that workers
receive fair and equitable wages; 20 and (7) the Constitution is primarily a document of
social justice, and although it has recognized the importance of the private sector, 21 it
has not embraced fully the concept of laissez faire 22 or otherwise, relied on pure
market forces to govern the economy; We can not give to the Act a meaning or intent
that will conflict with these basic principles.

(h) Fair return of the capital invested and capacity to pay of

emphasis employers;

It is the Court's thinking, reached after the Court's own study of the Act, that the Act is
meant to rationalize wages, that is, by having permanent boards to decide wages
rather than leaving wage determination to Congress year after year and law after law.
The Court is not of course saying that the Act is an effort of Congress to pass the
buck, or worse, to abdicate its duty, but simply, to leave the question of wages to the
expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of specialized
activities and their attendant peculiar problems, the national legislature has found it
more necessary to entrust to administrative agencies the power of subordinate
legislation' as it is caned." 23

(i) Effects of employment generation and family income; and

The Labor Code defines "wage" as follows:

(e) The need to induce industries to invest in the countryside;

(f) Improvements in standards of living;
(g) The prevailing wage levels;

The Court is not convinced that the Regional Board of the National Capital Region, in
decreeing an across-the-board hike, performed an unlawful act of legislation. It is true
that wage-fixing, like rate constitutes an act Congress; 13 it is also true, however, that
Congress may delegate the power to fix rates 14 provided that, as in all delegations
cases, Congress leaves sufficient standards. As this Court has indicated, it is
impressed that the above-quoted standards are sufficient, and in the light of the floorwage method's failure, the Court believes that the Commission correctly upheld the
Regional Board of the National Capital Region.

"Wage" paid to any employee shall mean the remuneration or

earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be
done, or for services rendered or to be rendered and includes the
fair and reasonably value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee. "Fair and reasonable value"
shall not include any profit to the employer or to any person
affiliated with the employer. 24

Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant
to "get the Government out of the industry" and leave labor and management alone in
deciding wages. The Court does not think that the law intended to deregulate the
relation between labor and capital for several reasons: (1) The Constitution calls upon
the State to protect the rights of workers and promote their welfare; 15 (2) the
Constitution also makes it a duty of the State "to intervene when the common goal so

The concept of "minimum wage" is, however, a different thing, and certainly, it means
more than setting a floor wage to upgrade existing wages, as ECOP takes it to mean.
"Minimum wages" underlies the effort of the State, as Republic Act No. 6727
expresses it, "to promote productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their families; to guarantee the
rights of labor to its just share in the fruits of production; to enhance employment

(j) The equitable distribution of income and wealth along the

imperatives of economic and social development. 12

generation in the countryside through industry dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth," 25 and as the
Constitution expresses it, to affirm "labor as a primary social economic force." 26 As the
Court indicated, the statute would have no need for a board if the question were
simply "how much". The State is concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is subserved.

The Labor Code, as amended by RA 6727 (the Wage Rationalization Act), grants the
National Wages and Productivity Commission (NWPC) the power to prescribe rules
and guidelines for the determination of appropriate wages in the country. Hence,
"guidelines" issued by the Regional Tripartite Wages and Productivity Boards
(RTWPB) without the approval of or, worse, contrary to those promulgated by the
NWPC are ineffectual, void and cannot be the source of rights and privileges.

It is another question, to be sure, had Congress created "roving" boards, and were
that the case, a problem of undue delegation would have ensued; but as we said, we
do not see a Board (National Capital Region) "running riot" here, and Wage Order No.
NCR-01-A as an excess of authority.

The Case
This is the principle used by the Court in resolving this petition for certiorari under Rule
65 of the Rules of Court assailing the Decision 1 dated March 8, 1993, promulgated by
the NWPC 2 which disposed as follows:

It is also another question whether the salary-cap method utilized by the Board may
serve the purposes of Republic Act No. 6727 in future cases and whether that method
is after all, a lasting policy of the Board; however, it is a question on which we may
only speculate at the moment. At the moment, we find it to be reasonable policy
(apparently, it has since been Government policy); and if in the future it would be
perceptibly unfair to management, we will take it up then.

WHEREFORE, premises considered, the Decision appealed from is hereby

MODIFIED. The application for exemption of Anakan Lumber Company is
hereby GRANTED for a period of one (1) year retroactive to the date subject
Wage Orders took effect until November 21, 1991. The applications for
exemption of Nasipit Lumber Company and Philippine Wallboard
Corporation are hereby DENIED for lack of merit, and as such, they are
hereby ordered to pay their covered workers the wage increases under
subject Wage Orders retroactive to the date of effectivity of said Wage
Orders plus interest of one percent (1%) per month.

WHEREFORE, premises considered, the petition is DENIED. No pronouncement as

to costs.
IT IS SO ORDERED.

SO ORDERED.

61. G.R. No. 113097 April 27, 1998

NASIPIT LUMBER COMPANY, INC., and PHILIPPINE WALLBOARD
CORPORATION, petitioners,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION, WESTERN AGUSAN
WORKERS UNION (WAWU-ULGWP LOCAL 101), TUNGAO LUMBER WORKERS
UNION (TULWU-ULGWP LOCAL 102) and UNITED WORKERS UNION (UWUULGWP LOCAL 103), respondents.

Petitioners also challenge the NWPC's Decision 3 dated November 17, 1993 which
denied their motion for reconsideration.
The RTWPB's August 1, 1991 Decision, which the NWPC modified, disposed as
follows:
WHEREFORE, all foregoing premises considered, the instant petition for
exemption from compliance with Wage Order Nos. RX-01 and RX-01-A is
hereby approved under and by virtue of criteria No. 2, Section 3 of RTWPB
Guidelines No. 3 on Exemption, dated November 26, 1990, for a period of
only one (1) year, retroactive to the date said Wage Order took effect up to
November 21, 1991.

PANGANIBAN, J.:

SO ORDERED. 4
The Facts

The undisputed facts are narrated by the NWPC as follows:

xxx xxx xxx

On October 20, 1990, the Region X [Tripartite Wages and Productivity] Board issued
Wage Order No. RX-01 which provides as follows:

2. Establishment belonging to distressed industry an

establishment that is engaged in an industry that
is distressed due to conditions beyond its control as
may be determined by the Board in consultation with
DTI and NWPC. (Emphasis supplied)

Sec. 1. Upon the effectivity of this Wage Order, the increase in minimum
wage rates applicable to workers and employees in the private sector in
Northern Mindanao (Region X) shall be as follows:
xxx xxx xxx
a. The provinces of Agusan del Norte, Bukidnon,
Misamis Oriental, and the Cities of Butuan, Gingoog,
and Cagayan de Oro P13.00/day
b. The provinces of Agusan del Sur, Surigao del Norte
and Misamis Occidental, and the Cities of Surigao
Oroquieta, Ozamis and Tangub P11.00/day.
c. The province of Camiguin P9.00/day.
Subsequently, a supplementary Wage Order No. RX-01-A was issued by the
Board on November 6, 1990 which provides as follows:
Sec. 1. Upon the effectivity of the original Wage Order
RX-01, all workers and employees in the private sector
in Region X already receiving wages above the
statutory minimum wage rates up to one hundred and
twenty pesos (P120.00) per day shall also receive an
increase of P13, P11, P9 per day, as provided for under
Wage Order No. RX-01;
Applicants/appellees Nasipit Lumber Company, Inc. (NALCO), Philippine
Wallboard Corporation (PWC), and Anakan Lumber Company (ALCO),
claiming to be separate and distinct from each other but for expediency and
practical purposes, jointly filed an application for exemption from the abovementioned Wage Orders as distressed establishments under Guidelines No.
3, issued by the herein Board on November 26, 1990, specifically Sec. 3(2)
thereof which, among others, provides:
A. For purposes of this Guidelines the following criteria
to determine whether the applicant-firm is actually
distressed shall be used.

Applicants/appellees aver that they are engaged in logging and integrated

wood processing industry but are distressed due to conditions beyond their
control, to wit: 1) Depressed economic conditions due to worldwide
recession; 2) Peace and order and other emergency-related problems
causing disruption and suspension of normal logging operations; 3)
Imposition of environmental fee for timber production in addition to regular
forest charges; 4) Logging moratorium in Bukidnon; 5) A reduction in the
annual allowable volume of cut logs of NALCO & ALCO by 59%; 6) Highly
insufficient raw material supply; 7) Extraordinary increases in the cost of
fuel, oil, spare parts, and maintenance; 8) Excessive labor cost/production
ratio that is more or less 47%; and 9) Lumber export ban.
On the other hand, oppositor/appellant Unions jointly opposed the
application for exemption on the ground that said companies are not
distressed establishments since their capitalization has not been impaired
by 25%. 5
Citing liquidity problems and business decline in the wood-processing industry, the
RTWPB approved the applicants' joint application for exemption in this wise:
1. The Board considered the arguments presented by petitioners and the
oppositors. The Board likewise took note of the financial condition of
petitioner firms. One of the affiliates, Anakan Lumber Company, is confirmed
to be suffering from capital impairment by: 14:80% in 1988, 71.35% in 1989
and 100% in 1990. On the other hand, NALCO had a capital impairment of
6.41%. 13.53% and 17.04% in 1988, 1989 and 1990, respectively, while
PWC had no capital impairment from 1988 to 1990. However, the Board
also took note of the fact that petitioners are claiming for exemption, not on
the strength of capital impairment, but on the basis of belonging to a
distressed industry an establishment that is engaged in an industry that is
distressed due to conditions beyond its control as may be determined by the
Board in consultation with DTI and NWPC.

2. Inquiries made by the Board from the BOI and the DTI confirm that all
petitioner-firms are encountering liquidity problems and extreme difficulty
servicing their loan obligations.
3. A perusal of the Provincial Trade and Industry Development Plan for
Agusan del Norte and Butuan City where petitioners are operating their
business, confirms the existence of a slump in the wood-processing industry
due to the growing scarcity of [a] large volume of raw materials to feed the
various plywood and lumber mills in the area. A lot of firms have closed and
shifted to other ventures, the report continued, although the competitive
ones are still in operation.
4. The Board took note of the fact that most of the circumstances
responsible for the financial straits of petitioners are largely external, over
which petitioners have very little control. The Board feels that as an
alternative to closing up their business[es] which could bring untold
detriment and dislocation to [their] 4,000 workers and their families,
petitioners should be extended assistance and encouragement to continue
operating so that jobs could thereby be preserved during these difficult
times. One such way is for the Board to grant them a temporary reprieve
from compliance with the mandated wage increase specifically W.O. RX-01
and RX-01-A only. 6
Dissatisfied with the RTWPB's Decision, the private respondents lodged an appeal
with the NWPC, which affirmed ALCO's application but reversed the applications of
herein petitioners, NALCO and PWC. The NWPC reasoned:
The Guidelines No. 3 dated November 26, 1990, issued by the herein Board
cannot be used as valid basis for granting applicants/appellees application
for exemption since it did not pass the approval of this Commission.
Under the Rules of Procedure on Minimum Wage Fixing dated June 4,
1990, issued by this Commission pursuant to Republic Act 6727, particularly
Section 1 of Rule VIII thereof provides that:
Sec. 1. Application For Exemption. Whenever a wage order provides for
exemption, applications thereto shall be filed with the appropriate Board
which shall process the same, subject to guidelines issued by the
Commission. (Emphasis supplied)
Clearly, it is the Commission that is empowered to set [the] criteria on
exemption from compliance with wage orders. While the Boards may issue

supplementary guidelines on exemption, the same should first pass the

Commission for the purpose of determining its conformity to the latter's
general policies and guidelines relative thereto. In fact, under the
"Guidelines on Exemption from Compliance with the Prescribed Wage/Cost
of Living Allowance Increases Granted by the Regional Tripartite Wages and
Productivity Boards" dated February 25, 1991, issued by the Commission,
there is a provision that "(T)he Board may issue supplementary guidelines
for exemption . . . subject to review/approval by the Commission". (Section
11). In the case at bar, after the Commission Secretariat made some
comments on said Guidelines No. 3, the same was never submitted again
for [the] Commission's approval either justifying its original provisions or
incorporating the comments made thereon. Until and unless said Guidelines
No. 3 is approved by the Commission, it has no operative force and effect.
The applicable guidelines on exemption therefore is that one issued by the
Commission dated February 25, 1991, the pertinent portion of which reads:
Sec. 3. CRITERIA FOR EXEMPTION
xxx xxx xxx
2. Distressed Employers/Establishment:
a. In the case of a stock corporation, partnership, single
proprietorship or non-stock, non-profit organization
engaged in business activity or charging fees for its
services.
When accumulated losses at end of the period under
review have impaired by at least 25 percent the:
Paid-up-capital at the end of the last full accounting
period preceding the application, in the case of
corporations;
Total invested capital at the beginning of the last full
accounting period preceding the application, in the case
of partnership and single proprietorships (Emphasis
supplied)

A perusal of the financial documents on record shows that for the year
1990, which is the last full accounting period preceding the applications for
exemption, appellees NALCO, ALCO, and PWC incurred a capital
impairment of 1.89%, 28.72%, and 5.03%, respectively. Accordingly, based
on the criteria set forth above in the NWPC Guidelines on Exemption, only
the application for exemption of ALCO should be approved in view of its
capital impairment of 28.72%.
We are not unmindful of the fact that during the Board hearing conducted,
both labor and management manifested their desire for a uniform decision
to apply to all three (3) firms. However, we cannot grant the same for want
of legal basis considering that we are required by the rules to decide on the
basis of the merit of application by an establishment having a legal
personality of its own. 7
In denying petitioners' motion for reconsideration, public respondent explained:
The fact that applicant companies relied in good faith upon Guidelines No. 3
issued by the Board a quo, the same is not sufficient reason that they
should be assessed based on the criteria of said Guidelines considering that
it does not conform to the policies and guidelines relative to wage
exemption issued by this Commission pursuant to Republic Act 6727.
Consequently, it has no force and effect. As such, said Guidelines No. 3
cannot therefore be a source of a right no matter if one has relied on it in
good faith. In like manner that the workers, who are similarly affected,
cannot be bound thereof.
Moreover, even assuming that Guidelines No. 3 conforms to the procedural
requirement, still, the same cannot be given effect insofar as it grants
exemption by industry considering that the subject Wage Order mentioned
only distressed establishments as one of those to be exempted thereof. It
did not mentionexemption by industries. Well-settled is the rule that an
implementing guidelines [sic] cannot expand nor limit the provision of [the]
law it seeks to implement. Otherwise, it shall be considered ultra vires. And,
contrary to applicant companies' claim, this Commission does not approve
rules implementing the Wage Orders issued by the Regional Tripartite
Wages and Productivity Boards. Perforce, it cannot be said that this
Commission has approved the Rules Implementing Wage Order No[s]. RX01 and RX-01 A. 8
Hence, this recourse.

The Issue
Petitioners raise this solitary issue:
With all due respect, Public Respondent National Wages and Productivity
Commission committed grave abuse of discretion amounting to lack of or in
excess of jurisdiction in ruling that RTWPB-X-Guideline No. 3 has "no
operative force and effect", among others, and consequently, denying for
lack of merit the application for exemption of petitioners Nasipit Lumber
Company, Inc. and Philippine Wallboard Corporation from the coverage of
Wage Orders Nos. RX-01 and RX-01-A.
In the main, the issue boils down to a question of power. Is a guideline issued by an
RTWPB without the approval of or, worse, contrary to the guidelines promulgated by
the NWPC valid?
The Court's Ruling
The petition is unmeritorious. The answer to the above question is in the negative.
Sole Issue: Approval of NWPC Required
Petitioners contend that the NWPC gravely abused its discretion in overturning the
RTWPB's approval of their application for exemption from Wages Orders RX-01 and
RX-01-A. They argue that under Art. 122 (e) of the Labor Code, the RTWPB has the
power "[t]o receive, process and act on applications for exemption from prescribed
wage rates as may be provided by law or any wage order." 10 They also maintain that
no law expressly requires the approval of the NWPC for the effectivity of the RTWPB's
Guideline No. 3. Assuming arguendo that the approval of the NWPC was legally
necessary, petitioners should not be prejudiced by their observance of the guideline,
pointing out that the NWCP's own guidelines 11 took effect "only on March 18,
1991 long after Guideline No. 3 was issued on November 26, 1990." 12 Lastly, they
posit that the NWPC guidelines "cannot be given retroactive effect as [they] will effect
or change the petitioners' vested rights." 13
The Court is not persuaded.
Power to Prescribe Guidelines

Lodged in the NWPC, Not in the RTWPB

The three great branches and the various administrative agencies of the government
can exercise only those powers conferred upon them by the Constitution and the
law. 14 It is through the application of this basic constitutional principle that the Court
resolves the instant case.
RA 6727 (the Wage Rationalization Act), amending the Labor Code, created both the
NWPC and the RTWPB and defined their respective powers. Article 121 of the Labor
Code lists the powers and functions of the NWPC, as follows:
Art. 121. Powers and Functions of the Commission. The Commission
shall have the following powers and functions:
(a) To act as the national consultative and advisory body to the President of
the Philippine[s] and Congress on matters relating to wages, incomes and
productivity;
(b) To formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels;
(c) To prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or
industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed
guidelines and national development plans;
(e) To undertake studies, researches and surveys necessary for the
attainment of its functions and objectives, and to collect and compile data
and periodically disseminate information on wages and productivity and
other related information, including, but not limited to, employment, cost-ofliving, labor costs, investments and returns;

(h) To call, from time to time, a national tripartite conference of

representatives of government, workers and employers for the consideration
of measures to promote wage rationalization and productivity; and
(i) To exercise such powers and functions as may be necessary to
implement this Act.
xxx xxx xxx
(Emphasis supplied)
Article 122 of the Labor Code, on the other hand, prescribes the powers of the
RTWPB thus:
Art. 122. Creation of Regional Tripartite Wages and Productivity Boards.
xxx xxx xxx
The Regional Boards shall have the following powers and functions in their
respective territorial jurisdiction:
(a) To develop plans, programs and projects relative to wages, income and
productivity improvement for their respective regions;
(b) To determine and fix minimum wage rates applicable in their region,
provinces or industries therein and to issue the corresponding wage orders,
subject to guidelines issued by the Commission;
(c) To undertake studies, researches, and surveys necessary for the
attainment of their functions, objectives and programs, and to collect and
compile data on wages, incomes, productivity and other related information
and periodically disseminate the same;

(f) To review plans and programs of the Regional Tripartite Wages and
Productivity Boards to determine whether these are consistent with national
development plans;

(d) To coordinate with the other Regional Boards as may be necessary to

attain the policy and intention of this Code.

(g) To exercise technical and administrative supervision over the Regional

Tripartite Wages and Productivity Boards;

(e) To receive, process and act on applications for exemption from

prescribed wage rates as may be provided by law or any Wage Order; and

(f) To exercise such other powers and functions as may be necessary to

carry out their mandate under this Code. (Emphasis supplied)
The foregoing clearly grants the NWPC, not the RTWPB, the power to "prescribe the
rules and guidelines" for the determination of minimum wage and productivity
measures. While the RTWPB has the power to issue wage orders under Article 122
(b) of the Labor Code, such orders are subject to the guidelines prescribed by the
NWPC. One of these guidelines is the "Rules on Minimum Wage Fixing," which was
issued on June 4, 1990. 15 Rule IV, Section 2 thereof, allows the RTWPB to issue
wage orders exempting enterprises from the coverage of the prescribed minimum
wages. 16 However, the NWPC has the power not only to prescribe guidelines to
govern wage orders, but also to issue exemptions therefrom, as the said rule provides
that "[w]henever a wage order provides for exemption, applications thereto shall be
filed with the appropriate Board which shall process the same, subject to guidelines
issued by the Commission." 17In short, the NWPC lays down the guidelines which the
RTWPB implements.
Significantly, the NWPC authorized the RTWPB to issue exemptions from wage
orders, but subject to its review and approval. 18 Since the NWPC never assented to
Guideline No. 3 of the RTWPB, the said guideline is inoperative and cannot be used
by the latter in deciding or acting on petitioners' application for exemption. Moreover,
Rule VIII, Section 1 of the NWPC's Rules of Procedure on Minimum Wage Fixing
issued on June 4, 1990 which was prior to the effectivity of RTWPB Guideline No. 3
requires that an application for exemption from wage orders should be processed
by the RTWPB, subject specifically to the guidelines issued by the NWPC.
To allow RTWPB Guideline No. 3 to take effect without the approval of the NWPC is to
arrogate unto RTWPB a power vested in the NWPC by Article 121 of the Labor Code,
as amended by RA 6727. The Court will not countenance this naked usurpation of
authority. It is a hornbook doctrine that the issuance of an administrative rule or
regulation must be in harmony with the enabling law. If a discrepancy occurs "between
the basic law and an implementing rule or regulation, it is the former that
prevails." 19 This is so because the law cannot be broadened by a mere administrative
issuance. It is axiomatic that "[a]n administrative agency cannot amend an act of
Congress." 20 Article 122 (e) of the Labor Code cannot be construed to enable the
RTWPB to decide applications for exemption on the basis of its own guidelines which
were not reviewed an approved by the NWPC, for the simple reason that a statutory
grant of "powers should not be extended by implication beyond what may be
necessary for their just and reasonable execution. Official powers cannot be merely
assumed by administrative officers, nor can they be created by the courts in the
exercise of their judicial functions." 21

There is no basis for petitioners' claim that their vested rights were prejudiced by the
NWPC's alleged retroactive application of its own rules 22 which were issued on
February 25, 1991 and took effect on March 18, 1991. 23 Such claim cannot stand
because Guideline No. 3, as previously discussed and as correctly concluded by the
NWPC, 24 was not valid and, thus, cannot be a source of a right; much less, a vested
one.
The Insertion in Guideline No. 3 of
"Distressed Industry" as a Criterion for
Exemption Void
The Court wishes to stress that the law does not automatically grant exemption to all
establishments belonging to an industry which is deemed "distressed." Hence, RX-O1,
Section 3 (4), must not be construed to automatically include all establishments
belonging to a distressed industry. The fact that the wording of a wage order may
contain some ambiguity would not help petitioners. Basic is the rule in statutory
construction that all doubts in the implementation and the interpretation of the
provisions of the Labor Code, as well as its implementing rules and regulations, must
be resolved in favor of labor. 25 By exempting all establishments belonging to a
distressed industry, Guideline No. 3 surreptitiously and irregularly takes away the
mandated increase in the minimum wage awarded to the affected workers. In so
acting, the RTWPB proceeded against the declared policy of the State, enshrined in
the enabling act, "to rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to ensure a decent standard of
living for the workers and their families; to guarantee the rights of labor to its just share
in the fruits of production; . . ." 26Thus, Guideline No. 3 is void not only because it lacks
NWPC approval and contains an arbitrarily inserted exemption, but also because it is
inconsistent with the avowed State policies protective of labor.
NWPC Decision Not Arbitrary
To justify the exemption of a distressed establishment from effects of wage orders, the
NWPC requires the applicant, if a stock corporation like petitioners, to prove that its
accumulated losses impaired its paid-up capital by at least 25 percent in the last full
accounting period preceding the application 27 or the effectivity of the order. 28 In the
case at bar, it is undisputed that during the relevant accounting period, NALCO, ALCO
and PWC sustained capital impairments of 1.89, 28.72, and 5.03 percent,
respectively. 29 Clearly, it was only ALCO which met the exemption standard. Hence,
the NWPC did not commit grave abuse of discretion in approving the application only
of ALCO and in denying those of petitioners. Indeed, the NWPC acted within the ambit

of its administrative prerogative when it set guidelines for the exemption of a

distressed establishment. Absent any grave abuse of discretion, NWPC's actions will
not be subject to judicial review. 30 Accordingly, we deem the appealed Decisions to be
consistent with law.

Shortly after December 1989 coup d'etat was crushed, respondent Secretary of Local
Government sent a telegram and a letter, both dated December 4, 1989, to petitioner
requiring him to show cause why should not be suspended or remove from office for
disloyalty to the Republic, within forty-eight (48) hours from receipt thereof.

WHEREFORE, the petition is hereby DISMISSED. The assailed Decisions are hereby
AFFIRMED. Costs against petitioners.

On December 7, 1989, a sworn complaint for disloyalty to the Republic and culpable
violation of the Constitution was filed by Veronico Agatep, Manuel Mamba and Orlino
Agatep, respectively the mayors of the municipalities of Gattaran, Tuao and Lasam, all
in Cagayan, against petitioner for acts the latter committed during the coup. Petitioner
was required to file a verified answer to the complaint.

SO ORDERED.

62. G.R. No. 94115 August 21, 1992

RODOLFO
E.
AGUINALDO, petitioner,
vs.
HON. LUIS SANTOS, as Secretary of the Department of Local Government, and
MELVIN VARGAS, as Acting Governor of Cagayan, respondents.
Victor I. Padilla for petitioner.

On January 5, 1990, the Department of Local Government received a letter from

petitioner dated December 29, 1989 in reply to respondent Secretary's December 4,
1989 letter requiring him to explain why should not be suspended or removed from
office for disloyalty. In his letter, petitioner denied being privy to the planning of the
coup or actively participating in its execution, though he admitted that he was
sympathetic to the cause of the rebel soldiers. 1
Respondent Secretary considered petitioner's reply letter as his answer to the
complaint of Mayor Veronico Agatep and others. 2 On the basis thereof, respondent
Secretary suspended petitioner from office for sixty (60) days from notice, pending the
outcome of the formal investigation into the charges against him.

Doroteo B. Laguna and Manuel T. Molina for private respondent.

NOCON, J.:
In this petition for certiorari and prohibition with preliminary mandatory injunction
and/or restraining order, petitioner Rodolfo E. Aguinaldo assails the decision of
respondent Secretary of Local Government dated March 19,1990 in Adm. Case No. P10437-89 dismissing him as Governor of Cagayan on the ground that the power of the
Secretary of Local Government to dismiss local government official under Section 14,
Article I, Chapter 3 and Sections 60 to 67, Chapter 4 of Batas Pambansa Blg. 337,
otherwise known as the Local Government Code, was repealed by the effectivity of
the 1987 Constitution.
The pertinent facts are as follows: Petitioner was the duly elected Governor of the
province of Cagayan, having been elected to said position during the local elections
held on January 17, 1988, to serve a term of four (4) years therefrom. He took his oath
sometimes around March 1988.

During the hearing conducted on the charges against petitioner, complainants

presented testimonial and documentary evidence to prove the charges. Petitioner
neither presented evidence nor even cross-examined the complainant's witnesses,
choosing instead to move that respondent Secretary inhibit himself from deciding the
case, which motion was denied.
Thereafter, respondent Secretary rendered the questioned decision finding petitioner
guilty as charged and ordering his removal from office. Installed as Governor of
Cagayan in the process was respondent Melvin Vargas, who was then the ViceGovernor of Cagayan.
Petitioner relies on three grounds for the allowance of the petition, namely: (1) that the
power of respondent Secretary to suspend or remove local government official under
Section 60, Chapter IV of B.P. Blg. 337 was repealed by the 1987 Constitution; (2) that
since respondent Secretary no longer has power to suspend or remove petitioner, the
former could not appoint respondent Melvin Vargas as Governor of Cagayan; and (3)
the alleged act of disloyalty committed by petitioner should be proved by proof beyond
reasonable doubt, and not be a mere preponderance of evidence, because it is an act
punishable as rebellion under the Revised Penal Code.

While this case was pending before this Court, petitioner filed his certificate of
candidacy for the position of Governor of Cagayan for the May 11, 1992 elections.
Three separate petitions for his disqualification were then filed against him, all based
on the ground that he had been removed from office by virtue of the March 19, 1990
resolution of respondent Secretary. The commission on Elections granted the petitions
by way of a resolution dated May 9, 1992. On the same day, acting upon a "Motion to
Clarify" filed by petitioner, the Commission ruled that inasmuch as the resolutions of
the Commission becomes final and executory only after five (5) days from
promulgation, petitioner may still be voted upon as a candidate for governor pending
the final outcome of the disqualification cases with his Court.

xxx xxx xxx

Considering the fact narrated, the expiration
of petitioner's term of office during which the
acts charged were allegedly committed, and
his subsequent reelection, the petitioner must
be dismissed for the reason that the issue
has become academic. In Pascual v.
Provincial Board of Nueva Ecija, L-11959,
October 31, 1959, this Court has ruled:

Consequently, on May 13, 1992, petitioner filed a petition for certiorari with this Court,
G.R. Nos. 105128-30, entitledRodolfo E. Aguinaldo v. Commission on Elections, et
al., seeking to nullify the resolution of the Commission ordering his disqualification.
The Court, in a resolution dated May 14, 1992, issued a temporary restraining order
against the Commission to cease and desist from enforcing its May 9, 1992 resolution
pending the outcome of the disqualification case, thereby allowing the canvassing of
the votes and returns in Cagayan to proceed. However, the Commission was ordered
not to proclaim a winner until this Court has decided the case.

The weight of authority,

however,
seems
to
incline to the ruled
denying the right to
remove
from
office
because of misconduct
during a prior term to
which we fully subscribe.

On June 9, 1992, a resolution was issued in the aforementioned case granting petition
and annulling the May 9, 1992 resolution of the Commission on the ground that the
decision of respondent Secretary has not yet attained finality and is still pending
review with this Court. As petitioner won by a landslide margin in the elections, the
resolution paved the way for his eventual proclamation as Governor of Cagayan.

Offenses committed, or acts done, during a previous term are

generally held not to furnish cause for removal and this is
especially true were the Constitution provides that the penalty in
proceeding for removal shall not extend beyond the removal from
office, and disqualification from holding office for a term for which
the officer was elected or appointed. (6 C.J.S. p. 248, citing Rice
v. State, 161 S.W. 2nd 4011; Montgomery v. Newell, 40 S.W. 23rd
418; People ex rel Bashaw v. Thompson, 130 P. 2nd 237; Board
of Com'rs Kingfisher County v. Shutler, 281 P. 222; State v. Blake,
280 P. 388; In re Fedula, 147 A 67; State v. Wald, 43 S.W. 217)

Under the environmental circumstances of the case, We find the petition meritorious.
Petitioner's re-election to the position of Governor of Cagayan has rendered the
administration case pending before Us moot and academic. It appears that after the
canvassing of votes, petitioner garnered the most number of votes among the
candidates for governor of Cagayan province. As held by this Court in Aguinaldo v.
Comelec et al., supra,:
. . . [T]he certified true xerox copy of the "CERTITICATE OF
VOTES OF CANDIDATES", attached to the "VERY URGENT
MOTION FOR THE MODIFICATION OF THE RESOLUTION
DATED MAY 14, 1992["] filed by petitioner shows that he received
170,382 votes while the other candidates for the same position
received the following total number of votes: (1) Patricio T.
Antonio 54,412, (2) Paquito F. Castillo 2,198; and (3)
Florencio L. Vargas 48,129.

The underlying theory is that each term is

separate from other terms, and that the
reelection to office operates as a condonation
of the officer's misconduct to the extent of
cutting off the right to remove him therefor.
(43 Am. Jur. p. 45, citing Atty. Gen. v. Kasty,
184 Ala. 121, 63 Sec. 599, 50 L.R.A. [NS]
553). As held in Comant v. Bregan [ 1887] 6
N.Y.S.R. 332, cited in 17 A.L.R. 63 Sec. 559,
50 [NE] 553.

The Court should ever remove a public officer for acts done prior
to his present term of office. To do otherwise would be to deprive
the people of their right to elect their officers. When a people have
elected a man to office, it must be assumed that they did this with
knowledge of his life and character, and that they disregarded or
forgave his fault or misconduct, if he had been guilty of any. It is
not for the court, by reason of such fault or misconduct, to
practically overrule the will of the people. (Lizares v. Hechanova,
et al., 17 SCRA 58, 59-60 [1966]) (See also Oliveros v. Villaluz,
57 SCRA 163 [1974]) 3

units. However, any change in the existing form of local

government shall not take effect until ratified by a majority of the
votes cast in the plebiscite called for the purpose. 5
A similar provision is found in Section 3, Article X of the 1987 Constitution, which
reads:

Clear then, the rule is that a public official can not be removed for administrative
misconduct committed during a prior term, since his re-election to office operates as a
condonation of the officer's previous misconduct to the extent of cutting off the right to
remove him therefor. The foregoing rule, however, finds no application
to criminal cases pending against petitioner for acts he may have committed during
the failed coup.

Sec. 3. The Congress shall enact a local government code which

shall provided for a more responsive and accountable local
government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative, and
referendum, allocate among the different local government units
their powers, responsibilities, and resources, and provide for
the qualifications,election, appointment, and removal, term and
salaries, powers and functions and duties of local officials, and all
other matters relating to the organization and operation of the
local units. 6

The other grounds raised by petitioner deserve scant consideration. Petitioner

contends that the power of respondent Secretary to suspend or remove local
government officials as alter ego of the President, and as embodied in B.P. Blg. 337
has been repealed by the 1987 Constitution and which is now vested in the courts.

Inasmuch as the power and authority of the legislature to enact a local government
code, which provides for the manner of removal of local government officials, is found
in the 1973 Constitution as well as in the 1987 Constitution, then it can not be said
that BP Blg. 337 was repealed by the effective of the present Constitution.

We do not agree. The power of respondent Secretary to remove local government

officials is anchored on both the Constitution and a statutory grant from the legislative
branch. The constitutional basis is provided by Articles VII (17) and X (4) of the 1987
Constitution which vest in the President the power of control over all executive
departments, bureaus and offices and the power of general supervision over local
governments, and by the doctrine that the acts of the department head are
presumptively the acts of the President unless expressly rejected by him. 4 The
statutory grant found in B.P. Blg. 337 itself has constitutional roots, having been
enacted by the then Batasan Pambansa pursuant to Article XI of the 1973
Constitution, Section 2 of which specifically provided as follows

Moreover, in Bagabuyo et al. vs. Davide, Jr., et al., 7 this court had the occasion to
state that B.P. Blg. 337 remained in force despite the effectivity of the present
Constitution, until such time as the proposed Local Government Code of 1991 is
approved.

Sec. 2. The National Assembly shall enact a local government

code which may not thereafter be amended except by a majority
vote of all its Members, defining a more responsive and
accountable local government structure with an effective system
of recall, allocating among the different local government units
their powers, responsibilities, and resources, and providing for the
qualifications, election and removal, term, salaries, power,
functions, and duties of local government officials, and all other
matters relating to the organization and operation of the local

The power of respondent Secretary of the Department of Local Government to

remove local elective government officials is found in Secs. 60 and 61 of B.P. Blg.
337. 8
As to petitioner's argument of the want of authority of respondent Secretary to appoint
respondent Melvin Vargas as Governor of Cagayan, We need but point to Section 48
(1) of B.P. Blg 337 to show the fallacy of the same, to writ
In case a permanent vacancy arises when a governor . . . refuses
to assume office, fails to quality, dies or is removed from
office, voluntarily resigns, or is otherwise permanently
incapacitated to discharge the functions of his office, the vicegovernor . . . shall assume the office for the unexpired term of the
former. 9

Equally without merit is petitioner's claim that before he could be suspended or

removed from office, proof beyond reasonable doubt is required inasmuch as he is
charged with a penal offense of disloyalty to the Republic which is defined and
penalized under Article 137 of the Revised Penal Code. Petitioner is not being
prosecuted criminally under the provisions of the Revised Penal Code, but
administratively with the end in view of removing petitioner as the duly elected
Governor of Cagayan Province for acts of disloyalty to the Republic where
the quantum of proof required is only substantial evidence. 10
WHEREFORE, petitioner is hereby GRANTED and the decision of public respondent
Secretary of Local Government dated March 19, 1990 in Adm. Case No. P-10437-89,
dismissing petitioner as Governor of Cagayan, is hereby REVERSED.

On 25 May 1989, the bank entered into a collective bargaining agreement with the
MBTCEU, granting a monthly P900 wage increase effective 01 January 1989, P600
wage increase 01 January 1990, and P200 wage increase effective 01 January 1991.
The MBTCEU had also bargained for the inclusion of probationary employees in the
list of employees who would benefit from the first P900 increase but the bank had
adamantly refused to accede thereto. Consequently, only regular employees as of 01
January 1989 were given the increase to the exclusion of probationary employees.
Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize
wage policy determination be establishing the mechanism and proper standards
thereof, . . . fixing new wage rates, providing wage incentives for industrial dispersal to
the countryside, and for other purposes," took effect. Its provisions, pertinent to this
case, state:

SO ORDERED.

63. G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP
and
ANTONIO
V.
BALINANG,petitioners,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION
(2nd
Division)
and
METROPOLITAN BANK and TRUST COMPANY, respondents.
Gilbert P. Lorenzo for petitioners.
Marcial G. dela Fuente for private respondents.

VITUG, J.:
In this petition for certiorari, the Metropolitan Bank & Trust Company Employees
Union-ALU-TUCP (MBTCEU) and its president, Antonio V. Balinang, raise the issue of
whether or not the implementation by the Metropolitan Bank and Trust Company of
Republic Act No. 6727, mandating an increase in pay of P25 per day for certain
employees in the private sector, created a distortion that would require an adjustment
under said law in the wages of the latter's other various groups of employees.

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum
wage rates of all workers and employees in the private sector,
whether agricultural or non-agricultural, shall be increased by
twenty-five pesos (P25) per day, . . .: Provided, That those
already receiving above the minimum wage rates up to one
hundred pesos(P100.00) shall also receive an increase of twentyfive pesos (P25.00) per day, . . .
xxx xxx xxx
(d) If expressly provided for and agreed upon in the collective
bargaining agreements, all increase in the daily basic wage rates
granted by the employers three (3) months before the effectivity of
this Act shall be credited as compliance with the increases in the
wage rates prescribed herein, provided that, where such
increases are less than the prescribed increases in the wage
rates under this Act, the employer shall pay the difference. Such
increase shall not include anniversary wage increases, merit
wage increase and those resulting from the regularization or
promotion of employees.
Where the application of the increases in the wage rates under
this Section results in distortions as defined under existing laws in
the wage structure within an establishment and gives rise to a
dispute therein, such dispute shall first be settled voluntarily
between the parties and in the event of a deadlock, the same
shall be finally resolved through compulsory arbitration by the

regional branches of the National Labor Relations Commission

(NLRC) having jurisdiction over the workplace.
It shall be mandatory for the NLRC to conduct continous hearings
and decide any dispute arising under this Section within twenty
(20) calendar days from the time said dispute is formally
submitted to it for arbitration. The pendency of a dispute arising
from a wage distortion shall not in any way delay the applicability
of the increase in the wage rates prescribed under this Section.
Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a
month, to its probationary employees and to those who had been promoted to regular
or permanent status before 01 July 1989 but whose daily rate was P100 and below.
The bank refused to give the same increase to its regular employees who were
receiving more than P100 per day and recipients of the P900 CBA increase.
Contending that the bank's implementation of Republic Act 6727 resulted in the
categorization of the employees into (a) the probationary employees as of 30 June
1989 and regular employees receiving P100 or less a day who had been promoted to
permanent or regular status before 01 July 1989, and (b) the regular employees as of
01 July 1989, whose pay was over P100 a day, and that, between the two groups,
there emerged a substantially reduced salary gap, the MBTCEU sought from the bank
the correction of the alleged distortion in pay. In order to avert an impeding strike, the
bank petitioned the Secretary of Labor to assume jurisdiction over the case or to
certify the same to the National Labor Relations Commission (NLRC) under Article
263 (g) of the Labor Code. 1 The parties ultimately agreed to refer the issue for
compulsory arbitration to the NLRC.
The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05
February 1991, the labor arbiter disregard with the bank's contention that the increase
in its implementation of Republic Act 6727 did not constitute a distortion because "only
143 employees or 6.8% of the bank's population of a total of 2,108 regular employees"
benefited. He stressed that "it is not necessary that a big number of wage earners
within a company be benefited by the mandatory increase before a wage distortion
may be considered to have taken place," it being enough, he said, that such increase
"result(s) in the severe contraction of an intentional quantitative difference in wage
between employee groups."
The labor arbiter concluded that since the "intentional quantitative difference" in wage
or salary rates between and among groups of employees is not based purely on skills
or length of service but also on "other logical bases of differentiation, a P900.00 wage
gap intentionally provided in a collective bargaining agreement as a quantitative

difference in wage between those who WERE regular employees as of January 1,

1989 and those who WERE NOT as of that date, is definitely a logical basis of
differentiation (that) deserves protection from any distorting statutory wage increase."
Otherwise, he added, "a minimum wage statute that seek to uplift the economic
condition of labor would itself destroy the mechanism of collective bargaining which,
with perceived stability, has been labor's constitutional and regular source of wage
increase for so long a time now." Thus, since the "subjective quantitative difference"
between wage rates had been reduced from P900.00 to barely P150.00, correction of
the wage distortion pursuant to Section 4(c) of the Rules Implementing Republic Act
6727 should be made.
The labor arbiter disposed of the case, thus:
WHEREFORE, premises considered, the respondent is hereby
directed to restore to complainants and their members the Nine
Hundred (P900.00) Pesos CBA wage gap they used to enjoy over
non-regular employees as of January 1, 1989 by granting them a
Seven Hundred Fifty (P750.00) Pesos monthly increase effective
July 1, 1989.
SO ORDERED. 2
The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a
vote of 2 to 1, reversed the decision of the Labor Arbiter. Speaking, through
Commissioners Rustico L. Diokno and Domingo H. Zapanta, the NLRC said:
. . . a wage distortion can arise only in a situation where the salary
structure is characterized by intentional quantitative differences
among employee groups determined or fixed on the basis of
skills, length of service, or other logical basis of differentiation and
such differences or distinction are obliterated (In Re: Labor
Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11096-89, Secretary of Labor and Employment, February 18, 1991).
As applied in this case, We noted that in the new wage salary
structure, the wage gaps between Level 6 and 7 levels 5 and 6,
and levels 6 and 7 (sic) were maintained. While there is a
noticeable decrease in the wage gap between levels 2 and 3,
Levels 3 and 4, and Levels 4 and 5, the reduction in the wage
gaps between said levels is not significant as to obliterate or
result in severe contraction of the intentional quantitative
differences in salary rates between the employees groups. For

this reason, the basis requirement for a wage in this case.

Moreover, there is nothing in the law which would justify an
across-the-board adjustment of P750.00 as ordered by the labor
Arbiter.

Minimum Wage = % x Prescribed = Distortion

WHEREFORE, premises considered, the appealed decision is

hereby set aside and a new judgment is hereby entered,
dismissing the complaint for lack of merit.

would be the most equitable and fair under the circumstances

obtaining in this case.

SO ORDERED. 3

For this very reason, I register my dissent from the majority

opinion and opt for the modification of the Labor Arbiter's decision
as afore-discussed. 4

Actual Salary

Increased

Adjustment

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said
quantitative distinction/difference aforecited but clearly there is a
contraction. Would such contraction be severe as to warrant the
necessary correction sanctioned by the law in point, RA 6727? It
is may considered view that the quantitative intended distinction in
pay between the two groups of workers in respondent company
was contracted by more than fifty (50%) per cent or in particular
by more or less eighty-three (83%) per cent hence, there is no
doubt that there is an evident severe contraction resulting in the
complained of wage distortion.
Nonetheless, the award of P750.00 per month to all of herein
individual complainants as ordered by the Labor Arbiter below, to
my mind is not the most equitable remedy at bar, for the same
would be an across the board increase which is not the intention
of RA 6727. For that matter, herein complainants cannot by right
claim for the whole amount of P750.00 a month or P25.00 per day
granted to the workers covered by the said law in the sense that
they are not covered by the said increase mandated by RA 6727.
They are only entitled to the relief granted by said law by way of
correction of the pay scale in case of distortion in wages by
reason thereof.
Hence, the formula offered and incorporated in Wage Order No.
IV-02 issued on 21 May 1991 by the Regional Tripartite Wages
and Productivity Commission for correction of pay scale
structures in case of wage distortion as in the case at bar which
is:

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having
been denied, the MBTCEU and its president filed the instant petition for certiorari,
charging the NLRC with gave abuse of discretion by its refusal (a) "to acknowledge
the existence of a wage distortion in the wage or salary rates between and among the
employee groups of the respondent bank as a result of the bank's partial
implementation" of Republic Act 6727 and (b) to give due course to its claim for an
across-the-board P25 increase under Republic Act No. 6727. 5
We agree with the Solicitor General that the petition is impressed with merit. 6
The term "wage distortion", under the Rules Implementing Republic Act 6727, is
defined, thus:
(p) Wage Distortion means a situation where an increase in
prescribed wage rates results in the elimination or severe
contradiction of intentional quantitative differences in wage or
salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.
The issue of whether or not a wage distortion exists as a consequence of the grant of
a wage increase to certain employees, we agree, is, by and large, a question of fact
the determination of which is the statutory function of the NLRC. 7 Judicial review of
labor cases, we may add, does not go beyond the evaluation of the sufficiency of the
evidence upon which the labor official's findings rest. 8 As such, factual findings of the
NLRC are generally accorded not only respect but also finality provided that its
decision are supported by substantial evidence and devoid of any taint of unfairness
of arbitrariness. 9 When, however, the members of the same labor tribunal are not in

accord on those aspects of a case, as in this case, this Court is well cautioned not to
be as so conscious in passing upon the sufficiency of the evidence, let alone the
conclusions derived therefrom.
In this case, the majority of the members of the NLRC, as well as its dissenting
member, agree that there is a wage distortion arising from the bank's implementation
of the P25 wage increase; they do differ, however, on the extent of the distortion that
can warrant the adoption of corrective measures required by law.
The definition of "wage distortion," 10 aforequoted, shows that such distortion can so
exist when, as a result of an increase in the prescribed wage rate, an "elimination or
severe contraction of intentional quantitative differences in wage or salary rates"
would occur "between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation." In mandating an
adjustment, the law did not require that there be an elimination or total abrogation of
quantitative wage or salary differences; a severe contraction thereof is enough. As has
been aptly observed by Presiding Commissioner Edna Bonto-Perez in her dissenting
opinion, the contraction between personnel groupings comes close to eighty-three
(83%), which cannot, by any stretch of imagination, be considered less than severe.

. . . . (T)o compel employers simply to add on legislated increases

in salaries or allowances without regard to what is already being
paid, would be to penalize employers who grant their workers
more than the statutorily prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as securing the
interests of labor is concerned. . . .
We find the formula suggested then by Commissioner Bonto-Perez, which has also
been the standard considered by the regional Tripartite Wages and Productivity
Commission for the correction of pay scale structures in cases of wage distortion, 15 to
well be the appropriate measure to balance the respective contentions of the parties in
this instance. We also view it as being just and equitable.
WHEREFORE, finding merit in the instant petition for certiorari, the same is
GRANTED DUE PROCESS, the questioned NLRC decision is hereby SET ASIDE and
the decision of the labor arbiter is REINSTATED subject to the MODIFICATION that
the wage distortion in question be corrected in accordance with the formula expressed
in the dissenting opinion of Presiding Commissioner Edna Bonto-Perez. This decision
is immediately executory.
SO ORDERED.

The "intentional quantitative differences" in wage among employees of the bank has
been set by the CBA to about P900 per month as of 01 January 1989. It is intentional
as it has been arrived at through the collective bargaining process to which the parties
are thereby concluded. 11 The Solicitor General, in recommending the grant of due
course to the petition, has correctly emphasized that the intention of the parties,
whether the benefits under a collective bargaining agreement should be equated with
those granted by law or not, unless there are compelling reasons otherwise, must
prevail and be given effect. 12
In keeping then with the intendment of the law and the agreement of the parties
themselves, along with the often repeated rule that all doubts in the interpretation and
implementation of labor laws should be resolved in favor of labor, 13 we must
approximate an acceptable quantitative difference between and among the CBA
agreed work levels. We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Like the majority of the members of the
NLRC, we are also of the view that giving the employees an across-the-board
increase of P750 may not be conducive to the policy of encouraging "employers to
grant wage and allowance increases to their employees higher than the minimum
rates of increases prescribed by statute or administrative regulation," particularly in
this case where both Republic Act 6727 and the CBA allow a credit for voluntary
compliance. As the Court, through Associate Justice Florentino Feliciano, also pointed
out in Apex Mining Company, Inc. v. NLRC: 14

64. G.R. No. 109328 August 16, 1994

ASSOCIATED LABOR UNIONS-TUCP representing its members, DMPIEU-ALUTUCP, LOCAL 302 and/or GERONIMO DE LOS SANTOS, petitioners,
vs.
THE HON. NATIONAL LABOR RELATIONS COMMISSION (FIFTH DIVISION),
ATTY. NOEL AUGUSTO S. MAGBANUA in his capacity as Labor Arbiter, and DEL
MONTE PHILIPPINES, INC., respondents.
Seno, Mendoza & Associates for petitioners.
Nuevas & Nuevas Law Offices for private respondent.

MENDOZA, J.:

A. Prior to July 1, 1989 P100.80/day P54.00/day P46.80

This is a special civil action of certiorari to set aside the decision and resolution dated
June 22, 1992 and September 14, 1992 respectively of the National Labor Relations
Commission (Fifth Division). 1

B. Effective July 1, 1989 P100.80/day P79.00/day P21.80 (Under

R.A.
No.
6727
giving
P25.00/day
increase
to
the
temporary employees)

The antecedent facts are as follows:

On July 1, 1989, Republic Act No. 6727, otherwise known as the Wage Rationalization
Act, took effect, granting a P25.00/day increase in the statutory minimum wage of all
workers and employees in the private sector, subject to certain conditions.
In implementation of the law, private respondent Del Monte Philippines, Inc. gave a
P25.00/day increase to the P54.00/day wages of its temporary employees or
"broilers." Because the regular employees, members of petitioner union, who were
then receiving P100.80 a day were not granted a similar increase, they complained to
the management of private respondent.
On February 14, 1990, the parties executed a Memorandum Agreement wherein
private respondent, "in positive response to the union's representations and
notwithstanding that it has no legal or contractual obligation," granted the members of
petitioner union a P10.00/day wage increase effective January 1, 1990, subject to the
latter's right to claim P15.00/day as balance, through compulsory arbitration. 2

C. Effective Sept. 1, 1989 P115.80/day P79.00/day P36.80

(Under
CBA
giving
P15.00/day
increase
to
the union members)
D. Effective Jan. 1, 1990 P125.80/day P79.00/day P46.80
(Under
Agreement
on
Feb.
14,
1990
giving
P10.00/day
increase
to the union members)
E. Effective Sept. 1, 1990 P140.80/day P79.00/day P61.80
(Under
CBA
giving
P15.00/day
increase
to the union members)

On June 5, 1990, petitioners (Associated Labor Union-TUCP, representing its

members, DMPIEU-ALU-TUCP, Local 302 and Geronimo de los Santos) filed a
complaint against private respondent in the National Labor Relations Commission
(NLRC) Regional Arbitration Branch X in Cagayan de Oro City. They alleged that a
wage distortion 3had been created by the grant to its temporary employees of a
P25.00/day salary increase under Republic Act No. 6727, thereby reducing to P21.80
from the previous P46.80, the difference in salaries between the regular employees
(herein petitioners) and the temporary employees.

On appeal the NLRC affirmed the Labor Arbiter's findings and denied petitioners'
motion for reconsideration. Hence this petition.

On November 27, 1990, the Labor Arbiter, Noel Augusto S. Miranda, dismissed the
complaint for lack of merit. He found no wage distortion in view of a series of salary
increases
which
respondent
had
granted
to
petitioners
vis-a-vis the temporary employees, as shown by the following table:

The contention has no merit.

Pay
of
Union
Members Employees

Pay

of

Temporary

Difference

Petitioners contend that the increases mandated by the parties' Collective Bargaining
Agreement and the voluntary agreement dated February 14, 1990 should not be
considered as having corrected the wage distortion, since employee benefits derived
from law are exclusive, distinct, and separate from those obtained through negotiation
and agreement.

Art. 124 of the Labor Code, as amended by Republic Act No. 6727, expressly provides
that where the application of any prescribed wage increase by virtue of a law or wage
order issued by any Regional Board results in distortions of the wage structure within
an establishment, the employer and the union shall negotiate to correct the distortions.
The law recognizes, therefore, the validity of negotiated wage increases to correct
wage distortions. The legislative intent is to encourage the parties to seek solution to

the problem of wage distortions through voluntary negotiation or arbitration, rather

than strikes, lockouts, or other concerted activities of the employees or
management. 4 Recognition and validation of wage increases given by employers
either unilaterally or as a result of collective bargaining negotiations for the purpose of
correcting wage distortions are in keeping with the public policy of encouraging
employers to grant wage and allowance increases to their employees which are
higher than the minimum rates of increases prescribed by statute or administrative
regulation. 5 As this Court stated in Apex Mining, Inc. v. NLRC: 6
To compel employers simply to add on legislated increases in
salary or allowances without regard to what is already paid, would
be to penalize employers who grant their workers more than the
statutorily prescribed minimum rates of increases. Clearly, this
would be counterproductive so far as securing the interest of labor
is concerned.
Thus in Cardona v. NLRC, 7 it was held that there was no wage distortion where the
employer made salary adjustments in terms of restructing of benefits and allowances
and there was an increase pursuant to the CBA.
There is thus, to use the language of the law, no "effective obliterat[ion of] the
distinction embodied in [private respondent's] wage structure based on skills, length of
service, or other logical basis of differentiation" in this case. For it is undisputed that
the difference in wages between petitioners and the temporary employees is now
even greater than it used to be prior to the grant of the P25.00/day increase to the
latter pay pursuant to Republic Act No. 6727.
Finally, whether or not a wage distortion exists by reason of the grant of a wage
increase to certain employees is essentially a question of fact. In this case, the
findings of the Labor Arbiter, affirmed by the NLRC, that no wage distortion exists
being based on substantial evidence, are entitled to respect and finality. 8
WHEREFORE, the petition is DISMISSED.

APEX
MINING
vs.
NATIONAL
LABOR
RELATIONS
CANDIDO, respondents.

INC., petitioner,

COMMISSION

Bernabe
B.
Alabastro
Angel Fernandez for private respondent.

for

and

SINCLITICA

petitioner.

GANCAYCO, J.:
Is the househelper in the staff houses of an industrial company a domestic helper or a
regular employee of the said firm? This is the novel issue raised in this petition.
Private respondent Sinclita Candida was employed by petitioner Apex Mining
Company, Inc. on May 18, 1973 to perform laundry services at its staff house located
at Masara, Maco, Davao del Norte. In the beginning, she was paid on a piece rate
basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a
month which was ultimately increased to P575.00 a month.
On December 18, 1987, while she was attending to her assigned task and she was
hanging her laundry, she accidentally slipped and hit her back on a stone. She
reported the accident to her immediate supervisor Mila de la Rosa and to the
personnel officer, Florendo D. Asirit. As a result of the accident she was not able to
continue with her work. She was permitted to go on leave for medication. De la Rosa
offered her the amount of P 2,000.00 which was eventually increased to P5,000.00 to
persuade her to quit her job, but she refused the offer and preferred to return to work.
Petitioner did not allow her to return to work and dismissed her on February 4, 1988.
On March 11, 1988, private respondent filed a request for assistance with the
Department of Labor and Employment. After the parties submitted their position
papers as required by the labor arbiter assigned to the case on August 24, 1988 the
latter rendered a decision, the dispositive part of which reads as follows:
WHEREFORE, Conformably With The Foregoing, judgment is hereby
rendered ordering the respondent, Apex Mining Company, Inc., Masara,
Davao del Norte, to pay the complainant, to wit:

SO ORDERED.

1 Salary
Differential P16,289.20
65. G.R. No. 94951

COMPANY,

April 22, 1991

2. Emergency Living

thereof, and ministers exclusively to the personal comfort and enjoyment of

the employer's family.3

Allowance 12,430.00
3. 13th Month Pay
Differential 1,322.32
4. Separation Pay
(One-month for
every year of
service [1973-19881) 25,119.30
or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE
PESOS AND 42/100 (P55,161.42).
SO ORDERED.1
Not satisfied therewith, petitioner appealed to the public respondent National Labor
Relations Commission (NLRC), wherein in due course a decision was rendered by the
Fifth Division thereof on July 20, 1989 dismissing the appeal for lack of merit and
affirming the appealed decision. A motion for reconsideration thereof was denied in a
resolution of the NLRC dated June 29, 1990.
Hence, the herein petition for review by certiorari, which appopriately should be a
special civil action for certiorari, and which in the interest of justice, is hereby treated
as such.2 The main thrust of the petition is that private respondent should be treated
as a mere househelper or domestic servant and not as a regular employee of
petitioner.

The foregoing definition clearly contemplates such househelper or domestic servant

who is employed in the employer's home to minister exclusively to the personal
comfort and enjoyment of the employer's family. Such definition covers family drivers,
domestic servants, laundry women, yayas, gardeners, houseboys and other similar
househelps.
The definition cannot be interpreted to include househelp or laundrywomen working in
staffhouses of a company, like petitioner who attends to the needs of the company's
guest and other persons availing of said facilities. By the same token, it cannot be
considered to extend to then driver, houseboy, or gardener exclusively working in the
company, the staffhouses and its premises. They may not be considered as within the
meaning of a "househelper" or "domestic servant" as above-defined by law.
The criteria is the personal comfort and enjoyment of the family of the employer in the
home of said employer. While it may be true that the nature of the work of a
househelper, domestic servant or laundrywoman in a home or in a company
staffhouse may be similar in nature, the difference in their circumstances is that in the
former instance they are actually serving the family while in the latter case, whether it
is a corporation or a single proprietorship engaged in business or industry or any other
agricultural or similar pursuit, service is being rendered in the staffhouses or within the
premises of the business of the employer. In such instance, they are employees of the
company or employer in the business concerned entitled to the privileges of a regular
employee.
Petitioner contends that it is only when the househelper or domestic servant is
assigned to certain aspects of the business of the employer that such househelper or
domestic servant may be considered as such as employee. The Court finds no merit
in making any such distinction. The mere fact that the househelper or domestic
servant is working within the premises of the business of the employer and in relation
to or in connection with its business, as in its staffhouses for its guest or even for its
officers and employees, warrants the conclusion that such househelper or domestic
servant is and should be considered as a regular employee of the employer and not
as a mere family househelper or domestic servant as contemplated in Rule XIII,
Section l(b), Book 3 of the Labor Code, as amended.

The petition is devoid of merit.

Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms
"househelper" or "domestic servant" are defined as follows:
The term "househelper" as used herein is synonymous to the term
"domestic servant" and shall refer to any person, whether male or female,
who renders services in and about the employer's home and which services
are usually necessary or desirable for the maintenance and enjoyment

Petitioner denies having illegally dismissed private respondent and maintains that
respondent abandoned her work.1wphi1This argument notwithstanding, there is
enough evidence to show that because of an accident which took place while private
respondent was performing her laundry services, she was not able to work and was
ultimately separated from the service. She is, therefore, entitled to appropriate relief
as a regular employee of petitioner. Inasmuch as private respondent appears not to be
interested in returning to her work for valid reasons, the payment of separation pay to
her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution
of public respondent NLRC are hereby AFFIRMED. No pronouncement as to costs.

On 17 April 1989, Metro paid its rank-and-file employees a salary increase of P500.00
per month in accordance with the terms of their CBA. 2 Metro, however, did not extend
a corresponding salary increase to its supervisory employees.

SO ORDERED.
On 1 December 1989, Metro, in compliance with its CBA with SEAM, paid its
supervisory employees a salary increase of P800.00 per month.

66. G.R. No. 116008 July 11, 1995

METRO
TRANSIT
ORGANIZATION,
INC., petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, Second
Division; EDNA BONTO-PEREZ, Presiding Commissioner; DOMINGO H.
ZAPANTA, Commissioner; ROGELIO I. RAYAZA, Commissioner; and THE
SUPERVISORY EMPLOYEES ASSOCIATION OF METRO (SEAM), respondents.

FELICIANO, J.:
In this Petition for Certiorari, petitioner Metro Transit Organization, Inc. ("Metro") asks
us to set aside the Decision and Resolution of the National Labor Relations
Commission ("NLRC") dated 30 March and 22 June 1994 respectively in NLRC-NCRCA No. 000042-92 ordering it to pay its supervisory employees amounts representing
(i) a demanded wage increase based on company practice and (ii) a correction or
adjustment of an underpayment of an annual wage increase granted in the collective
bargaining agreement (CBA) between Metro and herein private respondent
Supervisory Employees Association Metro ("SEAM").
Petitioner Metro is the operator and manager of the Light Railway Transit System in
Metro Manila. It employs close to 1,000 rank-and-file and over 200 supervisory
employees. Private respondent SEAM is a union composed of supervisory employees
of petitioner Metro. In May 1989, SEAM was certified as the sole bargaining unit for
the supervisory employees of Metro.
On 1 December 1989, the first collective bargaining agreement between petitioner
Metro and private respondent SEAM took effect. 1 Prior to December 1989, Metro had
a CBA only with its rank-and-file employees. During the period when no CBA governed
the terms and conditions of employment between Metro and its supervisory
employees, whenever rank-and-file employees were paid a statutorily mandated
salary increase, supervisory employees were, as a matter of practice, also paid the
same amount plus P50.00.

On 17 April 1990, Metro paid its rank-and-file and supervisory employees a P600.00
monthly increase. The payment thus made to rank-and-file employees was in
compliance with the second year salary increase provided in their CBA. On the other
hand, the P600.00 per month paid to supervisory employees was advanced from their
second year salary increase, provided in their CBA, of P1,000.00 per month effective
1 December 1990. On 1 December 1990, Metro paid its supervisory employees the
remaining balance of P400.00 per month in addition to the P600.00 a month it had
earlier started to pay.
The third year salary increases due rank-and-file and supervisory employees were
paid on 17 April and 1 December 1991, respectively, as scheduled in their
corresponding CBAs.
On 24 March 1992, private respondent SEAM filed a Notice of Strike before the
National Conciliation and Mediation Board ("NCMB") charging petitioner Metro with (a)
discrimination in terms of wages; (b) underpayment of salary increase per CBA for
1990 and/or adjustment of salaries for correction of disparity/inequity in pay with rankand-file employees and (c) harassment and demotion of union officers. Conciliation
and mediation efforts before the NCMB failed.
On 23 June 1992, acting on a petition filed by Metro, the Secretary of Labor assumed
jurisdiction over the labor dispute and certified the same to public respondent NLRC
for same compulsory arbitration.
On 30 March 1994, the NLRC rendered its decision the dispositive portion of which
reads:
WHEREFORE, the Company is hereby ordered to pay the
amount of P550.00 per month wage increase effective April 17,
1989 and onwards to each supervisory employee and likewise
pay the sum of P600.00 per month representing underpayment in
the correction of inequities in pay or underpayment of CBA wage
increase effective December 1, 1990 and onwards.
The charge of harassment and demotion was dismissed for "lack of basis."
On 22 June 1994, NLRC denied the motion for reconsideration filed by Metro.

The instant Petition for Certiorari was filed on 14 July 1994 accompanied by a prayer
for issuance of a temporary restraining order to enjoin public respondents from
enforcing their award.
On 31 August 1994, the Court, after an oral hearing, issued a Resolution encouraging
petitioner Metro and private respondent SEAM to vigorously and earnestly exercise
their best efforts to reach an amicable and mutually acceptable settlement of their
claims and counterclaims. In the meantime, the disputants were to maintain the status
quo, in particular, private respondent SEAM and public respondent NLRC were to
refrain from seeking and granting, respectively, the issuance of a writ of execution in
respect of the decision of the NLRC.
On 29 and 30 September 1994, petitioner Metro and private respondent SEAM
respectively informed the Court that their efforts amicably to settle their dispute had
failed. Cognizant of (a) the huge disparity between the financial capability of Metro
and the amount awarded to SEAM, 3 (b) the essential public services being rendered
by the parties and (c) in the interest of avoiding any disruption of these basic services,
the Court reiterated its Order of 31 August 1994 enjoining respondents SEAM and the
NLRC from seeking and granting a writ of execution until further orders from this
Court.
The principal issues, to the mind of the Court, are: (a) whether or not a wage distortion
existed in respect of the salaries of the rank-and-file and supervisory employees of
petitioner Metro; and (b) assuming a wage distortion existed, whether or not it has
been corrected by petitioner Metro in accordance with law. 4
Private respondent SEAM vigorously asserts that an already existing wage distortion
in respect of the salaries of rank-and-file and supervisory employees was aggravated
when Metro, on 17 April 1989, paid its rank-and-file employees their CBA-stipulated
P500.00 increase but did not grant a corresponding increase (and a premium) to its
supervisory employees. Furthermore, the advance by Metro of the P600.00 on 17
April 1990 only "artificially" reduced the existing distortion. The advance was,
according to SEAM, extended merely to give the appearance of a reduction of the
existing distortion in pay between the rank-and-file and supervisory employees. On 1
December 1990, when supervisory employees were paid the balance of P400.00 the
distortion existing prior to 17 April 1990 was reinstated. Finally, SEAM claims, on top
of the salary increases granted to supervisory employees by their CBA, they should
be paid the increase corresponding to the P500.00 increase given rank-and-file
employees not only for 1989 but also onwards.
Upon the other hand, petitioner Metro firmly maintains that its practice of giving higher
increases to supervisory employees whenever rank-and-file employees were given
increases, should not be regarded as compulsory. The grant of a corresponding
increase to supervisory employees is a prerogative or discretionary act of generosity
by management considering there is no law or company policy mandating it.
Moreover, SEAM is estopped, Metro asserts, from claiming such an increase. Despite
its awareness of the P500.00 increase paid to rank-and-file employees (pursuant to
their CBA) on 17 April 1989, SEAM did not negotiate in SEAM's own CBA for the

retroactive payment or pushing forward the effectivity date of its first increase of
P800.00 to 17 April 1989. Finally, the demanded P550.00 wage increase should be
deemed, according to Metro, included in the P800.00 salary increase paid supervisory
employees on 1 December 1989.
In respect of the issue of underpayment, petitioner Metro denies that it underpaid its
supervisory employees. Metro maintains (a) that the first increase of P800.00 effective
1 December 1989 as provided in its CBA with SEAM is higher than the P500.00
increase paid its rank-and-file employees; (b) that assuming arguendo a distortion in
pay still existed, the same was corrected when the majority of the supervisory
employees, in a referendum, voted to accept the advance payment of P600.00 out of
the scheduled CBA increase of P1,000.00 effective 1 December 1990; (c) it was
actually SEAM who had proposed the advance payment of P600.00 from their
scheduled second year increase of P1,000.00; (d) SEAM had further agreed that,
come 1 December 1990, only the balance of P400.00 would have to be paid to
supervisory employees; and (e) payment by Metro of the balance of P400.00 on 1
December 1990 was merely its compliance with the scheduled second year increase
aligned with Metro's subsequent agreement with SEAM to advance the effectivity date
of the first P600.00.
In its Comment, the Office of the Solicitor General argues, rather cursorily, that public
respondent NLRC did not commit any grave abuse of discretion and that its findings of
fact must be accorded respect and finality.
I
In respect of the issue of existence of a wage distortion, the Court finds and so holds
that a wage distortion did occur when the salaries of rank-and-file employees were
increased by P500.00 per month on 17 April 1989 as stipulated in their CBA and no
corresponding increase was paid to the supervisory employees. This fact was
admitted by Atty. Virgilio C. Abejo, counsel for petitioner Metro, during the oral hearing
and Metro is bound by that admission. 5
In addition, Atty. Abejo explained that his client, as a matter of practice, granted its
supervisory employees a salary increase (and a premium) whenever it paid its rankand-file employees a salary increase. 6
The defense of management prerogative or discretion invoked by petitioner Metro in
asserting that it is not obligated to grant supervisory employees a salary increase
whenever rank-and-file employee are granted an increase is, in this case, unavailing.
Basically, Metro's argument is that such increase was merely a bonus given to
supervisory employees. A "bonus" is an amount granted and paid to an employee for
his industry and loyalty which contributed to the success of the employer's business
and made possible the realization of profits. It is something given in addition to what is
ordinarily
received
by
or
strictly
due
to
the
recipient. 7

The general rule is that a bonus is a gratuity or an act of liberality which the recipient
has no right to demand as a matter of right. 8 A bonus, however, is a demandable or
enforceable obligation when it is made part of the wage or salary or compensation of
the employee. 9 Whether or not a bonus forms part of wages depends upon the
circumstances and conditions for its payment. If it is additional compensation which
the employer promised and agreed to give without any conditions imposed for its
payment, such as success of business or greater production or output, then it is part
of the wage.But if it is paid only if profits are realized or if a certain level of productivity
is achieved, it can not be considered part of the wage. Where it is not payable to all
but only to some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefor, not a part of the
wage. 10
In the case at bar, the increase of P550.00 sought by private respondent SEAM was
neither an inducement nor was it contingent on (a) the success of the business of
petitioner Metro; or (b) the increased production or work output of the company or (c)
the realization of profits. The demand for this increase was based on a company
practice, admitted by Metro, of granting a salary increase (and a premium) to
supervisory employees whenever rank-and-file employees were granted a salary
increase. That those increases were precisely designed to correct or minimize the
wage distortion effects of increases given to rank-and-file employees (under their CBA
or under Wage Orders), highlights the fact that those increases were part of the wage
structure of supervisory employees. The demanded increase therefore is not a bonus
that is generally not demandable as a matter of right. The demanded increase, in this
instance, is an enforceable obligation so far as the supervisory employees of Metro
are concerned.
We conclude that the supervisory employees, who then (i.e., on 17 April 1989) had,
unlike the rank-and-file employees, no CBA governing the terms and conditions of
their employment, had the right to rely on the company practice of unilaterally
correcting the wage distortion effects of a salary increase given to the rank-and-file
employees, by giving the supervisory employees a corresponding salary
increase plus a premium. For reasons, however, shortly to be stated in the disposition
of the second issue, we hold that the P550.00 increase is demandable by SEAM only
in respect of the period beginning 17 April 1989 and ending on 30 November 1989.
It is true enough that, in the present case, the wage distortion to be corrected by the
award of P550.00 increase for supervisory employees beginning 17 April 1989, was
due to the time gap between the effectivity date (17 April 1989) of the increase of
P500.00 per month given to rank-and-file employees under their CBA and the
effectivity date (1 December 1989) of the P800.00 increase given to supervisory
employees under their own CBA. It is also true that had the P800.00 increase to
supervisory employees been made retroactive to 17 April 1989 by an appropriate
synchronizing provision in the Metro-SEAM CBA, no wage distortion would have
arisen. The fact, however, remains that Metro and SEAM did not agree upon such
remedy in their CBA and that the CBA increase given to rank-and-file employees did
produce a distortion effect by obliterating or drastically reducing the previous gap
between the salary rates of rank-and-file and supervisory employees. The point to be

stressed is that considering the prior practice of petitioner Metro, its supervisory
employees had the right to expect rectification of that distortion.
II
We turn to the issue of whether the wage distortion referred to above was effectively
rectified by petitioner Metro in accordance with law.
This issue arises because, as already noted, the NLRC in its 30 March 1994 Decision
decreed that Metro shall pay the "P550.00 per month wage increase effective April 17,
1989 and onwards" and similarly ordered the payment of P600.00 per month which it
found to have been underpaid "effective December 1, 1990 and onwards."
It is helpful to recall the general principles laid down in National Federation of Labor v.
National Labor Relations Commission, 11 where the Court discussed at some length
the relatively obscure concept of wage distortion. Those principles may be summarily
stated in the following manner:
(a) The concept of wage
distortion assumes an
existing
grouping
or
classification
of
employees
which
establishes distinctions
among such employees
on some relevant or
legitimate basis. This
classification is reflected
in a deferring wage rate
for each of the existing
classes of employees.
(b) Wage distortions
have often been the
result of governmentdecreed increases in
minimum wages. There
are,
however,
other
causes
of
wage
distortions,
like
the
merger of two (2)
companies (with differing
classifications
of
employees and different
wage rates) where the
surviving
company
absorbs
all
the

employees
of
the
dissolved corporation. (In
the present Metro case,
as already noted, the
wage distortion arose
because the effectivity
dates of wage increases
given to each of the two
(2) classes of employees
(rank-and-file
and
supervisory) had not
been synchronized in
their respective CBAs.)

After careful examination of the provisions of the CBA between Metro and SEAM, in
particular the provisions relating to anniversary salary increases every 1 December
beginning 1989 to 1991, we believe and so hold that together with the increase of
P550.00 referred to in Part I above, those provisions will have adequately rectified the
wage distortion which arose in respect of rank-and-file and supervisory employees.

(c) Should a wage

distortion exist, there is
no legal requirement
that, in the rectification of
that distortion by readjustment of the wage
rates of the differing
classes of employees,
the gap which had
previously or historically
existed
be
restored
in precisely the same
amount. In other words,
correction of a wage
distortion may be done
by
re-establishing
a substantial orsignifican
t gap (as distinguished
from the historical gap)
between the wage rates
of the differing classes of
employees.

CBA

Effectivity

Increase

Date

Amount

Year I

1-Dec-89

P800.00

Year II

1-Dec-90

P1,000.00

Year III

1-Dec-91

P1,000.00

(d) The re-establishment

of a significant difference
in wage rates may be the
result
of
resort
to
grievance procedures or
collective
bargaining
negotiations.
In the present case, the Court must confront the task of determining whether the CBA
forged by Metro and SEAM had, along with the award of P550.00 per month from 17
April 1989 to 1 December 1989, referred to in Part I above, adequately corrected the
wage distortion.

The CBA of supervisory employees granted them an aggregate monthly increase of

P2,800.00 over three (3) years:
Table I

Upon the other hand, the CBA of the rank-and-file employees granted them monthly
increases totalling P1,850.00 also over three (3) years:
Table II

CBA

Effectivity

Increase

Date

Amount

Year I

17-Apr-89

P500.00

Year II

17-Apr-90

P600.00

Ye 4/17/8
ar I 9

550.00 550.00
12

12/1/8 9
Year III

17-Apr-91

0.00

50

800.0 850
0

P750.00

After all the above listed salary increases had become effective, the last being on 1
December 1991, supervisory employees as a group were receiving P950.00 more per
month than rank-and-file employees as a group. Adding to this figure the amount of
P550.00 per month which we in Part I (supra) have held petitioner Metro must pay, the
increase in pay of supervisory employees would be P1,500.00 more per month than
the increases in pay of rank-and-file employees:

Ye 4/17/9
ar 0
II

600.00 600.00
13

12/1/9 0

0.00

850

400.0 125
0
0

Table III

CBA

Effecti Wage Wage

vity
Increas Increase
e

Gap

Ye 4/17/9
ar 1
III

750.00 550.00

12/1/9 1
Increa Date
se

Rank
Supervis
and File ory

Employ Employe
ees
es

(PHP)

(PHP)

0.00

500

1,000. 150
00
0

(PH
P)

We consider the difference of P1,500.00 per month a significant differential that clearly
distinguishes, on the basis of pay scales, a rank-and-file employee from a supervisory
employee.
Applying the above increases to the actual salaries being received by rank-and-file
and supervisory employees of Metro, we find that indeed the distortion caused by the
CBA-stipulated wage increase granted rank-and-file employees on 17 April 1989 was
rectified by 1 December 1991.

The record before us does not include the actual amounts of the rank-and-file and
supervisory employees' salaries. In its position paper before the NCMB, however,
private respondent SEAM stated:

Year II

The highest salary of some rank-and-file employees at present

(before adding the CBA increase) is P4,790.00 which is higher
that some supervisors with [a] salary of P3,980.00. 14
Taking the above SEAM figures and adding to them the respective CBA-stipulated
increases to the salary of thehighest paid rank-and-file employee and to
the lowest paid supervisory employee, plus the P550.00 in wage already held due to
all supervisory employees as of 17 April 1989, we find that the salary of
the lowest paid supervisory employee was, by 1 December 1991, P690.00 more than
the salary of the highest paid rank-and-file employee:

Year III

4/17/90

5,890.00

5,930.00 18 40.00

12/1/90

5,890.00

6330.00

440.00

4/17/91

6,640.00

6330.00

(310.00) 19

12/1/91

6640.00

7,330.00

690.00

Table IV

CBA

Effectivity Wage of

Increase Date

Gap

Rank and

Supervisory (PHP)

File
Employees

Employees

(PHP)

Year I

Wage of

The difference in monthly wage scales of P690.00 clearly and substantially

distinguishes, on the basis of pay, a rank-and-file employee from a
supervisory employee. 20 Since the above computation utilizes the salaries
ofhighest paid rank-and-file employee and the lowest paid supervisory
employee, figures supplied by SEAM, the differential of P690.00 represents
merely the minimum difference or gap that was restored or established once
implementation of the salary increases due to supervisory employees was
completed on 1 December 1991. That differential would, of course, be
significantly greater for average rank-and-file employees receiving a
salary less thanP4,790.00 and for average supervisory employees receiving
a salary greater than P3,980.00.
We turn to the related issue of whether the first year salary increase of P800.00 per
month given to supervisory employees under their CBA covered or took the place of
the P550.00 increase we ruled is due them in Part I (supra) by virtue of the previous
unilateral practice of Metro.

(PHP)

4,790.00

3980.00

(810.00) 15

4/17/89

5,290.00

4,530.00 16 (760.00) 17

12/1/89

5,290.00

5330.00

40.00

Metro maintains that the P800.00 monthly salary increase paid to supervisory
employees starting on 1 December 1989, should be deemed to cover or include the
P550.00 in wage increase demanded by SEAM and held by us to be due to SEAM
from 17 April 1989 to 1 December 1989. In other words, Metro argues that the wage
distortion should be regarded as cured by the CBA-mandated increase of P800.00
starting 1 December 1989.
We note that the CBA of Metro and SEAM did not contain any provision stipulating
that the P550.00 monthly increase would be credited against the P800.00 increase.
There was no crediting provision apparently because the P550.00 monthly increase
had not been provided for in the CBA with SEAM. Even so, we agree with petitioner
Metro's position. The issue of whether increases in wages essential for correcting
wage distortions may be credited against CBA-mandated increases, is not an issue of

first impression. In National Federation of Labor v. National Labor Relations

Commission, 21 the Court rejected the argument of the NLRC that wage increases
resulting from collective bargaining negotiations should not be regarded as
constituting compliance with the direction to correct wage distortions arising from the
effectivity of Wage Orders. In National Federation of Labor, the Court, after quoting
the following excerpt from Apex Mining Company, Inc. v. National Labor Relations
Commission 22
It is important to note that the creditability provisions of Wage
Orders Nos. 5 and 6 (as well as the parallel provisions in Wage
Orders Nos. 2, 3 and 4) are grounded in an important public
policy. The public policy may be seen to be the encouragement of
employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases
prescribed by statute or administrative regulation. To obliterate the
creditability provisions in Wage Orders through interpretation or
otherwise, and to compel employers simply to add legislated
increases in salaries or allowances without regard to what is
already being paid, would be to penalize employers who grant
their workers more than the statutorily prescribed minimum rates
of increases. Clearly, this would be counter-productive so far as
securing the interests of labor is concerned. The creditability
provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for
statutorily prescribed increases in salary or allowances and pay
their workers more than what the law or regulations
require. 23 (Emphasis partly in the original and partly supplied)
said:
We believe that the same public policy requires recognition and
validation, as it were, of wage increases given by employers
either unilaterally or as a result of collective bargaining
negotiations, in the effort to correct wage distortions. 24 (Emphasis
supplied)
In the instant case, the CBA-stipulated increase of P800.00 a month was intended as
the countervailing increase for supervisory employees, the rank-and-file employees
having already received their own increase approximately eight (8) months earlier. In
other words, the wage distortion in the present case arose not because of a
government-decreed increase in minimum wages or because Metro simply refused to
treat its supervisory employees, differently from its rank-and-file workers, but rather
because of a failure to synchronize the CBA-stipulated increases for rank-and-file and
for supervisory employees. Moreover, as more than once pointed out above, the
P800.00 monthly increase given to supervisory employees should be taken in
conjunction with the P550.00 month increase already awarded to supervisory
employees under Part I above. When these are taken together, the wage distortion
which occurred on 17 April 1989 was completely and permanently corrected. There

is no legal basis for requiring Metro to pay not only the P800.00 month increase, but
also, on top thereof, the P550.00 monthly increase to supervisory employees, after 1
December 1989 and forever after.
From the foregoing, we conclude that beginning 1 December 1989, by the grant of the
award of P550.00 to supervisory employees in Part I (supra) and by the operation of
the Metro-SEAM CBA, the wage distortion which occurred on 17 April 1989 had been
corrected. By 1 December 1991, a substantial gap or differential had been reestablished between the salaries of the rank-and-file and supervisory employees of
petitioner Metro. It was, therefore, grievous abuse of discretion for the NLRC to
disregard such rectification and to rule that petitioner Metro was liable to its
supervisory employees for P550.00 monthly increase beyond 1 December 1989 and
"onwards." That distortion, as already pointed out, lasted only from 17 April 1989 up to
30 November 1989, since the following day, 1 December 1989, the CBA of Metro and
SEAM went into effect.
Similarly, we believe that the NLRC committed a grave abuse of discretion in requiring
Metro to pay the sum of P600.00 per month from 1 December 1990 and
onwards, i.e., forever after. It will be recalled that Metro, upon request of SEAM, had
agreed that of the P1,000.00 monthly increase originally scheduled to be effective
under the CBA on 1 December 1990, P600.00 would take effect instead on 17 April
1990. Metro agreed to do so precisely to remedy the distortion that would otherwise
have resulted (see Tables III and IV, supra) and so, starting 17 April 1990, supervisory
employees received a monthly increase of P600.00; and starting 1 December 1990,
they started receiving an additional P400.00 or the total stipulated CBA increase of
P1,000.00 per month.
Again, for the same reasons set out earlier, we consider that these additional
payments of P600.00 per month to supervisory employees from 17 April 1990 up to 1
December 1990 should be deemed included in the P1,000.00 monthly increase
effective from 1 December 1990 and onwards. Compelling Metro to pay, starting 1
December 1990, not only the P1,000.00 per month increase stipulated in the CBA but
also an additional P600.00 per month, amounts to allowing unjust enrichment of
supervisory employees at the expense of their employer Metro.
Finally, the Court is aware of the existence of a job evaluation study prepared by
Resources Consultants International, aimed at re-examining the wage structure of
rank-and-file and supervisory employees of Metro. 25 The decision we promulgate
today is without prejudice to higher wages which rank-and-file and supervisory
employees may be receiving by virtue of implementation of such report.
ACCORDINGLY, for all the foregoing, the Petition for Certiorari is hereby GRANTED
DUE COURSE, and the Decision and Resolution of the NLRC dated 30 March and 22
June 1994, respectively, in NLRC-NCR-CA No. 000042-92 are hereby SET ASIDE. In
place thereof, another Decision is hereby RENDERED requiring petitioner Metro
Transit Organization, Inc. to pay to each of its supervisory employees the amount of
Five Hundred Fifty Pesos (P550.00) for each month or fraction of a month, embraced
within the period from 17 April 1989 to 1 December 1989, plus legal interest (six

percent [6%] per annum) thereon computed from the various dates in 1989 when such
amount should have been paid during the aforementioned period. This Decision shall
be without prejudice to any increase of wages already being enjoyed by supervisory
employees at the time of promulgation hereof.
No pronouncement as to costs.
SO ORDERED.
67. G.R. No. 982767 February 15, 1995
COCOFED
(Kalamansig)
and/or
CRISPIN
ROSETE, petitioner,
vs.
HON. CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor
and Employment and HON. MELENCIO Q. BALANAG, Director IV, DOLE,
Regional XII, Cotabato City, respondents.

Petitioner submitted its position paper claiming that it should be classified as an

establishment with less than 30 employees and with a paid-up capital of P500,000.00
or less as evidenced by the assessment of the municipal treasurer. Moreover,
complainants worked for less than eight hours, a minimum of four and maximum of
six. Hence, petitioner was justified in paying an amount less than the statutory
minimum wage.
Complainants manifested that since 1984, they were not receiving the statutory
minimum wage. They also averred that petitioner should not be categorized as an
establishment with paid-up capital of P50,000.00 or less inasmuch as it erroneously
based its claim on the value of its declared real property and not its paid-up capital.
On November 13, 1989, petitioner filed a motion to conduct a time and motion study to
determine the fair and reasonable wage rates to be paid to complainants.
On March 22, 1990, Director Melencio Q. Balanag of the DOLE Regional Office in
Cotabato City, issued a Compliance Order 1 ruling:

RESOLUTION

ROMERO, J.:
Philippine Coconut Producers Federation operates petitioner COCOFED
(Kalamansig), a coconut plantation utilized as a demonstration farm for replanting
and/or training area for coconut farmers, located in Kalamansig, Sultan Kudarat.
On November 15, 1988, a complaint inspection was conducted by the Department of
Labor and Employment, Region XII, Cotabato City in response to complaints filed by
two of petitioner's employees, Alex Edicto and Delia Pahuwayan. The inspection
revealed that petitioner was guilty of underpayment of wages, emergency cost of living
allowance (ECOLA) and 13th month pay. Accordingly, notice of inspection results were
issued: requiring petitioner to effect restitution or correction within five (5) days from
notice.
Summary investigations were conducted. During one of these hearings, petitioner
offered to increase the complainants wages to P45.00 per day but the latter refused.
Hence, the parties agreed to submit their respective position papers and other
documents necessary for the resolution of the case.

On the manifestation made by the respondent that workers were

paid by results and the former has complied with the minimum
wage, we have noticed in the payrolls for the period January 1985
to February 1988 submitted by the former during summary
investigation that said workers were not paid all the time on a
piece rate basis during paydays for three (3) years. Further, they
showed that the latter were paid on a weekly basis through a
weekly payroll prepared indicating therein the workers paid by
results, the daily paid workers and a monthly paid worker. It is
noteworthy to mention that the respondent has no permanent
mode of payment to all its workers as evidenced by the payrolls
and other documents submitted during the hearing. This is
contradictory to their allegations that they are paying their workers
on a piece rate basis since 1985. Moreover, said documents
confirmed the manifestation by the counsel of complainants that
the workers paid on a daily and monthly basis are receiving below
the statutory minimum wage.
xxx xxx xxx
WHEREFORE, premises considered, respondent COCOFED
(Kalamansig) and/or manager with address at Kalamansig, Sultan
Kudarat, is ordered to pay the Twenty One (21) workers their
entitlements for underpayment of wages, underpayment of

ECOLA, and underpayment of 13th month pay in the total amount

of ONE HUNDRED TWENTY THREE THOUSAND FOUR
HUNDRED SIXTEEN AND 14/100 (P123,416.14), Philippine
Currency, respectively indicated in Annex "A" hereof within ten
(10) days from receipt hereof. 2

Lastly, we find that respondent's claim that it falls within the

category of establishments with paid-up capital of P500,000.00
remains a bare allegation without a scintilla of evidence to stand
on. Obviously, the same is bereft of merit.
WHEREFORE, the appeal filed by the respondent is hereby
DENIED for lack of merit. The Orders of the Director, Regional
Office No. XII, dated June 29, 1990 and March 22, 1990 are
AFFIRMED. 6

Petitioner filed a motion for reconsideration claiming that serious errors were
committed in the findings of fact which would cause it grave and irreparable damage
or injury. This was denied for lack of merit in an Order 3 dated June 29, 1990 which, in
part, said:
Hence, this petition.
. . . A three (3) year actual payrolls from March 1985 to February
1989 showing the daily actual payment made by the respondent
to involved workers are substantial evidence against the mere
memorandum issued by the respondents on the matter. Further,
such payrolls submitted by respondents are not mere summaries
of daily efforts of workers but these are daily records showing
workers actual daily rate. 4
On July 30, 1990, petitioner appealed to the Secretary of Labor and Employment. This
was denied in the Order 5dated April 15, 1991 of public respondent Undersecretary
Cresenciano B. Trajano, holding that:
On the basis of the payrolls submitted by the respondent, we find
that Regional Director was correct in ruling that the complainants
are daily paid workers. While respondent claims the in 1985 these
workers were paid on piece rate basis still the payrolls show that
from March 1985 to February 1989, the complainants were paid
on a daily basis. Granting that these workers were indeed
converted to piece-rate workers, said conversion is an outright
violation of the Labor Code. An employer cannot unilaterally
decrease the salary being given to the employees pursuant to Art.
100 of the Labor Code. What it has voluntarily given cannot be
unilaterally withdrawn. Besides, the implementing rules are
explicit to the effect that nothinzg therein shall justify an employer
from withdrawing or reducing benefits or supplements provided in
existing individual or collective agreement or employer practice or
policy. (Oceanic Phamacal Employees Union v. Hon. A. Inciong,
G.R. No. L-50568, November 7, 1979)

On May 13, 1991, the Court issued a Temporary Restraining Order enjoining
respondents from implementing the Order dated April 15, 1981, March 22, 1990, and
June 29, 1990, and June 29, 1990 in RO XII Case No. SK-C1-02088-06. The Court
further required petitioner to file a bond in the amount of P10,000.00. 7
Petitioner alleges that public respondents committed grave abuse of discretion in not
categorizing it as an establishment with less than 30 employees and with a paid up
capital of P500,000.00 or less and in not finding that complainants are piece rate
workers or paid by results.
We find no grave abuse of discretion on the part of public respondent.
Petitioner alleges that it is an establishment with less than 30 employees. and a paidup Capital of P500,000.00 or less. There is no question that it employs only twentyone employees. Petitioner argues that to have a paid-up capital of P500,000.00, it
should have a subscribed capital of at least P2,000,000.00 and authorized capital
stock of P8,000,000.00. Petitioners total capital asset based on an assessment from
the Municipal Treasurer of Kalamansig and the receipts of payment of its realty taxes
is only P1,365,430.00. If categorized as such, petitioner should pay the following
wages:
Per
W.O.
No.
6
Effe
ctive
1
Nov.
1

May
1
Oct.
1
Jan.
1984
1987
1987
1988
b.
Plantation 32.00 35.00 38.50 44.00

Agriculture

financial difficulty, the assets of a corporation may be completely

dissipated although its paid-up capitalization may remain intact.
The best evidence of its paid-up capitalization would be its articles
of incorporation together with the Treasurer's Affidavit which
petitioner seems to have conveniently overlooked. Consequently,
respondent Undersecretary correctly found said claim to be "a
bare allegation without a scintilla of evidence to stand on." 9
Petitioner likewise alleges that its employees are paid by result or are; piece rate
workers who work for less than eight hours, that is, a minimum of four and a maximum
of six. Thus, they should be paid a proportionate amount of the applicable statutory
minimum wage, thus: 10

instead of the following rates used by public respondents:

Per
W.O.
No.
6
Effe
ctive
1
Nov.
1
May
1
Oct.
1984
1987
1987
b.
Plantation 32.00 38.50 44.00 8

Agriculture

We are unable to agree with petitioner's submission. As correctly pointed out by the
Office of the Solicitor General:
The allegation of petitioner that it has capital assets of
P1,365,430.00 to support its position that it has a paid-up
capitalization of less than P500,000.00 is totally without basis. It is
a basic accounting principle that the assets of a corporation do
not necessarily reflect its capitalization. In fact, in times of

Effe
ctive
1
Nov.
1
May
1
Oct.
1
Jan.
1984
1987
1987
1988
For
4
hours
16.00
17.50
For 6 hours 24.00 26.26 28.92 33.00 11

19.35

22.00

Petitioner would have us overturn the factual finding of public respondents that its
employees are daily paid workers. This we are unable to do for the payrolls submitted
by it support the latters' position. Findings of administrative agencies which have
acquired expertise because their jurisdiction is confined to specific matters are
generally accorded not only respect but finality. 12 Moreover, there is absolutely
nothing in the records which show that petitioner's employees worked for less than
eight hours. Finally, there would have been no need for petitioner to make an offer
increasing the wage to P45.00 per day if complainants were indeed piece rate
workers, as it claimed and if their wages were not underpaid, as found by public
respondents.

WHEREFORE, the petition is DISMISSED and the Temporary Restraining Order

issued on May 13, 1991 is LIFTED.
SO ORDERED.

68. G.R. No. 88538

On the other hand, the respondent filed a Motion to Dismiss contending that
the complainant-union has no legal capacity to sue because a
representation issue is still pending with Med-Arbiter Edgardo Cruz in LRD
CASE NO. M-001-85.

April 25, 1990

ABOITIZ
SHIPPING
CORPORATION, petitioner,
vs.
HON. DIONISIO C. DELA SERNA, IN HIS CAPACITY AS UNDERSECRETARY OF
LABOR AND EMPLOYMENT; HON. LUNA C. PIEZAS IN HIS CAPACITY AS
DIRECTOR, NATIONAL CAPITAL REGION, DEPARTMENT OF LABOR AND
EMPLOYMENT;
and,
ABOITIZ
SHIPPING
EMPLOYEES
ASSOCIATION, respondents.
Alejandro
B.
Cinco
Rogelio B. De Guzman for private respondent.

. . . a complaint was filed by the Aboitiz Shipping Employees Association

against Aboitiz Shipping Corporation for non-compliance of the mandated
minimum wage rates and allowances pursuant to P.D. Nos. 1713, 1751,
Wage Order Nos. 1, 2, 3, 4, 5 and 6. Accordingly, the Labor Regulation
Officers of the Regional Office a quoinspected the respondent's employment
records.

for

petitioner.

PADILLA, J.:
The principal issue in this special civil action for certiorari is whether the respondent
Regional Director, National Capital Region, Department of Labor and Employment
(Regional Director, for short) correctly assumed jurisdiction over the money claims
filed with him by the complainants (members of herein private respondent).
Assailed specifically in this petition is the Order dated 9 February 1989 of the
respondent Undersecretary of Labor and Employment affirming the Order dated 13
October 1988 of the Regional Director, ordering petitioner company to pay the seven
hundred seventeen (717) complainants a total amount of P1,350,828.00.,
or P1,884.00 each, representing underpayment of an allowance of P2.00 per day,
reckoned from 16 February 1982 to 15 February 1985.
The facts of the case, as found by respondent Undersecretary, are as follows:

Series of hearings were conducted whereby the Office a quo repeatedly

directed the respondent to present and submit all its pertinent
papers/employment records covered by the investigation. However, on
several occasions, the respondent failed to appear. Likewise, despite
repeated notices, the respondent failed to present any of the documents
due for inspection evidencing correct payments of salaries and allowances.
On December 28, 1987, the hearing officer submitted his report and
recommended for the payment to the union's members amounting to an
aggregate sum of P16,200,877.47.
On January 20, 1988, the Office a quo formally issued subpoena duces
tecum, requiring the presentation by the respondent of its employees'
payrolls and vouchers covering the period from February 16, 1982 to
December 31, 1985. This, the respondent ignored. In lieu thereof, it filed a
second Motion to Dismiss alleging that on July 24, 1986, the parties entered
into a compromise agreement whereby they agreed that all cases filed
against and by respondent would be dropped and/or dismissed, including
the above entitled case; that pursuant to and by virtue of the compromise
agreement, cases filed against the Aboitiz Shipping Corporation and its
officers were dropped and/or withdrawn and/or dismissed; and that similarly,
cases filed by Aboitiz Shipping Corporation and its officers against the union
and its officers were dropped, withdrawn and/or dismissed.
In the subsequent hearing of February 16, 1988 however, the parties
agreed that on March 4, 1988, the respondent shall submit to the Office a
quo the required payrolls/vouchers for wages and salaries covering the
period from February 16, 1982 to December 31, 1985. On that date, the
respondent again failed to make good its commitment. Nevertheless, it
agreed to submit the payrolls of its Manila-based employees for the period
from January 1982 to December 1982. Together with the submission of the
photocopies of the payrolls of the Manila-based employees, the respondent
also filed a Manifestation of Compliance stating that the following should be
taken into consideration:

Annex 1. Which is a BWF/ISM Form No. 5 an advance notice dated October

1987 issued by the DOLE Regional Office No. 7 notifying respondent of
their intent to check payrolls etc. . . .
Annex 2. Which is the notice of inspection results no. 05598 dated October
23, 1987 stating that the respondent (company-wide payrolls, etc.) has no
violation insofar as wages, salaries, etc. are concerned as well as the
benefits. Its indicated in the CBA. . . .
Annex 3. Which is the certification of the ASEA Union President based in
Cebu City and the Union Vice President that company records inspected
coveting the period 1984-1987 were true correct and in order, and in
compliance with the Labor and Standard Laws;
Annex 4. Which is the existing CBA between the respondent and
complainant ASEA employees Union;
Annex 5. Which is the letter of Bureau of Working Conditions dated July 17,
1987 signed by Director Augusto Sanchez sustaining and validating
respondent's use of 314 as divisor in the computation of wages and COLA
for land based employees of respondent.
Again, on July 5, 1988, the respondent filed a supplemental Motion to
Dismiss, questioning this time the jurisdiction of the Office a quo. The
motion alleged that ". . . considering the complaint involves money claims,
the original and exclusive jurisdiction rests not before the Honorable
Director but before the labor Arbiter . . ."
xxx

xxx

xxx

Another hearing was conducted on August 17, 1988, whereby the

respondent was required to submit its payrolls for the year 1984. The
respondent manifested however, that its Motion to Dismiss be resolved first
by the Office a quo. Further, the respondent averred that the payroll for
1984 need not be submitted, and thus moved for the resolution of this case
based on the available records and motions submitted.1
Subsequently, respondent Regional Director issued the now assailed Order dated 13
October 1988, the dispositive portion of which reads:
WHEREFORE, premises considered, the Aboitiz Shipping Corporation is
hereby Ordered to pay the herein listed complainants the total amount of
ONE MILLION THREE HUNDRED FIFTY THOUSAND EIGHT HUNDRED
TWENTY EIGHT and 00/100 PESOS (P1,350,828.00.) representing
underpayment of daily allowance of TWO (P2.00) PESOS per day reckoned
from 16 February 1982 to 15 February 1985.

FURTHER, the Aboitiz Shipping Corporation is hereby Ordered to pay each

and every one of its employees the deficiency in allowance of two (P2.00)
PESOS per day from 16 February 1985 onward until this Order is fully
complied with.2
On appeal to the Office of the Secretary of Labor and Employment, in which petitioner
questioned, among others, the jurisdiction of respondent Regional Director over the
instant claims, respondent Undersecretary issued the Order dated 9 February 1989
dismissing petitioner's appeal and affirming the Order dated 13 October 1988 of the
respondent Director. The motion for reconsideration of the order dated 9 February
1989 having been denied by respondent Undersecretary in the Order dated 2 June
1989, petitioner interposed this present petition.
Petitioner contends that it is the Labor Arbiter, not the Regional Director who has
jurisdiction over money claims, citing Article 217 of the Labor Code, and invoking this
Court's ruling in Zambales Base Metals, Inc. vs. Minister of Labor.3
We rule against petitioner's contention.
Pertinent to the issue at bar are Articles 129 and 217 of the Labor Code, as amended
by Sections 2 and 9 of Republic Act 6715 approved on 2 March 1989 which read as
follows:
Article 129. Recovery of wages, simple money claims and other benefits.
Upon complaint of any interested party, the Regional Director of the
Department of Labor and Employment or any of the duly authorized hearing
officers of the Department is empowered, through summary proceeding and
other monetary claims and benefits, including legal interest, owing to an
employee or person employed in domestic or household service or
househelper under this Code, arising from employer-employee
relations: Provided, that such complaint does not include a claim for
reinstatement: Provided, further That the aggregate money claims of each
employee of househelper do not exceed five thousand pesos (P5,000.00).
The Regional Director hearing officer shall decide to resolve the complaint
within thirty (30) calendar days from the date of the filing of the same. Any
sum thus recovered on behalf of any employee or househelper pursuant to
this Article shall be held in a special deposit account, and shall be paid, on
order of the Secretary of Labor and Employment or the Regional Director
directly to the employee or househelper concerned. Any such sum not paid
to the employee or househelper, because he cannot be located after diligent
and reasonable effort to locate him within a period of three (3) years, shall
be held as a special fund of the Department of Labor and Employment to be
used exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or hearing officer
pursuant to this provision may be appealed on the same grounds provided
in Article 223 of this Code, within five (5) calendar days from receipt of a

copy of said decision or resolution, to the National Labor Relations

Commission which shall resolve the appeal within ten (10) calendar days
from the submission of the last pleading required or allowed under its rules.
The Secretary of Labor and Employment or his duly authorized
representative may supervise the payment of unpaid wages and other
monetary claims and benefits, including legal interest, found owing to any
employee or househelper under this Code.
xxx

xxx

interpretation or enforcement of company personnel policies shall

be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided
in said agreements.
It should be pointed out that, following the ruling in Briad Agro vs. Dela Cerna,
and L.M. Camus Engineering vs.Secretary of Labor, 4 the above-cited amendments,
being curative in nature, have retroactive effect and, thus, find application in the
instant case.

xxx

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

Under the foregoing provisions of Articles 129 and 217 of the Labor Code, as
amended, the Regional Director is empowered, through summary proceeding and
after due notice, to hear and decide cases involving recovery of wages and other
monetary claims and benefits, including legal interest, provided the following
requisites are present, 5 to wit:
1) the claim is presented by an employee or person employed in domestic
or household service, or househelper;

(1) Unfair labor practice cases;

2) the claim arises from employer-employee relations;
(2) Termination disputes;
3) the claimant does not seek reinstatement; and
(3) If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
(6) Except claims for employees compensation, social security,
medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) whether or not accompanies
with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements and those arising from the

4) the aggregate money claim of each employee or househelper does not

exceed P5,000.00 (Art. 129, Labor Code, as amended by R.A. 6715).
In the absence of any of the requisites above enumerated, it is the Labor Arbiter who
shall have exclusive original jurisdiction over claims arising from employer-employee
relations, except claims for employees' compensation, social security, medicare and
maternity benefits, all these pursuant to Article 217 of the Labor Code, particularly
paragraph six (6) thereof.
This power of the Regional Directors qualified under R.A. 6715 is recognized in the
modificatory resolution dated 9 November 1989 in said Briad Agro vs. Dela
Cerna which modified the earlier decision therein dated 29 June 1989. 6
In view of the enactment of R.A. 6715, and the modificatory resolution in the Briad
Agro case, the ruling in Zambales Base Metals, Inc. vs. Minister of Labor, supra, is no
longer applicable.
In the case at bar, it is noted that in the Order dated 13 October 1988 of the Regional
Director, the latter found eachof the seven hundred seventeen (717) complainants
entitled to a uniform amount of P1,884.00. (Rollo, pp. 11 7-131,). All the other
requisites for the exercise of the power of the Regional Director under Article 129 of

the Labor Code, as amended by R.A. 6715, are present. It follows that the respondent
Regional Director properly took cognizance of the claims, subject of this petition.
To the petitioner's contention that it was denied due process of law as it was not
afforded time and opportunity to present its evidence, the records show that on
several occasions despite due notice, petitioner failed to either appear at the
scheduled hearings, or to present its employees' payrolls and vouchers for wages and
salaries, particularly, those covering the period from 16 February 1982 to 31
December 1985. Therefore, petitioner was not denied due process of law.
We also do not agree with the petitioner's allegation that it was improper for the
respondent Regional Director to order in the questioned Order dated 13 October
1988, compliance with P.D. 1678 7 as the issue on the said decree was never raised
by private respondent in its complaint filed before the Regional Director. While it may
be true that P.D. 1678 is not one of the laws where non-compliance therewith was
complained of, still, the Regional Director correctly acted in ordering petitioner to
comply therewith, as he (Regional Director) has such power under his visitorial and
enforcement authority provided under Article 128(a) of the Labor Code, which
provides:
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.
Petitioner also claims that the complaint filed against it should have been dismissed
outright, considering the compromise agreement dated 24 July 1986, which
purportedly contains the agreement of the parties therein to dismiss the cases filed by
one against the other. 8
We find no merit in said contention, in the light of the Regional Director's finding that
the said agreement can not bind the complainant-union vis-a-vis the instant claims, for
the reason that it was entered into by one Mr. Elizardo Manuel 9 in his personal
capacity, one Luis M. Moro, Jr. representing Aboitiz Shipping Corporation, and Atty.
Luis D. Flores in his capacity as legal counsel of ASEA-CLO, 10 which finding is
supported by the records of the case before us. Such records show that the
compromise agreement primarily binds only the said Mr. Manuel, and that, therefore, it
has nothing to do with the rest of the other complainant-union members.1wphi1 The
said agreement 11 reads:
COMPROMISE AGREEMENT

This Agreement, entered into by and among Mr. ELIZARDO MANUEL in his personal
capacity, LUIS M. MORO, JR. representing Aboitiz Shipping Corporation and Atty.
LUIS D. FLORES in his capacity as Legal Counsel of ASEA-CLO.
Based on a compromise agreement Mr. Elizardo Manuel is requesting Aboitiz
Shipping Corporation for payment of P70,000.00 in full settlement of all monetary
claims for back wages and benefits he has, including the settlement decided by the
NLRC which presently is under appeal.
For and in consideration of the above stated amount Mr. Elizardo Manuel and Aboitiz
Shipping Corporation mutually agree that:
Mr. Elizardo Manuel is deemed resigned from Aboitiz Shipping
Corporation upon payment of the above stated amount;
xxx

xxx

xxx

Aboitiz Shipping Corporation will furnish Mr. E. Manuel a

certificate of good moral character;
All pending cases as attested by our Legal Counsel that are
related on filed by E. Manuel against the Officers of Aboitiz
Shipping Corporation and Aboitiz Shipping Corporation itself will
be immediately dropped;
Aboitiz Shipping Corporation also agrees to drop all pending
cases related to and filed against Mr. E. Manuel and Officers of
the Union.
Done this 24th day of July, 1986 in Metro Manila, Philippines.
(SGD)
ELIZARDO MANUEL

(SGD)
LUIS M. MORO, JR.

(SGD)
ATTY. LUIS D, FLORES
Considering the terms of the said compromise agreement, we rule that said Mr.
Manuel shall be excluded from the list of complainants who shall receive money
awards from the petitioner.
Finally, petitioner Avers: that the award of P1,350,828.00. is without factual and legal
basis; that petitioner did not commit any labor standards violation pursuant to the
DOLE inspection results and the union certification to that effect; and that 291 of the

717 complainants are non-employees of petitioner, and that the other 136 of the said
717 commenced employment only after February 1982. hence, not entitled to receive
money awards. The foregoing contentions being evidentiary in nature, we have to
respect the factual findings of public respondents regarding the above-cited
petitioner's averments, the long-settled rule being that factual findings of labor officials
are, generally, conclusive and binding on this Court when supported by substantial
evidence. 12
WHEREFORE, the assailed Order dated 9 February 1989 of the respondent
Undersecretary of Labor and Employment affirming the Order dated 13 October 1988
of the Regional Director is hereby AFFIRMED, with the modification that Mr. Elizardo
Manuel shall be excluded from the list of complainants at bar who are entitled to
money awards of P1,884.00. each. Petition is DISMISSED.
SO ORDERED.

69. G.R. No. 74621 February 7, 1990

BROKENSHIRE
MEMORIAL
HOSPITAL,
INC., petitioner,
vs.
THE HONORABLE MINISTER OF LABOR & EMPLOYMENT AND BROKENSHIRE
MEMORIAL HOSPITAL EMPLOYEES AND WORKER'S UNION-FFW Represented
by EDUARDO A. AFUAN, respondents.
Renato B. Pagatpatan for petitioner.

PARAS, J.:
This petition for review by certiorari seeks the annulment or modification of the Order
of public respondent Minister of Labor dated December 9, 1985 in a case for noncompliance with Wage Order Nos. 5 and 6 docketed as ROXI-LSED Case No. 14-85
which 1) denied petitioner's Motion for Reconsideration dated February 3, 1986 and 2)
affirmed the Order of Regional Director Eugenio I. Sagmit, Jr., Regional Office No. XI
Davao City, dated April 12, 1985, the dispositive portion of which reads as follows:

WHEREFORE, premises considered, respondent Brokenshire

Memorial Hospital, Incorporated is hereby ordered to pay the
above-named workers, through this Office, within fifteen (15) days
from receipt hereof, the total sum of TWO HUNDRED EIGHTYFOUR
THOUSAND
SIX
HUNDRED
TWENTY
FIVE
(P284,625.00) PESOS representing their living allowance under
Wage Order No. 5 covering the period from October 16, 1984 to
February 28, 1985 and under Wage Order No. 6 effective
November 1, 1984 to February 28, 1985. Respondent is further
ordered to pay the employees who are likewise entitled to the
claims here presented, but whose names were inadvertently
omitted in the list and computation. (Rollo, p. 7)
Petitioner contends that the respondent Minister of Labor and Employment acted
without, or in excess of his jurisdiction or with grave abuse of discretion in failing to
hold:
A) That the Regional Director committed grave abuse of
discretion in asserting exclusive jurisdiction and in not certifying
this case to the Arbitration Branch of the National Labor Relations
Commission for a full-blown hearing on the merits;
B) That the Regional Director erred in not ruling on the
counterclaim raised by the respondent (in the labor case, and now
petitioner in this case);
C) That the Regional Director erred -in skirting the constitutional
and legal issues raised. (Rollo, p. 4)
This case originated from a complaint filed by private respondents against petitioner
on September 21, 1984 with the Regional Office of the MOLE, Region XI, Davao City
for non-compliance with the provisions of Wage Order No. 5. After due healing the
Regional Director rendered a decision dated November 16, 1984 in favor of private
respondents. Judgment having become final and executory, the Regional Director
issued a Writ of Execution whereby some movable properties of the hospital
(petitioner herein) were levied upon and its operating expenses kept with the bank
were garnished. The levy and garnishment were lifted when petitioner hospital paid
the claim of the private respondents (281 hospital employees) directly, in the total
amount of P163,047.50 covering the period from June 16 to October 15, 1984.
After making said payment, petitioner hospital failed to continue to comply with Wage
Order No. 5 and likewise, failed to comply with the new Wage Order No. 6 which took

effect on November 1, 1984, prompting private respondents to file against petitioner

another complaint docketed as ROXI-LSED-14-85, which is now the case at bar.
In its answer, petitioner raised the following affirmative defenses:
1) That the Regional Office of the Ministry of Labor did not acquire
jurisdiction over it for want of allegation that it has the capacity to
be sued and
2) That Wage Order Nos. 5 and 6 are non-constitutional and
therefore void. Significantly petitioner never averred any
counterclaim in its Answer.
After the complainants had filed their reply, petitioner filed a Motion for the Certification
of the case to the National Labor Relations Commission for a full-blown hearing on the
matter, including the counterclaim interposed that the complainants had unpaid
obligations with the Hospital which might be offset with the latter's alleged obligation to
the former.
Issues having been joined, the Regional Director rendered a decision on April 12,
1985 in favor of the complainants (private respondents herein) declaring that petitioner
(respondent therein) is estopped from questioning the acquisition of jurisdiction
because its appearance in the hearing is in itself submission to jurisdiction and that
this case is merely a continuance of a previous case where the hospital already
willingly paid its obligations to the workers on orders of the Regional Office. On the
matter of the constitutionality of the Wage Order Nos. 5 and 6, the Regional Director
declared that only the court can declare a law or order unconstitutional and until so
declared by the court, the Office of the Regional Director is duly bound to enforce the
law or order.
Aggrieved, petitioner appealed to the Office of the Minister of Labor, which dismissed
the appeal for lack of merit. A motion for reconsideration was likewise denied by said
Office, giving rise to the instant petition reiterating the issues earlier mentioned.
The crucial issue We are tasked to resolve is whether or not the Regional Director has
jurisdiction over money claims of workers concurrent with the Labor Arbiter.
It is worthy of note that the instant case was deliberated upon by this Court at the
same time that Briad Agro Development Corporation v. de la Cerna, G.R. No. 82805
and L.M. Camus Engineering Corporation v. Hon. Secretary of Labor, et al. G.R. No.
83225, promulgated on June 29,1989 and Maternity Children's Hospital vs. Hon.

Secretary of Labor, et al., G.R. No. 78909, promulgated 30 June 1989, where
deliberated upon; for all three (3) cases raised the same issue of jurisdiction of the
Regional Director of the Department of Labor to pass upon money claims of
employees. Hence, we will be referring to these cases, most especially the case of
Briad Agro which, as will be seen later, was reconsidered by the court.
Contrary to the claim of petitioners that the original and exclusive jurisdiction over said
money claims is properly lodged in the Labor Arbiter (relying on the case of Zambales
Base Metals Inc. v. Minister of Labor, 146 SCRA 50) and the Regional Director has no
jurisdiction over workers' money claims, the Court in the three (3) cases abovementioned ruled that in view of the promulgation of Executive Order No. 111, the ruling
in the earlier case of Zambales Base Metals is already abandoned. In accordance with
the rulings in Briad Agro, L.M. Camus, and Maternity Children's Hospital, the Regional
Director exercises concurrent jurisdiction with the Labor Arbiter over money claims.
Thus,
. . . . Executive Order No. 111 is in the character of a curative law,
that is to say, it was intended to remedy a defect that, in the
opinion of the legislative (the incumbent Chief Executive in this
case, in the exercise of her lawmaking power under the Freedom
Constitution) had attached to the provision subject of the
amendment. This is clear from the proviso: "The provisions of
Article 217 to the contrary notwithstanding . . ." Plainly, the
amendment was meant to make both the Secretary of Labor (or
the various Regional Directors) and the Labor Arbiter share
jurisdiction. (Briad Agro Dev. Corp. v. Sec. of Labor, supra).
Under
the
present
rules,
a
Regional
Director
exercises both visitorial and enforcement power over labor
standards cases, and is therefore empowered to adj udicate
money claims, provided there still existsan employer-employee
relationship, and the findings of the regional office is not
contested by the employer concerned. (Maternity Children's
Hospital v. Sec. of Labor, supra).
However, it is very significant to note, at this point, that the decision in the
consolidated cases of Briad Agro Development Corp. and L.M. Camus Engineering
Corp. was reconsidered and set aside by this Court in a Resolution promulgated on
November 9,1989. In view of the enactment of Republic Act No. 6715, approved on
March 2, 1989, the Court found that reconsideration was proper.
RA 6715 amended Art. 129 and Art. 217 of the Labor Code, to read as follows:

ART. 129. Recovery of wages, simple money claims and other

benefits.Upon complaint of any interested party, the Regional
Director of the Department of Labor and Employment or any of
the duly authorized hearing officers of the Department is
empowered, through summary proceeding and after due notice,
to hear and decide any matter involving the recovery of wages
and other monetary claims and benefits, including legal interest,
owing to an employee or person employed in domestic or
household service or househelper under this code, arising from
employer-employee relations, Provided, That such complaint
does not include a claim for reinstatement; Provided, further, That
the aggregate money claims of each employee or househelper do
not exceed five thousand pesos (P5,000.00). The Regional
Director or hearing officer shall decide or resolve the complaint
within thirty (30) calendar days from the date of the filing of the
same . . .
Any decision or resolution of the Regional Director or hearing
officer pursuant to this provision may be appealed on the same
grounds provided in Article 223 of this Code, within five (5)
calendar days from 11 receipt of a copy of said decision or
resolution, to the National Labor Relations Commission which
shall resolve the appeal within ten (10) calendar days from the
submission of the last pleading required or allowed under its
rules.
ART. 217. Jurisdiction of Labor Arbiters and the Commission.
Except as otherwise provided under this code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case
by the parties for decision without extension, even in the absence
of steno graphic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanied with a claim of reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;

(4) Claims for actual, moral, exemplary and other forms of

damages arising from the employer-employee relation;
(5) Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
(6) Except claims for employees compensation, social security,
medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount not
exceeding five thousand pesos (P5,000.00), whether or not
accompanied with a claim for reinstatement.
It will be observed that what in fact conferred upon Regional Directors and other
hearing officers of the Department of Labor (aside from the Labor Arbiters)
adjudicative powers, i.e., the power to try and decide, or hear and determine any claim
brought before them for recovery of wages, simple money claims, and other benefits,
is Republic Act 6715, provided that the following requisites concur, to wit:
1) The claim is presented by an employee or person employed in
domestic or household service, or househelper under the code;
2) The claimant, no longer being employed, does not seek
reinstatement; and
3) The aggregate money claim of the employee or househelper
does not exceed five thousand pesos (P5,000.00).
In the absence of any of the three (3) requisites, the Labor Arbiters have exclusive
original jurisdiction over all claims arising from employer-employee relations, other
than claims for employee's compensation, social security, medicare and maternity
benefits.
We hereby adopt the view taken by Mr. Justice Andres Narvasa in his Separate
Opinion in the case of Briad Agro Dev. Corp., as reconsidered, a portion of which
reads:
In the resolution, therefore, of any question of jurisdiction over a
money claim arising from employer-employee relations, the first

inquiry should be into whether the employment relation does

indeed still exist between the claimant and the respondent.
If the relation no longer exists, and the claimant does not seek
reinstatement, the case is cognizable by the Labor Arbiter, not by
the Regional Director. On the other hand, if the employment
relation still exists, or reinstatement is sought, the next inquiry
should be into the amount involved.
If the amount involved does not exceed P5,000.00, the Regional
Director undeniably has jurisdiction. But even if the amount of the
claim exceeds P5,000.00, the claim is not on that account
necessary removed from the Regional Director's competence. In
respect thereof, he may still exercise the visitorial and
enforcement powers vested in him by Article 128 of the Labor
Code, as amended, supra; that is to say, he may still direct his
labor regulations officers or industrial safety engineers to inspect
the employer's premises and examine his records; and if the
officers should find that there have been violations of labor
standards provisions, the Regional Director may, after due notice
and hearing, order compliance by the employer therewith and
issue a writ of execution to the appropriate authority for the
enforcement thereof. However, this power may not, to repeat, be
exercised by him where the employer contests the labor
regulation officers' findings and raises issues which cannot be
resolved without considering evidentiary matters not verifiable in
the normal course of inspection. In such an event, the case will
have to be referred to the corresponding Labor Arbiter for
adjudication, since it falls within the latter's exclusive original
jurisdiction.
Anent the other issue involved in the instant case, petitioner's contention that the
constitutionality of Wage Order Nos. 5 and 6 should be passed upon by the National
Labor Relations Commission, lacks merit. The Supreme Court is vested by the
Constitution with the power to ultimately declare a law unconstitutional. Without such
declaration, the assailed legislation remains operative and can be the source of rights
and duties especially so in the case at bar when petitioner complied with Wage Order
No. 5 by paying the claimants the total amount of P163,047.50, representing the
latter's minimum wage increases up to October 16, 1984, instead of questioning
immediately at that stage before paying the amount due, the validity of the order on
grounds of constitutionality. The Regional Director is plainly ,without the authority to
declare an order or law unconstitutional and his duty is merely to enforce the law
which stands valid, unless otherwise declared by this Tribunal to be unconstitutional.

On our part, We hereby declare the assailed Wage Orders as constitutional, there
being no provision of the 1973 Constitution (or even of both the Freedom Constitution
and the 1987 Constitution) violated by said Wage Orders, which Orders are without
doubt for the benefit of labor.
Based on the foregoing considerations, it is our shared view that the findings of the
labor regulations officers may not be deemed uncontested as to bring the case at bar
within the competence of the Regional Director, as duly authorized representative of
the Secretary of Labor, pursuant to Article 128 of the Labor Code, as amended.
Considering further that the aggregate claims involve an amount in excess of
P5,000.00, We find it more appropriate that the issue of petitioner hospital's liability
therefor, including the proposal of petitioner that the obligation of private respondents
to the former in the aggregate amount of P507,237.57 be used to offset its obligations
to them, be ventilated and resolved, not in a summary proceeding before the Regional
Director under Article 128 of the Labor Code, as amended, but in accordance With the
more formal and extensive proceeding before the Labor Arbiter. Nevertheless, it
should be emphasized that the amount of the employer's liability is not quite a factor in
determining the jurisdiction of the Regional Director. However, the power to order
compliance with labor standards provisions may not be exercised where the employer
contends or questions the findings of the labor regulation officers and raises issues
which cannot be determined without taking into account evidentiary matters not
verifiable in the normal course of inspection, as in the case at bar.
Viewed in the light of RA 6715 and read in consonance with the case of Briad Agro
Development Corp., as reconsidered, We hold that the instant case falls under the
exclusive original jurisdiction of the Labor Arbiter RA 6715 is in the nature of a curative
statute. Curative statutes have long been considered valid in our jurisdiction, as long
as they do not affect vested rights. In this case, We do not see any vested right that
will be impaired by the application of RA 6715. Inasmuch as petitioner had already
paid the claims of private respondents in the amount of P163,047.50 pursuant to the
decision rendered in the first complaint, the only claim that should be deliberated upon
by the Labor Arbiter should be limited to the second amount given by the Regional
Director in the second complaint together with the proposal to offset the obligations.
WHEREFORE, the assailed decision of the Regional Director dated April 12, 1985, is
SET ASIDE. The case is REFERRED, if the respondents are so minded, to the Labor
Arbiter for proper proceedings.
SO ORDERED.

70. G.R. No. 87439 February 21, 1990

ODIN
SECURITY
AGENCY, petitioner,
vs.
HON. DIONISIO C. DE LA SERNA, in his capacity as Undersecretary, Department
of Labor and Employment, HON. LUNA C. PIEZAS, in his capacity as Regional
Director (DOLE), National Capital Region and SERGIO APILADO, MAMERTO
GENER, ARMANDO YUMUL, HERMINIGILDO BARGAS, MARCIANO BOLOCON,
WILLIAM ADAMI, ANTONIO PUBLICO, LEOPOLDO SAAVEDRA, WARLITO
ILAGA, JOVANY SERATO, DANIEL MINGLANA, JOSE MIRANDA, JR.,
ANASTACIO SANTILLAN, ROLANDO FERNANDEZ, NICANOR FEREAS,
FRANCISCO VERZOSA, PLARIDEL ELORIA, APSIN PAGAYAO, JAIME DORADO,
GUILLERMO ELLARES, ARTURO FACTOR, DANIEL FERUISH, CRISOSTOMO
FONSECA, JERRY GA, FRANCISCO GUINSATAO, SIXTO LIPER, ALLAN
MANALLA, GEORGE ORQUESTA, WILFREDO QUIROZ, BENJAMIN UY, EDWIN
ORDONA and DEMETRIO TORRES, respondents.

Private respondents alleged in their position paper that their latest monthly salary was
P1,600; that from this amount, petitioner deducted P100 as administrative cost and
P20 as bond; that they were not paid their premium pay and overtime pay for working
on the eleven (11) legal holidays per year; and, that since private respondents were
relieved or constructively dismissed, they must also be paid backwages.
Petitioner, on the other hand, contended that on July 21, 1986, some 48 security
guards threatened mass action against it. Alarmed by a possible abandonment of post
by the guards and mindful of its contractual obligations to its clients/principals,
petitioner relieved and re-assigned the complaining guards to other posts in Metro
Manila. Those relieved were ordered to report to the agency's main office for
reassignment. Only few complied, so those who failed to comply were placed on
"AWOL" status. Petitioner claimed it complied with the Labor Code provisions, and in
support thereof, it submitted the "Quitclaim and Waiver" of thirty-four (34)
complainants. It further alleged that complainants who rendered over-time work as
shown by their time sheets were paid accordingly; that service incentive leaves not
availed of, night shift differential, rest days, and holidays were paid in cash.

Ramon Encarnacion and Honesto D. Noche for petitioner.

Luis Sementilla, Jr. for private respondents.

On November 18, 1986, petitioner filed an ex parte manifestation alleging that

nineteen (19) complainants had withdrawn their complaints.
On January 1, 1987, petitioner again filed a supplemental ex parte manifestation
alleging that Luis San Francisco also withdrew his complaint.

GRIO-AQUINO, J.:
This petition for certiorari and prohibition with prayer for a restraining order and/or
preliminary injunction seeks to annul and set aside the order dated March 20, 1987,
issued by public respondent Luna C. Piezas in his capacity as the Regional Director,
National Capital Region, Department of Labor and Employment, and the orders dated
March 23, 1988 and March 13, 1989, issued by public respondent Dionisio C. De la
Serna as Undersecretary of the Department of Labor and Employment, and to enjoin
the public respondents and the Department of Labor and Employment (DOLE) from
executing said orders.
On July 8, 1986, a complaint was filed by Sergio Apilado and fifty-five (55) others
charging the petitioner Odin Security Agency (hereafter "OSA"), underpayment of
wages, illegal deductions, non-payment of night shift differential, overtime pay,
premium pay for holiday work, rest days and Sundays, service incentive leaves,
vacation and sick leaves, and 13th-month pay. When conciliation efforts failed, the
parties were required to submit their position papers.

Earlier, on October 21, 1986, seventeen (17) complainants repudiated their quitclaim
and waiver. They alleged that management pressured them to sign documents which
they were not allowed to read and that if such waiver existed, they did not have any
intention of waiving their rights under the law.
Petitioner in its reply argued that complainants were estopped from denying their
quitclaims on the ground of equity; that being high school graduates, complainants
fully understood the document they signed; and that complainant's allegation of
coercion or threat was a mere afterthought.
Later, six (6) of the seventeen (17) complainants who repudiated their quitclaims again
executed quitclaims and waivers.
On March 20, 1987, public respondent Luna C. Piezas issued an order, the dispositive
portion of which reads:

WHEREFORE, premises considered, Order of Compliance is

hereby issued directing respondent to pay complainants the
amounts opposite their names, to wit:
1. Mamerto Gener Pl,989.05

The complaining guards filed a motion for reconsideration which was treated as an
appeal by respondent Undersecretary Dionisio C. De la Serna.
On March 23, 1988, the Undersecretary affirmed the order of the Regional Director
with modifications. The dispositive portion of his order reads as follows:

2. Armando Yumul 1,989.05

WHEREFORE, the Order dated March 20, 1987 is hereby

affirmed subject to the following modifications, to wit:

3. Herminigildo Bargas 1,989.05

1. The complaints of the sixteen (16) complainants above set forth
are hereby reinstated and their names added to those listed by
the Regional Director in his Order;

4. Marciano Bolocon 1,989.05

5. William Adami 1,989.05

2. The monetary awards is [sic] hereby extended to three years

from the time of the filing of the instant complaint without any
qualification; and

6. Antonio Publico 1,989.05

7. Leopoldo Saavedra 1,989.05

3. Respondent is hereby directed to reinstate all the above active

complainants to their former positions without loss of seniority
rights plus backwages from the time of their relief from work until
their actual reinstatement. (p. 69, Rollo.)

8. Warlito Ilaga 1,989.05

9. Jovany Serate 1,989.05

The sixteen (16) complainants mentioned in the body of the decision are:
10. Daniel Minglana. 1,989.05
1. Pagayo, Apsin
11. Jose Miranda, Jr. 1,989.05
2. Dorado, Jaime
12. Anastacio Santillan 1,989.05
3. Ellares, Guillermo
13. Rolando Fernandez 1,989.05
4. Factor, Arturo
14. Nicanor Fereras 1,776.95
5. Feruish, Daniel
15. Francisco Verzosa 1,015.40
6. Fonseca, Crisostomo
16. Plaridel Eloria 253.95
7. Ga, Jerry
within 15 days from receipt hereof. (p. 51, Rollo.)
8. Guinsatao, Francisco

9. Liper, Sixto

1. that it was deprived of due process of law, both substantive and

procedural;

10. Manalla, Allan

11. Orquesta, George
12. Pardeno, Joseph
13. Quiroz, Wilfredo
14. Uy, Benjamin
15. Ordona, Edwin
16. Torres, Deuretiro
Petitioner filed a motion for reconsideration.
On March 13, 1989, public respondent Undersecretary modified his order of March 23,
1988 as follows:
WHEREFORE, the Order of this Office dated 23 March 1988 is
hereby modified to read as follows, to wit:
1. The complaint of the fifteen (15) complainants above set forth
are hereby reinstated and their names added to those listed by
the Regional Director in his order;
2. The monetary awards is [sic] hereby limited to the past three
years from the time of the filing of the complaint without any
qualification subject to computation at the Regional Office. (p.
105, Rollo.)
The reason for the reduction to fifteen (15) of the original list of sixteen (16)
complainants was because the Undersecretary found that Joseph Pardeno was never
relieved from his post but continued to work for petitioner.
In this petition for certiorari, the petitioner alleges:

2. that the Order dated March 20, 1987 is contrary to law and that
respondent Luna C. Piezas acted with grave abuse of discretion
amounting to lack or excess of jurisdiction; and
3. that the Orders dated March 23, 1988 and March 13, 1989,
affirming and modifying the Order dated March 20, 1987 are
contrary to law and that respondent Dionisio C. De la Serna acted
with grave abuse of discretion amounting to lack or excess of
jurisdiction.
On April 17, 1989, as prayed for in the petition, the Court issued a temporary
restraining order upon a bond of P50,000 enjoining the respondents from enforcing or
executing the orders dated March 20, 1987, March 23, 1988 and March 13, 1989 of
the Department of Labor and Employment.
The petition has no merit.
The petitioner was not denied due process for several hearings were in fact conducted
by the hearing officer of the Regional Office of the DOLE and the parties submitted
position papers upon which the Regional Director based his decision in the case.
There is abundant jurisprudence to the effect that the requirements of due process are
satisfied when the parties are given an opportunity to submit position papers (CocaCola Bottlers, Phil., Inc. vs. NLRC, G.R. No. 78787, December 18, 1989; Asiaworld
Publishing House vs. Ople, 152 SCRA 224; Manila Doctors Hospital vs. NLRC, 135
SCRA 262). What the fundamental law abhors is not the absence of previous notice
but rather the absolute lack of opportunity to be heard (Antipolo Realty Corp. vs.
National Housing Authority, 153 SCRA 399). There is no denial of due process where
a party is given an opportunity to be heard and present his case (Ong, Sr. vs. Parel,
156 SCRA 768; Adamson & Adamson, Inc. vs. Amores, 152 SCRA 237). Since
petitioner herein participated in the hearings, submitted a position paper, and filed a
motion for reconsideration of the March 23, 1988 decision of the Labor
Undersecretary, it was not denied due process.
The petitioner is estopped from questioning the alleged lack of jurisdiction of the
Regional Director over the private respondents' claims. Petitioner submitted to the
jurisdiction of the Regional Director by taking part in the hearings before him and by
submitting a position paper. When the Regional Director issued his March 20, 1987
order requiring petitioner to pay the private respondents the benefits they were
claiming, petitioner was silent. Only the private respondents filed a motion for

reconsideration. It was only after the Undersecretary modified the order of the
Regional Director on March 23, 1988 that the petitioner moved for reconsideration and
questioned the jurisdiction of the public respondents to hear and decide the case. The
principle of jurisdiction by estoppel bars it from doing this. In Tijam vs.
Sibonghanoy, 23 SCRA 29, 35-36, we held:
It has been held that a party can not invoke the jurisdiction of a
court to secure affirmative relief against his opponent and, after
obtaining or failing to obtain such relief, repudiate or question that
same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In
the case just cited, by way of explaining the rules, it was further
said that the question whether the court had jurisdiction either of
the subject-matter of the action or of the parties was not important
in such cases because the party is barred from such conduct not
because the judgment or order of the court is valid and conclusive
as an adjudication, but for the reason that such a practice can not
be tolerated obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting
a cause and encountering an adverse decision on the merits, it is
too late for the loser to question the jurisdiction or power of the
court (Pease vs. Rathbunjones, etc., 243 U.S. 273, 61 L. Ed. 715,
37 S. Ct. 283; St. Louis etc. vs. McBride, 141 U.S. 127, 35 L. Ed.
659). And in Littleton vs. Burgess, 16 Wyo, 58, the Court said that
it is not right for a party who has affirmed and invoked the
jurisdiction of a court in a particular matter to secure an affirmative
relief, to afterwards deny that same jurisdiction to escape a
penalty.
Sibonghanoy was reiterated in Crisostomo vs. C.A., 32 SCRA 54; Libudan vs. Gil, 45
SCRA 17; Capilitan vs. De la Cruz, 55 SCRA 706; and PNB vs. IAC, 143 SCRA 299.
The fact is, the Regional Director and the Undersecretary did have jurisdiction over the
private respondents' complaint which was originally for violation of labor standards
(Art. 128[b], Labor Code). Only later did the guards ask for backwages on account of
their alleged constructive dismissal (p. 32, Rollo). Once vested, that jurisdiction
continued until the entire controversy was decided (Lee vs. MTC, 145 SCRA 408;
Abadilla vs. Ramos, 156 SCRA 92; and Pucan vs. Bengzon, 155 SCRA 692).
The jurisdiction of public respondents over the complaints is clear from a reading of
Article 128(b) of the Labor Code, as amended by Executive Order No. 111, thus:

(b) The provisions of Article 217 of this Code to the contrary

notwithstanding and in cases where the relationship of employeremployee still exists, the Minister of Labor and Employment or his
duly authorized representatives shall have the power to order and
administer, after due notice and hearing, compliance with the
labor standards provisions of this Code and other labor legislation
based on the findings of labor regulation officers or industrial
safety engineers made in the course of inspection, and to 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 regulation officer and raises issues which
cannot be resolved without considering evidentiary matters that
are not verifiable in the normal course of inspection.
In Briad Agro Development Corp. vs. Hon. Dionisio De la Serna, G.R. No. 82805,
June 29, 1989, we clarified the amendment when we ruled, thus:
To recapitulate under EO 111, the Regional Directors, in
representation of the Secretary of Labor and notwithstanding
the grant of exclusive original jurisdiction to Labor Arbiters by
Article 217 of the Labor Code, as amended have power to hear
cases involving violations of labor standards provisions of the
Labor Code or other legislation discovered in the course of normal
inspection, and order compliance therewith, provided that:
l) the alleged violations of the employer involve persons who are
still his employees, i.e., not dismissed, and
2) the employer does not contest the findings of the labor
regulations officer or raise issues which cannot be resolved
without considering evidentiary matters that are not verifiable in
the normal course of inspection (p. 9, Concurring Opinion, J.
Narvasa.)
The ruling in Briad Agro was reiterated in Maternity Children's Hospital vs. Secretary
of Labor, G.R. No. 78909, June 30, 1989:
... Under
the
present rules, a
Regional
Director
exercises both visitorial and enforcement power over labor
standards cases, and is therefore empowered to adjudicate
money claims, provided there still exists an employer-employee

relationship, and the findings of the regional office is not

contested by the employer concerned. (p. 5, Decision.)

On June 27, 1991, petitioner Reyes handed a letter to private respondent informing
the latter that his employment in the company was to be terminated effective July 31,
1991 on the ground of habitual tardiness and absenteeism. The letter states, thus:

WHEREFORE, the petition is dismissed and the orders dated March 23, 1988 and
March 13, 1989 of the Undersecretary of Labor are hereby affirmed. The temporary
restraining order earlier issued by this Court is lifted. No costs.

June 27, 1991

Mr. Angel D. Israel

SO ORDERED.
Present
Dear Angel,
71. G.R. No. 117221 April 13, 1999
IBM PHILIPPINES, INC., VIRGILIO L. PEA, and VICTOR V. REYES, petitioners,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION
and
ANGEL
D.
ISRAEL, respondents.

MENDOZA, J
This is a petition or certiorari to set aside the decision, 1 dated April 15, 1994, of the
National Labor Relations Commission (NLRC) finding private respondent to have been
illegally dismissed and ordering his reinstatement and the payment of his wages from
August 1991 until he is reinstated.
Petitioner IBM Philippines, Inc. (IBM) is a domestic corporation engaged in the
business of selling computers and computer services. Petitioners Virgilio L. Pea and
Victor V. Reyes were ranking officers of IBM during the period pertinent to this case.

This refers to our previous discussion regarding your habitual

absences and tardiness the last of which was on June 26, 1991.
Your records will attest to the fact that on several occasions, your
attention has been called to your habitual tardiness and nonobservance of standing office procedures regarding attendance.
Despite several opportunities given to you, you cannot seem to
reform your ways and attitude on the matter of attendance.
Considering that we area service-oriented company, you can
appreciate that we cannot allow such a situation to continue lest
we put the best interest of the Company in jeopardy.1wphi1.nt
Much to our regret, therefore, pleased (sic) be advised that the
Company is terminating your employment effective July 31, 1991.
You are requested to report to Personnel Department at your
earliest convenience for the settlement of any money or benefits
due you.
Very truly yours,

On April 1, 1975, private respondent Angel D. Israel commenced employment with

IBM as Office Products Customer Engineer. For the next sixteen (16) years, he
occupied two other positions in the company, 2 received numerous award, 3 and
represented the company in various seminars and conferences in and out of the
country. 4

(Sgd) V.V. REYES

Business Manager
cc. L.L. Abano

On February 1, 1990, private respondent was assigned to the team supervised by

petitioner Reyes.

Alleging that his dismissal was without just cause and due process, private respondent
filed a complaint with the Arbitration Branch of the Department of Labor and
Employment (DOLE) on July 18, 1991.
In his position paper filed on September 6, 1991, he claimed that he was not given the
opportunity to be heard and that he was summarily dismissed from employment based
on charges which had not been duly proven. 5
Petitioners denied private respondent's claims. It was alleged that several conferences
were held by the management with private respondent because of the latter's
unsatisfactory performance in the company and he was given sufficient warning and
opportunity to "reform and improve his attitude toward attendance," 6 but to their
regret, he never did. It was alleged that private respondent was constantly told of his
poor attendance record and inefficiency through the company's internal electronic mail
(e-mail) system. According to petitioners, this system allows paperless or
"telematic"7 communication among IBM personnel in the company offices here and
abroad. An employee is assigned a "User ID" and the corresponding password is
provided by the employee himself and, theoretically, known only to him. Employees
are then expected to turn on their computers everyday, "log in" to the system by
keying in their respective IDs and passwords in order to access and read the
messages sent to and stored in the computer system. To reply, an employee types in
or encodes his message-response and sends the same to the intended recipient, also
via the computer system. The system automatically records the time and date each
message was sent and received, including the identification of the sender and receiver
thereof. All messages are recorded and stored in computer disks. 8
Attached to petitioners' position paper were copies of print-outs of alleged computer
entries/messages sent by petitioner Reyes to private respondent through IBM's
internal computer system. The following is a summary of the contents of the print-ours
which mostly came from petitioner Reyes' computer:
(a) Private respondent was admonished when he would miss out on meetings with
clients and failed to attend to important accounts, such as that of Hella Philippines; 9
(b) Petitioner Reyes conducted consultations with private respondent concerning the
latter's work habits; 10
(c) A new policy of requiring employees to be at the office at 8:30 a.m. every morning
was adopted and employers were no longer allowed to sign out of the office by
phone; 11

(d) Petitioner Reyes would type into his computer the records of the security guard
which reflect private respondent's daily tardiness and frequent absences; 12
(e) Private respondent was admonished when he failed to respond to instructions from
his superiors; 13
(f) IBM Australia, contacted by Hella Australia, once asked about the reported lack of
attention given to Hella Philippines. 14 Private respondent directly answered IBM
Australia, through telematic memo, and reported that Hella Philippines was deferring
its computer plan and decided to use micros in the meantime; 15
(g) The said response was denied by Hella Australia which later made it clear that it
would be buying "anything but IBM"; 16 and
(h) While private respondent showed some improvement after consultations where he
allegedly admitted his shortcomings, petitioner Reyes reported that he (private
respondent) would eventually slide back to his old ways despite constant counselling
and repeated warnings that he would be terminated if he would not improve his work
habits. 17
Through these computer print-ours calling private respondent's attention to
his alleged tardiness and absenteeism, petitioner sought to prove that
private respondent was sufficiently notified of the charges against him and
was guilty thereof because of his failure to deny the said charges.
On March 13, 1992, the labor arbiter rendered a decision finding private respondent to
have been terminated for cause and accordingly dismissing the complaint.
Considering, however, the ground for termination as well as private respondent's long
record of service to the company, the arbiter ordered the award of separation pay at
the rate equivalent to one-half (1/2) month salary for every year of service. The
dispositive portion of the decision reads
WHEREFORE, judgment is hereby rendered in this case
declaring respondent IBM Phils., Inc. not guilty of the charge of
illegal dismissal. However, respondent company is directed to pay
complainant Israel the sum of Two Hundred Forty Eight Thousand
(P248,000.00) as separation pay. All other claims are denied for
lack of merit.
It appears, however, that prior to the release of the labor arbiter's decision at 11:21
a.m. on March 26, 1992, private respondent had filed a "Manifestation And Motion To

Admit Attached New Evidence For The Complainant" which was received by the
Arbitration Branch at 10:58 a.m. of the same day. The evidence consisted of private
respondent's Daily Time Records (DTRs) for the period June 1, 1990 to August 31,
1990 and pay slips for the period January 1990 to June 1991 showing that private
respondent did not incur any unexcused absences, that he was not late on any day
within the period and that no deduction was made from his salary on account of
tardiness or absences.
Private respondent appealed to the NLRC which, on April 15, 1994, reversed the labor
arbiter's decision and found private respondent's dismissal illegal. The NLRC ruled: (1)
that the computer print-outs which petitioners presented in evidence to prove that
private respondent's office attendance was poor were insufficient to show that the
latter was guilty of habitual absences and tardiness; and (2) that private respondent
was not heard in his defense before the issuance of the final notice of
dismissal. 18 The dispositive portion of the NLRC's decision reads:
WHEREFORE, the Decision dated March 13, 1992 is hereby SET
ASIDE and a new one entered declaring the dismissal of the
complainant as illegal. Respondent (sic) are hereby ordered to
reinstate complainant to his former position without loss of his
seniority rights and to pay backwages starting August 1991 until
reinstated at the rate of P40,516.65 a month including all its
benefits and bonuses.
Presiding Commissioner Edna Bonto-Perez dissented on the
ground she found that petitioners have presented strong and
convincing documentary evidence that private respondent was
guilty of habitual tardiness and absences. She was also of the
opinion that private respondent was sufficiently warned before he
was actually dismissed. 19
Petitioners moved for a reconsideration, but their motion was denied in a resolution,
dated July 20, 1994. Hence, this petition for certiorari. Petitioners contend that
1. THE NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE
OF DISCRETION TANTAMOUNT TO LACK
Of JURISDICTION IN HOLDING THAT NO
JUST CAUSE EXISTS NOR WAS THERE
DUE PROCESS OBSERVED IN THE
DISMISSAL
OF
THE
PRIVATE
RESPONDENT BECAUSE THE COMPUTER

PRINTOUTS WHICH PROVE JUST CAUSE

AND
DUE
PROCESS
ARE
NOT
ADMISSIBLE IN EVIDENCE.
2. THE NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE
OF DISCRETION TANTAMOUNT TO LACK
OR EXCESS OF ITS JURISDICTION IN
HOLDING THAT EVEN IF THE COMPUTER
PRINTOUTS
WERE
ADMISSIBLE,
PETITIONER FAILED TO SATISFY DUE
PROCESS.
We find petitioners' contention to be without merit.
First. Petitioners argue that the computer print-outs submitted by them need not be
identified or authenticated according to the rules of procedure in regular courts in
order for the same to be admissible in evidence. They contend that technical rules of
evidence do not apply to administrative/labor cases 20 and because of a relaxation of
the rules of evidence, private respondent was in fact allowed by the labor arbiter to
adduce additional evidence even after a decision had been rendered. 21
It is indeed true that administrative agencies, such as the NLRC, are not bound by the
technical rules of procedure and evidence in the adjudication of cases. 22 This was the
reason private respondent was allowed to submit additional evidence even after the
case was deemed submitted for resolution by the labor arbiter. The practice of
admitting additional evidence on appeal in labor cases has been sanctioned by this
Court. 23
However, the liberality of procedure in administrative actions is subject to limitations
imposed by basic requirements of due process. As this Court said in Ang Tibay v.
CIR, 24 the provision for flexibility in administrative procedure "does not go so far as to
justify orders without a basis in evidence having rational probative value." More
specifically, as held in Uichico v. NLRC: 25
It is true that administrative and quasi-judicial bodies like the
NLRC are not bound by the technical rules of procedure in the
adjudication of cases. However, this procedural rule should not be
construed as a license to disregard certain fundamental
evidentiary rules. While the rules of evidence prevailing in the
courts of law or equity are not controlling in proceedings before
the NLRC, the evidence presented before it must at least have a

modicum of admissibility for it to be given some probative value.

The Statement of Profit and Losses submitted by Crispa, Inc. to
prove its alleged losses, without the accompanying signature of a
certified public accountant or audited by an independent auditor,
are nothing but self-serving documents which ought to be treated
as a mere scrap of paper devoid of any probative value.

Likewise, in the case of EMS Manpower & Placement Services v.

NLRC, 27 the employer submitted a photocopy of a telex which supposedly shows that
the employee was guilty of "serious misconduct" and which became the basis of her
dismissal. This Court ruled that the telex, a "single document, totally uncorroborated
and easily concocted or fabricated to suit one's personal interest and purpose," 28 was
insufficient to uphold the employer's defense.

The computer print-outs, which constitute the only evidence of petitioners, afford no
assurance of their authenticity because they are unsigned. The decisions of this Court,
while adhering to a liberal view in the conduct of proceedings before administrative
agencies, have nonetheless consistently required some proof of authenticity or
reliability as condition for the admission of documents.

In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, this Court held as incompetent
unsigned daily time records presented to prove that the employee was neglectful of
his duties:

In Rizal Workers Union v. Ferrer-Calleja, 26 this Court struck down the decision of the
Director of Labor Relations which was based on an unsigned and unidentified
manifesto. It was held:
From even a perfunctory assessment, it becomes apparent that
the "evidence" upon which said decision is professedly based
does not come up to that standard of substantiality.
It is of course also a sound and settled rule that administrative
agencies performing quasi-judicial functions are unfettered by the
rigid technicalities of procedure observed in the courts of law, and
this so that disputes brought before such bodies may be resolved
in the most expeditious and inexpensive manner possible. But
what is involved here transcends mere procedural technicality and
concerns the more paramount principles and requirements of due
process, which may not be sacrificed to speed or expediency. . .
The clear message of [Article 221 of the Labor Code] is that even
in the disposition of labor cases, due process must never be
subordinated to expediency or dispatch. Upon this principle, the
unidentified documents relied upon by respondent Director must
be seen and taken for what they are, mere inadmissible hearsay.
They cannot, by any stretch of reasoning, be deemed substantial
evidence of the election frauds complained of.

Indeed, the [DTRs] annexed to the present petition would tend to

establish private respondent's neglectful attitude towards his work
duties as shown by repeated and habitual absences and
tardiness and propensity for working undertime for the year 1992.
But the problem with these DTRs is that they are neither originals
nor certified true copies. They are plain photocopies of the
originals, if the latter do exist. More importantly, they are not even
signed by private respondent nor by any of the employer's
representatives. . . . 29
In the case at bar, a specimen of the computer print-out submitted by petitioners
reads:

Date and time 10/12/

From: REYES VV MNLVM1
To: ISRAEL MNLRVM Israel, A.D.
SEC: I IBM INTERNAL USE ONLY
Subject:
Angel, have been trying to pin you down for a talk the past couple
of days. Whatever happened to our good discussion 2 weeks
ago? I thought you would make an effort to come in on time from
then on? If you have problems which prevent you from coming in
on time, let me know because I would really like to help if I can.
The sum of all your quotas is less than mine so I really need all of
you pitching in. Kindly take a look at your proofs in-tray as there

are some to do's which are pending. Acts such as St. Louis U.
and NEECO should be worth looking into as they've been
inquiring about upgrading their very old boxes. If you are too tied
up for these accounts do let me know so I can reassign. By
Monday morning please. Let's give it that final push for the
branch!.

Regard from the APPLICATION MNLVM 1 (REYES VV)

SYSTEMS MARKETING group T (832) 8192-279
Victor V. Reyes Marketing Manager

Not one of the 18 print-out copies submitted by petitioners was ever signed, either by
the sender or the receiver. There is thus no guarantee that the message sent was the
same message received. As the Solicitor General pointed out, the messages were
transmitted to and received nor by private respondent himself but his computer. 30
Neither were the print-outs certified or authenticated by any company official who
could properly attest that these came from IBM's computer system or that the data
stored in the system were not and/or could not have been tampered with before the
same were printed out. It is noteworthy that the computer unit and system in which the
contents of the print-outs were stored were in the exclusive possession and control of
petitioners since after private respondent was served his termination letter, he had no
more access to his computer. 31
Second. Even if the computer print-outs were admissible, they would not suffice to
show that private respondent's dismissal was justified.
Petitioners' contention is that private respondent was repeatedly warned through
computer messages for coming in late or not reporting at all to the office during the
period May 1990 June 1991 but he never denied the allegavtions. Therefore, he
must be deemed to have admitted these allegations. 32 But the burden of proving that
the dismissal was for just cause is on petitioners. They cannot simply rely on any
admission by private respondent implied from his failure to deny the alleged computer

messages to him which he denied he had ever received. On the other hand, private
respondent's additional evidence, consisting of DTRs and reporting pay slips, show
that he did not incur unexcused absences or tardiness or that he suffered deduction in
pay on account of such absences or tardiness.
Indeed, petitioners could have easily proven their allegations by presenting private
respondent's DTRs. Since these were in petitioners' possession, their non-production
thereof raises the presumption that if presented they would be adverse to petitioners.
This is precisely what the best evidence rule guards against.
The purpose of the rule requiring the production of the best
evidence is the prevention of fraud, because if a party is in
possession of such evidence and withholds it, and seeks to
substitute inferior evidence in its place, the presumption naturally
arises that the better evidence is withheld for fraudulent purposes
which its production would expose and defeat. 33
Private respondent's DTRs for the period June 1, 1990 August 30, 1990 34 show
that while his attendance record may not have been perfect, it was at least
satisfactory. The days when private respondent did not report to the office were
credited either as vacation or as sick leaves. On days when he was away on business
trips, his destination was shown. The DTRs were signed by petitioner Victor Reyes.
It is said that the DTRs presented were only for the period when private respondent's
attendance was excellent; he took care not to submit his DTRs for other months
during which he was often late in coming to office. 35 As the Solicitor General has
pointed out, however, it was precisely during that period of June 1, 1990 August 30,
1990 when, according to the print-outs submitted by petitioners, private respondent
was often late or absent.
Nor is there proof to support petitioners' allegation that it was private respondent's
secretary and not him who often signed the attendance sheet. 36 Indeed, petitioners
did not present private respondent's secretary or, at the very least, attach an affidavit
sworn to by her to prove their allegations and thus dispute the DTRs presented by
private respondent. This, notwithstanding ample opportunity to do so. On the other
hand, as already stated, the DTRs, showing private respondent's good attendance,
were signed by petitioner Victor Reyes himself, and no good reason has been shown
why they cannot be relied upon in determining private respondent's attendance.
Third. Even assuming the charges of habitual tardiness and absenteeism were true,
such offenses do not warrant private respondent's dismissal. He has not been shown
to have ever committed any infraction of company rules during his sixteen-year stint in

the company. Although it is alleged that he failed to attend important client meetings
and gave false representations to a valued client to cover his tracks, there is no record
finding him guilty of such offenses. Dismissal has always been regarded as the
ultimate penalty. 37 The fact that lapses in private respondent's attendance record may
have occurred only during his final year in the company, after a long period of
exemplary performance, makes petitioners' contention dubious. While it is true that
long years of service is no guarantee against dismissal for wrongdoing, 38 at least the
employee's record does provide an index to his work. In case doubt exists between
the evidence presented by the employer and that presented by the employee, the
scales of justice must be tilted in favor of the latter. 39
Fourth. The print-outs likewise failed to show that private respondent was allowed due
process before his dismissal.
The law requires an employer to furnish the employee two written notices before
termination of his employment may be ordered. The first notice must inform him of the
particular acts or omissions for which his dismissal is sought, the second of the
employer's decision to dismiss the employee after he has been given the opportunity
to be heard and defend himself. 40
These requirements were not observed in this case. As noted earlier, there is no
evidence that there was an exchange of communication between petitioners and
private respondent regarding the latter's supposed substandard performance. Private
respondent has consistently denied, however, that he was ever advised of the charges
hurled against him. The so-called one-on-one consultations or "personal counsellings"
mentioned in the print-outs between petitioner Reyes and private respondent
concerning the latter's work habits do not satisfy the requirements of due process, as
we had occasion to say in Pono v. NLRC. 41
Consultations or conferences may not be a substitute for the
actual holding of a hearing. Every opportunity and assistance
must be accorded to the employee by the management to enable
him to prepare adequately for his defense, including legal
representation. 42
In Ruffy v. NLRC, 43 this Court held that what would qualify as sufficient or "ample
opportunity," as required by law, would be "every kind of assistance that management
must accord to the employee to enable him to prepare adequately for his defense." No
such opportunity was given to private respondent in this case. He was simply served
his termination notice without being heard in his defense.

Fifth. Petitioners allege that the NLRC, after concluding that the evidence submitted
by them were not properly identified or authenticated, should have remanded the case
to the arbiter for "clarificatory" hearing.
A formal hearing was not de rigueur. The 1994 Rules of Procedure of the NLRC, 4
provides:
Immediately after the submission by the parties of their position
papers/memorandum, the Labor Arbiter shall, motu proprio,
determine whether there is need for a formal trial or hearing. At
this stage, he may, at his discretion and for the purpose of making
such determination, ask clarificatory questions to further elicit
facts or information, including but not limited to the subpoena of
relevant documentary evidence, if any, from any party or witness.
As held by the NLRC:
Aside from these computer print-outs, respondents have not
presented any other evidence to prove that complainant was ever
called for investigation nor his side heard prior to receipt of the
termination letter dated June 27, 1991. In fact, even if we consider
these computer print-outs, respondents still failed to satisfy the
requirements of procedure due process. . . . In this particular
case, we observe that there is failure on the part of respondents
to prove the existence of a legal cause. The evidence presented
before the Labor Arbiter did not sufficiently and clearly support the
allegation of respondents that complainant committed habitual
absences and tardiness resulting into inefficiency. 44
In spite of this finding, petitioners failed to adduce additional evidence when they
moved for a reconsideration of the NLRC decision or when they filed the instant
petition. Despite the opportunities afforded them, petitioners failed to substantiate their
allegations. Neither have they shown sufficient reasons to convince this Court that, if
the case were to be remanded to the arbiter or a formal hearing, they would be able to
present evidence which they could not have presented during the initial stages of this
case. As we held in Megascope General Services v. NLRC: 45
As regards petitioner's contention that a hearing has to be
conducted to be fully ventilate the issues in the case, . . . [s]uffice
it to state that nonverbal devices such as written explanations,
affidavits, position papers or other pleadings can establish just as
clearly and concisely an aggrieved party's defenses. Petitioner

was amply provided with the opportunity to present evidence that

private respondents were not its employees. Indeed, it was
petitioner's failure to present substantial evidence to buttress its
claims that worked to its disadvantage and not the absence of a
full-blown hearing before the public respondent.
WHEREFORE, the petition is DISMISSED and the decision of the NLRC, dated April
15, 1994, is hereby AFFIRMED.1wphi1.nt

replacement of one Erlinda F. Dizon who went on leave during both periods. 2 After
August 8, 1991, and pursuant to their Reliever Agreement, her services were
terminated.
On September 2, 1991, private respondent was once more asked to join petitioner
company as a probationary employee, the probationary period to cover 150 days. In
the job application form that was furnished her to be filled up for the purpose, she
indicated in the portion for civil status therein that she was single although she had
contracted marriage a few months earlier, that is, on May 26, 1991. 3

SO ORDERED.

72. G.R. No. 118978 May 23, 1997

PHILIPPINE
TELEGRAPH
AND
TELEPHONE
COMPANY, *
petitioner,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION
and
GRACE
DE
GUZMAN, respondents.

REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine
Telegraph and Telephone Company (hereafter, PT & T) invokes the alleged
concealment of civil status and defalcation of company funds as grounds to terminate
the services of an employee. That employee, herein private respondent Grace de
Guzman, contrarily argues that what really motivated PT & T to terminate her services
was her having contracted marriage during her employment, which is prohibited by
petitioner in its company policies. She thus claims that she was discriminated against
in gross violation of law, such a proscription by an employer being outlawed by Article
136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a
"Supernumerary Project Worker," for a fixed period from November 21, 1990 until April
20, 1991 vice one C.F. Tenorio who went on maternity leave. 1Under the Reliever
Agreement which she signed with petitioner company, her employment was to be
immediately terminated upon expiration of the agreed period. Thereafter, from June
10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private
respondent's services as reliever were again engaged by petitioner, this time in

It now appears that private respondent had made the same representation in the two
successive reliever agreements which she signed on June 10, 1991 and July 8, 1991.
When petitioner supposedly learned about the same later, its branch supervisor in
Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated
January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she
was reminded about the company's policy of not accepting married women for
employment. 4
In her reply letter dated January 17, 1992, private respondent stated that she was not
aware of PT&T's policy regarding married women at the time, and that all along she
had not deliberately hidden her true civil status. 5Petitioner nonetheless remained
unconvinced by her explanations. Private respondent was dismissed from the
company effective January 29, 1992, 6 which she readily contested by initiating a
complaint for illegal dismissal, coupled with a claim for non-payment of cost of living
allowances (COLA), before the Regional Arbitration Branch of the National Labor
Relations Commission in Baguio City.
At the preliminary conference conducted in connection therewith, private respondent
volunteered the information, and this was incorporated in the stipulation of facts
between the parties, that she had failed to remit the amount of P2,380.75 of her
collections. She then executed a promissory note for that amount in favor of
petitioner 7. All of these took place in a formal proceeding and with the agreement of
the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision
declaring that private respondent, who had already gained the status of a regular
employee, was illegally dismissed by petitioner. Her reinstatement, plus payment of
the corresponding back wages and COLA, was correspondingly ordered, the labor
arbiter being of the firmly expressed view that the ground relied upon by petitioner in
dismissing private respondent was clearly insufficient, and that it was apparent that
she had been discriminated against on account of her having contracted marriage in
violation of company rules.

On appeal to the National Labor Relations Commission (NLRC), said public

respondent upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled
that private respondent had indeed been the subject of an unjust and unlawful
discrimination by her employer, PT & T. However, the decision of the labor arbiter was
modified with the qualification that Grace de Guzman deserved to be suspended for
three months in view of the dishonest nature of her acts which should not be
condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter,
including the order for the reinstatement of private respondent in her employment with
PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by
respondent NLRC in its resolution of November 9, 1994, hence this special civil action
assailing the aforestated decisions of the labor arbiter and respondent NLRC, as well
as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded
with love and respect but, through the ages, men have responded to that injunction
with indifference, on the hubristic conceit that women constitute the inferior sex.
Nowhere has that prejudice against womankind been so pervasive as in the field of
labor, especially on the matter of equal employment opportunities and standards. In
the Philippine setting, women have traditionally been considered as falling within the
vulnerable groups or types of workers who must be safeguarded with preventive and
remedial social legislation against discriminatory and exploitative practices in hiring,
training, benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in
almost all phases of social and political life, provides a gamut of protective provisions.
To cite a few of the primordial ones, Section 14, Article II 8 on the Declaration of
Principles and State Policies, expressly recognizes the role of women in nationbuilding and commands the State to ensure, at all times, the fundamental equality
before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the
progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly
requires the State to afford full protection to labor and to promote full employment and
equality of employment opportunities for all, including an assurance of entitlement to
tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the
State shall protect working women through provisions for opportunities that would
enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more
frequency in the years since the Labor Code was enacted on May 1, 1974 as
Presidential Decree No. 442, largely due to our country's commitment as a signatory
to the United Nations Convention on the Elimination of All Forms of Discrimination
Against Women (CEDAW). 11

Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits
discrimination against women with respect to terms and conditions of employment,
promotion, and training opportunities; Republic Act No. 6955 13 which bans the "mailorder-bride" practice for a fee and the export of female labor to countries that cannot
guarantee protection to the rights of women workers; Republic Act No. 7192 14 also
known as the "Women in Development and Nation Building Act," which affords women
equal opportunities with men to act and to enter into contracts, and for appointment,
admission, training, graduation, and commissioning in all military or similar schools of
the Armed Forces of the Philippines and the Philippine National Police; Republic Act
No. 7322 15 increasing the maternity benefits granted to women in the private sector;
Republic Act No. 7877 16 which outlaws and punishes sexual harassment in the
workplace and in the education and training environment; and Republic Act No.
8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which
prescribes as a matter of policy, inter alia, the deployment of migrant workers, with
emphasis on women, only in countries where their rights are secure. Likewise, it would
not be amiss to point out that in the Family Code, 18 women's rights in the field of civil
law have been greatly enhanced and expanded.
In the Labor Code, provisions governing the rights of women workers are found in
Articles 130 to 138 thereof. Article 130 involves the right against particular kinds of
night work while Article 132 ensures the right of women to be provided with facilities
and standards which the Secretary of Labor may establish to ensure their health and
safety. For purposes of labor and social legislation, a woman working in a nightclub,
cocktail lounge, massage clinic, bar or other similar establishments shall be
considered as an employee under Article 138. Article 135, on the other hand,
recognizes a woman's right against discrimination with respect to terms and conditions
of employment on account simply of sex. Finally, and this brings us to the issue at
hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of
a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional
guarantee of protection to labor and security of tenure. Thus, an employer is required,
as a condition sine qua non prior to severance of the employment ties of an individual
under his employ, to convincingly establish, through substantial evidence, the
existence of a valid and just cause in dispensing with the services of such employee,
one's labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls
within the so-called management prerogatives, which prescriptions encompass the
matter of hiring, supervision of workers, work assignments, working methods and
assignments, as well as regulations on the transfer of employees, lay-off of workers,
and the discipline, dismissal, and recall of employees. 19 As put in a case, an employer
is free to regulate, according to his discretion and best business judgment, all aspects

of employment, "from hiring to firing," except in cases of unlawful discrimination or

those which may be provided by law. 20
In the case at bar, petitioner's policy of not accepting or considering as disqualified
from work any woman worker who contracts marriage runs afoul of the test of, and the
right against, discrimination, afforded all women workers by our labor laws and by no
less than the Constitution. Contrary to petitioner's assertion that it dismissed private
respondent from employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved principally because of the
company's policy that married women are not qualified for employment in PT & T, and
not merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent
by Delia M. Oficial, the branch supervisor of the company, with the reminder, in the
words of the latter, that "you're fully aware that the company is not accepting married
women employee (sic), as it was verbally instructed to you." 21 Again, in the
termination notice sent to her by the same branch supervisor, private respondent was
made to understand that her severance from the service was not only by reason of her
concealment of her married status but, over and on top of that, was her violation of the
company's policy against marriage ("and even told you that married women
employees are not applicable [sic] or accepted in our company.") 22 Parenthetically,
this seems to be the curious reason why it was made to appear in the initiatory
pleadings that petitioner was represented in this case only by its said supervisor and
not by its highest ranking officers who would otherwise be solidarily liable with the
corporation. 23
Verily, private respondent's act of concealing the true nature of her status from PT & T
could not be properly characterized as willful or in bad faith as she was moved to act
the way she did mainly because she wanted to retain a permanent job in a stable
company. In other words, she was practically forced by that very same illegal company
policy into misrepresenting her civil status for fear of being disqualified from work.
While loss of confidence is a just cause for termination of employment, it should not
be simulated. 24 It must rest on an actual breach of duty committed by the employee
and not on the employer's caprices. 25 Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified. 26
In the present controversy, petitioner's expostulations that it dismissed private
respondent, not because the latter got married but because she concealed that fact,
does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty
hence the consequent loss of confidence in her which justified her dismissal.

Petitioner would asseverate, therefore, that while it has nothing against marriage, it
nonetheless takes umbrage over the concealment of that fact. This improbable
reasoning, with interstitial distinctions, perturbs the Court since private respondent
may well be minded to claim that the imputation of dishonesty should be the other way
around.
Petitioner would have the Court believe that although private respondent defied its
policy against its female employees contracting marriage, what could be an act of
insubordination was inconsequential. What it submits as unforgivable is her
concealment of that marriage yet, at the same time, declaring that marriage as a trivial
matter to which it supposedly has no objection. In other words, PT & T says it gives its
blessings to its female employees contracting marriage, despite the maternity leaves
and other benefits it would consequently respond for and which obviously it would
have wanted to avoid. If that employee confesses such fact of marriage, there will be
no sanction; but if such employee conceals the same instead of proceeding to the
confessional, she will be dismissed. This line of reasoning does not impress us as
reflecting its true management policy or that we are being regaled with responsible
advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of
propositions which confuse through less than candid arguments. Indeed, petitioner
glosses over the fact that it was its unlawful policy against married women, both on
the aspects of qualification and retention, which compelled private respondent to
conceal her supervenient marriage. It was, however, that very policy alone which was
the cause of private respondent's secretive conduct now complained of. It is then
apropos to recall the familiar saying that he who is the cause of the cause is the cause
of the evil caused.
Finally, petitioner's collateral insistence on the admission of private respondent that
she supposedly misappropriated company funds, as an additional ground to dismiss
her from employment, is somewhat insincere and self-serving. Concededly, private
respondent admitted in the course of the proceedings that she failed to remit some of
her collections, but that is an altogether different story. The fact is that she was
dismissed solely because of her concealment of her marital status, and not on the
basis of that supposed defalcation of company funds. That the labor arbiter would thus
consider petitioner's submissions on this supposed dishonesty as a mere afterthought,
just to bolster its case for dismissal, is a perceptive conclusion born of experience in
labor cases. For, there was no showing that private respondent deliberately
misappropriated the amount or whether her failure to remit the same was through
negligence and, if so, whether the negligence was in nature simple or grave. In fact, it
was merely agreed that private respondent execute a promissory note to refund the
same, which she did, and the matter was deemed settled as a peripheral issue in the
labor case.

Private respondent, it must be observed, had gained regular status at the time of her
dismissal. When she was served her walking papers on January 29, 1992, she was
about to complete the probationary period of 150 days as she was contracted as a
probationary employee on September 2, 1991. That her dismissal would be effected
just when her probationary period was winding down clearly raises the plausible
conclusion that it was done in order to prevent her from earning security of
tenure. 27 On the other hand, her earlier stints with the company as reliever were
undoubtedly those of a regular employee, even if the same were for fixed periods, as
she performed activities which were essential or necessary in the usual trade and
business of PT & T. 28 The primary standard of determining regular employment is the
reasonable connection between the activity performed by the employee in relation to
the business or trade of the employer. 29
As an employee who had therefore gained regular status, and as she had been
dismissed without just cause, she is entitled to reinstatement without loss of seniority
rights and other privileges and to full back wages, inclusive of allowances and other
benefits or their monetary equivalent. 30 However, as she had undeniably committed
an act of dishonesty in concealing her status, albeit under the compulsion of an
unlawful imposition of petitioner, the three-month suspension imposed by respondent
NLRC must be upheld to obviate the impression or inference that such act should be
condoned. It would be unfair to the employer if she were to return to its fold without
any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation
was withheld up to the time of her actual reinstatement, shall be reduced by deducting
therefrom the amount corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that
adopted by petitioner PT & T. The Labor Code state, in no uncertain terms, as follows:
Art. 136. Stipulation against marriage. It shall be unlawful for
an employer to require as a condition of employment or
continuation of employment that a woman shall not get married,
or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of marriage.
This provision had a studied history for its origin can be traced to Section 8 of
Presidential Decree No. 148, 31 better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No.
679, 32 entitled "An Act to Regulate the Employment of Women and Children, to
Provide Penalties for Violations Thereof, and for Other Purposes." The forerunner to
Republic Act No. 679, on the other hand, was Act No. 3071 which became law on

March 16, 1923 and which regulated the employment of women and children in shops,
factories, industrial, agricultural, and mercantile establishments and other places of
labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et
al. vs. Philippine Air Lines, 33 a decision that emanated from the Office of the
President. There, a policy of Philippine Air Lines requiring that prospective flight
attendants must be single and that they will be automatically separated from the
service once they marry was declared void, it being violative of the clear mandate in
Article 136 of the Labor Code with regard to discrimination against married women.
Thus:
Of first impression is the incompatibility of the respondent's policy
or regulation with the codal provision of law. Respondent is
resolute in its contention that Article 136 of the Labor Code
applies only to women employed in ordinary occupations and that
the prohibition against marriage of women engaged in
extraordinary occupations, like flight attendants, is fair and
reasonable, considering the pecularities of their chosen
profession.
We cannot subscribe to the line of reasoning pursued by
respondent. All along, it knew that the controverted policy has
already met its doom as early as March 13, 1973 when
Presidential Decree No. 148, otherwise known as the Women and
Child Labor Law, was promulgated. But for the timidity of those
affected or their labor unions in challenging the validity of the
policy, the same was able to obtain a momentary reprieve. A close
look at Section 8 of said decree, which amended paragraph (c) of
Section 12 of Republic Act No. 679, reveals that it is exactly the
same provision reproduced verbatim in Article 136 of the Labor
Code, which was promulgated on May 1, 1974 to take effect six
(6) months later, or on November 1, 1974.
It cannot be gainsaid that, with the reiteration of the same
provision in the new Labor Code, all policies and acts against it
are deemed illegal and therefore abrogated. True, Article 132
enjoins the Secretary of Labor to establish standards that will
ensure the safety and health of women employees and in
appropriate cases shall by regulation require employers to
determine appropriate minimum standards for termination in
special occupations, such as those of flight attendants, but that is
precisely the factor that militates against the policy of respondent.

The standards have not yet been established as set forth in the
first paragraph, nor has the Secretary of Labor issued any
regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or
regulations which are as yet to be established, the policy of
respondent against marriage is patently illegal. This finds support
in Section 9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employees. The State shall assure
the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work . . . .
Moreover, we cannot agree to the respondent's proposition that
termination from employment of flight attendants on account of
marriage is a fair and reasonable standard designed for their own
health, safety, protection and welfare, as no basis has been laid
therefor. Actually, respondent claims that its concern is not so
much against the continued employment of the flight attendant
merely by reason of marriage as observed by the Secretary of
Labor, but rather on the consequence of marriage-pregnancy.
Respondent discussed at length in the instant appeal the
supposed ill effects of pregnancy on flight attendants in the
course of their employment. We feel that this needs no further
discussion as it had been adequately explained by the Secretary
of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went
as far as invoking the provisions of Articles 52 and 216 of the New
Civil Code on the preservation of marriage as an inviolable social
institution and the family as a basic social institution, respectively,
as bases for its policy of non-marriage. In both instances,
respondent predicates absence of a flight attendant from her
home for long periods of time as contributory to an unhappy
married life. This is pure conjecture not based on actual
conditions, considering that, in this modern world, sophisticated
technology has narrowed the distance from one place to another.
Moreover, respondent overlooked the fact that married flight
attendants can program their lives to adapt to prevailing
circumstances and events.

Article 136 is not intended to apply only to women employed in

ordinary occupations, or it should have categorically expressed
so. The sweeping intendment of the law, be it on special or
ordinary occupations, is reflected in the whole text and supported
by Article 135 that speaks of non-discrimination on the
employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining &
Industrial Corporation 34considered as void a policy of the same nature. In said case,
respondent, in dismissing from the service the complainant, invoked a policy of the
firm to consider female employees in the project it was undertaking as separated the
moment they get married due to lack of facilities for married women. Respondent
further claimed that complainant was employed in the project with an oral
understanding that her services would be terminated when she gets married. Branding
the policy of the employer as an example of "discriminatory chauvinism" tantamount to
denying equal employment opportunities to women simply on account of their sex, the
appellate court struck down said employer policy as unlawful in view of its repugnance
to the Civil Code, Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference
or conditions relating to the marital status of an employee are categorized as a "sexplus" discrimination where it is imposed on one sex and not on the other. Further, the
same should be evenly applied and must not inflict adverse effects on a racial or
sexual group which is protected by federal job discrimination laws. Employment rules
that forbid or restrict the employment of married women, but do not apply to married
men, have been held to violate Title VII of the United States Civil Rights Act of 1964,
the main federal statute prohibiting job discrimination against employees and
applicants on the basis of, among other things, sex. 35
Further, it is not relevant that the rule is not directed against all women but just against
married women. And, where the employer discriminates against married women, but
not against married men, the variable is sex and the discrimination is unlawful. 36 Upon
the other hand, a requirement that a woman employee must remain unmarried could
be justified as a "bona fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the ground of a general
principle, such as the desirability of spreading work in the workplace. A requirement of
that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance. Thus, in one case, a no-marriage rule
applicable to both male and female flight attendants, was regarded as unlawful since
the restriction was not related to the job performance of the flight attendants. 37
5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the
Labor Code on the right of a woman to be free from any kind of stipulation against

marriage in connection with her employment, but it likewise assaults good morals and
public policy, tending as it does to deprive a woman of the freedom to choose her
status, a privilege that by all accounts inheres in the individual as an intangible and
inalienable right. 38 Hence, while it is true that the parties to a contract may establish
any agreements, terms, and conditions that they may deem convenient, the same
should not be contrary to law, morals, good customs, public order, or public
policy. 39 Carried to its logical consequences, it may even be said that petitioner's
policy against legitimate marital bonds would encourage illicit or common-law relations
and subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the
relations between the parties, that is, of capital and labor, are not merely contractual,
impressed as they are with so much public interest that the same should yield to the
common good. 40 It goes on to intone that neither capital nor labor should visit acts of
oppression against the other, nor impair the interest or convenience of the public. 41 In
the final reckoning, the danger of just such a policy against marriage followed by
petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage
as an inviolable social institution and, ultimately, of the family as the foundation of the
nation. 42 That it must be effectively interdicted here in all its indirect, disguised or
dissembled forms as discriminatory conduct derogatory of the laws of the land is not
only in order but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone
Company is hereby DISMISSED for lack of merit, with double costs against petitioner.
SO ORDERED.

73. The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining
& Industrial Corporation 34considered as void a policy of the same nature. In said
case, respondent, in dismissing from the service the complainant, invoked a
policy of the firm to consider female employees in the project it was undertaking
as separated the moment they get married due to lack of facilities for married
women. Respondent further claimed that complainant was employed in the
project with an oral understanding that her services would be terminated when
she gets married. Branding the policy of the employer as an example of
"discriminatory chauvinism" tantamount to denying equal employment
opportunities to women simply on account of their sex, the appellate court struck
down said employer policy as unlawful in view of its repugnance to the Civil
Code, Presidential Decree No. 148 and the Constitution.

74. G.R. No. 94951

April 22, 1991

APEX MINING COMPANY, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA
CANDIDO, respondents.
Bernabe B. Alabastro for petitioner.
Angel Fernandez for private respondent.

GANCAYCO, J.:
Is the househelper in the staff houses of an industrial company a domestic helper or a
regular employee of the said firm? This is the novel issue raised in this petition.
Private respondent Sinclita Candida was employed by petitioner Apex Mining
Company, Inc. on May 18, 1973 to perform laundry services at its staff house located
at Masara, Maco, Davao del Norte. In the beginning, she was paid on a piece rate
basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a
month which was ultimately increased to P575.00 a month.
On December 18, 1987, while she was attending to her assigned task and she was
hanging her laundry, she accidentally slipped and hit her back on a stone. She
reported the accident to her immediate supervisor Mila de la Rosa and to the
personnel officer, Florendo D. Asirit. As a result of the accident she was not able to
continue with her work. She was permitted to go on leave for medication. De la Rosa
offered her the amount of P 2,000.00 which was eventually increased to P5,000.00 to
persuade her to quit her job, but she refused the offer and preferred to return to work.
Petitioner did not allow her to return to work and dismissed her on February 4, 1988.
On March 11, 1988, private respondent filed a request for assistance with the
Department of Labor and Employment. After the parties submitted their position
papers as required by the labor arbiter assigned to the case on August 24, 1988 the
latter rendered a decision, the dispositive part of which reads as follows:
WHEREFORE, Conformably With The Foregoing, judgment is hereby
rendered ordering the respondent, Apex Mining Company, Inc., Masara,
Davao del Norte, to pay the complainant, to wit:
1 Salary

Differential P16,289.20
2. Emergency Living
Allowance 12,430.00
3. 13th Month Pay
Differential 1,322.32
4. Separation Pay
(One-month for
every year of
service [1973-19881) 25,119.30
or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE
PESOS AND 42/100 (P55,161.42).
SO ORDERED.1
Not satisfied therewith, petitioner appealed to the public respondent National Labor
Relations Commission (NLRC), wherein in due course a decision was rendered by the
Fifth Division thereof on July 20, 1989 dismissing the appeal for lack of merit and
affirming the appealed decision. A motion for reconsideration thereof was denied in a
resolution of the NLRC dated June 29, 1990.
Hence, the herein petition for review by certiorari, which appopriately should be a
special civil action for certiorari, and which in the interest of justice, is hereby treated
as such.2 The main thrust of the petition is that private respondent should be treated
as a mere househelper or domestic servant and not as a regular employee of
petitioner.
The petition is devoid of merit.
Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms
"househelper" or "domestic servant" are defined as follows:
The term "househelper" as used herein is synonymous to the term
"domestic servant" and shall refer to any person, whether male or female,
who renders services in and about the employer's home and which services

are usually necessary or desirable for the maintenance and enjoyment

thereof, and ministers exclusively to the personal comfort and enjoyment of
the employer's family.3
The foregoing definition clearly contemplates such househelper or domestic servant
who is employed in the employer's home to minister exclusively to the personal
comfort and enjoyment of the employer's family. Such definition covers family drivers,
domestic servants, laundry women, yayas, gardeners, houseboys and other similar
househelps.
The definition cannot be interpreted to include househelp or laundrywomen working in
staffhouses of a company, like petitioner who attends to the needs of the company's
guest and other persons availing of said facilities. By the same token, it cannot be
considered to extend to then driver, houseboy, or gardener exclusively working in the
company, the staffhouses and its premises. They may not be considered as within the
meaning of a "househelper" or "domestic servant" as above-defined by law.
The criteria is the personal comfort and enjoyment of the family of the employer in the
home of said employer. While it may be true that the nature of the work of a
househelper, domestic servant or laundrywoman in a home or in a company
staffhouse may be similar in nature, the difference in their circumstances is that in the
former instance they are actually serving the family while in the latter case, whether it
is a corporation or a single proprietorship engaged in business or industry or any other
agricultural or similar pursuit, service is being rendered in the staffhouses or within the
premises of the business of the employer. In such instance, they are employees of the
company or employer in the business concerned entitled to the privileges of a regular
employee.
Petitioner contends that it is only when the househelper or domestic servant is
assigned to certain aspects of the business of the employer that such househelper or
domestic servant may be considered as such as employee. The Court finds no merit
in making any such distinction. The mere fact that the househelper or domestic
servant is working within the premises of the business of the employer and in relation
to or in connection with its business, as in its staffhouses for its guest or even for its
officers and employees, warrants the conclusion that such househelper or domestic
servant is and should be considered as a regular employee of the employer and not
as a mere family househelper or domestic servant as contemplated in Rule XIII,
Section l(b), Book 3 of the Labor Code, as amended.
Petitioner denies having illegally dismissed private respondent and maintains that
respondent abandoned her work.1wphi1This argument notwithstanding, there is
enough evidence to show that because of an accident which took place while private
respondent was performing her laundry services, she was not able to work and was
ultimately separated from the service. She is, therefore, entitled to appropriate relief
as a regular employee of petitioner. Inasmuch as private respondent appears not to be
interested in returning to her work for valid reasons, the payment of separation pay to
her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution
of public respondent NLRC are hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.

75. G.R. No. 123737 May 28, 1999

CARLOS C. LIBRES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL STEEL
CORPORATION, OSMUNDO G. WAGA, JR., ANTONIE D. SEVA, PETER J.
LOQUILLANO, SATURNINO P. MEJORADA and ISIDRO F. HYNSON,
JR., respondent.

BELLOSILLO, J.:
This petition for certiorari seeks to annul the decision of public respondent National
Labor Relations Commission (NLRC) sustaining the Labor Arbiter's finding that
petitioner was validly suspended by private respondents, as well as the NLRC
resolution denying petitioner's motion to reconsider its decision.
Petitioner Carlos G. Libres, an electrical engineer, was holding a managerial position
with National Steel Corporation (NSC) as Assistant Manager. On 3 August 1993 he
received a Notice of Investigation from Assistant Vice president Isidro F. Hynson Jr.,
his immediate superior, requesting him to submit a written explanation relative to the
charge of sexual harassment made by Susan D. Capiral, Hynson's secretary,
allegedly committed by Libres sometime in May 1992, and subsequently to answer
clarificatory questions on the matter. The notice also warned him that failure to file his
written explanation would be construed as a waiver of his right to be heard. On 14
August 1993 petitioner submitted his written explanation denying the accusation
against him and offering to submit himself for clarificatory interrogation.
Subsequently, Hynson Jr. conducted an internal investigation to which Libres and
Capiral were invited to ventilate their respective sides of the issue. They readily
responded. Thereafter, Hynson Jr. submitted his report to the Management Evaluation
Committee (MEC).

The MEC, after deliberation concluded that the charges against petitioner constituted
a violation of Item 2, Table V, of the Plant's Rules and Regulations. 1 It opined that
"touching a female subordinate's hand and shoulder, caressing her nape and telling
other people that Capiral was the one who hugged and kissed or that she responded
to the sexual advances are unauthorized acts that damaged her honor". 2 Referring to
the Manual of the Philippine Daily Inquirer in defining sexual harassment, 3 the MEC
finally concluded that petitioner's acts clearly constituted sexual harassment as
charged and recommended petitioner's suspension for thirty (30) days without pay.
On 5 January 1994 petitioner wrote Melchor Q. Villamor, Vice President for
Manufacturing requesting reconsideration of his suspension, but the same was
denied. On 12 February 1994 the suspension order was finally implemented.
Seeking to reverse his misfortune, Libres filed a complaint for illegal suspension and
unjust discrimination against respondent NSC and its officers, private respondents
herein, before the Labor Arbiter. Citing the failure of the MEC to grant him audience
despite his offer to answer clarificatory questions, petitioner claimed denial of due
process. Labor Arbiter Nicodemus G. Palangan however ruled that due process was
properly observed and that there was a positive finding of sexual harassment to justify
petitioner's suspension. He pointed out that there was no substantial inconsistency
between the narration of complainant Capiral and petitioner regarding the incident in
the evening of May 1992. The Labor Arbiter found that aside from a few facts which
were controverted by Capiral in her complaint-affidavit, petitioner's admissions
approximated the truth; consequently, he ruled that the MEC was correct in concluding
that sexual harassment had indeed transpired. The Labor Arbiter observed that
petitioner should welcome that his penalty was only for suspension of thirty (30) days
as opposed to termination imposed in Villarama v. NLRC and Golden Donuts. 4
In this recourse petitioner maintains that public respondent grievously erred
amounting to lack or excess of jurisdiction in finding that he committed sexual
harassment justifying his suspension, and in concluding that he was afforded due
process.
Petitioner argues that the issue of sexual harassment was not adequately considered
as he noted that the finding of the NLRC was made without proper basis in fact and in
law. He maintains that the NLRC merely adopted the conclusions of the Labor Arbiter
which in turn were simply derived from the report of the MEC. Petitioner primarily
disputes the failure of the NLRC to apply RA No. 7877, "An Act Declaring Sexual
Harassment Unlawful in the Employment, Education or Training Environment and for
Other Purposes," in determining whether he actually committed sexual harassment.
He asserts that his acts did not fall within the definition and criteria of sexual
harassment as laid down in Sec. 3 of the law. 5 Specifically, he cites public
respondent's failure to show that his acts of fondling the hand and massaging the

shoulders of Capiral "discriminated against her continued employment," "impaired her

rights and privileges under the Labor Code," or "created a hostile, intimidating or
offensive environment." 6
Petitioner also contends that public respondent's reliance on Villarama v. NLRC and
Golden Donuts 7 was misplaced. He draws attention to victim Divina Gonzaga's
immediate filing of her letter of resignation in the Villarama case as opposed to the
one-year delay of Capiral in filing her complaint against him. He now surmises that the
filing of the case against him was merely an afterthought and not borne out of a valid
complaint, hence, the Villarama case should have no bearing on the instant case.
As regards his assertion that he was not afforded due process, petitioner would point
to his demand for personal confrontation which was brushed aside by the MEC. He
argues strongly that in rejecting his plea, the MEC clearly denied him an opportunity to
be heard and present his side.
The issues raised in this petition require this Court to delve into the findings of fact by
the public respondent. We have ruled in a litany of cases that resort to judicial review
of the decisions of the NLRC under Rule 65 of the Rules of Court is confined only to
issues of want or excess of jurisdiction and grave abuse of discretion on the part of
the tribunal rending them. It does not include an inquiry on the correctness of the
evaluation of evidence, which served as basis for the labor official in determining his
conclusion. Findings of fact of administrative officers are generally given
finality. 8 Nonetheless, the Court shall discuss the matter if only to emphasize that the
contentions of petitioner are definitely without merit.
Petitioner assails the failure of the NLRC to strictly apply RA No. 7877 to the instant
case. We note however that petitioner never raised the applicability of the law in his
appeal to the NLRC nor in his motion for reconsideration. Issues or arguments must
chiefly be raised before the court or agency concerned so as to allow it to pass upon
and correct its mistakes without the intervention of a higher court. Having failed to
indicate his effort along this line, petitioner cannot now belatedly raise its application in
this petition.

Republic Act No. 7877 was not yet in effect at the time of the occurrence of the act
complained of. It was still being deliberated upon in Congress when petitioner's case
was decided by the Labor Arbiter. As a rule, laws shall have no retroactive effect
unless otherwise provided, or except in a criminal case when their application will
favor the accused. 9 Hence, the Labor Arbiter have to rely on the MEC report and the
common connotation of sexual harassment as it is generally as understood by the
public. Faced with the same predicament, the NLRC had to agree with the Labor
Arbiter. In so doing, the NLRC did not commit any abuse of discretion in affirming the
decision of the Labor Arbiter.
Petitioner next trains his gun on the reliance by the NLRC on Villarama and claims it
was erroneous. We rule otherwise and hold that it was both fitting and appropriate
since it singularly addressed the issue of a managerial employee committing sexual
harassment on a subordinate. The disparity in the periods of filing the complaints in
the two (2) cases did not in any way reduce this case into insignificance. On the
contrary, it even invited the attention of the Court to focus on sexual harassment as a
just and valid cause for termination. Whereas petitioner Libres was only meted a 30day suspension by the NLRC, Villarama in the other case was penalized with
termination. As Mr. Justice Puno elucidated, "As a managerial employee, petitioner is
bound by more exacting work ethics. He failed to live up to his higher standard of
responsibility when he succumbed to his moral perversity. And when such moral
perversity is perpetrated against his subordinate, he provides a justifiable ground for
his dismissal for lack of trust and confidence. It is the right, nay, the duty of every
employer to protect its employees from oversexed superiors." 10 Public respondent
therefore is correct in its observation that the Labor Arbiter was in fact lenient in his
application of the law and jurisprudence for which petitioner must be grateful and not
gripe against.
Petitioner further claims that the delay in instituting the complaint shows that it was
only an afterthought. We disagree. As pointed out by the Solicitor General, it could be
expected since Libres was Capiral's immediate superior. Fear of retaliation and
backlash, not to forget the social humiliation and embarrassment that victims of this
human frailty usually suffer, are all realities that Capiral had to contend with. Moreover,
the delay did not detract from the truth derived from the facts. Petitioner Libres never
questioned the veracity of Capiral's allegations. In fact his narration even corroborated
the latter's assertion in several material points. He only raised issue on the complaint's
protracted filing.
On the question of due process, we find that the requirements thereof were sufficiently
complied with. Due process as a constitutional precept does not always and in all
situations require a trial type proceeding. Due process is satisfied when a person is
notified of the charge against him and given an opportunity to explain or defend
himself. The essence of due process is simply to be heard, or as applied to

administrative proceedings, an opportunity to explain one's side, or an opportunity to

seek a reconsideration of the action or ruling complained of. 11 It is undeniable that
petitioner was given a Notice of Investigation informing him of the charge of sexual
harassment as well as advising him to submit a written explanation regarding the
matter; that he submitted his written explanation to his superior, Isidro F. Hyson Jr.;
that Hynson Jr. further allowed him to air his grievance in a private session; and, that
upon release of the suspension order made by the MEC petitioner requested its
reconsideration but was denied. From the foregoing it can be gleaned that petitioner
was given more than adequate opportunity to explain his side and air his grievances.
The personal confrontation with the MEC officers, which he requested, was not
necessary. The parties had already exhaustively presented their claims and defenses
in different fora. As stated in Howevers Savings and Loan Association
v. NLRC,litigants may be heard through pleadings, written explanations, position
papers, memoranda or oral arguments. 12 Petitioner has been afforded all of the above
means to air his side. Due process was therefore properly observed.
WHEREFORE, the petition is DISMISSED, no grave abuse of discretion having been
committed by public respondent National Labor Relations Commission in upholding
the suspension of petitioner Carlos G. Libres as justified and in accordance with due
process. Consequently, its decision of 28 August 1995 as well as its resolution of 31
October 1995 is AFFIRMED.1wphi1.nt
SO ORDERED.

76. A.M. No. MTJ-01-1356

April 16, 2001

LUCITA E. BIBOSO, complainant,

vs.
JUDGE OSMUNDO M. VILLANUEVA, Presiding Judge of the Fourth Municipal
Circuit Trial Court, Bagumbayan-Esperanza, Sultan Kudarat
Province, respondent.
MENDOZA, J.:
This is an administrative complaint for sexual harassment against respondent Judge
Osmundo Villanueva of the Fourth Municipal Circuit Trial Court, BagumbayanEsperanza, Sultan Kudarat.

Complainant Lucita E. Biboso, 33, claimed that at around 11 oclock in the morning of
August 20, 1996, she went to see respondent at the MCTC in Esperanza, Sultan
Kudarat to "follow up" her case (Civil Case No. 71). Complainant made the following
account of how she was allegedly molested by respondent:
. . . [Judge Osmundo M. Villanueva] invited me to get inside his chamber for
personal conference. When we were already inside his office, he locked the
room. To my surprise he immediately embraced and kissed me, hugged me
and hurriedly removed my blouse he took advantage of caressing my
breasts and began unzipping my pants. Shocked and helpless during that
time, I cried and cried and cannot resist from his sexual advances . . . being
weak against [his] male strength. So what I did was to evade his sexual
advances and immediately run outside of his chamber and went home.1
Complainant said that she was again molested by respondent on September 4, 1996
inside the latters chamber in Esperanza, Sultan Kudarat. According to complainant,
she went to see respondent because he allegedly told her that she had to sign some
papers in "connection with the issuance of a warrant of arrest."2
In his Answer3 to the complaint, respondent denied having made any sexual advances
against complainant at any time. He claimed that complainant and her father-in-law,
Cipriano Biboso, trumped up charges against him because he had dismissed two
cases (Civil Case No. 71 entitled "Lucita Biboso v. Haide4 Navarra" and Criminal Case
No. 1662-B entitled "Cipriano Biboso v. Heide Navarra") filed by complainant and her
father-in-law. He contended that he could not have sexually molested complainant on
August 20, 1996 in Esperanza because he was in Lebak, Sultan Kudarat from August
19-23, 1996, discharging his duties as Acting Presiding Judge of the First Municipal
Circuit Trial Court for Lebak-Kalamansig, Sultan Kudarat.
To support his alibi, respondent submitted several documents, namely: copies of the
transcript of stenographic notes, dated August 20, 1996, of the preliminary
investigation of complainant in Criminal Case No. 2033-L, conducted in Lebak (Exh.
8); the complaints in Criminal Case Nos. 2033-L and 2034-L, both entitled "People v.
Eric Camporedondo and Christopher Camporedondo," received and notarized by him
on August 20, 1996, also in Lebak (Exhs. 10 and 11); the itinerary of his travels and
the corresponding disbursement voucher prepared by the Clerk of Court of the MCTC
of Lebak-Kalamansig showing that he was in Lebak from August 19-23, 1996 (Exhs. 5
and 6); and a certification, dated May 25, 1998, by the Clerk of Court of the MCTC of
Lebak-Kalamansig stating therein that respondent judge was in Lebak from August
19-23, 1996 (Exh. 7). As to the second incident of sexual harassment which allegedly
took place on September 4, 1996, respondent stated that such could not have been
committed as there was no session in Esperanza on that date.

The case was referred to the Executive Judge of the Regional Trial Court, Isulan,
Sultan Kudarat for investigation, report, and recommendation. During the
investigation, complainant and her sister-in-law, Lorna Biboso, testified, while
respondent, in addition to himself, presented as his witnesses SPO4 Rogelio Venus,
Romeo Chiva, process server of MCTC, Bagumbayan-Esperanza, and Virginia
Dumaguing, Clerk of Court, MCTC, Lebak-Kalamansig.

Are you referring to Bagumbayan in Sultan Kudarat province?

Yes, sir.

Will you please describe to us how the incident occurred?

In his report, dated February 5, 2001, Executive Judge German M. Malcampo found
complainants claim of sexual harassment to be unsubstantiated due to material
inconsistencies between complainants affidavit-complaint and her testimony during
the investigation of the case. Nevertheless, in view of his finding that respondent gave
assistance to complainants father-in-law in filing a case in his sala, Judge Malcampo
recommended that respondent be reprimanded and ordered to pay a fine in the
amount of P20,000.00.

A
In the Municipal Trial Court of Bagumbayan Judge Villanueva called
me in his office. When I entered in his office he asked me why my
appearance is always "nakasimangot."

Did you make any answer to that question of Judge Villanueva?

The recommendation is well taken. Indeed, the evidence presented during the
investigation of the case fails to show that respondent sexually harassed complainant.
Contrary to her statement in her affidavit-complaint that respondent judge sexually
molested her on August 20, 1996 inside his chamber in Esperanza, Sultan Kudarat,
complainant testified during the investigation of this case that their meeting actually
took place on August 27, 1996 in the courthouse in Bagumbayan, Sultan Kudarat,
during which respondent merely shook her hand, thus:

Yes, sir.

What did you tell Judge Villanueva, if any?

I told Judge Villanueva that, "Sir, I have a problem."

Please continue your narration Mrs. Biboso.

....

ATTY. JABIDO, JR.

[Counsel for complainant]
Q
Mrs. Biboso, your complaint is for sexual harassment allegedly
committed upon you by respondent Judge Osmundo Villanueva. To begin
with, when did this incident of sexual harassment occur?

A
I told him that I have a problem in connection with my land. He told
me, "Tell me your problem and I am willing to help you."
Q

What else? Was there anything else that happened?

Then he held my hand.

August 27.

What year?

Which hand did he hold?

1996, sir.

It was my left hand that was held by him, sir.

Where did the incident occur?

Q
Can you demonstrate to us, you yourself as Judge Villanueva and
myself to take your place?

At Bagumbayan.

....

ATTY. JABIDO:
Your Honor, the witness is demonstrating that with her right hand,
she held my left hand with her four (4) fingers pressing my palm
and the thumb on the upper part of my hand.
....
Q

Did anything else happen after that?

I went back to my chair and sat down.

at the time she executed the affidavit. She insisted, however, that the alleged incident
on September 4, 1996 did take place.6
We find her explanation to be inadequate. Considering the nature of the alteration
involved, pertaining as it does to the time, place, and manner of commission of the
alleged first incident of sexual harassment, it is more likely that, confronted with the
numerous and unimpeachable documentary evidence presented by respondent which
showed that he was not in Esperanza, Sultan Kudarat on August 20, 1996, where the
alleged first incident of sexual harassment took place, complainant was forced to
change her story. In any event, the incident which she said allegedly took place on
August 27, 1996 between her and respondent in the municipal courthouse in
Bagumbayan, Sultan Kudarat does not constitute sexual harassment for, as she
herself stated, respondent merely shook her hand.

....
Q

From that point, Mrs. Biboso, did anything else happen?

No more, sir.

So, what did you do after that?

I went out.

....

As for their September 4, 1996 meeting, it appears that complainant went to see
respondent not at the latters initiative but because she wanted to seek advice in filing
an estafa case against Heidi Navarra. As respondent testified:
ATTY. CORDERO, JR.:
[Counsel for respondent]
Q
Going back to the second part of the complaint, that on September
4, 1996, you sexually molested or sexually harassed the complainant in the
same manner as what have been done to her allegedly on August 20, 1996.
What can you say to that?

[ATTY. CORDERO]
Q
How did Judge Villanueva [take] hold of your hand when you were
facing each other in between the table?
A

He stretched his hand and shook my hand.

And that was all?

And then, he said, "I will help you with your problem."5

When confronted with the inconsistency between what she stated in her affidavit and
her testimony during the investigation, complainant admitted that what she had stated
in her affidavit regarding the incident on August 20, 1996 was not true. She claimed
that the discrepancy was due to the fact that she was confused ("hindi pa naka-isip")

That is not true. I have not molested her.

What is the truth?

A
On September 4, she came in the office and asked me about the
filing of that case of estafa against Navarra.
Q
Meaning, she was legally consulting the court or seeking advice on
that proposed criminal case that was filed?
A

She asked me on what to do.

Who was interested in the filing of the estafa case?

She was the one together with the father-in-law.

Who prepared the affidavit?

What was your advice on September 4, 1996, on that consultation?

I dictated it to my clerk.

A
I told her that it is the father-in-law who should be the one to file the
complaint.

That was duly signed by the complainant?

Yes, sir.

In your presence?

Yes.

And it was you who ratified the document?

Yes, sir.

Did she do that?

On the following day, she returned together with the father-in-law.

And what was the conversation between you and her father-in-law?

A
Well, if that property is registered [in his name], he should be the
party to file the case and he told me that although that land belongs to his
daughter-in-law, he is still the registered owner.
Q
As you said it was rather Lucita Biboso [who] claims the land but the
title is not registered in her name so you advised her that it was her fatherin-law who should do the filing?
A

Yes, sir.

INVESTIGATING JUDGE:
Q
And that was the reason why she appeared on the following day,
September 5, 1996, together with her father-in-law, Cipriano Biboso?
A
They appeared in Court and they requested that I will help them
execute the affidavit so that they will not be investigated anymore.
Q

That was September 5, 1996?

Yes, sir.

Was the affidavit prepared?

Yes.

Q
After the execution of the said affidavit, did you advice them further
on what to do?
A
Well, after Cipriano Biboso signed the document, I adviced them
[to] . . . just give this document to the PNP Bagumbayan for the proper filing
of the criminal complaint.
Q
With the complaint of Cipriano Biboso, was a criminal complaint
finally prepared?
A

Yes.

When?

I think, the document will show that it is stated September.

Q
When the aforesaid criminal complaint was presented to you for
filing, who were the persons who delivered or filed the same in your court at
Esperanza?
A
Mr. Cipriano Biboso was there, Lucita Biboso and together with
SPO4 Rogelio Venus, the PNP member of Bagumbayan.7

It is noteworthy that complainant confirmed respondents claim. Complainant said:

ATTY. CORDERO:
Q
Now, you mentioned of having been again molested by Judge
Villanueva on September 4, 1996. What day was September 4, 1996?
A

Wednesday, sir.

And at what time did you arrive at the court on September 4, 1996?

In Esperanza, sir.8

Respondents testimony was likewise corroborated by SPO4 Rogelio Venus of the

Philippine National Police, Bagumbayan, Sultan Kudarat, who testified:
[ATTY. CORDERO]
Q
On September 5, 1996, can you recall whether Lucita Biboso and
her father-in-law went to your police station at Bagumbayan?
A

Yes, sir.

What time was that?

That was 3:00 oclock in the afternoon, sir.

About 9:30 oclock, sir.

....

Q
By the way, why were you there on that particular day on September
4, 1996?
A

Q
Do you know what was the purpose of both of them in going to the
police station of Bagumbayan?

We will file [a complaint for] estafa, sir.

A

Against whom?

Heidi Navarra.

Who was filing the estafa case?

My father-in-law.

They wanted to file a case against Haydee Navarra.

....
ATTY. CORDERO:

....

Q
Did any one of them present a document to support the filing of [an]
estafa case?
A
They were bringing with them an affidavit to support the criminal
complaint.

Q
When you went there on September 4, 1996, was the estafa case
already filed?

You have seen that affidavit?

Yes, sir.

Whose affidavit was that?

Affidavit of Cipriano Biboso.

Not yet, sir. It was filed on September 5.

....

Where was it filed, in Bagumbayan or in Esperanza?

....

And you presented that criminal complaint?

Q
Now, based on this affidavit, did the police station prepare the
criminal complaint?

Yes, sir.

....
A
During that time, sir, considering that it [was] already late in the
afternoon, we adviced them to go back the following day.

Was there a warrant of arrest issued on that same day?

....

Yes, sir.

Q
Now, on the next day, you said that they were adviced to come back.
That was already September 6, 1996. Did they come back to the PNP
station [of] Bagumbayan?

In connection with the criminal complaint?

Yes, sir.

Did you receive that warrant of arrest?

After the filing, I received a copy of the warrant of arrest.9

Yes, sir.

And what did you do with the prepared criminal complaint?

A
I was instructed by our Chief of Police to go with them [to] Esperanza
to file the case.

Complainants behavior during the actual filing of the case on September 6, 1996, as
observed by SPO4 Rogelio Venus, belies her allegation that she had been subjected
to sexual abuse by respondent two days before, thus:

Did you go with them?

Yes, sir.

What time did you arrive at Esperanza?

Q
You entered the chamber of the MCTC Judge Villanueva in the
Municipal Court of Esperanza, Sultan Kudarat?

More or less, 10:00 oclock in the morning

[INVESTIGATING JUDGE]

Yes, your Honor.

....

....

Q
When you arrived at Esperanza, the three of you went directly to the
Court?

How long did you stay inside the chamber of the Judge?

If I remember it right, 20 minutes.

Yes, sir.

Was the Judge present that time when you arrived thereat?

Yes, sir.

Q
Who was talking with the Judge as soon as you entered his
chamber?

A
We were four (4) in the office, Your Honor. The complainant is talking
with the Judge.
Q

A
Of course, sir, naturally they were happy because we are holding the
warrant of arrest and then they told me to facilitate the immediate arrest of
the accused.

To whom are you referring?

....

A
The complainant Mr. Biboso and his companion, his daughter-in-law
Lucita Biboso.
Q

You were just [listening]?

Q
Since you were with Cipriano Biboso and Lucita Biboso, did not
Lucita Biboso tell you of anything in connection with this case and in
connection with the respondent Judge?

Yes, Your Honor.

None, Your Honor.

Q
How was the conversation between the respondent Judge and the
complainant, Cipriano Biboso, as well as his daughter-in-law?

Q
Did she not tell you that a day or two earlier, she was allegedly
harassed or molested by the respondent Judge?

None, sir.

Are you very sure of that?

Yes, Your Honor.10

Normal, Your Honor.

Q
In other words, the complainant, Cipriano Biboso, and his daughterin-law, were satisfied that the complaint for estafa was finally filed and
accepted by the MCTC Judge?
A

Yes, Your Honor.

....
Q
On your way out of the courthouse in Esperanza, Sultan Kudarat,
what if any did the complainant, Cipriano Biboso, tell you considering that
you were now in possession of the warrant of arrest?
A

He told me to effect the arrest immediately.

Q
any?

How about his daughter-in-law, Lucita Biboso, what did she tell you if

The same, sir, [to serve] the warrant of arrest.

Q
Did you notice [the] action [on] their faces that they were happy
because of the issuance of a warrant of arrest against the accused, Haydee
Navarra?

Complainant thus failed to prove her charges against respondent. The inconsistencies
between her testimony and complaint-affidavit, in contrast to the credible testimonial
and documentary evidence presented by respondent, put in serious doubt the veracity
of her claims. Indeed, it appears, as respondent judge claims, that this case was filed
to punish him for having dismissed the cases filed by complainant and her father-inlaw, especially as the filing of this case came on the heels of the dismissal of the latter.
There could no other reason for complainant to turn against respondent when the
latter had previously helped complainant in her legal problems to the extent of
preparing her father-in-laws complaint-affidavit for estafa against Navarra and even
issuing a writ of execution in one case (Civil Case No. 71) and a warrant of arrest in
another (Criminal Case No. 1662-B). Furthermore, it took complainant more than a
year after the commission of the alleged sexual harassment on September 4, 1996 to
file the instant administrative complaint. Even complainant's explanation as to why she
executed her affidavit-complaint only on October 16, 1997 was conflicting. She initially
stated that she was only able to execute her complaint-affidavit for this case on said
late date because rumors had spread by that time that she was respondents lover
(kabit).11During her cross-examination, however, she stated that she had to defer the
execution of her complaint because she had to wait for her husband to come back
from Manila.12

The foregoing notwithstanding, as found by the investigating judge, respondent should

be held liable for his conduct in relation to Criminal Case No. 1662-B. Respondent
acted as a lawyer for complainant and her father-in-law when he drafted complainants
affidavit which became the basis of a complaint for estafa filed against Heidi Navarra.
By acting as counsel for complainant and the latters father-in-law in a case filed in his
court, respondent compromised his neutrality and independence. How could he then
be expected to decide with objectivity and fairness the cases in which he has acted as
a lawyer for the plaintiff or complainant? Respondents misconduct in this case is
further compounded by the fact that he rendered the legal services in question using
government facilities during office hours.

WHEREFORE, respondent Judge Osmundo M. Villanueva, Fourth Municipal Circuit

Trial Court, Bagumbayan-Esperanza, Sultan Kudarat, is found GUILTY of misconduct
and is hereby ORDERED to pay a FINE in the amount of P20,000.00 with warning
that commission of similar and other misconduct will be dealt with more severely.
SO ORDERED.