To whom does the Labor Code Apply

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 98107 August 18, 1997

BENJAMIN C. JUCO, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING CORPORATION, respondents.

 

HERMOSISIMA, JR., J.:

This is a petition for certiorari to set aside the Decision of the National Labor Relations Commission (NLRC) dated March 14, 1991, which reversed the Decision dated May 21, 1990 of Labor Arbiter Manuel R Caday, on the ground of lack of jurisdiction.

Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing Corporation (NHC) from November 16, 1970 to May 14, 1975. On May 14, 1975, he was separated from the service for having been implicated in a crime of theft and/or malversation of public funds.

On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the Department of Labor.

On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the ground that the NLRC had no jurisdiction over the case. 1

Petitioner then elevated the case to the NLRC which rendered a decision on December 28, 1982, reversing the decision of the Labor Arbiter. 2

Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on January 17, 1985, we rendered a decision, the dispositive portion thereof reads as follows:

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National Labor Relations Commission is SET ASIDE. The decision of the Labor Arbiter dismissing the case before it for lack of jurisdiction is REINSTATED. 3

On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal dismissal, with preliminary mandatory injunction. 4

On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the ground that the Civil Service Commission has no jurisdiction over the case. 5

On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of jurisdiction. It ratiocinated that:

The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that NHC is a government corporation without an original charter but organized/created under the Corporation Code.

Article IX, Section 2 (1) of the 1987 Constitution provides:

The civil service embraces all branches, subdivisions, instrumentalities and agencies of the Government, including government owned and controlled corporations with original charters. (emphasis supplied)

From the aforequoted constitutional provision, it is clear that respondent NHC is not within the scope of the civil service and is therefore beyond the jurisdiction of this Board. Moreover, it is pertinent to state that the 1987 Constitution was ratified and became effective on February 2, 1987.

WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed. 6

On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal with preliminary mandatory injunction against respondent NHC. 7

On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was illegally dismissed from his employment by respondent as there was evidence in the record that the criminal case against him was purely fabricated, prompting the trial court to dismiss the charges against him. Hence, he concluded that the dismissal was illegal as it was devoid of basis, legal or factual.

He further ruled that the complaint is not barred by prescription considering that the period from which to reckon the reglementary period of four years should be from the date of the receipt of the decision of the Civil Service Commission promulgated on April 11, 1989. He also ratiocinated that:

It appears . . . complainant filed the complaint for illegal dismissal with the Civil Service Commission on January 6, 1989 and the same was dismissed on April 11, 1989 after which on April 28, 1989, this case was filed by the complainant. Prior to that, this case was ruled upon by the Supreme Court on January 17, 1985 which enjoined the complainant to go to the Civil Service Commission which in fact, complainant did. Under the circumstances, there is merit on the contention that the running of the reglementary period of four (4) years was suspended with the filing of the complaint with the said Commission. Verily, it was not the fault of the respondent for failing to file the complaint as alleged by the respondent but due to, in the words of the complainant, a "legal knot" that has to be untangled. 8

Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:

Premises considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal and ordering the respondent to immediately reinstate him to his former position without loss of seniority rights with full back wages inclusive of allowance and to his other benefits or equivalent computed from the time it is withheld from him when he was dismissed on March 27, 1977, until actually reinstated. 9

On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991, the NLRC promulgated a decision which reversed the decision of Labor Arbiter Manuel R. Caday on the ground of lack of jurisdiction. 10

The primordial issue that confronts us is whether or not public respondent committed grave abuse of discretion in holding that petitioner is not governed by the Labor Code.

Under the laws then in force, employees of government-owned and/or controlled corporations were governed by the Civil Service Law and not by the Labor Code. Hence,

Article 277 of the Labor Code (PD 442) then provided:

The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations shall be governed by the Civil Service Law, rules and regulations . . . .

The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:

The Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including government-owned or controlled corporations.

Although we had earlier ruled in National Housing Corporation v.Juco, 11 that employees of government-owned and/or controlled corporations, whether created by special law or formed as subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the Labor Code, this ruling has been supplanted by the 1987 Constitution. Thus, the said Constitution now provides:

The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government owned or controlled corporations with original charter. (Article IX-B, Section 2[1])

In National Service Corporation (NASECO) v. National Labor Relations Commission, 12 we had the occasion to apply the present Constitution in deciding whether or not the employees of NASECO are covered by the Civil Service Law or the Labor Code notwithstanding that the case arose at the time when the 1973 Constitution was still in effect. We ruled that the NLRC has jurisdiction over the employees of NASECO on the ground that it is the 1987 Constitution that governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled that the new phrase "with original charter" means that government-owned and controlled corporations refer to corporations chartered by special law as distinguished from corporations organized under the Corporation Code. Thus, NASECO which had been organized under the general incorporation statute and a subsidiary of the National Investment Development Corporation, which in turn was a subsidiary of the Philippine National Bank, is exluded from the purview of the Civil Service Commission.

We see no cogent reason to depart from the ruling in the aforesaid case.

In the case at bench, the National Housing Corporation is a government owned corporation organized in 1959 in accordance with Executive Order No. 399, otherwise known as the Uniform Charter of Government Corporation, dated January 1, 1959. Its shares of stock are and have been one hundred percent (100%) owned by the Government from its incorporation under Act 1459, the former corporation law. The government entities that own its shares of stock are the Government Service Insurance System, the Social Security System, the Development Bank of the Philippines, the National Investment and Development Corporation and the People's Homesite and Housing Corporation. 13 Considering the fact that the NHA had been incorporated under Act 1459, the former corporation law, it is but correct to say that it is a government-owned or controlled corporation whose employees are subject to the provisions of the Labor Code. This observation is reiterated in the recent case of Trade Union of the Philippines and Allied Services (TUPAS) v. National Housing Corporation, 14 where we held that the NHA is now within the jurisdiction of the Department of Labor and Employment, it being a government-owned and/or controlled corporation without an original charter. Furthermore, we also held that the workers or employees of the NHC (now NHA) undoubtedly have the right to form unions or employee's organization and that there is no impediment to the holding of a certification election among them as they are covered by the Labor Code.

Thus, the NLRC erred in dismissing petitioner's complaint for lack of jurisdiction because the rule now is that the Civil Service now covers only government-owned or controlled corporations with original charters. 15 Having been incorporated under the Corporation Law, its relations with its personnel are governed by the Labor Code and come under the jurisdiction of the National Labor Relations Commission.

One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal case. It is but apt that we put an end to his dilemna in the interest of justice.

WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is hereby REVERSED and the Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 108813 December 15, 1994

JUSMAG PHILIPPINES, petitioner, vs.THE NATIONAL LABOR RELATIONS COMMISSION (Second Division) and FLORENCIO SACRAMENTO, Union President, JPFCEA, respondents.

Juan, Luces, Luna and Associates for petitioner.

Galutera & Aguilar Law Offices for private respondent.

 

PUNO, J.:

The immunity from suit of the Joint United States Military Assistance Group to the Republic of the Philippines (JUSMAG-Philippines) is the pivotal issue in the case at bench.

JUSMAG assails the January 29, 1993 Resolution of the NATIONAL LABOR RELATIONS COMMISSION (public respondent), in NLRC NCR CASE NO. 00-03-02092-92, reversing the July 30, 1991 Order of the Labor Arbiter, and ordering the latter to assume jurisdiction over the complaint for illegal dismissal filed by FLORENCIO SACRAMENTO (private respondent) against petitioner.

First, the undisputed facts.

Private respondent was one of the seventy-four (74) security assistance support personnel (SASP) working at JUSMAG-Philippines. 1 He had been with JUSMAG from December 18, 1969, until his dismissal on April 27, 1992. When dismissed, he held the position of Illustrator 2 and was the incumbent President of JUSMAG PHILIPPINES-FILIPINO CIVILIAN EMPLOYEES ASSOCIATION (JPFCEA), a labor organization duly registered with the Department of Labor and Employment. His services were terminated allegedly due to the abolition of his position. 2 He was also advised that he was under administrative leave until April 27, 1992, although the same was not charged against his leave.

On March 31, 1992, private respondent filed a complaint with the Department of Labor and Employment on the ground that he was illegally suspended and dismissed from service by JUSMAG. 3 He asked for his reinstatement.

JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of the United States. It further alleged lack of employer-employee relationship and that it has no juridical personality to sue and be sued. 4

In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject complaint " for want of jurisdiction." 5 Private respondent appealed 6 to the National Labor Relations Commission (public respondent), assailing the ruling that petitioner is immune from suit for alleged violation of our labor laws. JUSMAG filed its Opposition, 7 reiterating its immunity from suit for its non-contractual, governmental and/or public acts.

In a Resolution, dated January 29, 1993, the NLRC 8 reversed the ruling of the Labor Arbiter as it held that petitioner had lost its right not to be sued. The resolution was predicated on two grounds: (1) the principle of estoppel — that JUSMAG failed to refute the existence of employer-employee relationship under the "control test"; and (2) JUSMAG has waived its right to immunity from suit when it hired the services of private respondent on December 18, 1969.

The NLRC relied on the case of Harry Lyons vs. United States of America, 9 where the "United States Government (was considered to have) waived its immunity from suit by entering into (a) contract of stevedoring services, and thus, it submitted itself to the jurisdiction of the local courts."

Accordingly, the case was remanded to the labor arbiter for reception of evidence as to the issue on illegal dismissal.

Hence, this petition, JUSMAG contends:

I

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. IN REVERSING THE DECISION OF THE LABOR ARBITER AND IN NOT AFFIRMING THE DISMISSAL OF THE COMPLAINT IT BEING A SUIT AGAINST THE UNITED STATES OF AMERICA WHICH HAD NOT GIVEN ITS CONSENT TO BE SUED; AND

B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY FROM SUIT;

II

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN JUSMAG AND PRIVATE RESPONDENT; AND

B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYING THAT PRIVATE RESPONDENT IS ITS EMPLOYEE FOR FAILURE TO PRESENT PROOF TO THE CONTRARY.

We find the petition impressed with merit.

It is meet to discuss the historical background of the JUSMAG to determine its immunity from suit.

JUSMAG was created pursuant to the Military Assistance Agreement 10 dated March 21, 1947, between the Government of the Republic of the Philippines and the Government of the United States of America. As agreed upon, JUSMAG shall consist of Air, Naval and Army group, and its primary task was to advise and assist the Philippines, on air force, army and naval matters. 11

Article 14 of the 1947 Agreement provides, inter alia, that "the cost of all services required by the Group, including compensation of locally employed interpreters, clerks, laborers, and other personnel, except personal servants, shall be borne by the Republic of the Philippines."

This set-up was to change in 1991. In Note No 22, addressed to the Department of Foreign Affairs (DFA) of the Philippines, dated January 23, 1991, the United States Government, thru its Embassy, manifested its preparedness "to provide funds to cover the salaries of security assistance support personnel" and security guards, the rent of JUSMAG occupied buildings and housing, and the cost of utilities. 12 This offer was accepted by our Government, thru the DFA, in Note No. 911725, dated April 18, 1991. 13

Consequently, a Memorandum of Agreement 14 was forged between the Armed Forces of the Philippines and JUSMAG-Philippines, thru General Lisandro C. Abadia and U.S. Brigadier General Robert G. Sausser. The Agreement delineated the terms of the assistance-in-kind of JUSMAG for 1991, the relevant parts of which read:

a. The term salaries as used in this agreement include those for the security guards currently contracted between JUSMAG and A' Prime Security Services Inc., and the Security Assistance Support Personnel (SASP). . . . .

b. The term Security Assistance Support Personnel (SASP) does not include active duty uniformed members of the Armed Forces of the Philippines performing duty at JUSMAG.

c. It is understood that SASP are employees of the Armed Forces of the Philippines (AFP). Therefore,the AFP agrees to appoint, for service with JUSMAG, no more than 74 personnel to designated positions with JUSMAG.

d. SASP are under the total operational control of the Chief, JUSMAG-Philippines. The term "Operational Control" includes, but is not limited to, all personnel administrative actions, such as: hiring recommendations; firing recommendations; position classification; discipline; nomination and approval of incentive awards; and payroll computation. Personnel administration will be guided by Annex E of JUSMAG-Philippines Memo 10-2. For the period of time that there is an exceptional funding agreement between the government of the Philippines and the United States Government (USG), JUSMAG will pay the total payroll costs for the SASP employees. Payroll costs include only regular salary; approved overtime, costs of living allowance;

medical insurance; regular contributions to the Philippine Social Security System, PAG-IBIG Fund and Personnel Economic Relief Allowance (PERA); and the thirteenth-month bonus. Payroll costs do not include gifts or other bonus payments in addition to those previously defined above. Entitlements not considered payroll costs under this agreement will be funded and paid by the AFP.

e. All SASP employed as of July 1, 1990 will continue their service with JUSMAG at their current rate of pay and benefits up to 30 June 1991, with an annual renewal of employment thereafter subject to renewal of their appointment with the AFP (employees and rates of pay are indicated at Enclosure 3). No promotion or transfer internal to JUSMAG of the listed personnel will result in the reduction of their pay and benefits.

f. All SASP will, after proper classification, be paid salaries and benefits at established AFP civilian rates. Rules for computation of pay and allowances will be made available to the Comptroller, JUSMAG, by the Comptroller, GHQ, AFP. Additionally, any legally mandated changes in salary levels or methods of computation shall be transmitted within 48 hours of receipt by Comptroller, GHQ to Comptroller, JUSMAG.

g. The AFP agrees not to terminate SASP without 60 days prior written notice to Chief, JUSMAG-Philippines. Any termination of these personnel thought to be necessary because of budgetary restrictions or manpower ceiling will be subject to consultations between AFP and JUSMAG to ensure that JUSMAG's mission of dedicated support to the AFP will not be degraded or harmed in any way.

h. The AFP agrees to assume the severance pay/retirement pay liability for all appointed SASP. (Enclosure 3 lists the severance pay liability date for current SASP). Any termination of services, other than voluntary resignations or termination for cause, will result in immediate payments of AFP of all termination pay to the entitled employee. Vouchers for severance/retirement pay and accrued bonuses and annual leave will be presented to the Comptroller, GHQ, AFP, not later than 14 calendar days prior to required date of payment.

i. All SASP listed in Enclosure 3 will continue to participate in the Philippine Social Security System.

A year later, or in 1992, the United States Embassy sent another note of similar import to the Department of Foreign Affairs (No. 227, dated April 8, 1992), extending the funding agreement for the salaries of SASP and security guards until December 31, 1992.

From the foregoing, it is apparent that when JUSMAG took the services of private respondent, it was performing a governmental function on behalf of the United States pursuant to the Military Assistance Agreement dated March 21, 1947. Hence, we agree with petitioner that the suit is, in effect, one against the United States Government, albeit it was not impleaded in the complaint. Considering that the United States has not waived or consented to the suit, the complaint against JUSMAG cannot not prosper.

In this jurisdiction, we recognize and adopt the generally accepted principles of international law as part of the law of the land. 15 Immunity of State from suit is one of these universally recognized principles. In international law, "immunity" is commonly understood as an exemption of the state and its organs from the judicial jurisdiction of another state. 16 This is anchored on the principle of the sovereign equality of states under which one state cannot assert jurisdiction over another in violation of the maxim par in parem non habet imperium (an equal has no power over an equal). 17

Under the traditional rule of State immunity, a state cannot be sued in the courts of another State, without its consent or waiver. However, in Santos, et al., vs. Santos, et al., 18 we recognized an exception to the doctrine of immunity from suit by a state, thus:

. . . . Nevertheless, if, where and when the state or its government enters into a contract, through its officers or agents, in furtherance of a legitimate aim and purpose and pursuant to constitutional legislative authority, whereby mutual or reciprocal benefits accrue and rights and obligations arise therefrom, and if the law granting the authority to enter into such contract does not provide for or name the officer against whom action may be brought in the event of a breach thereof, the state itself may be

sued, even without its consent, because by entering into a contract, the sovereign state has descended to the level of the citizen and its consent to be sued is implied from the very act of entering into such contract. . . . . (emphasis ours)

It was in this light that the state immunity issue in Harry Lyons, Inc., vs. United States of America 19 was decided.

In the case of Harry Lyons, Inc., the petitioner entered into a contract with the United States Government for stevedoring services at the U.S. Naval Base, Subic Bay, Philippines. It then sought to collect from the US government sums of money arising from the contract. One of the issues posed in the case was whether or not the defunct Court of First Instance had jurisdiction over the defendant United States, a sovereign state which cannot be sued without its consent. This Court upheld the contention of Harry Lyons, Inc., that "when a sovereign state enters into a contract with a private person, the state can be sued upon the theory that it has descended to the level of an individual from which it can be implied that it has given its consent to be sued under the contract."

The doctrine of state immunity from suit has undergone further metamorphosis. The view evolved that the existence of a contract does not, per se, mean that sovereign states may, at all times, be sued in local courts. The complexity of relationships between sovereign states, brought about by their increasing commercial activities, mothered a more restrictive application of the doctrine. 20 Thus, in United States of America vs. Ruiz, 21 we clarified that our pronouncement in Harry Lyons, supra, with respect to the waiver of State immunity, was obiter and "has no value as an imperative authority."

As it stands now, the application of the doctrine of immunity from suit has been restricted to sovereign orgovernmental activities ( jure imperii). 22 The mantle of state immunity cannot be extended to commercial, private and proprietary acts ( jure gestionis). As aptly stated by this Court (En banc) in US vs. Ruiz, supra:

The restrictive application of State immunity is proper when the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State may be said to have descended to the level of an individual and thus can be deemed to have tacitly given its consent to be used only when it enters into business contracts. It does not apply where the contract relates to the exercise of its sovereign functions. (emphasis ours)

We held further, that the application of the doctrine of state immunity depends on the legal nature of the act. Ergo, since a governmental function was involved — the transaction dealt with the improvement of the wharves in the naval installation at Subic Bay — it was held that the United States was not deemed to have waived its immunity from suit.

Then came the case of United States vs. Hon. Rodrigo, et al. 23 In said case, Genove was employed as a cook in the Main Club located at U.S. Air Force Recreation Center, John Hay Air Station. He was dismissed from service after he was found to have polluted the stock of soup with urine. Genove countered with a complaint for damages. Apparently, the restaurant services offered at the John Hay Air Station partake of the nature of a business enterprise undertaken by the United States government in its proprietary capacity. The Court then noted that the restaurant is well known and available to the general public, thus, the services are operated for profit, as a commercial and not a governmental activity. Speaking through Associate Justice Isagani Cruz, the Court (En Banc) said:

The consequence of this finding is that the petitioners cannot invoke the doctrine of state immunity to justify the dismissal of the damage suit against them by Genove. Such defense will not prosper even if it be established that they were acting as agents of the United States when they investigated and later dismissed Genove. For the matter, not even the United States government itself can claim such immunity. The reason is that by entering into the employment contract with Genove in the discharge of its proprietary functions, it impliedly divested itself of its sovereign immunity from suit. (emphasis ours)

Conversely, if the contract was entered into in the discharge of its governmental functions, the sovereign state cannot be deemed to have waived its immunity from suit. 24 Such is the case at bench. Prescinding from this premise, we need not determine whether JUSMAG controls the employment conditions of the private respondent.

We also hold that there appears to be no basis for public respondent to rule that JUSMAG is stopped from denying the existence of employer-employee relationship with private respondent. On the contrary, in its Opposition before the public respondent, JUSMAG consistently contended that the

(74) SASP, including private respondent, working in JUSMAG, are employees of the Armed Forces of the Philippines. This can be gleaned from: (1) the Military Assistance Agreement, supra, (2) the exchange of notes between our Government, thru Department of Foreign Affairs, and the United States, thru the US Embassy to the Philippines, and (3) the Agreement on May 21, 1991,supra between the Armed Forces of the Philippines and JUSMAG.

We symphatize with the plight of private respondent who had served JUSMAG for more than twenty (20) years. Considering his length of service with JUSMAG, he deserves a more compassionate treatment. Unfortunately, JUSMAG is beyond the jurisdiction of this Court. Nonetheless, the Executive branch, through the Department of Foreign Affairs and the Armed Forces of the Philippines, can take the cudgel for private respondent and the other SASP working for JUSMAG, pursuant to the aforestated Military Assistance Agreement.

IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED. Accordingly, the impugned Resolution dated January 29, 1993 of the National Labor Relations Commission is REVERSED and SET ASIDE. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO, MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO, SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B. ESPINA, all represented by MARIANO R. ESPINA, petitioner, vs.UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION (UNRFNRE) represented by its operations manager, DR. KYRIACOS LOUCA, OSCAR N. ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT, Commissioners of National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING PETILLA, Labor Arbiter of Butuan City, respondents.

 

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Resolution dated January 25, 1993 of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City.

We dismiss the petition.

I

Petitioners were dismissed from their employment with private respondent, the United Nations Revolving Fund for Natural Resources Exploration (UNRFNRE), which is a special fund and subsidiary organ of the United Nations. The UNRFNRE is involved in a joint project of the Philippine Government and the United Nations for exploration work in Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91 and SRAB 10-07-00159-91 for illegal dismissal and damages.

In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction over its personality since it enjoyed diplomatic immunity pursuant to the 1946 Convention on the

Privileges and Immunities of the United Nations. In support thereof, private respondent attached a letter from the Department of Foreign Affairs dated August 26, 1991, which acknowledged its immunity from suit. The letter confirmed that private respondent, being a special fund administered by the United Nations, was covered by the 1946 Convention on the Privileges and Immunities of the United Nations of which the Philippine Government was an original signatory (Rollo, p. 21).

On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the ground that private respondent was protected by diplomatic immunity. The dismissal was based on the letter of the Foreign Office dated September 10, 1991.

Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which affirmed the dismissal of the complaints in its Resolution dated January 25, 1993.

Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC resolution.

II

Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC are final and executory. Thus, they may only be questioned through certiorari as a special civil action under Rule 65 of the Revised Rules of Court.

Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed before the respondent tribunal, to allow it an opportunity to correct its assigned errors (Liberty Insurance Corporation v. Court of Appeals, 222 SCRA 37 [1993]).

In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant petition. Moreover, the petition lacks any explanation for such omission, which may merit its being considered as falling under the recognized exceptions to the necessity of filing such motion.

Notwithstanding, we deem it wise to give due course to the petition because of the implications of the issue in our international relations.

Petitioners argued that the acts of mining exploration and exploitation are outside the official functions of an international agency protected by diplomatic immunity. Even assuming that private respondent was entitled to diplomatic immunity, petitioners insisted that private respondent waived it when it engaged in exploration work and entered into a contract of employment with petitioners.

Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to labor and promote full employment and equality of employment opportunities for all (1987 Constitution, Art. XIII, Sec. 3).

The Office of the Solicitor General is of the view that private respondent is covered by the mantle of diplomatic immunity. Private respondent is a specialized agency of the United Nations. Under Article 105 of the Charter of the United Nations:

1. The Organization shall enjoy in the territory of its Members such privileges and immunities as are necessary for the fulfillment of its purposes.

2. Representatives of the Members of the United Nations and officials of the Organization shall similarly enjoy such privileges and immunities as are necessary for the independent exercise of their functions in connection with the organization.

Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, to which the Philippines was a signatory (Vol. 1, Philippine Treaty Series, p. 621). We quote Sections 4 and 5 of Article III thereof:

Sec. 4. The specialized agencies, their property and assets, wherever located and by whomsoever held shall enjoy immunity from every form of legal process except insofar as in any particular case they have expressly waived their immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution (Emphasis supplied).

Sec. 5. The premises of the specialized agencies shall be inviolable. The property and assets of the specialized agencies, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation and any other form of interference, whether by executive, administrative, judicial or legislative action (Emphasis supplied).

As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the generally accepted principles of international law (1987 Constitution, Art. II, Sec. 2). Being a member of the United Nations and a party to the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, the Philippine Government adheres to the doctrine of immunity granted to the United Nations and its specialized agencies. Both treaties have the force and effect of law.

In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:

It is a recognized principle of international law and under our system of separation of powers thatdiplomatic immunity is essentially a political question and courts should refuse to look beyond a determination by the executive branch of the government, and where the plea of diplomatic immunity is recognized and affirmed by the executive branch of the government as in the case at bar, it is then the duty of the courts to accept the claim of immunity upon appropriate suggestion by the principal law officer of the government, the Solicitor General or other officer acting under his direction. Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction by seizure and detention of property, as to embarrass the executive arm of the government in conducting foreign relations, it is accepted doctrine that "in such cases the judicial department of (this) government follows the action of the political branch and will not embarrass the latter by assuming an antagonistic jurisdiction (Emphasis supplied).

We recognize the growth of international organizations dedicated to specific universal endeavors, such as health, agriculture, science and technology and environment. It is not surprising that their existence has evolved into the concept of international immunities. The reason behind the grant of privileges and immunities to international organizations, its officials and functionaries is to secure them legal and practical independence in fulfilling their duties (Jenks, International Immunities 17 [1961]).

Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield the affairs of international organizations, in accordance with international practice, from political pressure or control by the host country to the prejudice of member States of the organization, and to ensure the unhampered performance of their functions" (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).

In the International Catholic Migration Commission case, we held that there is no conflict between the constitutional duty of the State to protect the rights of workers and to promote their welfare, and the grant of immunity to international organizations. Clauses on jurisdictional immunity are now standard in the charters of the international organizations to guarantee the smooth discharge of their functions.

The diplomatic immunity of private respondent was sufficiently established by the letter of the Department of Foreign Affairs, recognizing and confirming the immunity of UNRFNRE in accordance with the 1946 Convention on Privileges and Immunities of the United Nations where the Philippine Government was a party. The issue whether an international organization is entitled to diplomatic immunity is a "political question" and such determination by the executive branch is conclusive on the courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No. 101949, Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).

Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity, which is not so in the case at bench (Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, Art. III, Sec. 4).

Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is by virtue of a joint project entered into by the Philippine Government and the United Nations for mineral exploration in Dinagat Island. Its mission is not to exploit our natural resources and gain pecuniarily thereby but to help improve the quality of life of the people, including that of petitioners.

This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations states that "each specialized agency shall make a provision for appropriate modes of settlement of: (a) disputes arising out of contracts or other disputes of private character to which the specialized agency is a party."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 86773 February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDEC-AQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES (FINANCE OFFICER), petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.

Ramon Encarnacion for petitioners.

Caesar T. Corpus for private respondent.

 

NOCON, J.:

This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits, and the resolution denying the petitioners' motion for reconsideration of said decision dated January 9, 1989.

The antecedent facts of the case are as follows:

SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the SEAFDEC).

On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of Professional III and designated as Head of External Affairs Office with the same pay and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to private respondent informing him that due to the financial constraints being experienced by the department, his services shall be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153).

Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari).

Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as the SEAFDEC-AQD is an international organization and that private respondent must first secure clearances from the proper departments for property or money accountability before any claim for separation pay will be paid, and which clearances had not yet been obtained by the private respondent.

A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by the petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private respondent has property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is not entitled to accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of the same during his employment with the SEAFDEC-AQD (Annex "D", Id.).

On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents:

1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits;

2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees.

All other claims are hereby dismissed.

SO ORDERED. (Rollo, p. 51, Annex "E")

On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.)

On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international character and the complaint is in effect a suit against the State which cannot be maintained without its consent.

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an international agency beyond the jurisdiction of public respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam (Annex "H", Petition).

The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the fisheries development in Southeast Asia by mutual co-operation among the member governments of the Center, hereinafter called the "Members", and through collaboration with international organizations and governments external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H" Petition) (p.310, Rollo)

SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates:

1. The Council shall be the supreme organ of the Center and all powers of the Center shall be vested in the Council.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional independence and freedom from control of the state in whose territory its office is located.

As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public International Law (p. 83, 1956 ed.):

Permanent international commissions and administrative bodies have been created by the agreement of a considerable number of States for a variety of international purposes, economic or social and mainly non-political. Among the notable instances are the International Labor Organization, the International Institute of Agriculture, the International Danube Commission. In so far as they are autonomous and beyond the control of any one State, they have a distinct juridical personality independent of the municipal law of the State where they are situated. As such, according to one leading authority "they must be deemed to possess a species of international personality of their own." (Salonga and Yap, Public International Law, 83 [1956 ed.])

Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be represented by one Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H",ibid.) and that its national laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and immovable property and services necessary for the establishment and operation of the Center" are concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).

The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDEC-AQD in Opinion No. 139, Series of 1984 —

4. One of the basic immunities of an international organization is immunity from local jurisdiction, i.e.,that it is immune from the legal writs and processes issued by the tribunals of the country where it is found. (See Jenks, Id., pp. 37-44) The obvious reason for this is that the subjection of such an organization to the authority of the local courts would afford a convenient medium thru which the host government may interfere in there operations or even influence or control its policies and decisions of the organization; besides, such subjection to local jurisdiction would impair the capacity of such body to discharge its responsibilities impartially on behalf of its member-states. In the case at bar, for instance, the entertainment by the National Labor Relations Commission of Mr. Madamba's reinstatement cases would amount to interference by the Philippine Government in the management decisions of the SEARCA governing board; even worse, it could compromise the desired impartiality of the organization since it will have to suit its actuations to the requirements of Philippine law, which may not necessarily coincide with the interests of the other member-states. It is precisely to forestall these possibilities that in cases where the extent of the immunity is specified in the enabling instruments of international organizations, jurisdictional immunity from the host country is invariably among the first accorded. (See Jenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285).

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can provide one. Settled is the rule that the decision of a tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held:

A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject matter of the action is

a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which it stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])

Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it took cognizance of the case. Said the Court:

We would note, finally, that the present petition relates to a controversy between two claimants to the same position; this is not a controversy between the SEAFDEC on the one hand, and an officer or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the other hand. There is before us no question involving immunity from the jurisdiction of the Court, there being no plea for such immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without jurisdiction. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 144767      March 21, 2002

DILY DANY NACPIL, petitioner, vs.INTERNATIONAL BROADCASTING CORPORATION, respondent.

KAPUNAN, J.:

This is a petition for review on certiorari under Rule 45, assailing the Decision of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No. 527551 and the Resolution dated August 31, 2000 denying petitioner Dily Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the decisions promulgated by the Labor Arbiter and the National Labor Relations Commission (NLRC), which consistently ruled in favor of petitioner.

Petitioner states that he was Assistant General Manager for Finance/Administration and Comptroller of private respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997. According to petitioner, when Emiliano Templo was appointed to replace IBC President Tomas Gomez III sometime in March 1997, the former told the Board of Directors that as soon as he assumes the IBC presidency, he would terminate the services of petitioner. Apparently, Templo blamed petitioner, along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement of IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed, insulted, humiliated and pressured petitioner into resigning until the latter was forced to retire. However, Templo refused to

pay him his retirement benefits, allegedly because he had not yet secured the clearances from the Presidential Commission on Good Government and the Commission on Audit. Furthermore, Templo allegedly refused to recognize petitioner's employment, claiming that petitioner was not the Assistant General Manager/Comptroller of IBC but merely usurped the powers of the Comptroller. Hence, in 1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal and non-payment of benefits.1âwphi1.nêt

Instead of filing its position paper, IBC filed a motion to dismiss alleging that the Labor Arbiter had no jurisdiction over the case. IBC contended that petitioner was a corporate officer who was duly elected by the Board of Directors of IBC; hence, the case qualifies as an intra-corporate dispute falling within the jurisdiction of the Securities and Exchange Commission (SEC). However, the motion was denied by the Labor Arbiter in an Order dated April 22, 1998.2

On August 21, 1998, the Labor Arbiter rendered a Decision stating that petitioner had been illegally dismissed. The dispositive portion thereof reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the complainant and against all the respondents, jointly and severally, ordering the latter:

1. To reinstate complainant to his former position without diminution of salary or loss of seniority rights, and with full backwages computed from the time of his illegal dismissal on May 16, 1997 up to the time of his actual reinstatement which is tentatively computed as of the date of this decision on August 21, 1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a month x 15.16 months = P1,137,000.00 plus 13th month pay equivalent to 1/12 of P 1,137,000.00 = P94,750.00 or the total amount of P 1,231,750.00). Should complainant be not reinstated within ten (10) days from receipt of this decision, he shall be entitled to additional backwages until actually reinstated.

2. Likewise, to pay complainant the following:

a) P 2 Million as and for moral damages;

b) P500,000.00 as and for exemplary damages; plus and (sic)

c) Ten (10%) percent thereof as and for attorney's fees.

SO ORDERED.3

IBC appealed to the NLRC, but the same was dismissed in a Resolution dated March 2, 1999, for its failure to file the required appeal bond in accordance with Article 223 of the Labor Code.4 IBC then filed a motion for reconsideration that was likewise denied in a Resolution dated April 26, 1999.5

IBC then filed with the Court of Appeals a petition for certiorari under Rule 65, which petition was granted by the appellate court in its Decision dated November 23, 1999. The dispositive portion of said decision states:

WHEREFORE, premises considered, the petition for Certiorari is GRANTED. The assailed decisions of the Labor Arbiter and the NLRC are REVERSED and SET ASIDE and the complaint is DISMISSED without prejudice.

SO ORDERED.6

Petitioner then filed a motion for reconsideration, which was denied by the appellate court in a Resolution dated August 31, 2000.

Hence, this petition.

Petitioner Nacpil submits that:

I.

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS APPOINTED BY RESPONDENT'S BOARD OF DIRECTORS AS COMPTROLLER. THIS FINDING IS CONTRARY TO THE COMMON, CONSISTENT POSITION AND ADMISSION OF BOTH PARTIES. FURTHER, RESPONDENT'S BY-LAWS DOES NOT INCLUDE COMPTROLLER AS ONE OF ITS CORPORATE OFFICERS.

II.

THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT SUBSTITUTED THE NATIONAL LABOR RELATIONS COMMISSION'S DECISION TO APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN THE INSTANT CASE. THE ONLY ISSUE FOR ITS DETERMINATION IS WHETHER NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DOING THE SAME.7

The issue to be resolved is whether the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-payment of benefits filed by petitioner. The Court finds that the Labor Arbiter had no jurisdiction over the same.

Under Presidential Decree No. 902-A (the Revised Securities Act), the law in force when the complaint for illegal dismissal was instituted by petitioner in 1997, the following cases fall under the exclusive of the SEC:

a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity;

c) Controversies in the election or appointment of directors, trustees, officers, or managers of such corporations, partnerships or associations;

d) Petitions of corporations, partnerships, or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses property to cover all of its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the Management Committee created pursuant to this decree. (Emphasis supplied.)

The Court has consistently held that there are two elements to be considered in determining whether the SEC has jurisdiction over the controversy, to wit: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy.8

Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since he had not been elected nor appointed as Comptroller and Assistant Manager by the IBC's Board of Directors. He points out that he had actually been appointed as such on January 11, 1995 by the IBC's General Manager, Ceferino Basilio. In support of his argument, petitioner underscores the fact that the IBC's By-Laws does not even include the position of comptroller in its roster of corporate officers.9 He therefore contends that his dismissal is a controversy falling within the jurisdiction of the labor courts.10

Petitioner's argument is untenable. Even assuming that he was in fact appointed by the General Manager, such appointment was subsequently approved by the Board of Directors of the IBC.11 That the position of Comptroller is not expressly mentioned among the officers of the IBC in the By-Laws is of no moment, because the IBC's Board of Directors is empowered under Section 25 of the Corporation Code12 and under the corporation's By-Laws to appoint such other officers as it may deem necessary. The By-Laws of the IBC categorically provides:

XII. OFFICERS

The officers of the corporation shall consist of a President, a Vice-President, a Secretary-Treasurer, a General Manager, and such other officers as the Board of Directors may from time to time does fit to provide for. Said officers shall be elected by majority vote of the Board of Directors and shall have such powers and duties as shall hereinafter provide (Emphasis supplied).13

The Court has held that in most cases the "by-laws may and usually do provide for such other officers,"14 and that where a corporate office is not specifically indicated in the roster of corporate offices in the by-laws of a corporation, the board of directors may also be empowered under the by-laws to create additional officers as may be necessary.15

An "office" has been defined as a creation of the charter of a corporation, while an "officer" as a person elected by the directors or stockholders. On the other hand, an "employee" occupies no office and is generally employed not by action of the directors and stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee.16

As petitioner's appointment as comptroller required the approval and formal action of the IBC's Board of Directors to become valid,17 it is clear therefore holds that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable by the SEC under Section 5(c) of P.D. 902-A which includes controversies involving both election and appointment of corporate directors, trustees, officers, and managers.18 Had petitioner been an ordinary employee, such board action would not have been required.

Thus, the Court of Appeals correctly held that:

Since complainant's appointment was approved unanimously by the Board of Directors of the corporation, he is therefore considered a corporate officer and his claim of illegal dismissal is a controversy that falls under the jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or non-appointment of a corporate officer is clearly an intra-corporate matter and jurisdiction over the case properly belongs to the SEC, not to the NLRC.19

As to petitioner's argument that the nature of his functions is recommendatory thereby making him a mere managerial officer, the Court has previously held that the relationship of a person to a corporation, whether as officer or agent or employee is not determined by the nature of the services performed, but instead by the incidents of the relationship as they actually exist.20

It is likewise of no consequence that petitioner's complaint for illegal dismissal includes money claims, for such claims are actually part of the perquisites of his position in, and therefore linked with his relations with, the corporation. The inclusion of such money claims does not convert the issue into a simple labor problem. Clearly, the issues raised by petitioner against the IBC are matters that come within the area of corporate affairs and management, and constitute a corporate controversy in contemplation of the Corporation Code.21

Petitioner further argues that the IBC failed to perfect its appeal from the Labor Arbiter's Decision for its non-payment of the appeal bond as required under Article 223 of the Labor Code, since compliance with the requirement of posting of a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from has been held to be both mandatory and jurisdictional.22 Hence, the Decision of the Labor Arbiter had long become final and executory and thus, the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction in giving due course to the IBC's petition for certiorari, and in deciding the case on the merits.

The IBC's failure to post an appeal bond within the period mandated under Article 223 of the Labor Code has been rendered immaterial by the fact that the Labor Arbiter did not have jurisdiction over the case since as stated earlier, the same is in the nature of an intra-corporate controversy. The Court has consistently held that where there is a finding that any decision was rendered without jurisdiction, the action shall be dismissed. Such defense can be interposed at any time, during appeal or even after final judgment.23 It is a well-settled rule that jurisdiction is conferred only by the Constitution or by law. It cannot be fixed by the will of the parties; it cannot be acquired through, enlarged or diminished by, any act or omission of the parties.24

Considering the foregoing, the Court holds that no error was committed by the Court of Appeals in dismissing the case filed before the Labor Arbiter, without prejudice to the filing of an appropriate action in the proper court. 1âwphi1.nêt

It must be noted that under Section 5.2 of the Securities Regulation Code (Republic Act No. 8799) which was signed into law by then President Joseph Ejercito Estrada on July 19, 2000, the SEC's jurisdiction over all cases enumerated in Section 5 of P.D. 902-A has been transferred to the Regional Trial Courts.25

WHEREFORE, the petition is hereby DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-63742 April 17, 1989

TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, petitioner, vs.HON. PEDRO GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS, WENCESLAO DURAN, SERGIO SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO ZERNA, ANTONIO DIVINAGRACIA, PEDRO SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ, FRANCISCO CABILAO and ESPERIDION MOSO, respondents.

G.R. No. 84300 April 17, 1989

JOSEFINO DATUIN, petitioner, vs.TARLAC WATER DISTRICT, respondent.

Rodulfo O. Navarro and Baldomero Limbaga for petitioner in G.R. No. 63742.

Joaquin R. Hitosis for respondents in G.R. No. 63742.

Isabelo C. Salamida for petitioner in G.R. No. 84300.

Conrado C. Ginelo Jr. for respondent in G.R. No. 84300.

Bernardito A. Florido for Philippine Association of Water Districts.

Reuben A. Espancho for Esperidion Moso.

 

GRIÑO-AQUINO, J.:

The common issue in these consolidated cases is whether or not water districts created under PD No. 198, as amended, are private corporations or government-owned or controlled corporations. Another issue in G.R. No. 63742 is whether respondent Judge acted without, or in excess of, jurisdiction or with grave abuse of discretion in dismissing Civil Case No. 8144 for alleged lack of jurisdiction over the subject matter.

I. G.R. No. 63742

On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo, filed in the Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case No. 8144, an action for injunction with preliminary mandatory injunction and damages, against respondent Municipality of Pamplona and its officials to prevent them from interfering in the management of the Tanjay Waterworks System.

Respondent Judge set the hearing of the application for injunction on March 16, 1983. The Municipality and its officials answered the complaint. Esperidion Moso filed a separate answer.

When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five (5) days to submit their respective position papers on the issue of the court's jurisdiction (or lack of it), over the action. The respondents' position paper questioned the court's jurisdiction over the case and asked for its dismissal of the complaint (Annex F). Instead of a position paper, the petitioner filed a reply with opposition to the motion to dismiss (Annex G).

On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of jurisdiction over the subject matter (water) and over the parties (both being government instrumentalities) by virtue of Art. 88 of PD No. 1067 and PD No. 242. He declared that the petitioner's recourse to the court was premature because the controversy should have been ventilated first before the National Water Resources Council pursuant to Arts. 88 and 89 of PD No. 1067. He further ruled that as the parties are government instrumentalities, the dispute should be administratively settled in accordance with PD No. 242.

Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in excess of jurisdiction or with grave abuse of discretion in dismissing the case.

II. G.R. No. 84300

Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water District in the Department of Labor and Employment (DOLE) which decided in his favor. However, upon respondent's motion for reconsideration (which was treated as an appeal) the National Labor Relations Commission (NLRC) reversed the decision and dismissed the complaint "for lack of jurisdiction," holding that as the respondent Tarlac Water District is a corporation created by a special law (PD No. 198), its officers and employees belong to the civil service and their separation from office should be governed by Civil Service Rules and Regulations.

Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro C. Gabaton, et al., G.R. No. 63742, because the lone issue in both cases is whether or not water districts created under PD No. 198, as amended, are private corporations or government-owned or controlled corporations. The two cases were consolidated pursuant to the resolution dated July 25, 1988 of this Court.

Actually the question of the corporate personality of local water districts is not new. The Court ruled in the recent case of Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988, that they are quasi public corporations whose employees belong to the civil service, hence, the dismissal of those employees shall be governed by the civil service law, rules and regulations. The pertinent part of this Court's decision reads as follows:

The only question here is whether or not local water districts are government owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198, known as the 'Provincial Water Utilities Act of 1973' which went into effect on 25 May 1973, and which provides as follows:

Exemption from Civil Service. — The district and its employees, being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels: Provided, however, That the total of all salaries, wages, emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthly revenue, said net revenue representing income from

water sales and sewerage service charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year.

The Labor Arbiter failed to take into account the provisions of Presidential, Decree No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as Section 25 in the following manner:

Section 26. of the same decree P.D. 198 is hereby amended to read as Section 25 as follows:

Section 25. Authorization. — The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration.

Thus, Section 25 of P.D. 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books.

This is not the first time that officials of the Department of Labor and Employment have taken the position that the Labor Arbiter here adopted. In Baguio Water District vs. Cresenciano B. Trajano etc., et al. (127 SCRA 730 [1984]), the petitioner Water District sought review of a decision of the Bureau of Labor Relations which affirmed that of a Med-Arbiter calling for a certification election among the regular rank-and-file employees of the Baguio Water District (BWD). In granting the petition, the Court said

The Baguio Water District was formed pursuant to Title II — Local Water District Law — of P.D. No. 198, as amended. The BWD is by Sec. 6 of that decree 'a quasi-public corporation performing public service and supplying public wants'.

x x x x x x

We grant the petition for the following reasons:

I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of P.E. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree took effect on June 11, 1978.

x x x x x x x x x

3. The BWD is a corporation created pursuant to a special law — P.D. No. 198, as amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 868.)

The hiring and firing of employees of government-owned or controlled corporations are governed by the Civil Service Law and Civil Service Rules and Regulations. In National Housing Corporation vs. Juco, 134 SCRA 172,176, We held:

There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the civil service law and civil service rules and regulations.

Section 1, Article XII-B of the [1973] Constitution specifically provides:

The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporation ... .

The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:

A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.

The inclusion of 'government-owned or controlled corporations' within the embrace of the civil service shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or controlled corporations to avoid the full consequences of the all-encompassing coverage of the civil service system. The same explicit intent is shown by the addition of 'agency' and 'instrumentality' to branches and subdivisions of the Government. All offices and firms of the government are covered.

The amendments introduced in 1973 are not Idle exercises or meaningless gestures. They carry the strong message that civil service coverage is broad and all-embracing insofar as employment in the government in any of its governmental or corporate arms is concerned.

x x x x x x x x x

Section 1 of Article XII-B, 1973 Constitution uses the word 'every' to modify the phrase 'government-owned or controlled corporation'

'Every' means each one of a group, without exception. It means all possible and all, taken one by one. Of course, our decision in this case refers to a corporation created as a government-owned or controlled entity. It does not cover cases involving private firms taken over by the government in foreclosure or similar proceedings. We reserve judgment on these latter cases when the appropriate controversy is brought to this Court. (Emphasis ours)

Significantly, Article XIB Section 2(l) of the 1987 Constitution provides that "(t)he civil service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled corporations with original charters." Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they come under the coverage of the civil service law, rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807.)

In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was water, the case should have been brought first to the National Water Resources Council in accordance with Articles 88 and 89 of PD No. 1067, and, as the parties are government instrumentalities (The Tanjay Water District and the Municipality of Pamplona), the dispute should be administratively settled in accordance with PD No. 242.

Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as follows:

ART. 88. The [Water Resources] Council shall have original jurisdiction over all disputes relating to appropriation, utilization, exploitation, development, control, conservation and protection of waters within the meaning and context of the provisions of this Code.

The decisions of the Council on water rights controversies shall be immediately executory and the enforcement thereof may be suspended only when a bond, in an amount fixed by the Council to answer for damages occasioned by the suspension or stay of execution, shall have been filed by the appealing party, unless the suspension is by virtue of an order of a competent court.

All disputes shall be decided within sixty (60) days after the parties submit the same for decision or resolution.

The Council shall have the power to issue writs of execution and enforce its decisions with the assistance of local or national police agencies.

ART. 89. The decisions of the Council on water rights controversies may be appealed to the Court of First Instance of the province where the subject matter of the controversy is situated within fifteen (15) days from the date the party appealing receives a copy of the decision, on any of the following grounds: (2) grave abuse of discretion question of law; and (3) questions of fact and law. (Emphasis supplied.)

Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of First Instance (now Regional Trial Court) has only appellate jurisdiction over the case.

P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the settlement of:

.... all disputes, claims and controversies solely between or among the departments, bureaus, offices, agencies and instrumentalities of the National Government, including government-owned or controlled corporations but excluding constitutional offices or agencies, arising from the interpretation and application of statutes, contracts or agreements.

by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel, depending on the parties involved and whether the case raises pure questions of law or mixed questions of law and fact.

P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the "interpretation and application of statutes, contracts, or agreements" of the parties herein. As previously stated, it involves the appropriation, utilization, and control of water.

Our determination in the earlier cases (Baguio Water District vs. Trajano, 127 SCRA 730; Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988) that water districts are government instrumentalities and that their employees belong to the civil service, disposes of Datuin's petition in G.R. No. 84300. The National Labor Relations Commission has no jurisdiction over his complaint for illegal dismissal.

WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the petitioners in G.R. No. 63742 filing their complaint in the National Water Resources Council and the petitioner in G.R. No. 84300 seeking redress in the Civil Service Commission. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-63742 April 17, 1989

TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, petitioner, vs.HON. PEDRO GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS, WENCESLAO DURAN, SERGIO SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO ZERNA, ANTONIO DIVINAGRACIA, PEDRO SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ, FRANCISCO CABILAO and ESPERIDION MOSO, respondents.

G.R. No. 84300 April 17, 1989

JOSEFINO DATUIN, petitioner, vs.TARLAC WATER DISTRICT, respondent.

Rodulfo O. Navarro and Baldomero Limbaga for petitioner in G.R. No. 63742.

Joaquin R. Hitosis for respondents in G.R. No. 63742.

Isabelo C. Salamida for petitioner in G.R. No. 84300.

Conrado C. Ginelo Jr. for respondent in G.R. No. 84300.

Bernardito A. Florido for Philippine Association of Water Districts.

Reuben A. Espancho for Esperidion Moso.

 

GRIÑO-AQUINO, J.:

The common issue in these consolidated cases is whether or not water districts created under PD No. 198, as amended, are private corporations or government-owned or controlled corporations. Another issue in G.R. No. 63742 is whether respondent Judge acted without, or in excess of, jurisdiction or with grave abuse of discretion in dismissing Civil Case No. 8144 for alleged lack of jurisdiction over the subject matter.

I. G.R. No. 63742

On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo, filed in the Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case No. 8144, an action for injunction with preliminary mandatory injunction and damages, against respondent Municipality of Pamplona and its officials to prevent them from interfering in the management of the Tanjay Waterworks System.

Respondent Judge set the hearing of the application for injunction on March 16, 1983. The Municipality and its officials answered the complaint. Esperidion Moso filed a separate answer.

When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five (5) days to submit their respective position papers on the issue of the court's jurisdiction (or lack of it), over the action. The respondents' position paper questioned the court's jurisdiction over the case and asked for its dismissal of the complaint (Annex F). Instead of a position paper, the petitioner filed a reply with opposition to the motion to dismiss (Annex G).

On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of jurisdiction over the subject matter (water) and over the parties (both being government instrumentalities) by virtue of Art. 88 of PD No. 1067 and PD No. 242. He declared that the petitioner's recourse to the court was premature because the controversy should have been ventilated first before the National Water Resources Council pursuant to Arts. 88 and 89 of PD No. 1067. He further ruled that as the parties are government instrumentalities, the dispute should be administratively settled in accordance with PD No. 242.

Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in excess of jurisdiction or with grave abuse of discretion in dismissing the case.

II. G.R. No. 84300

Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water District in the Department of Labor and Employment (DOLE) which decided in his favor. However, upon respondent's motion for reconsideration (which was treated as an appeal) the National Labor Relations Commission (NLRC) reversed the decision and dismissed the complaint "for lack of jurisdiction," holding that as the respondent Tarlac Water District is a corporation created by a special law (PD No. 198), its officers and employees belong to the civil service and their separation from office should be governed by Civil Service Rules and Regulations.

Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro C. Gabaton, et al., G.R. No. 63742, because the lone issue in both cases is whether or not water districts created under PD No. 198, as amended, are private corporations or government-owned or controlled corporations. The two cases were consolidated pursuant to the resolution dated July 25, 1988 of this Court.

Actually the question of the corporate personality of local water districts is not new. The Court ruled in the recent case of Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988, that they are

quasi public corporations whose employees belong to the civil service, hence, the dismissal of those employees shall be governed by the civil service law, rules and regulations. The pertinent part of this Court's decision reads as follows:

The only question here is whether or not local water districts are government owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198, known as the 'Provincial Water Utilities Act of 1973' which went into effect on 25 May 1973, and which provides as follows:

Exemption from Civil Service. — The district and its employees, being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels: Provided, however, That the total of all salaries, wages, emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthly revenue, said net revenue representing income from water sales and sewerage service charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year.

The Labor Arbiter failed to take into account the provisions of Presidential, Decree No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as Section 25 in the following manner:

Section 26. of the same decree P.D. 198 is hereby amended to read as Section 25 as follows:

Section 25. Authorization. — The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration.

Thus, Section 25 of P.D. 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books.

This is not the first time that officials of the Department of Labor and Employment have taken the position that the Labor Arbiter here adopted. In Baguio Water District vs. Cresenciano B. Trajano etc., et al. (127 SCRA 730 [1984]), the petitioner Water District sought review of a decision of the Bureau of Labor Relations which affirmed that of a Med-Arbiter calling for a certification election among the regular rank-and-file employees of the Baguio Water District (BWD). In granting the petition, the Court said

The Baguio Water District was formed pursuant to Title II — Local Water District Law — of P.D. No. 198, as amended. The BWD is by Sec. 6 of that decree 'a quasi-public corporation performing public service and supplying public wants'.

x x x x x x

We grant the petition for the following reasons:

I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of P.E. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree took effect on June 11, 1978.

x x x x x x x x x

3. The BWD is a corporation created pursuant to a special law — P.D. No. 198, as amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 868.)

The hiring and firing of employees of government-owned or controlled corporations are governed by the Civil Service Law and Civil Service Rules and Regulations. In National Housing Corporation vs. Juco, 134 SCRA 172,176, We held:

There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the civil service law and civil service rules and regulations.

Section 1, Article XII-B of the [1973] Constitution specifically provides:

The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporation ... .

The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:

A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.

The inclusion of 'government-owned or controlled corporations' within the embrace of the civil service shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or controlled corporations to avoid the full consequences of the all-encompassing coverage of the civil service system. The same explicit intent is shown by the addition of 'agency' and 'instrumentality' to branches and subdivisions of the Government. All offices and firms of the government are covered.

The amendments introduced in 1973 are not Idle exercises or meaningless gestures. They carry the strong message that civil service coverage is broad and all-embracing insofar as employment in the government in any of its governmental or corporate arms is concerned.

x x x x x x x x x

Section 1 of Article XII-B, 1973 Constitution uses the word 'every' to modify the phrase 'government-owned or controlled corporation'

'Every' means each one of a group, without exception. It means all possible and all, taken one by one. Of course, our decision in this case refers to a corporation created as a government-owned or controlled entity. It does not cover cases involving private firms taken over by the government in foreclosure or similar proceedings. We reserve judgment on these latter cases when the appropriate controversy is brought to this Court. (Emphasis ours)

Significantly, Article XIB Section 2(l) of the 1987 Constitution provides that "(t)he civil service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled corporations with original charters." Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they come under the coverage of the civil service law, rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807.)

In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was water, the case should have been brought first to the National Water Resources Council in accordance with Articles 88 and 89 of PD No. 1067, and, as the parties are government instrumentalities (The Tanjay Water District and the Municipality of Pamplona), the dispute should be administratively settled in accordance with PD No. 242.

Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as follows:

ART. 88. The [Water Resources] Council shall have original jurisdiction over all disputes relating to appropriation, utilization, exploitation, development, control, conservation and protection of waters within the meaning and context of the provisions of this Code.

The decisions of the Council on water rights controversies shall be immediately executory and the enforcement thereof may be suspended only when a bond, in an amount fixed by the Council to answer for damages occasioned by the suspension or stay of execution, shall have been filed by the appealing party, unless the suspension is by virtue of an order of a competent court.

All disputes shall be decided within sixty (60) days after the parties submit the same for decision or resolution.

The Council shall have the power to issue writs of execution and enforce its decisions with the assistance of local or national police agencies.

ART. 89. The decisions of the Council on water rights controversies may be appealed to the Court of First Instance of the province where the subject matter of the controversy is situated within fifteen (15) days from the date the party appealing receives a copy of the decision, on any of the following grounds: (2) grave abuse of discretion question of law; and (3) questions of fact and law. (Emphasis supplied.)

Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of First Instance (now Regional Trial Court) has only appellate jurisdiction over the case.

P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the settlement of:

.... all disputes, claims and controversies solely between or among the departments, bureaus, offices, agencies and instrumentalities of the National Government, including government-owned or controlled corporations but excluding constitutional offices or agencies, arising from the interpretation and application of statutes, contracts or agreements.

by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel, depending on the parties involved and whether the case raises pure questions of law or mixed questions of law and fact.

P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the "interpretation and application of statutes, contracts, or agreements" of the parties herein. As previously stated, it involves the appropriation, utilization, and control of water.

Our determination in the earlier cases (Baguio Water District vs. Trajano, 127 SCRA 730; Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988) that water districts are government instrumentalities and that their employees belong to the civil service, disposes of Datuin's petition in G.R. No. 84300. The National Labor Relations Commission has no jurisdiction over his complaint for illegal dismissal.

WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the petitioners in G.R. No. 63742 filing their complaint in the National Water Resources Council and the petitioner in G.R. No. 84300 seeking redress in the Civil Service Commission. No costs.

SO ORDERED.

Why the preference for Labor over Capital

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-2779             October 18, 1950

DANIEL SANCHEZ, ET AL., plaintiffs-appellees, vs.HARRY LYONS CONSTRUCTION, INC., ET AL., defendants-appellants.

Gibbs, Gibbs, Chuidian and Quasha for appellant Harry Lyons Construction, Inc.Cecilio I. Lim and Antonio M. Castro for appellees.

 

MORAN, C. J.:

This case originated in the Municipal Court of Manila upon a complaint filed on March 9, 1948, by the herein appellees as plaintiffs, against the herein appellants as defendants, for the sum of P2,210 plus interest, which plaintiffs claimed as one month advance pat due them. On April 28, 1948, the parties entered into a stipulation of facts upon which said municipal court rendered judgment for the plaintiffs. Upon denial of their motion for reconsideration of this judgment, the defendants filed an appeal to the Court of First Instance of Manila, wherein the parties submitted the case upon the same facts agreed upon in the Municipal Court. On October 2, 1948, the Court of First Instance of Manila rendered its decision holding for plaintiffs, as follows:

Wherefore judgment is hereby rendered —

1. Ordering defendant Material Distributors, Inc. to pay plaintiff Enrique Ramirez the sum of P360 and plaintiff Juan Ramirez the sum of P250 with legal interest on each of the said sums from the date of the filing of the complaint in the Municipal Court of Manila until the date of full payment thereof; and

2. Ordering defendant Harry Lyons Construction, Inc. to pay plaintiff Daniel Sanchez the sum of P250, and plaintiff Mariano Javier, Venancio Diaz, Esteban Bautista, Faustino Aquillo, Godofredo Diamante, Marcial Lazaro, Ambrosio de la Cruz, and Marcelino Maceda the sum of P150 each, with legal interest on each of the said sums from the date of the filing of the complaint in the Municipal Court of Manila until the date of full payment thereof.

One half of the costs is to be paid by Material Distributors, Inc. and the other half by Harry Lyons Construction, Inc.

From this judgment, defendants filed an appeal with this court purely upon a question of law. The stipulation of facts entered into by the parties on April 28, 1948, is as follows: lawphil.net

STIPULATION OF FACTS.

Come now the plaintiffs and the defendants, by their respective undersigned attorneys and to this Honorable Court, respectfully submit the following stipulation of facts:

1. That the plaintiffs were respectively employed as follows:

EMPLOYED BY DEFENDANT MATERIAL DISTRIBUTORS, INC.

Name Date of Position SalaryemploymentEnrique Ramirez .............. 12/16/46 Warehouseman P450 a mo.Juan Ramirez ................... do do 250 a mo.

NOTE. — The salary of Enrique Ramirez was later reduced to P360 per month. This was the amount he was receiving at the time of his dismissal.

EMPLOYED BY DEFENDANT HARRY LYONS CONSTRUCTION, INC.

Daniel Sanchez ................ 1/1/47 Carpenter- P250 a mo.Foreman

Mariano Javier ................. ....do.................. Guard................. 5 a dayVenancio Diaz ................. ....do.................. do....................... 5 a dayEsteban Bautista ............ ....do.................. do....................... 5 a dayFaustino Aquillo ............ ....do.................. do....................... 5 a dayGodofredo Diamante ..... ....do.................. do....................... 5 a dayMarcial Lazaro ................ ....do.................. do....................... 5 a dayAmbrosio de la Cruz ..... ....do.................. do....................... 5 a dayMarcelino Macada ........ ....do.................. do....................... 5 a day

as per contracts of employment, copies of which are attached to defendants' answer marked Exhibits 1 to 11 inclusive

2. That in said contracts of employment the plaintiff agreed as follows:

"I accept the foregoing appointment, and in consideration thereof I hereby agree that such employment may be terminated at any time, without previous notice, and I further agree that salary and wages, shall be computed and paid at the rate specified up to the date of such termination.

"Also in consideration of such employment I hereby expressly waive the benefit of article 302 of the Code of Commerce and that of any other law, ruling, or custom which might require notice of discharge or payment of salary or wages after date of the termination of such employment."

3. That the plaintiffs were dismissed by the defendants on December 31, 1947 without one months' previous notice.

4. That each of the plaintiffs demanded payment of one month's salary from the defendants and that the latter refused to pay the same.

WHEREFORE, it is respectfully prayed that judgment on the foregoing stipulation of facts be rendered by this Honorable Court.

The points in issue herein are: first, whether plaintiffs, both those paid on a monthly and daily basis, are entitled to the benefit granted in article 302 of the Code of Commerce; and secondly, if they are so entitled, was their waiver of such benefits legal and valid?

Article 302 of the Code of Commerce reads as follows:

ART. 302. In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may cancel it, advising the other party thereof one month in advance.

The factor or shop clerk shall be entitled, in such case, to the salary due for said month.

It is a clear doctrine, as gleaned from the provision of the law and settled jurisprudence, 1 that in a mercantile contract of service in which no special time is fixed, any one of the parties may cancel said contract upon giving of a one-month notice, called a mesada, to the other party. The law gives an added proviso that in the case of factors or shop clerks, these shall be entitled to salary during this one month of standing notice. In any case, the one-month notice must be given to any employee, whether factor, shop clerk or otherwise, so long as the two conditions concur, namely, that no special time is fixed in the contract of service, and that said employee is a commercial employee. And when such notice is not given under these conditions, not only the factor or shop clerk but any employee discharged without cause, is entitled to indemnity which may be one month's salary. 2

In the instant case, there lies no doubt that plaintiffs are commercial employees of appellant corporations, rendering service as warehousemen, carpenter-foreman and guards. There is likewise no doubt as can be seen from the contracts of employment submitted as exhibits, that no special time has been fixed in the contracts of services between plaintiffs-appellees and defendants-appellants. The stated computation or manner of payment, whether monthly or daily, does not represent nor determine a special time of employment. Thus, a commercial employee may be employed for one year and yet receive his salary on the daily or weekly or monthly or other basis.

Appellants allege that the use of the word "temporary" in the contracts of services of some of the plaintiffs shows that their employment was with a term, and the term was "temporary, on a day to day basis." The record discloses that this conclusion is unwarranted. The contracts simply say — "You are hereby employed as temporary guard with a compensation at the rate of P5 a day . . . ." The word "temporary" as used herein does not mean the special time fixed in the contracts referred to in article

302 of the Code of Commerce. The daily basis therein stipulated is for the computation of pay, and is not necessarily the period of employment. Hence, this Court holds that plaintiffs-appellants come within the purview of article 302 of the Code of Commerce.

Now, as the second question, namely, the validity of plaintiffs' waiver of the benefits given them by said article 302. This court holds that such a waiver, made in advance, is void as being contrary to public policy. Granting that the "mesada" given in article 302 of the Code of Commerce, is for the bilateral benefit of both employer and employee, nevertheless, this does not preclude the finding that a waiver of such "mesada" in advance by the employee is contrary to public policy.

Public policy, with regard to labor, is clearly stated in article II, section 5, of the Philippine Constitution, which reads —

The promotion of social justice to insure the well-being and economic security of all the people should be the concern of the State.

and article XIV, section 6, which reads —

The State shall afford protection to labor, especially to working women and minors, and shall regulate the relations between land-owner and tenant, and between labor and capital in industry and in agriculture. . . .

Article 302 of the Code of Commerce must be applied in consonance with these provisions of our constitution. In the matter of employment bargaining, there is no doubt that the employer stands on higher footing than the employee. First of all, there is greater supply than demand for labor. Secondly, the need for employment by labor comes from vital and even desperate, necessity. Consequently, the law must protect labor, at least, to the extent of raising him to equal footing in bargaining relations with capital and to shield him from abuses brought about by the necessity for survival. It is safe to presume therefore, that an employee or laborer who waives in advance any benefit granted him by law does so, certainly not in his interest or through generosity but under the forceful intimidation of urgent need, and hence, he could not have so acted freely and voluntarily.

For all the foregoing, this court hereby affirms the decision of the lower court, with costs against appellants.

Ozaeta, Paras, Feria, Pablo, Tuason, Bengzon and Reyes, JJ., concur.

What are the basic principles in the constitution and labor related laws on protection to labor

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 78763 July 12,1989

MANILA ELECTRIC COMPANY, petitioner, vs.THE NATIONAL LABOR RELATIONS COMMISSION, and APOLINARIO M. SIGNO, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Dominador Maglalang for private respondent.

 

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the resolution of the respondent National Labor Relations Commission dated March 12, 1987 (p.

28, Rollo) in NLRC Case No. NCR-8-3808-83, entitled, "Apolinario M. Signo, Complainant, versus Manila Electric Company, Respondents", affirming the decision of the Labor Arbiter which ordered the reinstatement of private respondent herein, Apolinario Signo, to his former position without backwages.

The antecedent facts are as follows:

Private respondent Signo was employed in petitioner company as supervisor-leadman since January 1963 up to the time when his services were terminated on May 18, 1983.

In 1981, a certain Fernando de Lara filed an application with the petitioner company for electrical services at his residence at Peñafrancia Subdivision, Marcos Highway, Antipolo, Rizal. Private respondent Signo facilitated the processing of the said application as well as the required documentation for said application at the Municipality of Antipolo, Rizal. In consideration thereof, private respondent received from Fernando de Lara the amount of P7,000.00. Signo thereafter filed the application for electric services with the Power Sales Division of the company.

It was established that the area where the residence of de Lara was located is not yet within the serviceable point of Meralco, because the place was beyond the 30-meter distance from the nearest existing Meralco facilities. In order to expedite the electrical connections at de Lara's residence, certain employees of the company, including respondent Signo, made it appear in the application that the sari-sari store at the corner of Marcos Highway, an entrance to the subdivision, is applicant de Lara's establishment, which, in reality is not owned by the latter.

As a result of this scheme, the electrical connections to de Lara's residence were installed and made possible. However, due to the fault of the Power Sales Division of petitioner company, Fernando de Lara was not billed for more than a year.

Petitioner company conducted an investigation of the matter and found respondent Signo responsible for the said irregularities in the installation. Thus, the services of the latter were terminated on May 18, 1983.

On August 10 1983, respondent Signo filed a complaint for illegal dismissal, unpaid wages, and separation pay.

After the parties had submitted their position papers, the Labor Arbiter rendered a decision (p. 79, Rollo) on April 29, 1985, which stated, inter alia:

Verily, complainant's act of inducing the Meralco employees to effectuate the installation on Engr. de Lara's residence prejudiced the respondent, and therefore, complainant himself had indeed became a participant in the transactions, although not directly, which turned out to be illegal, not to mention that some of the materials used therein belongs to Meralco, some of which were inferior quality. . . .

While complainant may deny the violation, he cannot do away with company's Code on Employee Discipline, more particularly Section 7, par. 8 and Section 6, par. 24 thereof However, as admitted by the respondent, the infraction of the above cited Code is punishable by reprimand to dismissal."

... . And in this case, while considering that complainant indeed committed the above-cited infractions of company Code of Employee Discipline, We shall also consider his records of uninterrupted twenty (20) years of service coupled with two (2) commendations for honesty. Likewise, We shall take note that subject offense is his first, and therefore, to impose the extreme penalty of dismissal is certainly too drastic. A penalty short of dismissal is more in keeping with justice, and adherence to compassionate society.

WHEREFORE, respondent Meralco is hereby directed to reinstate complainant Apolinario M. Signo to his former position as Supervisor Leadman without backwages, considering that he is not at all faultless. He is however, here warned, that commission of similar offense in the future, shall be dealt with more severely.

SO ORDERED.

Both parties appealed from the decision to the respondent Commission. On March 12, 1987, the respondent Commission dismissed both appeals for lack of merit and affirmed in toto the decision of the Labor Arbiter.

On June 23, 1987, the instant petition was filed with the petitioner contending that the respondent Commission committed grave abuse of discretion in affirming the decision of the Labor Arbiter. A temporary restraining order was issued by this Court on August 3, 1987, enjoining the respondents from enforcing the questioned resolution of the respondent Commission.

The issue to resolve in the instant case is whether or not respondent Signo should be dismissed from petitioner company on grounds of serious misconduct and loss of trust and confidence.

Petitioner contends that respondent Signo violated Sections 6 and 7 of the company's Code on Employee Discipline, which provide:

Section 6, Par. 24—Encouraging, inducing or threatening another employee to perform an act constituting a violation of this Code or of company work, rules or an offense in connection with the official duties of the latter, or allowing himself to be persuaded, induced or influenced to commit such offense.

Penalty—Reprimand to dismissal, depending upon the gravity of the offense.

Section 7, Par. 8—Soliciting or receiving money, gift, share, percentage or benefits from any person, personally or through the mediation of another, to perform an act prejudicial to the Company.

Penalty—Dismissal. (pp. 13-14, Rollo)

Petitioner further argues that the acts of private respondent constituted breach of trust and caused the petitioner company economic losses resulting from the unbilled electric consumption of de Lara; that in view thereof, the dismissal of private respondent Signo is proper considering the circumstances of the case.

The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss or lay-off an employee for just and authorized causes enumerated under Articles 282 and 283 of the Labor Code. However, the right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of its paramount police power. This is so because the preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of corporate profits (Euro-Linea, Phil. Inc. v. NLRC, G.R. No. 75782, December 1, 1987,156 SCRA 78).

There is no question that herein respondent Signo is guilty of breach of trust and violation of company rules, the penalty for which ranges from reprimand to dismissal depending on the gravity of the offense. However, as earlier stated, the respondent Commission and the Labor Arbiter found that dismissal should not be meted to respondent Signo considering his twenty (20) years of service in the employ of petitioner, without any previous derogatory record, in addition to the fact that petitioner company had awarded him in the past, two (2) commendations for honesty. If ever the petitioner suffered losses resulting from the unlisted electric consumption of de Lara, this was found to be the fault of petitioner's Power Sales Division.

We find no reason to disturb these findings. Well-established is the principle that findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by this Court on labor cases does not go so far as to evaluate the sufficiency of the evidence upon which the proper labor officer or office based his or its determination but is limited to issues of jurisdiction or grave abuse of discretion (Special Events and Central Shipping Office Workers Union v. San Miguel Corporation, G.R. Nos. L-51002-06, May 30,1983,122 SCRA 557).

This Court has held time and again, in a number of decisions, that notwithstanding the existence of a valid cause for dismissal, such as breach of trust by an employee, nevertheless, dismissal should not be imposed, as it is too severe a penalty if the latter has been employed for a considerable length of

time in the service of his employer. (Itogon-Suyoc Mines, Inc. v. NLRC, et al., G.R. No. L- 54280, September 30,1982,117 SCRA 523; Meracap v. International Ceramics Manufacturing Co., Inc., et al., G.R. Nos. L-48235-36, July 30,1979, 92 SCRA 412; Sampang v. Inciong, G.R. No. 50992, June 19,1985,137 SCRA 56; De Leon v. NLRC, G.R. No. L-52056, October 30,1980, 100 SCRA 691; Philippine Airlines, Inc. v. PALEA, G.R. No. L-24626, June 28, 1974, 57 SCRA 489).

In a similar case, this Court ruled:

As repeatedly been held by this Court, an employer cannot legally be compelled to continue with the employment of a person who admittedly was guilty of breach of trust towards his employer and whose continuance in the service of the latter is patently inimical to its interest. The law in protecting the rights of the laborers, authorized neither oppression nor self- destruction of the employer.

However, taking into account private respondent's 'twenty-three (23) years of service which undisputedly is unblemished by any previous derogatory record' as found by the respondent Commission itself, and since he has been under preventive suspension during the pendency of this case, in the absence of a showing that the continued employment of private respondent would result in petitioner's oppression or self-destruction, We are of the considered view that his dismissal is a drastic punishment. ... .

xxx xxx xxx

The ends of social and compassionate justice would therefore be served if private respondent is reinstated but without backwages in view of petitioner's obvious good faith. (Itogon- Suyoc Mines, Inc. v. NLRC, et al., 11 7 SCRA 528)

Further, in carrying out and interpreting the Labor Code's provisions and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor Code which states that "all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140).

In view of the foregoing, reinstatement of respondent Signo is proper in the instant case, but without the award of backwages, considering the good faith of the employer in dismissing the respondent.

ACCORDINGLY, premises considered, the petition is hereby DISMISSED and the assailed decision of the National Labor Relations Commission dated March 12, 1987 is AFFIRMED. The temporary restraining order issued on August 3, 1987 is lifted.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 162053             March 7, 2007

ST. LUKE'S MEDICAL CENTER EMPLOYEE'S ASSOCIATION-AFW (SLMCEA-AFW) AND MARIBEL S. SANTOS,Petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND ST. LUKE'S MEDICAL CENTER, INC.,Respondents.

D E C I S I O N

AZCUNA, J.:

Challenged in this petition for review on certiorari is the Decision1 of the Court of Appeals (CA) dated January 29, 2004 in CA-G.R. SP No. 75732 affirming the decision2 dated August 23, 2002 rendered by the National Labor Relations Commission (NLRC) in NLRC CA No. 026225-00.

The antecedent facts are as follows:

Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology department of private respondent St. Luke's Medical Center, Inc. (SLMC) on October 13, 1984. She is a graduate of Associate in Radiologic Technology from The Family Clinic Incorporated School of Radiologic Technology.

On April 22, 1992, Congress passed and enacted Republic Act No. 7431 known as the "Radiologic Technology Act of 1992." Said law requires that no person shall practice or offer to practice as a radiology and/or x-ray technologist in the Philippines without having obtained the proper certificate of registration from the Board of Radiologic Technology.

On September 12, 1995, the Assistant Executive Director-Ancillary Services and HR Director of private respondent SLMC issued a final notice to all practitioners of Radiologic Technology to comply with the requirement of Republic Act No. 7431 by December 31, 1995; otherwise, the unlicensed employee will be transferred to an area which does not require a license to practice if a slot is available.

On March 4, 1997, the Director of the Institute of Radiology issued a final notice to petitioner Maribel S. Santos requiring the latter to comply with Republic Act. No. 7431 by taking and passing the forthcoming examination scheduled in June 1997; otherwise, private respondent SLMC may be compelled to retire her from employment should there be no other position available where she may be absorbed.

On May 14, 1997, the Director of the Institute of Radiology, AED-Division of Ancillary Services issued a memorandum to petitioner Maribel S. Santos directing the latter to submit her PRC Registration form/Examination Permit per Memorandum dated March 4, 1997.

On March 13, 1998, the Director of the Institute of Radiology issued another memorandum to petitioner Maribel S. Santos advising her that only a license can assure her of her continued employment at the Institute of Radiology of the private respondent SLMC and that the latter is giving her the last chance to take and pass the forthcoming board examination scheduled in June 1998; otherwise, private respondent SLMC shall be constrained to take action which may include her separation from employment.

On November 23, 1998, the Director of the Institute of Radiology issued a notice to petitioner Maribel S. Santos informing the latter that the management of private respondent SLMC has approved her retirement in lieu of separation pay.

On November 26, 1998, the Personnel Manager of private respondent SLMC issued a "Notice of Separation from the Company" to petitioner Maribel S. Santos effective December 30, 1998 in view of the latter's refusal to accept private respondent SLMC's offer for early retirement. The notice also states that while said private respondent exerted its efforts to transfer petitioner Maribel S. Santos to other position/s, her qualifications do not fit with any of the present vacant positions in the hospital.

In a letter dated December 18, 1998, a certain Jack C. Lappay, President of the Philippine Association of Radiologic Technologists, Inc., wrote Ms. Judith Betita, Personnel Manager of private respondent SLMC, requesting the latter to give "due consideration" to the organization's three (3) regular members of his organization (petitioner Maribel S. Santos included) "for not passing yet the Board of Examination for X-ray Technology," "by giving them an assignment in any department of your hospital awaiting their chance to pass the future Board Exam."

On January 6, 1999, the Personnel Manager of private respondent SLMC again issued a "Notice of Separation from the Company" to petitioner Maribel S. Santos effective February 5, 1999 after the latter failed to present/ submit her appeal for rechecking to the Professional Regulation Commission (PRC) of the recent board examination which she took and failed.

On March 2, 1999, petitioner Maribel S. Santos filed a complaint against private respondent SLMC for illegal dismissal and non-payment of salaries, allowances and other monetary benefits. She likewise prayed for the award of moral and exemplary damages plus attorney's fees.

In the meantime, petitioner Alliance of Filipino Workers (AFW), through its President and Legal Counsel, in a letter dated September 22, 1999 addressed to Ms. Rita Marasigan, Human Resources Director of private respondent SLMC, requested the latter to accommodate petitioner Maribel S. Santos and assign her to the vacant position of CSS Aide in the hospital arising from the death of an employee more than two (2) months earlier.

In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:

Gentlemen:

Thank you for your letter of September 22, 1999 formally requesting to fill up the vacant regular position of a CSS Aide in Ms. Maribel Santos' behalf.

The position is indeed vacant. Please refer to our Recruitment Policy for particulars especially on minimum requirements of the job and the need to meet said requirements, as well as other pre-employment requirements, in order to be considered for the vacant position. As a matter of fact, Ms. Santos is welcome to apply for any vacant position on the condition that she possesses the necessary qualifications.

As to the consensus referred to in your letter, may I correct you that the agreement is, regardless of the vacant position Ms. Santos decides to apply, she must go through the usual application procedures. The formal letter, I am afraid, will not suffice for purposes of recruitment processing. As you know, the managers requesting to fill any vacancy has a say on the matter and correctly so. The manager's inputs are necessarily factored into the standard recruitment procedures. Hence, the need to undergo the prescribed steps.

Indeed we have gone through the mechanics to accommodate Ms. Santos' transfer while she was employed with SLMC given the prescribed period. She was given 30 days from issuance of the notice of termination to look for appropriate openings which incidentally she wittingly declined to utilize. She did this knowing fully well that the consequences would be that her application beyond the 30-day period or after the effective date of her termination from SLMC would be considered a re-application with loss of seniority and shall be subjected to the pertinent application procedures.

Needless to mention, one of the 3 X-ray Technologists in similar circumstances as Ms. Santos at the time successfully managed to get herself transferred to E.R. because she opted to apply for the appropriate vacant position and qualified for it within the prescribed 30-day period. The other X-ray Technologist, on the other hand, as you may recall, was eventually terminated not just for his failure to comply with the licensure requirement of the law but for cause (refusal to serve a customer).

Why Ms. Santos opted to file a complaint before the Labor Courts and not to avail of the opportunity given her, or assuming she was not qualified for any vacant position even if she tried to look for one within the prescribed period, I simply cannot understand why she also refused the separation pay offered by Management in an amount beyond the minimum required by law only to re-apply at SLMC, which option would be available to her anyway even (if she) chose to accept the separation pay!

Well, here's hoping that our Union can timely influence our employees to choose their options well as it has in the past.

(Signed)RITA MARASIGAN

Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita, Personnel Manager of private respondent SLMC wrote Mr. Angelito Calderon, President of petitioner union as follows:

Dear Mr. Calderon:

This is with regard to the case of Ms. Maribel Santos. Please recall that last Oct. 8, 1999, Ms. Rita Marasigan, HR Director, discussed with you and Mr. Greg Del Prado the terms regarding the re-hiring

of Ms. Maribel Santos. Ms. Marasigan offered Ms. Santos the position of Secretary at the Dietary Department. In that meeting, Ms. Santos replied that she would think about the offer. To date, we still have no definite reply from her. Again, during the conference held on Dec. 14, 1999, Atty. Martir promised to talk to Ms. Santos, and inform us of her reply by Dec. 21, 1999. Again we failed to hear her reply through him.

Please be informed that said position is in need of immediate staffing. The Dietary Department has already been experiencing serious backlog of work due to the said vacancy. Please note that more than 2 months has passed since Ms. Marasigan offered this compromise. Management cannot afford to wait for her decision while the operation of the said department suffers from vacancy.

Therefore, Management is giving Ms. Santos until the end of this month to give her decision. If we fail to hear from her or from you as her representatives by that time, we will consider it as a waiver and we will be forced to offer the position to other applicants so as not to jeopardize the Dietary Department's operation.

For your immediate action.

(Signed)JUDITH BETITAPersonnel Manager

On September 5, 2000, the Labor Arbiter came out with a Decision ordering private respondent SLMC to pay petitioner Maribel S. Santos the amount of One Hundred Fifteen Thousand Five Hundred Pesos (P115,500.00) representing her separation pay. All other claims of petitioner were dismissed for lack of merit.

Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public respondent NLRC.

On August 23, 2002, public respondent NLRC promulgated its Decision affirming the Decision of the Labor Arbiter. It likewise denied the Motion for Reconsideration filed by petitioners in its Resolution promulgated on December 27, 2002.

Petitioner thereafter filed a petition for certiorari with the CA which, as previously mentioned, affirmed the decision of the NLRC.

Hence, this petition raising the following issues:

I. Whether the CA overlooked certain material facts and circumstances on petitioners' legal claim in relation to the complaint for illegal dismissal.

II. Whether the CA committed grave abuse of discretion and erred in not resolving with clarity the issues on the merit of petitioner's constitutional right of security of tenure.3

For its part, private respondent St. Luke's Medical Center, Inc. (SLMC) argues in its comment4 that: 1) the petition should be dismissed for failure of petitioners to file a motion for reconsideration; 2) the CA did not commit grave abuse of discretion in upholding the NLRC and the Labor Arbiter's ruling that petitioner was legally dismissed; 3) petitioner was legally and validly terminated in accordance with Republic Act Nos. 4226 and 7431; 4) private respondent's decision to terminate petitioner Santos was made in good faith and was not the result of unfair discrimination; and 5) petitioner Santos' non-transfer to another position in the SLMC was a valid exercise of management prerogative.

The petition lacks merit.

Generally, the Court has always accorded respect and finality to the findings of fact of the CA particularly if they coincide with those of the Labor Arbiter and the NLRC and are supported by substantial evidence.5 True this rule admits of certain exceptions as, for example, when the judgment is based on a misapprehension of facts, or the findings of fact are not supported by the evidence on record6 or are so glaringly erroneous as to constitute grave abuse of discretion.7 None of these exceptions, however, has been convincingly shown by petitioners to apply in the present case. Hence, the Court sees no reason to disturb such findings of fact of the CA.

Ultimately, the issue raised by the parties boils down to whether petitioner Santos was illegally dismissed by private respondent SLMC on the basis of her inability to secure a certificate of registration from the Board of Radiologic Technology.

The requirement for a certificate of registration is set forth under R.A. No. 74318 thus:

Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray Technology. - Unless exempt from the examinations under Sections 16 and 17 hereof, no person shall practice or offer to practice as a radiologic and/or x-ray technologist in the Philippines without having obtained the proper certificate of registration from the Board.

It is significant to note that petitioners expressly concede that the sole cause for petitioner Santos' separation from work is her failure to pass the board licensure exam for X-ray technicians, a precondition for obtaining the certificate of registration from the Board. It is argued, though, that petitioner Santos' failure to comply with the certification requirement did not constitute just cause for termination as it violated her constitutional right to security of tenure. This contention is untenable.

While the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be reasonably regulated pursuant to the police power of the State to safeguard health, morals, peace, education, order, safety, and the general welfare of the people. Consequently, persons who desire to engage in the learned professions requiring scientific or technical knowledge may be required to take an examination as a prerequisite to engaging in their chosen careers.9 The most concrete example of this would be in the field of medicine, the practice of which in all its branches has been closely regulated by the State. It has long been recognized that the regulation of this field is a reasonable method of protecting the health and safety of the public to protect the public from the potentially deadly effects of incompetence and ignorance among those who would practice medicine.10 The same rationale applies in the regulation of the practice of radiologic and x-ray technology. The clear and unmistakable intention of the legislature in prescribing guidelines for persons seeking to practice in this field is embodied in Section 2 of the law:

Sec. 2. Statement of Policy. - It is the policy of the State to upgrade the practice of radiologic technology in the Philippines for the purpose of protecting the public from the hazards posed by radiation as well as to ensure safe and proper diagnosis, treatment and research through the application of machines and/or equipment using radiation.11

In this regard, the Court quotes with approval the disquisition of public respondent NLRC in its decision dated August 23, 2002:

The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's inherent police power. It should be noted that the police power embraces the power to prescribe regulations to promote the health, morals, educations, good order, safety or general welfare of the people. The state is justified in prescribing the specific requirements for x-ray technicians and/or any other professions connected with the health and safety of its citizens. Respondent-appellee being engaged in the hospital and health care business, is a proper subject of the cited law; thus, having in mind the legal requirements of these laws, the latter cannot close its eyes and [let] complainant-appellant's private interest override public interest.

Indeed, complainant-appellant cannot insist on her "sterling work performance without any derogatory record" to make her qualify as an x-ray technician in the absence of a proper certificate of Registration from the Board of Radiologic Technology which can only be obtained by passing the required examination. The law is clear that the Certificate of Registration cannot be substituted by any other requirement to allow a person to practice as a Radiologic Technologist and/or X-ray Technologist (Technician).12

No malice or ill-will can be imputed upon private respondent as the separation of petitioner Santos was undertaken by it conformably to an existing statute. It is undeniable that her continued employment without the required Board certification exposed the hospital to possible sanctions and even to a revocation of its license to operate. Certainly, private respondent could not be expected to retain petitioner Santos despite the inimical threat posed by the latter to its business. This notwithstanding, the records bear out the fact that petitioner Santos was given ample opportunity to qualify for the position and was sufficiently warned that her failure to do so would result in her separation from work in the event there were no other vacant positions to which she could be

transferred. Despite these warnings, petitioner Santos was still unable to comply and pass the required exam. To reiterate, the requirement for Board certification was set by statute. Justice, fairness and due process demand that an employer should not be penalized for situations where it had no participation or control.13

It would be unreasonable to compel private respondent to wait until its license is cancelled and it is materially injured before removing the cause of the impending evil. Neither can the courts step in to force private respondent to reassign or transfer petitioner Santos under these circumstances. Petitioner Santos is not in the position to demand that she be given a different work assignment when what necessitated her transfer in the first place was her own fault or failing. The prerogative to determine the place or station where an employee is best qualified to serve the interests of the company on the basis of the his or her qualifications, training and performance belongs solely to the employer.14 The Labor Code and its implementing Rules do not vest in the Labor Arbiters nor in the different Divisions of the NLRC (nor in the courts) managerial authority.15

While our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.16 Labor laws, to be sure, do not authorize interference with the employer's judgment in the conduct of the latter's business. Private respondent is free to determine, using its own discretion and business judgment, all elements of employment, "from hiring to firing" except in cases of unlawful discrimination or those which may be provided by law. None of these exceptions is present in the instant case.

The fact that another employee, who likewise failed to pass the required exam, was allowed by private respondent to apply for and transfer to another position with the hospital does not constitute unlawful discrimination. This was a valid exercise of management prerogative, petitioners not having alleged nor proven that the reassigned employee did not qualify for the position where she was transferred. In the past, the Court has ruled that an objection founded on the ground that one has better credentials over the appointee is frowned upon so long as the latter possesses the minimum qualifications for the position.17 Furthermore, the records show that Ms. Santos did not even seriously apply for another position in the company.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

ADOLFO S. AZCUNAAssociate Justice

WE CONCUR:

REYNATO S. PUNOChairpersonChief Justice

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

RENATO C. CORONAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNOChief Justice

Management Prerogatives

FIRST  DIVISION 

 

RURAL BANK OF CANTILAN, INC., and WILLIAM HOTCHKISS III,                                      

                                              Petitioners,

 

 

 

-versus-

 

 

 

ARJAY RONNEL H. JULVE,

        Respondent.                     

 

G.R. No. 169750

 

Present:

 

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,

CORONA,

   *AZCUNA, and

GARCIA, JJ.

 

 

Promulgated:

 

February 27, 2007

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

  

DECISION 

 

SANDOVAL-GUTIERREZ, J.:

 

For   our   resolution   is   the   instant   Petition   for   Review   on   Certiorari   assailing   the Decision[1] of   the  Court   of   Appeals   (Twenty   Second  Division,   Cagayan  de  Oro  City)   dated September 23, 2004 in CA-G.R. SP No. 77206 and its Resolution of September 6, 2005.

          The facts of this case as found by the Court of Appeals are:

 

          On August 1,  1997, the Rural Bank of Cantilan,  Inc.,  petitioner,  hired respondent as a management trainee.  Later, he was appointed as planning and marketing officer.

          On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank, issued a memorandum addressed to all its branch managers informing them of the abolition of the positions of planning and marketing officer and remedial officer; that this was undertaken in accordance with the bank’s Personnel Streamlining Program; and that the operations officer shall absorb the functions of the abolished offices. 

          On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been appointed bookkeeper I at the bank’s branch in Madrid, Surigao del Sur effective immediately with the same salary corresponding to  his old position.  Initially, respondent agreed to accept the appointment, but eventually, he changed his mind and made the following notation on Hotchkiss’ memorandum, thus:

 

         I am withdrawing my signature on this appointment because I feel that this is a demotion (on the position itself and allowances) and not a lateral transfer as what the President told me yesterday. I believe I do not deserve a demotion.

 

            Thank you.

          On August   9,   2001,   Hotchkiss   appointed   respondent   as   bookkeeper   I   and   assistant branch head of the Madrid branch.  However, he did not report for work.

          On September 11, 2001, Hotchkiss directed respondent to explain why he should not be sanctioned for his failure to assume his new post at the Madrid branch.

 

          The following day, respondent submitted his written explanation, which partly reads:

 

         I regret to say that I am not accepting the position of Asst. Branch Head of RBCI-Madrid Branch for the very reason that the papers were not left with me by the Admin. Officer after she let me read them. Considering that Asst. Branch Head is 

a newly-created position, I requested her for a copy of the said papers first so I can thoroughly study them before making my decision. But she immediately took them back from me after I told her about this.

          On September 14, 2001, respondent filed with the Regional Arbitration Branch No. XIII, National   Labor   Relations   Commission   (NLRC), Butuan City,   a   complaint   for   constructive dismissal against petitioners, docketed as NLRC Case No. RAB-13-09-00276-2001.

          On January 14, 2002, the Labor Arbiter rendered a Decision, the dispositive portion of which is partly reproduced below:

 

          WHEREFORE, premises considered, judgment is hereby entered:

1.      Declaring complainant as constructively illegally dismissed;

 

2.      Ordering respondents to reinstate complainant to his former or equivalent position without loss of seniority rights with full backwages from the time his salary was withheld from him up to the time he is actually reinstated;

 

3.      To   pay   complainant   his   partial   backwages   in   the   amount   of P57,165.33 computed up to the date of this decision as follows:

 

A.  BACKWAGES   FROM 16  Oct   2001   to 15   Jan   2002 (4  months) (Partial)

 

                        P12,192.50 + 1,000 x 4      = P52,768.00

              Plus P52,768/13 (13th mo. Pay)    = P4,397.33

 

        TOTAL BACKWAGES  P57,165.33    

        and

 

4.      Ordering respondents to pay complainant moral and exemplary damages in the total amount of P100,000.00 plus P15,718.53, as attorney’s fees which is equivalent to 10% of the total monetary award.

 

            Complainant’s other claims are dismissed for lack of merit.

            SO ORDERED.

 

On appeal  by petitioners,   the NLRC,   in   its  Resolution dated November 19,  2002,  set aside the Labor Arbiter’s judgment, thus:

 

WHEREFORE,   foregoing   premises   considered,   the   appealed   decision   is Vacated and Set Aside. In lieu thereof, a new judgment is rendered dismissing the above-entitled case for lack of merit.

 

SO ORDERED.

The NLRC held that respondent’s reassignment is not a demotion. There was neither diminution   in   functions   and   pay.  Thus,   he   was   not   constructively   dismissed   from employment.  Moreover, respondent himself admitted that he decided not to report for work at his new station. Yet, he continued receiving his salaries and allowances.

Respondent filed a motion for reconsideration but it was denied by the NLRC.

Respondent then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 77206.

On September   23,   2004,   the   Court   of   Appeals   rendered   its   Decision   granting   the petition, thus:

 

WHEREFORE, the instant Petition is hereby GRANTED. The NLRC Resolutions dated 19   November   2002 and 26   February   2003 are   hereby   ANNULLED   and   SET ASIDE. The Labor Arbiter’s Decision dated 14 January 2002 is hereby REINSTATED.

 

SO ORDERED.

 

Petitioners filed a motion for reconsideration.   However, it was denied by the appellate court in its Resolution dated September 6, 2005.

The   only   issue   before   us   is   whether   the   Court   of   Appeals   erred   in   holding   that respondent was constructively dismissed from employment.

In resolving this issue, we rely on the following guide posts:

Under the doctrine of management prerogative, every employer has the inherent right to   regulate,   according   to   his   own   discretion   and   judgment,   all   aspects   of   employment, including hiring, work assignments, working methods, the time, place and manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees.[2]  The only limitations to the exercise of this prerogative are those imposed by labor laws and the principles of equity and substantial justice.

While   the   law   imposes  many   obligations   upon   the   employer,   nonetheless,   it   also protects   the   employer’s   right   to   expect   from  its   employees   not   only   good  performance, adequate work, and diligence, but also good conduct and loyalty.[3]   In fact, the Labor Code does   not   excuse   employees   from   complying  with   valid   company  policies   and   reasonable regulations for their governance and guidance.

Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a movement from one position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to another of equivalent rank or salary;[4] (b) the employer has the inherent right to transfer or reassign an employee for legitimate business purposes;[5] (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment or is a demotion without sufficient   cause;[6] (d)   the   employer   must   be   able   to   show   that   the   transfer   is   not unreasonable, inconvenient, or prejudicial to the employee.[7]

Constructive dismissal is defined as “quitting when continued employment is rendered impossible, unreasonable, or unlikely as the offer of employment involves a demotion in rank and diminution of pay.”[8]

In light of the above guidelines, we agree with the NLRC in ruling that respondent was not constructively dismissed from employment. 

Respondent contends that the abolition of his position as planning and marketing officer and his appointment as bookkeeper I and assistant branch head of the Madrid Branch is a demotion.  However,  a   look  at   the   functions  of  his  new position shows  the  contrary.  The bookkeeper and assistant branch head is not only charged with preparing financial reports and monthly   bank   reconciliations,   he   is   also   the   head   of   the   Accounting   Department   of   a branch.  Under any standard, these are supervisory and administrative tasks which entail great responsibility.  Moreover, respondent’s transfer did not decrease his pay.

Nor   was   respondent’s   transfer   motivated   by   ill-will   or   prejudice   on   the   part   of petitioners.  His position was not the only one abolished pursuant to the bank’s Personnel Streamlining   Program.   We   recall   that   the   position   of   remedial   officer   was   likewise abolished.  Petitioners’ reason was to acquire savings from the salaries it would pay to full-time personnel in these positions.  

Finally,  we  note   that  despite   respondent’s   refusal   to  accept   the  new appointment, petitioners did not dismiss him.  Rather, it was he who opted to terminate his employment when he purposely failed to report for work.

In fine, we hold that the Court of Appeals erred when it concluded that respondent was constructively dismissed from employment.

WHEREFORE, we GRANT the petition and REVERSE the Decision of the Court of Appeals in CA-G.R. SP No. 77206. The Resolutions of the NLRC dated November 19, 2002 and February 26, 2003, dismissing respondent’s complaint are AFFIRMED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 155421             July 7, 2004

ELMER M. MENDOZA, petitioner, vs.RURAL BANK OF LUCBAN, respondent.

D E C I S I O N

PANGANIBAN, J.:

The law protects both the welfare of employees and the prerogatives of management. Courts will not interfere with business judgments of employers, provided they do not violate the law, collective bargaining agreements, and general principles of fair play and justice. The transfer of personnel from one area of operation to another is inherently a managerial prerogative that shall be upheld if exercised in good faith -- for the purpose of advancing business interests, not of defeating or circumventing the rights of employees.

The Case

The Court applies these principles in resolving the instant Petition for Review1 under Rule 45 of the Rules of Court, assailing the June 14, 2002 Decision2 and September 25, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68030. The assailed Decision disposed as follows:

"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit."4

The challenged Resolution denied petitioner's Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution Nos. 99-52 and 99-53, which read:

"Board Res. No. 99-52

"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the bank to familiarize bank employees with the various phases of bank operations and further strengthen the existing internal control system[,] all officers and employees are subject to reshuffle of assignments. Moreover, this resolution does not preclude the transfer of assignment of bank officers and employees from the branch office to the head office and vice-versa."

"Board Res. No. 95-53

"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new assignments without changes in their compensation and other benefits.

NAME OF EMPLOYEES

PRESENT ASSIGNMENT

NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA

C/A Clerk Actg. Appraiser

ELMER L. MENDOZA Appraiser Clerk-Meralco Collection

CHONA R. MENDOZA

Clerk-Meralco Collection

Bank Teller"5

In a letter dated April 30, 1999, Alejo B. Daya, the bank's board chairman, directed Briccio V. Cada, the manager of the bank's Tayabas branch, to implement the reshuffle.6 The new assignments were to "be effective on May 1, 1999 without changes in salary, allowances, and other benefits received by the aforementioned employees."7

On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his opinion on the reshuffle, as follows:

"RE: The recent reshuffle of employees as perBoard Resolution dated April 25, 1999

"Dear Sir:

"This is in connection with the aforementioned subject matter and which the undersigned received on April 25, 1999.

"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-Meralco Collection is deemed to be a demotion without any legal basis. Before this action on your part[,] the undersigned has been besieged by intrigues due to [the] malicious machination of a certain public official who is bruited to be your good friend. These malicious insinuations were baseless and despite the fact that I have been on my job as Appraiser for the past six (6) years in good standing and never involved in any anomalous conduct, my

being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a prelude to my termination in due time. This will constitute an unfair labor practice.

"Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until the reason [for] my being reshuffled is made clear.

"Your kind consideration on this request will be highly appreciated."8

On May 10, 1999, Daya replied:

"Dear Mr. Mendoza,

"Anent your undated letter expressing your resentment/comments on the recent management's decision to reshuffle the duties of bank employees, please be informed that it was never the intention (of management) to downgrade your position in the bank considering that your due compensation as Bank Appraiser is maintained and no future reduction was intended.

"Aside from giving bank employees a wider experience in various banking operations, the reshuffle will also afford management an effective tool in providing the bank a sound internal control system/check and balance and a basis in evaluating the performance of each employee. A continuing bankwide reshuffle of employees shall be made at the discretion of management which may include bank officers, if necessary as expressed in Board Resolution No. 99-53, dated April 25, 1999. Management merely shifted the duties of employees, their position title [may be] retained if requested formally.

"Being a standard procedure in maintaining an effective internal control system recommended by the Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of bank management."9

On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a letter in which he applied for a leave of absence from work:

"Dear Sir:

"I wish I could continue working but due to the ailment that I always feel every now and then, I have the honor to apply for at least ten (10) days sick leave effective June 7, 1999.

"Hoping that this request [merits] your favorable and kind consideration and understanding."10

On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for twenty days effective on the same date.11

On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before Arbitration Branch No. IV of the National Labor Relations Commission (NLRC). The Complaint -- for illegal dismissal, underpayment, separation pay and damages -- was filed against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and its Tayabas branch manager, Briccio V. Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q.12

The labor arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:

"WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of seniority rights with full backwages from date of dismissal to actual reinstatement in the amount of P55,000.00 as of June 30, 2000.

3. Ordering the payment of separation pay if reinstatement is not possible in the amount ofP30,000.00 in addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount ofP5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the payment of Attorney's fees in the amount of P18,000.00 which is 10% of the monetary award."13

On appeal, the NLRC reversed the labor arbiter.14 In its July 18, 2001 Resolution, it held:

"We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its implementation of its Board Resolution directing the reshuffle of employees at its Tayabas branch to positions other than those they were occupying. While at first the employees thereby affected would experience difficulty in adjusting to their new jobs, it cannot be gainsaid that the objective for the reshuffle is noble, as not only would the employees obtain additional knowledge, they would also be more well-rounded in the operations of the bank and thus help the latter further strengthen its already existing internal control system.

"The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an appraiser he was made to perform the work of a clerk in the collection of Meralco payments, which he may have considered as beneath him and his experience, being a pioneer employee. But it cannot be discounted either that other employees at the Tayabas branch were similarly reshuffled. The only logical conclusion therefore is that the Board Resolution was not aimed solely at the [petitioner], but for all the other employees of the x x x bank as well. Besides, the complainant has not shown by clear, competent and convincing evidence that he holds a vested right to the position of Appraiser. x x x.

"How and by what manner a business concern conducts its affairs is not for this Commission to interfere with, especially so if there is no showing, as in the case at bar, that the reshuffle was motivated by bad faith or ill-will. x x x."15

After the NLRC denied his Motion for Reconsideration,16 petitioner brought before the CA a Petition for Certiorari17 assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled thus:

"The so-called 'harassment' which Mendoza allegedly experienced in the aftermath of the reshuffling of employees at the bank is but a figment of his imagination as there is no evidence extant on record which substantiates the same. His alleged demotion, the 'cold shoulder' stance, the things about his chair and table, and the alleged reason for the harassment are but allegations bereft of proof and are perforce inadmissible as self-serving statements and can never be considered repositories of truth nor serve as foundations of court decisions anent the resolution of the litigants' rights.

"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no [diminution] of his salary benefits and rank. He could even retain his position title, had he only requested for it pursuant to the reply of the Chairman of the bank's board of directors to Mendoza's letter protesting the reshuffle. There is, therefore, no cause to doubt the reasons which the bank propounded in support of its move to reshuffle its employees, viz:

1. to 'familiarize bank employees with the various phases of bank operations,' and

2. to 'further strengthen the existing internal control system' of the bank.

"The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of constructive dismissal.

"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does not signify that the bank has dismissed the former from its employ. Mendoza separated himself from the bank's employ when, on June 24, 1999, while on leave, he filed the illegal dismissal case against his employer for no apparent reason at all."18

Hence, this Petition.19

The Issues

Petitioner raises the following issues for our consideration:

"I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service and/or abandoned his job when he filed his Complaint for constructive and consequently illegal dismissal;

"II. Whether or not the reshuffling of private respondent'[s] employees was done in good faith and cannot be made as the basis of a finding of constructive dismissal, even as the [petitioner's] demotion in rank is admitted by both parties;

"III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department Store (323 SCRA 445)] is applicable to the case at bar;

"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's money claims, damages, and unpaid salaries for the period July 1-30, 1999, although this was not disputed by the private respondent; and

"V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC are a nullity since the appeal filed by private respondent before the NLRC on August 5, 2000 was on the 15th day or five (5) days beyond the reglem[e]ntary period of ten (10) days as provided for by law and the NLRC Rules of Procedure."20

In short, the main issue is whether petitioner was constructively dismissed from his employment.

The Court's Ruling

The Petition has no merit.

Main Issue:Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.21 Petitioner argues that he was compelled to file an action for constructive dismissal, because he had been demoted from appraiser to clerk and not given any work to do, while his table had been placed near the toilet and eventually removed.22 He adds that the reshuffling of employees was done in bad faith, because it was designed primarily to force him to resign.23

Management Prerogativeto Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often decline to interfere in legitimate business decisions of employers.24 Indeed, labor laws discourage interference in employers' judgments concerning the conduct of their business.25 The law must protect not only the welfare of employees, but also the right of employers.

In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one office or area of operation to another -- provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause.26 This privilege is inherent in the right of employers to control and manage their enterprise effectively.27 The

right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.28

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice.29 The test for determining the validity of the transfer of employees was explained in Blue Dairy Corporation v. NLRC30 as follows:

"[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee's transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment."31

Petitioner's Transfer Lawful

The employer bears the burden of proving that the transfer of the employee has complied with the foregoing test. In the instant case, we find no reason to disturb the conclusion of the NLRC and the CA that there was no constructive dismissal. Their finding is supported by substantial evidence -- that amount of relevant evidence that a reasonable mind might accept as justification for a conclusion.32

Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with the various phases of bank operations and further strengthen the existing internal control system"33 of all officers and employees. We have previously held that employees may be transferred -- based on their qualifications, aptitudes and competencies -- to positions in which they can function with maximum benefit to the company.34 There appears no justification for denying an employer the right to transfer employees to expand their competence and maximize their full potential for the advancement of the establishment. Petitioner was not singled out; other employees were also reassigned without their express consent.

Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges and other benefits. This fact is clear in respondent's Board Resolutions, the April 30, 1999 letter of Bank President Daya to Branch Manager Cada, and the May 10, 1999 letter of Daya to petitioner.

On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no credence by both lower tribunals was his bare and self-serving statement that he had been positioned near the comfort room, made to work without a table, and given no work assignment.35 Purely conjectural is his claim that the reshuffle of personnel was a harassment in retaliation for an alleged falsification case filed by his relatives against a public official.36 While the rules of evidence prevailing in courts of law are not controlling in proceedings before the NLRC,37 parties must nonetheless submit evidence to support their contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC38 does not apply to the present factual milieu. The Court ruled therein that the lack of notice and hearing made the dismissal of the employee ineffectual, but not necessarily illegal.39 Thus, the procedural infirmity was remedied by ordering payment of his full back wages from the time of his dismissal.40 The absence of constructive dismissal in the instant case precludes the application of Serrano. Because herein petitioner was not dismissed, then he is not entitled to his claimed monetary benefits.

Alleged Nullity of NLRCand CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were void, since respondent's appeal before the NLRC had allegedly been filed beyond the reglementary period.41 A careful scrutiny of his Petition for Review42 with the appellate court shows that this issue was not raised there. Inasmuch as the instant Petition challenges the Decision of the CA, we cannot rule on arguments that were not brought before it. This ruling is consistent with the due-process requirement that no question shall be entertained on appeal, unless it has been raised in the court below.43

WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25, 2002 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.

The POEA

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. L-79436-50 January 17, 1990

EASTERN ASSURANCE & SURETY CORPORATION, petitioner, vs.SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA VENTURA, ESTER TRANGUILLAN, et al., respondents.

Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioner.

 

NARVASA, J.:

In connection with the application with the Philippine Overseas Employment Administration (POEA) of J & B Manpower Specialist, Inc. for a license to engage in business as a recruitment agency, a surety bond was filed on January 2, 1985 by the applicant and the Eastern Assurance and Surety Corporation, herein petitioner, in virtue of which they both held themselves —

. . . firmly bound unto (said) Philippine Overseas Employment Administration, Ministry of Labor in the penal sum of PESOS ONE HUNDRED FIFTY THOUSAND ONLY . . . (Pl50,000.00) for the payment of which will and truly to be made, . . . (they bound themselves, their) heirs, executors, administrators, successors and assigns, jointly and severally . .

The bond stipulated that:

a) it was "conditioned upon the true and faithful performance and observance of the . . . principal (J & B Manpower Specialist, Inc.) of its duties and obligations in accordance with all the rules and regulations promulgated by the Ministry of Labor Philippine Overseas Employment Administration and with the terms and conditions stipulated in the License;

b) the liability of the . . . Surety (petitioner) shall in no case exceed the sum of PESOS ONE HUNDRED FIFTY THOUSAND (P150,000.00) ONLY, PHILIPPINE CURRENCY; 1

c) notice to the Principal is also a notice to the Surety; and

d) LIABILITY of the surety . . . shall expire on JANUARY 02, 1986 and this bond shall be automatically cancelled ten (10) days after its expiration and the surety shall not be liable for any claim not discovered and presented to it in writing within said period of . . . from expiration and the

obligee hereby expressly waives the rights to file any court action against the Surety after termination of said period of . . . . above cited. 2

As narrated by respondent Secretary of Labor, the facts are as follows: 3

From June 1983 to December 1985 . . . thirty three (33) . . . (persons) applied for overseas employment with . . . (J & B). In consideration of promised deployment, complainants paid respondent various amounts for various fees. Most of' the receipts issued were sighed by Mrs. Baby Bundalian, Executive Vice-President of . . . (J & B).

Because of non-deployment . . . (the applicants) filed separate complaints with the Licensing and Regulation Office of POEA against . . . (J & B) for violation of Articles 32 and 34 (a) of the Labor Code between the months of April to October 1985.

Despite summons/notices of hearing,, . . . (J & B) failed to file Answer nor appear in the hearings conducted.

In its separate Answer, . . . EASCO essentially disclaimed liability on the ground that the claims were not expressly covered by the bond, that POEA had no jurisdiction to order forfeiture of the bond, that some of the claims were paid beyond or prior to the period of effectivity of the bond.

On September 8, 1986, the POEA Administrator issued the Order in favor of complainants ruling thus:

After careful evaluation, we find that the receipts and testimonies of complainants, in the absence of controverting evidence substantially establish that respondent charged and collected fees from them in amounts exceeding what is prescribed by this Administration. Complainants' non-deployment strongly indicates that there was no employment obtained for them. Hence, violation of Articles 32 and 34 (a) of the Labor Code, as amended, is established against respondent. The claims of complainants having arose (arisen) out of acts of the principal covered under the surety (bond), the respondent surety is equally liable therefor.

Except for complainants Ramos, Samson, de Leon and Rizada, whose claims were transacted prior to the effectivity of the bond, . . . EASCO was declared jointly and severally liable with . . . (J & B) to twenty-nine (29) complainants.

(The dispositive portion of the POEA Administrator's Order also contained the following statement and direction, viz.:

Respondent was suspended on May 23, 1985, June 26, 1985 and January 17, 1986 all for illegal exaction. Considering its track record of illegal exaction activities and considering further the gross violation of recruitment rules and regulations established against it in the instant cases, and the expiration of its license on February 15, 1985, it is hereby forever banned from participation in the overseas employment program. It is ordered to cease and desist from further engaging in recruitment activities otherwise it shall be prosecuted for illegal recruitment.')

(J & B filed a motion for reconsideration). On December 19, 1986, the then deputy Minister of Labor and Employment denied the . . . Motion for Reconsideration for lack of merit and affirmed the findings in the Order of the POEA Administrator finding no reversible error therein.

On appeal by EASCO — J & B having as aforestated taken no part in the proceeding despite due service of summons — the judgment was modified by the Secretary of Labor, by Order dated July 1, 1987, disposing as follows: 4

WHEREFORE, in view of the foregoing, the Resolution of the then Deputy Minister of Labor dated December 19, 1986 affirming the Order of the POEA Administrator dated September 8, 1986 is hereby MODIFIED. Respondent J & B Manpower Specialist is directed to refund all thirty-three (33) complainants as listed in the Order of September 8, 1986 in the amounts listed thereto with the modification that complainants Lucena Cabasal and Felix Rivero are both entitled only to P15,980 and not P15,980 each. Respondent Eastern Assurance and Surety Corporation is hereby found jointly and severally liable with respondent J & B Manpower Specialist to refund nineteen (19) complainants in the modified amounts . . . (particularly specified).

The other findings in the Order of the POEA Administrator dated September 8, 1986 affirmed in the Resolution of the then Deputy Minister . . . are also hereby AFFIRMED. This Order is FINAL. No further Motion for Reconsideration hereof shall be entertained.

It is noteworthy that EASCO's liability for the refund, jointly and severally with its principal, was limited to 19 named complainants (in contrast to verdicts of the POEA and the Deputy Minister which both ordered payment to no less than 33 complainants) and was correspondingly reduced from P308,751.75 and US $ 400.00 5 to the aggregate amount of P 140,817.75. 6

The special civil action of certiorari at bar was thereafter instituted by EASCO 7 praying for the nullification of the POEA Administrator's Order of September 8, 1986, the Resolution of the Deputy Minister of Labor of' December 19, 1986, and the Order of the Secretary of Labor of July 1, 1987, It theorizes that:

1) the POEA had no jurisdiction over the claims for refund filed by non-employees;

2) neither did the Secretary of Labor have jurisdiction of the claims;

3) assuming they had jurisdiction, both the POEA and Secretary of Labor also committed legal errors and acted with grave abuse of discretion when they ruled that petitioner is liable on the claims.

EASCO contends that the POEA had no "adjudicatory jurisdiction" over the monetary claims in question because the same "did not arise from employer-employee relations." Invoked in support of the argument is Section 4 (a) of EO 797 providing in part 8 that the POEA has —

. . . original and exclusive jurisdiction over all cases, including money claims, involving employer-employee relations arising out of or by virtue of any law or contract involving Filipino workers for overseas employment including seamen . . .

The complaints are however for violation of Articles 32 and 34 a) of the Labor Code. Article 32 and paragraph (a) of Article 34 read as follows:

Art. 32. Fees to be paid by workers.—Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the approved receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees.

Art. 34. Prohibited practices.—It shall be unlawful for any individual, entity, licensee, or holder of authority:

a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount greater than actually received by him as a loan or advance; . . .

The penalties of suspension and cancellation of license or authority are prescribed for violations of the above quoted provisions, among others. And the Secretary of Labor has the power under Section 35 of the law to apply these sanctions, as well as the authority, conferred by Section 36, not only, to "restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate rules and regulations to carry out the objectives and implement the provisions" governing said activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the POEA 9 "on its own initiative or upon filing of a complaint or report or upon request for investigation by any aggrieved

person, . . . (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or authority of any agency or entity" for certain enumerated offenses including —

1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or any fee or bond in excess of what is prescribed by the Administration, and

2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and regulations. 10

The Administrator was also given the power to "order the dismissal of the case or the suspension of the license or authority of the respondent agency or contractor or recommend to the Minister the cancellation thereof." 11

Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by the respondent agency or contractor, specially the refund or reimbursement of such fees as may have been fraudulently or otherwise illegally collected, or such money, goods or services imposed and accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on an offending recruitment agency or contractor to suspension or cancellation of its license, without the concomitant obligation to repair the injury caused to its victims. It would result either in rewarding unlawful acts, as it would leave the victims without recourse, or in compelling the latter to litigate in another forum, giving rise to that multiplicity of actions or proceedings which the law abhors.

Even more untenable is EASCO's next argument that the recruiter and its victims are in pari delicto — the former for having required payment, and the latter for having voluntarily paid, "prohibited recruitment fees" — and therefore, said victims are barred from obtaining relief. The sophistical, if not callous, character of the argument is evident upon the most cursory reading thereof; it merits no consideration whatever.

The Court is intrigued by EASCO's reiteration of its argument that it should not be held liable for claims which accrued prior to or after the effectivity of its bond, considering that the respondent Secretary had conceded the validity of part of said argument, at least. The Secretary ruled that EASCO's "contention that it should not be held liable for claims/payments made to respondent agency before the effectivity of the surety bond on January 2, 1985 is well taken." According to the Secretary: 12

. . . A close examination of the records reveal(s) that respondent EASCO is not jointly and severally liable with respondent agency to refund complainants Lucena Cabasal, Felix Rivero, Romulo del Rosario, Rogelio Banzuela, Josefina Ogatis, Francisco Sorato, Sonny Quiazon, Josefina Dictado, Mario del Guzman and Rogelio Mercado (10 in all). These complainants paid respondent agency in 1984, or before the effectivity of the bond on January 2, 1985 as evidence by the reciept and their testimonies.

The related argument, that it is also not liable for claims filed after the expiry (on January 2, 1986) of the period stipulated in the surety bond for the filing of claims against the bond, must however be rejected, as the Secretary did. The Court discerns no grave abuse of discretion in the Secretary's statement of his reasons for doing so, to wit:

. . . While it may be true that respondent EASCO received notice of their claims after the ten (10) day expiration period from cancellation or after January 12, 1986 as provided in the surety bond, records show that . . . EASCO's principal, respondent agency, was notified/ summoned prior to the expiration period or before January 12, 1986. Respondent agency received summons on July 24, 1985 with respect to claims of complainants Penarroyo, dela Cruz and Canti. It also received summons on November 26, 1985 with respect to Giovanni Garbillons' claim. Respondent agency was likewise considered constructively notified of the claims of complainants Calayag, Danuco Domingo and Campena on October 6, 1985. In this connection, it may be stressed that the surety bond provides that notice to the principal is notice to the surety. Besides, it has been held that the contract of a compensated surety like respondent EASCO is to be interpreted liberally in the interest of the promises and beneficiaries rather than strictly in favor of the surety (Acoustics Inc. v. American Surety, 74 Nev-6, 320 P2d. 626, 74 Am. Jur. 2d).

So, too, EASCO's claim that it had not been properly served with summons as regards a few of the complaints must be rejected, the issue being factual, and the Court having been cited to no grave error invalidating the respondent Secretary's conclusion that summons had indeed been duly served.

Finally, EASCO's half-hearted argument that its liability should be limited to the maximum amount set in its surety bond, i.e., P150,000.00, is palpably without merit, since the aggregate liability imposed on it, P140,817.75, supra, does not in fact exceed that limit.

WHEREFORE, the petition is DISMISSED for lack of merit, and this decision is declared to be immediately executory. Costs against petitioner.

SO ORDERED.

Solidary Liability of Recruitment Agencies

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 82310 June 18, 1990

FEAGLE CONSTRUCTION CORPORATION, petitioner, vs.GAVINO GAYDA, ELPIDIO AGPALAYA, MIGUELITO BATOON, ELIGIO CUENCO, CLARO CUNANAN, SANTIAGO CURAMENG, MANUEL DACO, EDUARDO DEPONE, RAYMUNDO ERVERA, JOSE ESTABILLO, ROGELIO FIGUEROA, ARTEMIO HULINGNGA, JORGE ITING, EMILIANO NACAM, ALEXANDER MAPUTOL, AVELINO MENDOZA, ROGELIO NOO, ROLANDO PATINIO, VITALIANO PENA, ROLLY PERALES, DOMINADOR STA. CATALINA, ARSENIO SANTOS, FELIPE TESADO and NATIONAL LABOR RELATIONS COMMISSION,respondents.

G.R. No. 87998 June 18, 1990

FEAGLE CONSTRUCTION CORPORATION, petitioner, vs.JOSEPH ORPILIA AND NATIONAL LABOR RELATIONS COMMISSION, respondents.

Jacinto D. Jimenez for petitioner.

Millora, Nario, Canto & Pontejos for private respondents.

GANCAYCO, J.:

The singular issue in this case is whether or not petitioner may be held solidarily liable with the foreign employer for any unpaid claims of private respondents against their foreign principal employer for any unpaid claims of private respondents against their foreign principal employer even as they have a stipulation to this effect.

This petition (G.R. No. 82310) was previously dismissed on March 23, 1988 for failure of Petitioner to sufficiently to show that the respondent Commission had committed a grave abuse of discretion in rendering its questioned judgment. 1 An amended petition was filed on April 4, 1988. 2 The amended petition was given due course on July 4, 1988. 3

Petitioner questions the decision of the First Division of public respondent National Labor Relations Commission 4 dated January 29, 1988 in POEA Case No. L-86-10-971, which modified the decision dated July 20, 1987, of Commissioner Tomas D. Achacoso of the Philippine Overseas Employment Administration dated July 20, 1987, excluding petitioner's officials Florentino Aguila and Rene Aguila from liability, but affirming the liability of the petitioner to private respondents on the ground that petitioner is solidarily liable together with the private respondents' foreign employer-Algosaibi-Bison Ltd., Dammam, Saudi Arabia. 5

The modified decision of administrator Achacoso has the following dispositive portion.

WHEREFORE, premises considered, respondents Feagle Construction Corporation, Florentino Aguila and Rene Aguila and its (sic) foreign principal Algosaibi Bison, Ltd., Dammam, Saudi Arabia are hereby held jointly and severally liable to pay herein complainants within ten (10) days from receipt of this Order, the peso equivalent at the time of actual payment of the sum appearing opposite complainants' names representing their total claim for unpaid salaries/wages, remittances and other benefits, to wit:

1. Elpidio Agpalza

S.R. 19,245.00

2. Miguel Batoon

9,433.00

3. Eligio Cuenco

18,015.00

4. Claro Cu

16,409.0

nanan

0

5. Santiago Curameng

13,065.00

6. Manuel Daco

9,062.00

7. Eduardo Depone

24,038.00

8. Raymundo Er

15,235.00

vera

9. Jose Estabillo

9,358.00

10. Rogelio Figueroa

19,554.00

11. Gavino Gayda

14,977.00

12. Artemio Huli

8,581.00

ngnga

13. Jorge Iting

18,436.00

14. Erqiliano Macam

13,436.00

15. Alexander Maputol

16,394.00

16. Avelino Me

8,124.00

ndoza

17. Rogelio Noo

18,930.00

18. Rolando Patinio

18,598.00

19. Vitiliano Pena

16,187.00

20. Rolly Perales

10,713.00

21. Dominador Sta. Catalina

12,767.00

22. Arsenio L. Santos

17,708.00

23. Felipe Tesado

14,236.00

TOTAL

S.R. 3

42,501.00

We take note that complainants have been paid of (sic) their plane fare bonds as evidenced by check vouchers duly signed by individual complainants, hence, such claim is considered settled and/or fully paid.

Respondent are further ordered to pay attorneys fees equivalent to five percent (5%) of the total amount of the claims.

All other claims are hereby dismissed for lack of merit.

No pronouncement as to cost. 6

A temporary restraining order was issued by this Court on September 12, 1988 and the petitioner filed the required bond in the amount of P50,000.00. 7 The following antecedent pertinent facts are not disputed:

1. Private respondents have been employed with Algosaibi-Bison, Ltd. in Saudi Arabia for three to five years working on construction projects for the Kingdom of Saudi Arabia.

2. Sometime in 1983, Algosaibi-Bison, Ltd. started encountering financial difficulties because of the drop in the price of oil. Because of the drop in the price of oil, the income of the Kingdom of Saudi Arabia plunged from about one hundred billion dollars a year to eighteen billion dollars a year. As a result, the Kingdom of Saudi Arabia encountered financial difficulties in paying Algosaibi-Bison, Ltd. for its construction projects.

3. Starting in 1983, the remittance of the allotments of the beneficiaries of Filipino workers employed with Algosaibi-Bison, Ltd. was delayed. Although all the allotments for 1983 and 1984 were eventually paid, all these payments were delayed.

4. During all these years petitioner never charged Filipino workers like private respondents a single centavo for sending them to work for Algosaibi-Bison, Ltd. Petitioner advanced all mobilization expenses out of its funds.

5. Because of its financial difficulties, Algosaibi-Bison, Ltd. could not even reimburse petitioner for the mobilization expenses petitioner advanced, such as passport fees, medical fees, and visa application fees. Petitioner insisted that Algosaibi-Bison, Ltd. should give top priority to the payment of the wages and the allotments of the Filipino workers employed with it.

6. Because of this development, petitioner decided to stop sending back Filipino workers to work with Algosaibi-Bison, Ltd. Workers are given a one-month vacation after a year with re-entry visa.

7. Sometime in July, 1984, the Filipino workers employed with Algosaibi-Bison, Ltd. who had returned to Manila, including private respondents, requested for a meeting with the management of petitioner. About forty (40) Filipino workers attended the meeting. During the meeting, the workers requested petitioner to return them to their job site in Saudi Arabia. Mr. Florentino B. Aguila, the president of petitioner, informed the workers that petitioner did not want to send back any workers to Saudi Arabia because of the big risk due to the financial difficulties of Algosaibi-Bison, Ltd.

8. However, the workers pleaded with Mr. Florentino B. Aguila to send them back to Saudi Arabia. They explained that they were jobless in the Philippines, because of the

depressed economic condition of the country. Rather than remain jobless, they would rather to take a chance in Saudi Arabia. They assured petitioner that they were willing to assume the risk in case the remittance of their salaries would be delayed. They emphasized that they were willing to sign a written statement indicating that they would not hold petitioner liable for any delay or non-payment of their salaries and any amounts due them from Algosaibi-Bison, Ltd. In accordance with their commitment, the said workers, including private respondents, signed a Statement .... Moreover, the workers stated they would seek the help of Saudi labor authorities individually in the event they would not be paid.

9. It was under the foregoing circumstances that petitioner reluctantly agreed to send back private respondents to Saudi Arabia to help them in their dire financial need if they would sign the aforementioned 'Statement' ... before they leave for Saudi Arabia. ...

10. While the Filipino workers were in Saudi Arabia, they received their salaries directly from Algosaibi-Bison, Ltd.

11. When Algosaibi-Bison, Ltd. went into bankruptcy in 1986, all the Filipino workers in its employ, including private respondents dealt with the liquidator directly and in their individual capacities. They filed their claims with the liquidator, and the liquidator issued to each of them a certificate stating the amount payable to each of them as soon as funds are available. The said Filipino workers, including private respondents, agreed that the liquidator would pay them directly and individually through their bank accounts in the Philippines. ...

12. Just the same, to assist the workers, petitioner has written the liquidator to follow up the claims of the Filipino workers, and the liquidator has replied to it. The reply of the liquidator confirmed the individual agreement of the said workers, including private respondents, that they would be paid by the liquidator directly and individually. Thus, petitioner has nothing to do with the remittance of the payments due private respondents. In fact, the liquidator even refused to furnish the petitioner a list of their individual claims and corresponding amounts due each of them. The liquidator considered these information confidential and privy to said workers. ...

13. Under the law of Saudi Arabia, the claims of the Filipino workers of Algosaibi- Bison, Ltd. has first priority for payment in the bankruptcy proceeding. Article 15 of the Labor Law of Saudi Arabia provides:

The amounts to which the workman or his dependents are entitled under the provisions of this Law shall be considered first class privileged debts, and for the recovery thereof the workman or his heirs shall have a priority rights over all the employer's property.'

14. On October 3, 1986, private respondents filed with the Philippine Overseas Employment Administration a Complaint against petitioner for the payment of their claims with the liquidator of Algosaibi-Bison, Ltd.

15. On December 2, 1986, petitioner filed its Answer. In its Answer, it pointed out that it was never furnished with a copy of any Complaint from private respondent Artemio Hulingnga.

16. On July 20, 1987, the Philippine Overseas Employment Administration rendered a Decision in favor of private respondents, including respondent Artemio Hulingnga, although petitioner was never furnished with a copy of his Complaint.

17. On August 7, 1987, petitioner appealed to respondent National Labor Relations Commission (hereinafter referred to as respondent Commission).

18. On January 29, 1988, respondent Commission rendered a Decision affirming the Decision of the Philippine Overseas Employment Administration with the modification that the 'president' and the 'vice president for administration and finance' of petitioner were exempted from liability for the claims of private respondents. ...

18. On February 11, 1988, petitioner filed a Motion for Reconsideration. ...

19. On February 29, 1988, respondent Commission issued a Resolution denying the Motion for Reconsideration. ...

20. On March 8, 1988, before receipt of the aforementioned Resolution of respondent Commission, petitioner filed a Supplemental Motion for Reconsideration. ... Petitioner received the said Resolution of respondent Commission only after petitioner had filed its Supplemental Motion for Reconsideration." 8

The petition is impressed with merit.

We agree with Public Respondents that the general rule as provided for in Section 1, Rule II of the rules and regulations of the Philippine Overseas Employment Administration is that every licensed private recruitment agency shall be jointly and solidarity liable with the employer for all claims and liabilities which may arise in connection with the implementation of the contract of employment.

In this case, however, We find it necessary to deviate from the general rule. First, because of changed circumstances, and second, because of individual agreements between petitioner and private respondents which cannot be considered void because the same cannot be considered contrary to law.

It is the uncontradicted contention of petitioner that 13 of private respondents filed their claims for salaries due in January, February and March of 1986, when their contracts of employment expired in1985. 9

It is also clear that private respondents executed new and different contracts of employment directly with Algosaibi-Bison, Ltd. without the participation and consent of the petitioner. The former contracts with the petitioner expired and private respondents entered into new contracts of employment with the Algosaibi-Bison, Ltd., without the participation of petitioner.

The claims of private respondents were made directly with the liquidator of Algosaibi- Bison, Ltd. and they agreed to wait for the promised payment. Again the petitioner had nothing to do with those claims.

We simply cannot ignore that petitioner was reluctant to send the private respondents back to Saudi Arabia because as early as 1983, the Algosaibi-Bison, Ltd. started encountering financial difficulties because of the drop in the price of oil. Private respondents were the ones who insisted that they be allowed to resume employment. They were informed of the risks involved relating to the financial reverses of the employer. They insisted to return to Saudi Arabia and they agreed to sign individual statements, which they did, to the effect that each one of them did not hold petitioner responsible for delay or non-payment of their salaries and any amounts due them from Algosaibi-Bison, Ltd.

These individual statements voluntary signed by the private respondents to convince the reluctant petitioner to send them back to Saudi Arabia, notwithstanding their knowledge of the financial reverses of this employer, are eloquent individual waivers of their rights against petitioner. They were informed of the risk involved in returning to an employer in serious financial distress. They insisted on returning to work, even persuading petitioner to allow them to do so, by waiving the possible liability of petitioner. Under these circumstances, when private respondents were insisting to return to work despite the warning, We cannot consider their written waivers as to petitioner's responsibilities void. They were not victims of deceit or deception. They entered into those waivers with open eyes and clear minds. They were aware of the imminent danger and the great risks involved in their renewed ventures.

We also consider that as of record in the past, petitioner never took advantage of private respondents. They were always treated fairly and in accordance with law. Private respondents did not question the good faith of Petitioner. Their former employer Algosaibi-Bison, Ltd. went into bankruptcy in 1986 and petitioner had nothing to do with that. Private respondents filed their claims directly with the Liquidator of their former employer Algosaibi-Bison, Ltd. They were given certificates of the amounts due them, to be given preference under the laws of Saudi Arabia. They were to be paid directly, again without participation of the petitioner. Petitioner wrote the Liquidator just to help private respondents, so that their claims may be expedited.

Holding, therefore, that in view of the circumstances proven in this case, and the very clear waiver of liability individually signed by private respondents in favor of petitioner, the petitioner cannot be held jointly and solidarity liable with the employer Algosaibi-Bison, Ltd. for the claims of private respondents. All other issues need no longer be discussed.

WHEREFORE, the temporary restraining order issued on September 12, 1988, is made permanent and the bond filed of P50,000.00 by petitioner is canceled. The questioned decision of the National Labor Relations Commission dated January 29, 1988, and the order denying the motion for reconsideration of the same in POEA Case No. L-86-10-971, are modified, in that petitioner and its officials are not solidarily liable with petitioner with the Algosaibi-Bison, Ltd. on the claims filed by private respondents. Costs against private respondents.

This decision is immediately executory.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 77279 April 15, 1988

MANUELA S. CATAN/M.S. CATAN PLACEMENT AGENCY, petitioners, vs.THE NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION and FRANCISCO D. REYES, respondents.

Demetria Reyes, Merris & Associates for petitioners.

The Solicitor General for public respondents.

Bayani G. Diwa for private respondent.

 

CORTES, J.:

Petitioner, in this special civil action for certiorari, alleges grave abuse of discretion on the part of the National Labor Relations Commission in an effort to nullify the latters resolution and thus free petitioner from liability for the disability suffered by a Filipino worker it recruited to work in Saudi Arabia. This Court, however, is not persuaded that such an abuse of discretion was committed. This petition must fail.

The facts of the case are quite simple.

Petitioner, a duly licensed recruitment agency, as agent of Ali and Fahd Shabokshi Group, a Saudi Arabian firm, recruited private respondent to work in Saudi Arabia as a steelman.

The term of the contract was for one year, from May 15,1981 to May 14, 1982. However, the contract provided for its automatic renewal:

FIFTH: The validity of this Contract is for ONE YEAR commencing from the date the SECOND PARTY assumes hill port. This Contract is renewable automatically if neither of the PARTIES notifies the other PARTY of his wishes to terminate the Contract by at least ONE MONTH prior to the expiration of the contractual period. [Petition, pp. 6-7; Rollo, pp. 7-8].

The contract was automatically renewed when private respondent was not repatriated by his Saudi employer but instead was assigned to work as a crusher plant operator. On March 30, 1983, while he

was working as a crusher plant operator, private respondent's right ankle was crushed under the machine he was operating.

On May 15, 1983, after the expiration of the renewed term, private respondent returned to the Philippines. His ankle was operated on at the Sta. Mesa Heights Medical Center for which he incurred expenses.

On September 9, 1983, he returned to Saudi Arabia to resume his work. On May 15,1984, he was repatriated.

Upon his return, he had his ankle treated for which he incurred further expenses.

On the basis of the provision in the employment contract that the employer shall compensate the employee if he is injured or permanently disabled in the course of employment, private respondent filed a claim, docketed as POEA Case No. 84-09847, against petitioner with respondent Philippine Overseas Employment Administration. On April 10, 1986, the POEA rendered judgment in favor of private respondent, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the complainant and against the respondent, ordering the latter to pay to the complainant:

1. SEVEN THOUSAND NINE HUNDRED EIGHTY-FIVE PESOS and 60/100 (P7,985.60), Philippine currency, representing disability benefits;

2. TWENTY-FIVE THOUSAND NINETY-SIX Philippine pesos and 20/100 (29,096.20) representing reimbursement for medical expenses;

3. Ten percent (10%) of the abovementioned amounts as and for attorney's fees. [NLRC Resolution, p. 1; Rollo, p. 16].

On appeal, respondent NLRC affirmed the decision of the POEA in a resolution dated December 12, 1986.

Not satisfied with the resolution of the POEA, petitioner instituted the instant special civil action for certiorari, alleging grave abuse of discretion on the part of the NLRC.

1. Petitioner claims that the NLRC gravely abused its discretion when it ruled that petitioner was liable to private respondent for disability benefits since at the time he was injured his original employment contract, which petitioner facilitated, had already expired. Further, petitioner disclaims liability on the ground that its agency agreement with the Saudi principal had already expired when the injury was sustained.

There is no merit in petitioner's contention.

Private respondents contract of employment can not be said to have expired on May 14, 1982 as it was automatically renewed since no notice of its termination was given by either or both of the parties at least a month before its expiration, as so provided in the contract itself. Therefore, private respondent's injury was sustained during the lifetime of the contract.

A private employment agency may be sued jointly and solidarily with its foreign principal for violations of the recruitment agreement and the contracts of employment:

Sec. 10. Requirement before recruitment.— Before recruiting any worker, the private employment agency shall submit to the Bureau the following documents:

(a) A formal appointment or agency contract executed by a foreign-based employer in favor of the license holder to recruit and hire personnel for the former ...

xxx xxx xxx

2. Power of the agency to sue and be sued jointly and solidarily with the principal or foreign-based employer for any of the violations of the

recruitment agreement and the contracts of employment. [Section 10(a) (2) Rule V, Book I, Rules to Implement the Labor Code].

Thus, in the recent case of Ambraque International Placement & Services v. NLRC [G.R. No. 77970, January 28,1988], the Court ruled that a recruitment agency was solidarily liable for the unpaid salaries of a worker it recruited for employment in Saudi Arabia.

Even if indeed petitioner and the Saudi principal had already severed their agency agreement at the time private respondent was injured, petitioner may still be sued for a violation of the employment contract because no notice of the agency agreement's termination was given to the private respondent:

Art 1921. If the agency has been entrusted for the purpose of contra with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. [Civil Code].

In this connection the NLRC elaborated:

Suffice it to state that albeit local respondent M. S. Catan Agency was at the time of complainant's accident resulting in his permanent partial disability was (sic) no longer the accredited agent of its foreign principal, foreign respondent herein, yet its responsibility over the proper implementation of complainant's employment/service contract and the welfare of complainant himself in the foreign job site, still existed, the contract of employment in question not having expired yet. This must be so, because the obligations covenanted in the recruitment agreement entered into by and between the local agent and its foreign principal are not coterminus with the term of such agreement so that if either or both of the parties decide to end the agreement, the responsibilities of such parties towards the contracted employees under the agreement do not at all end, but the same extends up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the said recruitment agreement. Otherwise, this will render nugatory the very purpose for which the law governing the employment of workers for foreign jobs abroad was enacted. [NLRC Resolution, p. 4; Rollo, p. 18]. (Emphasis supplied).

2. Petitioner contends that even if it is liable for disability benefits, the NLRC gravely abused its discretion when it affirmed the award of medical expenses when the said expenses were the consequence of private respondent's negligence in returning to work in Saudi Arabia when he knew that he was not yet medically fit to do so.

Again, there is no merit in this contention.

No evidence was introduced to prove that private respondent was not medically fit to work when he returned to Saudi Arabia. Exhibit "B", a certificate issued by Dr. Shafquat Niazi, the camp doctor, on November 1, 1983, merely stated that private respondent was "unable to walk properly, moreover he is still complaining [of] pain during walking and different lower limbs movement" [Annex "B", Reply; Rollo, p. 51]. Nowhere does it say that he was not medically fit to work.

Further, since petitioner even assisted private respondent in returning to work in Saudi Arabia by purchasing his ticket for him [Exhibit "E"; Annex "A", Reply to Respondents' Comments], it is as if petitioner had certified his fitness to work. Thus, the NLRC found:

Furthermore, it has remained unrefuted by respondent that complainant's subsequent departure or return to Saudi Arabia on September 9, 1983 was with the full knowledge, consent and assistance of the former. As shown in Exhibit "E" of the record, it was respondent who facilitated the travel papers of complainant. [NLRC Resolution, p. 5; Rollo, p. 19].

WHEREFORE, in view of the foregoing, the petition is DISMISSED for lack of merit, with costs against petitioner.

SO ORDERED.

Recuitment Agencies – Bond

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 88050 January 30, 1992

STRONGHOLD INSURANCE COMPANY, INC., petitioner, vs.HON. COURT OF APPEALS and ADRIANO URTESUELA, respondents.

T.J. Sumawang & Associates for petitioner.

Linsangan Law Office for private respondent.

 

CRUZ, J.:

The petitioner invokes due process to escape liability on a surety bond executed for the protection of a Filipino seaman. It is a familiar argument that will be denied, in light of the following findings.

Acting on behalf of its foreign principal, Qatar National Fishing Co., Pan Asian Logistics and Trading, a domestic recruiting and placement agency, hired Adriano Urtesuela as captain of the vessel M/V Oryx for the stipulated period of twelve months. The required surety bond, in the amount of P50,000.00, was submitted by Pan Asian and Stronghold Insurance Co., Inc., the herein petitioner, to answer for the liabilities of the employer. Urtesuela assumed his duties on April 18, 1982, but three months later his services were terminated and he was repatriated to Manila. He thereupon filed a complaint against Pan Asian and his former employer with the Philippine Overseas Employment Administration for breach of contract and damages.

In due time, the POEA rendered a decision in his favor for the amount of P6,374.94, representing his salaries for the unexpired portion of his contract and the cash value of his unused vacation leave, plus attorney's fees and costs, which the respondents were required to pay. The judgment eventually became final and executory, not having been appealed on time. Pursuant thereto, a writ of execution was issued against Pan Asian but could be enforced only against its cash bond of P10,000.00, the company having ceased to operate. Urtesuela then filed a complaint with the Insurance Commission against Stronghold on the basis of the aforementioned surety bond and prayed for the value thereof plus attorney's fees and litigation costs.

Under the bond, the petitioner and Pan Asian undertook —

To answer for all liabilities which the Philippine Overseas Employment Administration may adjudge/impose against the Principal in connection with the recruitment of Filipino seamen.

It is understood that notice to the Principal is notice to the surety. (Exh. "I-2").

WHEREAS, the liability of the surety under this Bond shall in no case exceed the sum of PESOS: FIFTY THOUSAND ONLY (P50,000.00) Philippine Currency.

After hearing, the Insurance Commission held that the complaint should be reformed because the provisions in the surety bond were not stipulations pour autrui to entitle Urtesuela to bring the suit himself. It held that the proper party was the POEA. 1 This ruling was reversed on appeal by the respondent court in its decision dated April 20, 1989. 2 It was there declared that, as the actual beneficiary of the surety bond, Urtesuela was competent to sue Stronghold, which as surety was solidarily liable with Pan Asian for the judgment rendered against the latter by the POEA.

The petitioner asks for reversal of the Court of Appeals. It submits that the decision of the POEA is not binding upon it because it was not impleaded in the complaint; it was not notified thereof nor did it participate in the hearing; and it was not specifically directed to pay the damages awarded to the complainant.

In support of its posture, the petitioner cites abundant jurisprudence, particularly Aguasin v. Velasquez, 3 where the Court held:

If the surety is to be bound by his undertaking, it is essential according to Section 10 of Rule 62 in connection with Section 20 of Rule 59 of the Rules of Court that the damages be awarded upon application and after proper hearing and included in the judgment. As a corollary to these requirements, due notice to the plaintiff and his surety setting forth the facts showing his right to damages and the amount thereof under the bond is indispensable. This has to be so if the surety is not to be condemned or made to pay without due process of law. It is to be kept in mind that the surety in this case was not a party to the action and had no notice of or intervention in the trial. It seems elementary that before being condemned to pay, it was the elementary right of the surety to be heard and to be informed that the party seeking indemnity would hold it liable and was going to prove the grounds and extent of its liability. This case is different from those in which the surety, by law and/or by the terms of his contract, has promised to abide by the judgment against the principal and renounced the right to be sued or cited.

The Court has gone over the decision and finds that the petitioner is "hoist by its own petard." For as the quoted excerpt itself says, the case is "different from those in which the surety, by law and/or by the terms of his contract, has promised to abide by the judgment against the principal and renounced the right to be sued or cited."

In the surety bond, the petitioner unequivocally bound itself:

To answer for all liabilities which the Philippine Overseas Employment Administration may adjudge/impose against the Principal in connection with the recruitment of Filipino seamen.

Strictly interpreted, this would mean that the petitioner agreed to answer for whatever decision might be rendered against the principal, whether or not the surety was impleaded in the complaint and had the opportunity to defend itself. There is nothing in the stipulation calling for a direct judgment against the surety as a co-defendant in an action against the principal. On the contrary, the petitioner agreed "to answer for all liabilities" that "might be adjudged or imposed by the POEA against the Principal."

But even if this interpretation were rejected, considering the well-known maxim that "the surety is a favorite of the law," the petitioner would still have to explain its other agreement that "notice to the Principal is notice to the surety." This was in fact another special stipulation typewritten on the printed form of the surety bond prepared by the petitioner. Under this commitment, the petitioner is deemed, by the implied notice, to have been given an opportunity to participate in the litigation and to present its side, if it so chose, to avoid liability. If it did not decide to intervene as a co-defendant (and perhaps also as cross-claimant against Pan Asian), it cannot be heard now to complain that it was denied due process.

The petitioner contends, however, that the said stipulation is unconstitutional and contrary to public policy, because it is "a virtual waiver" of the right to be heard and "opens wide the door for fraud and collusion between the principal and the bond obligee" to the prejudice of the surety. Hence, disregarding the stipulation, the petitioner should be deemed as having received no notice at all of the complaint and therefore deprived of the opportunity to defend itself.

The Court cannot agree. The argument assumes that the right to a hearing is absolute and may not be waived in any case under the due process clause. This is not correct. As a matter of fact, the right to be heard is as often waived as it is invoked, and validly as long as the party is given an opportunity to be heard on his behalf. 4

The circumstance that the chance to be heard is not availed of does not disparage that opportunity and deprive the person of the right to due process. This Court has consistently held in cases too numerous to mention that due process is not violated where a person is not heard because he has

chosen, for whatever reason, not to be heard. It should be obvious that if he opts to be silent where he has a right to speak, he cannot later be heard to complain that he was unduly silenced.

Neither is public policy offended on the wicked ground of fraud and collusion imagined by the petitioner. For one thing, the speculation contravenes without proof the presumption of good faith and unreasonably imputes dishonest motives to the principal and the obligee. For another, it disregards the fiduciary relationship between the principal and the surety, which is the legal and also practical reason why the latter is willing to answer for the liabilities of the former.

In a familiar parallel, notice to the lawyer is considered notice to the client he represents even if the latter is not actually notified. It has not been suspected that this arrangement might result in a confabulation between the counsel and the other party to the client's prejudice.

At any rate, it is too late now for the petitioner to challenge the stipulation. If it believed then that it was onerous and illegal, what it should have done was object when its inclusion as a condition in the surety bond was required by the POEA. Even if the POEA had insisted on the condition, as now claimed, there was still nothing to prevent the petitioner from refusing altogether to issue the surety bond. The petitioner did neither of these. The fact is that, whether or not the petitioner objected, it in the end filed the surety bond with the suggested condition. The consequence of its submission is that it cannot now argue that it is not bound by that condition because it was coerced into accepting it.

This Court has always been receptive to complaints against the denial of the right to be heard, which is the very foundation of a free society. This right is especially necessary in the court of justice, where cases are decided after the parties shall have been given an opportunity to present their respective positions, for evaluation by the impartial judge. Nevertheless, a party is not compelled to speak if it chooses to be silent. If it avails itself of the right to be heard, well and good; but if not, that is also its right. In the latter situation, however, it cannot later complain that, because it was not heard, it was deprived of due process.

Worthy of consideration also is the private respondent's contention that he sought to enforce the petitioner's liability not in NSB Case No. 3810-82 as decided by the POEA, but in another forum. What he did was file an independent action for that purpose with the Insurance Commission on the basis of the surety bond which bound the petitioner to answer for whatever liabilities might be adjudged against Qatar National Fishing Co. by the POEA. In the proceedings before the Commission, the petitioner was given full opportunity (which it took) to present its side, in its answer with counterclaim to the complaint, in its testimony at the hearings, in its motion to dismiss the complaint, and in its 10-page memorandum. There is absolutely no question that in that proceeding, the petitioner was actually and even extensively heard.

The surety bond required of recruitment agencies 5 is intended for the protection of our citizens who are engaged for overseas employment by foreign companies. The purpose is to insure that if the rights of these overseas workers are violated by their employers, recourse would still be available to them against the local companies that recruited them for the foreign principal. The foreign principal is outside the jurisdiction of our courts and would probably have no properties in this country against which an adverse judgment can be enforced. This difficulty is corrected by the bond, which can be proceeded against to satisfy that judgment.

Given this purpose, and guided by the benign policy of social justice, we reject the technicalities raised by the petitioner against its established legal and even moral liability to the private respondent. These technicalities do not impair the rudiments of due process or the requirements of the law and must be rejected in deference to the constitutional imperative of justice for the worker.

WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals AFFIRMED in toto. The respondent court is directed to ENFORCE payment to the private respondent in full, and with all possible dispatch of the amount awarded to him by the POEA in its decision dated May 13, 1983. It is so ordered.

Narvasa, C.J., Griño-Aquino and Medialdea, JJ., concur.

POEAs Authority

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. L-79436-50 January 17, 1990

EASTERN ASSURANCE & SURETY CORPORATION, petitioner, vs.SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA VENTURA, ESTER TRANGUILLAN, et al., respondents.

Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioner.

 

NARVASA, J.:

In connection with the application with the Philippine Overseas Employment Administration (POEA) of J & B Manpower Specialist, Inc. for a license to engage in business as a recruitment agency, a surety bond was filed on January 2, 1985 by the applicant and the Eastern Assurance and Surety Corporation, herein petitioner, in virtue of which they both held themselves —

. . . firmly bound unto (said) Philippine Overseas Employment Administration, Ministry of Labor in the penal sum of PESOS ONE HUNDRED FIFTY THOUSAND ONLY . . . (Pl50,000.00) for the payment of which will and truly to be made, . . . (they bound themselves, their) heirs, executors, administrators, successors and assigns, jointly and severally . .

The bond stipulated that:

a) it was "conditioned upon the true and faithful performance and observance of the . . . principal (J & B Manpower Specialist, Inc.) of its duties and obligations in accordance with all the rules and regulations promulgated by the Ministry of Labor Philippine Overseas Employment Administration and with the terms and conditions stipulated in the License;

b) the liability of the . . . Surety (petitioner) shall in no case exceed the sum of PESOS ONE HUNDRED FIFTY THOUSAND (P150,000.00) ONLY, PHILIPPINE CURRENCY; 1

c) notice to the Principal is also a notice to the Surety; and

d) LIABILITY of the surety . . . shall expire on JANUARY 02, 1986 and this bond shall be automatically cancelled ten (10) days after its expiration and the surety shall not be liable for any claim not discovered and presented to it in writing within said period of . . . from expiration and the obligee hereby expressly waives the rights to file any court action against the Surety after termination of said period of . . . . above cited. 2

As narrated by respondent Secretary of Labor, the facts are as follows: 3

From June 1983 to December 1985 . . . thirty three (33) . . . (persons) applied for overseas employment with . . . (J & B). In consideration of promised deployment, complainants paid respondent various amounts for various fees. Most of' the receipts issued were sighed by Mrs. Baby Bundalian, Executive Vice-President of . . . (J & B).

Because of non-deployment . . . (the applicants) filed separate complaints with the Licensing and Regulation Office of POEA against . . . (J & B) for violation of Articles 32 and 34 (a) of the Labor Code between the months of April to October 1985.

Despite summons/notices of hearing,, . . . (J & B) failed to file Answer nor appear in the hearings conducted.

In its separate Answer, . . . EASCO essentially disclaimed liability on the ground that the claims were not expressly covered by the bond, that POEA had no jurisdiction to order

forfeiture of the bond, that some of the claims were paid beyond or prior to the period of effectivity of the bond.

On September 8, 1986, the POEA Administrator issued the Order in favor of complainants ruling thus:

After careful evaluation, we find that the receipts and testimonies of complainants, in the absence of controverting evidence substantially establish that respondent charged and collected fees from them in amounts exceeding what is prescribed by this Administration. Complainants' non-deployment strongly indicates that there was no employment obtained for them. Hence, violation of Articles 32 and 34 (a) of the Labor Code, as amended, is established against respondent. The claims of complainants having arose (arisen) out of acts of the principal covered under the surety (bond), the respondent surety is equally liable therefor.

Except for complainants Ramos, Samson, de Leon and Rizada, whose claims were transacted prior to the effectivity of the bond, . . . EASCO was declared jointly and severally liable with . . . (J & B) to twenty-nine (29) complainants.

(The dispositive portion of the POEA Administrator's Order also contained the following statement and direction, viz.:

Respondent was suspended on May 23, 1985, June 26, 1985 and January 17, 1986 all for illegal exaction. Considering its track record of illegal exaction activities and considering further the gross violation of recruitment rules and regulations established against it in the instant cases, and the expiration of its license on February 15, 1985, it is hereby forever banned from participation in the overseas employment program. It is ordered to cease and desist from further engaging in recruitment activities otherwise it shall be prosecuted for illegal recruitment.')

(J & B filed a motion for reconsideration). On December 19, 1986, the then deputy Minister of Labor and Employment denied the . . . Motion for Reconsideration for lack of merit and affirmed the findings in the Order of the POEA Administrator finding no reversible error therein.

On appeal by EASCO — J & B having as aforestated taken no part in the proceeding despite due service of summons — the judgment was modified by the Secretary of Labor, by Order dated July 1, 1987, disposing as follows: 4

WHEREFORE, in view of the foregoing, the Resolution of the then Deputy Minister of Labor dated December 19, 1986 affirming the Order of the POEA Administrator dated September 8, 1986 is hereby MODIFIED. Respondent J & B Manpower Specialist is directed to refund all thirty-three (33) complainants as listed in the Order of September 8, 1986 in the amounts listed thereto with the modification that complainants Lucena Cabasal and Felix Rivero are both entitled only to P15,980 and not P15,980 each. Respondent Eastern Assurance and Surety Corporation is hereby found jointly and severally liable with respondent J & B Manpower Specialist to refund nineteen (19) complainants in the modified amounts . . . (particularly specified).

The other findings in the Order of the POEA Administrator dated September 8, 1986 affirmed in the Resolution of the then Deputy Minister . . . are also hereby AFFIRMED. This Order is FINAL. No further Motion for Reconsideration hereof shall be entertained.

It is noteworthy that EASCO's liability for the refund, jointly and severally with its principal, was limited to 19 named complainants (in contrast to verdicts of the POEA and the Deputy Minister which both ordered payment to no less than 33 complainants) and was correspondingly reduced from P308,751.75 and US $ 400.00 5 to the aggregate amount of P 140,817.75. 6

The special civil action of certiorari at bar was thereafter instituted by EASCO 7 praying for the nullification of the POEA Administrator's Order of September 8, 1986, the Resolution of the Deputy Minister of Labor of' December 19, 1986, and the Order of the Secretary of Labor of July 1, 1987, It theorizes that:

1) the POEA had no jurisdiction over the claims for refund filed by non-employees;

2) neither did the Secretary of Labor have jurisdiction of the claims;

3) assuming they had jurisdiction, both the POEA and Secretary of Labor also committed legal errors and acted with grave abuse of discretion when they ruled that petitioner is liable on the claims.

EASCO contends that the POEA had no "adjudicatory jurisdiction" over the monetary claims in question because the same "did not arise from employer-employee relations." Invoked in support of the argument is Section 4 (a) of EO 797 providing in part 8 that the POEA has —

. . . original and exclusive jurisdiction over all cases, including money claims, involving employer-employee relations arising out of or by virtue of any law or contract involving Filipino workers for overseas employment including seamen . . .

The complaints are however for violation of Articles 32 and 34 a) of the Labor Code. Article 32 and paragraph (a) of Article 34 read as follows:

Art. 32. Fees to be paid by workers.—Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the approved receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees.

Art. 34. Prohibited practices.—It shall be unlawful for any individual, entity, licensee, or holder of authority:

a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount greater than actually received by him as a loan or advance; . . .

The penalties of suspension and cancellation of license or authority are prescribed for violations of the above quoted provisions, among others. And the Secretary of Labor has the power under Section 35 of the law to apply these sanctions, as well as the authority, conferred by Section 36, not only, to "restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate rules and regulations to carry out the objectives and implement the provisions" governing said activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the POEA 9 "on its own initiative or upon filing of a complaint or report or upon request for investigation by any aggrieved person, . . . (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or authority of any agency or entity" for certain enumerated offenses including —

1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or any fee or bond in excess of what is prescribed by the Administration, and

2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and regulations. 10

The Administrator was also given the power to "order the dismissal of the case or the suspension of the license or authority of the respondent agency or contractor or recommend to the Minister the cancellation thereof." 11

Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by the respondent agency or contractor, specially the refund or reimbursement of such fees as may have been fraudulently or otherwise illegally collected, or such money, goods or services imposed and accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on an offending recruitment agency or contractor to suspension or cancellation of its license, without the concomitant obligation to repair the injury caused to its victims. It would result either in rewarding

unlawful acts, as it would leave the victims without recourse, or in compelling the latter to litigate in another forum, giving rise to that multiplicity of actions or proceedings which the law abhors.

Even more untenable is EASCO's next argument that the recruiter and its victims are in pari delicto — the former for having required payment, and the latter for having voluntarily paid, "prohibited recruitment fees" — and therefore, said victims are barred from obtaining relief. The sophistical, if not callous, character of the argument is evident upon the most cursory reading thereof; it merits no consideration whatever.

The Court is intrigued by EASCO's reiteration of its argument that it should not be held liable for claims which accrued prior to or after the effectivity of its bond, considering that the respondent Secretary had conceded the validity of part of said argument, at least. The Secretary ruled that EASCO's "contention that it should not be held liable for claims/payments made to respondent agency before the effectivity of the surety bond on January 2, 1985 is well taken." According to the Secretary: 12

. . . A close examination of the records reveal(s) that respondent EASCO is not jointly and severally liable with respondent agency to refund complainants Lucena Cabasal, Felix Rivero, Romulo del Rosario, Rogelio Banzuela, Josefina Ogatis, Francisco Sorato, Sonny Quiazon, Josefina Dictado, Mario del Guzman and Rogelio Mercado (10 in all). These complainants paid respondent agency in 1984, or before the effectivity of the bond on January 2, 1985 as evidence by the reciept and their testimonies.

The related argument, that it is also not liable for claims filed after the expiry (on January 2, 1986) of the period stipulated in the surety bond for the filing of claims against the bond, must however be rejected, as the Secretary did. The Court discerns no grave abuse of discretion in the Secretary's statement of his reasons for doing so, to wit:

. . . While it may be true that respondent EASCO received notice of their claims after the ten (10) day expiration period from cancellation or after January 12, 1986 as provided in the surety bond, records show that . . . EASCO's principal, respondent agency, was notified/ summoned prior to the expiration period or before January 12, 1986. Respondent agency received summons on July 24, 1985 with respect to claims of complainants Penarroyo, dela Cruz and Canti. It also received summons on November 26, 1985 with respect to Giovanni Garbillons' claim. Respondent agency was likewise considered constructively notified of the claims of complainants Calayag, Danuco Domingo and Campena on October 6, 1985. In this connection, it may be stressed that the surety bond provides that notice to the principal is notice to the surety. Besides, it has been held that the contract of a compensated surety like respondent EASCO is to be interpreted liberally in the interest of the promises and beneficiaries rather than strictly in favor of the surety (Acoustics Inc. v. American Surety, 74 Nev-6, 320 P2d. 626, 74 Am. Jur. 2d).

So, too, EASCO's claim that it had not been properly served with summons as regards a few of the complaints must be rejected, the issue being factual, and the Court having been cited to no grave error invalidating the respondent Secretary's conclusion that summons had indeed been duly served.

Finally, EASCO's half-hearted argument that its liability should be limited to the maximum amount set in its surety bond, i.e., P150,000.00, is palpably without merit, since the aggregate liability imposed on it, P140,817.75, supra, does not in fact exceed that limit.

WHEREFORE, the petition is DISMISSED for lack of merit, and this decision is declared to be immediately executory. Costs against petitioner.

SO ORDERED.

Acts Constituting ESTAFA

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 141221-36      March 7, 2002

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs.FRANCISCO HERNANDEZ (at large), KARL REICHL, and YOLANDA GUTIERREZ DE REICHL, accused,KARL REICHL and YOLANDA GUTIERREZ DE REICHL, accused-appellants

PUNO, J.:

This is an appeal from the Joint Decision of the Regional Trial Court, Batangas City in Criminal Case Nos. 6428, 6429, 6430, 6431, 6432, 6433, 6434, 6435, 6436, 6437, 6438, 6439, 6528, 6529, 6530 and 6531 finding accused-appellants, Spouses Karl Reichl and Yolanda Gutierrez de Reichl guilty of five (5) counts of estafa and one (1) count of syndicated and large scale illegal recruitment.1

In April 1993, eight (8) informations for syndicated and large scale illegal recruitment and eight (8) informations for estafa were filed against accused-appellants, spouses Karl and Yolanda Reichl, together with Francisco Hernandez. Only the Reichl spouses were tried and convicted by the trial court as Francisco Hernandez remained at large. 1âwphi1.nêt

The evidence for the prosecution consisted of the testimonies of private complainants; a certification from the Philippine Overseas Employment Administration (POEA) that Francisco Hernandez, Karl Reichl and Yolanda Gutierrez Reichl in their personal capacities were neither licensed nor authorized by the POEA to recruit workers for overseas employment;2 the receipts for the payment made by private complainants; and two documents signed by the Reichl spouses where they admitted that they promised to secure Austrian tourist visas for private complainants and that they would return all the expenses incurred by them if they are not able to leave by March 24, 1993,3 and where Karl Reichl pledged to refund to private complainants the total sum of P1,388,924.00 representing the amounts they paid for the processing of their papers.4

Private complainant Narcisa Hernandez, a teacher, was first to testify for the prosecution. She stated that Francisco Hernandez introduced her to the spouses Karl and Yolanda Reichl at the residence of a certain Hilarion Matira at Kumintang Ibaba, Batangas City. At the time, she also saw the other applicants Melanie Bautista, Estela Manalo, Edwin Coleng, Anicel Umahon, Analiza Perez and Maricel Matira. Karl and Yolanda Reichl told Narcisa that they could find her a job as domestic helper in Italy. They, however, required her to pay the amount ofP150,000.00 for the processing of her papers and travel documents. She paid the fee in three installments. She paid the first installment of P50,000.00 on July 14, 1992, the second installment of P25,000.00 on August 6, 1992 and the third in the amount of P75,000.00 on December 27, 1992. She gave the money to Francisco Hernandez in the presence of the Reichl spouses at Matira's residence. Francisco Hernandez issued a receipt for the first and second installment5 but not for the third. Narcisa was scheduled to leave on December 17, 1992 but was not able to do so. Karl Reichl explained that she would get her transit visa to Italy in Austria, but she could not yet leave for Austria because the hotels were fully booked at that time because of the Christmas season. Narcisa's departure was again scheduled on January 5, 1993, but it still did not push through. Narcisa stated that they went to Manila several times supposedly to obtain a visa from the Austrian Embassy and Karl Reichl assured her that she would be able to leave once she gets her visa. The accused set the departure of Narcisa and that of the other applicants several times but these proved to be empty promises. In March 1993, the applicants met with the three accused at the residence of private complainant Charito Balmes and asked them to refund the payment if they could not send them abroad. The meeting resulted in an agreement which was reduced into writing and signed by Karl Reichl. Mr. Reichl promised to ensure private complainants' departure by April, otherwise, they would return their payment.6

Private complainant Leonora Perez also gave the following testimony: In July 1992, her sister, Analiza Perez, introduced her to Francisco Hernandez at their residence in Dolor Subdivision, Batangas City. Francisco Hernandez convinced her to apply for a job in Italy. When she accepted the offer, Francisco Hernandez told her to prepare P150,000.00 for the processing of her papers. In August 1992, Leonora, together with her sister and Francisco Hernandez, went to Ramada Hotel in Manila to meet with Karl and Yolanda Reichl. At said meeting, Leonora handed her payment of P50,000.00 to Yolanda Reichl. Yolanda assured her that she would be able to work in Italy.

Francisco Hernandez and the Reichl spouses told Leonora to wait for about three weeks before she could leave. After three weeks, Francisco Hernandez invited Leonora and the other applicants to the house of Hilarion Matira in Batangas City to discuss some matters. Francisco Hernandez informed the applicants that their departure would be postponed to December 17, 1992. December 17 came and the applicants were still unable to leave as it was allegedly a holiday. Yolanda and Karl Reichl nonetheless assured Leonora of employment as domestic helper in Italy with a monthly salary of $1,000.00. Francisco Hernandez and the Reichl spouses promised the applicants that they would leave for Italy on January 5, 1993. Some time in January 1993, Francisco Hernandez went to the residence of Leonora and collected the sum of P50,000.00 purportedly for the plane fare. Francisco issued a receipt for the payment. When the applicants were not able to leave on the designated date, Francisco Hernandez and the spouses again made another promise. Tired of the recruiters' unfulfilled promises, the applicants decided to withdraw their application. However, Karl Reichl constantly assured them that they would land a job in Italy because he had connections in Vienna. The promised employment, however, never materialized. Thus, Karl Reichl signed a document stating that he would refund the payment made by the applicants plus interest and other expenses. The document was executed and signed at the house of one of the applicants, Charito Balmes, at P. Zamora St., Batangas City.7

Janet Perez, Leonora's sister, corroborated the latter's testimony that she paid a total amount of P100,000.00 to the three accused.8

Private complainant Charito Balmes told a similar story when she testified before the court. She said that Francisco Hernandez convinced her to apply for the job of domestic helper in Italy and required her to pay a fee ofP150,000.00. He also asked her to prepare her passport and other papers to be used to secure a visa. On November 25, 1992, she gave P25,000.00 to Francisco Hernandez. They proceeded to Kumintang Ibaba, Batangas City and Francisco Hernandez introduced her to his business partners, spouses Karl and Yolanda Reichl. Francisco Hernandez turned over the payment to the spouses so that they could secure a visa for her. The Reichl spouses promised her an overseas job. They said she and the other applicants would leave on December 17, 1992. On December 11, 1992, Charito paid the amount of P70,300.00 to Francisco Hernandez in the presence of the Reichls. Francisco Hernandez again handed the money to the spouses. On February 16, 1993, Charito paid P20,000.00 to Francisco Hernandez who delivered the same to the spouses. Francisco Hernandez did not issue a receipt for the payment made by Charito because he told her that he would not betray her trust. Like the other applicants, Charito was not able to leave the country despite the numerous promises made by the accused. They gave various excuses for their failure to depart, until finally the Reichls told the applicants that Karl Reichl had so many business transactions in the Philippines that they would not be able to send them abroad and that they would refund their payment instead. Hence, they executed an agreement which was signed by Karl Reichl and stating that they would return the amounts paid by the applicants. The accused, however, did not comply with their obligation.9

Mrs. Elemenita Bautista, the mother of private complainant Melanie Bautista, also took the witness stand. She stated that in May 1992, Melanie applied for an overseas job through Francisco Hernandez. Francisco Hernandez told her to prepare P150,000.00 to be used for the processing of her papers and plane ticket. On June 26, 1992, Melanie made the initial payment of P50,000.00 to Francisco Hernandez who was then accompanied by Karl and Yolanda Reichl.10 Upon receipt of the payment, Francisco Hernandez gave the money to Yolanda Reichl. Melanie made two other payments: one on August 6, 1992 in the amount of P25,000.00,11 and another on January 3, 1993 in the amount of P51,000.00.12 Three receipts were issued for the payments.13

Rustico Manalo, the husband of private complainant Estela Abel de Manalo, testified that his wife applied for the job of domestic helper abroad. In June 1992, Francisco Hernandez introduced them to Karl and Yolanda Reichl who were allegedly sending workers to Italy. Rustico and his wife prepared all the relevant documents, i.e., passport, police clearance and marriage contract, and paid a total placement fee of P130,000.00.14 They paidP50,000.00 on June 5, 1992, P25,000.00 on August 8, 1992, and P55,000.00 on January 3, 1993. The payments were made at the house of Hilarion Matira and were received by Francisco Hernandez who, in turn, remitted them to the Reichl spouses. Francisco Hernandez issued a receipt for the payment. The Reichls promised to take care of Estela's papers and to secure a job for her abroad. The Reichls vowed to return the payment if they fail on their promise. As with the other applicants, Estela was also not able to leave the country.15

The defense interposed denial and alibi.

Accused-appellant Karl Reichl, an Austrian citizen, claimed that he entered the Philippines on July 29, 1992. Prior to this date, he was in various places in Europe. He came to the country on July 29, 1992 to explore business opportunities in connection with the import and export of beer and sugar. He also planned to establish a tourist spot somewhere in Batangas. Upon his arrival, he and his wife, Yolanda Reichl, stayed at the Manila Intercontinental Hotel. On August 3, 1992, they moved to Manila Midtown Hotel. They stayed there until August 26, 1992. After they left Manila Midtown Hotel, they went to another hotel in Quezon City. Karl Reichl returned to Vienna on September 19, 1992.16

Mr. Reichl stated that he first met Francisco Hernandez through a certain Jimmy Pineda around August 1992 at Manila Midtown Hotel. Francisco Hernandez was allegedly looking for a European equipment to be used for the quarrying operation of his friend. Before accepting the deal, he made some research on the background of the intended business. Realizing that said business would not be viable, Karl Reichl advised Francisco Hernandez to instead look for a second-hand equipment from Taiwan or Japan. He never saw Francisco Hernandez again until he left for Vienna in September 1992.17

Karl Reichl returned to the Philippines on October 21, 1992. Francisco Hernandez allegedly approached him and sought his help in securing Austrian visas purportedly for his relatives. Karl Reichl refused and told him that he was planning to stay permanently in the Philippines. On one occasion, Francisco Hernandez invited him to an excursion at Sombrero Island. Francisco Hernandez told him that he would also bring some of his relatives with him and he would introduce him to them. There he met Narcisa Hernandez and Leonora Perez. Leonora Perez, together with Francisco Hernandez, later went to see Mr. Reichl at the house of his in-laws at No. 4 Buenafe Road, Batangas City and asked him if he could help her obtain an Austrian visa. Karl Reichl, however, was firm on his refusal.18

In his testimony before the trial court, Karl Reichl denied any knowledge about Francisco Hernandez's recruitment activities. He said that Francisco Hernandez merely told him that he wanted to help his relatives go to Europe. He further denied that he promised private complainants that he would give them overseas employment.19 As regards the document where Mr. Reichl undertook to pay P1,388,924.00 to private complainants, he claimed that he signed said document under duress. Francisco Hernandez allegedly told him that private complainants would harm him and his family if he refused to sign it. He signed the document as he felt he had no other option.20

Yolanda Gutierrez de Reichl corroborated the testimony of her husband and denied the charges against her. She claimed that she was in Manila on the dates alleged in the various informations, thus, she could not have committed the acts charged therein. Yolanda Reichl further stated that she did not know of any reason why private complainants filed these cases against her and her husband. She said that several persons were harassing her and pressuring her to pay private complainants the sum of at least P50,000.00.21

After assessing the evidence presented by the parties, the trial court rendered a decision convicting accused-appellants of one (1) count of illegal recruitment in large scale and six (6) counts of estafa. The dispositive portion of the decision reads:

"WHEREFORE, judgment is hereby rendered finding the accused spouses KARL REICHL and YOLANDA GUTIERREZ REICHL -

1. NOT GUILTY of the crime of syndicated and large-scale illegal recruitment as charged in the above-mentioned Criminal Cases Nos. 6435, 6437 and 6529;

2. NOT GUILTY of the crime of estafa as charged in the above-mentioned Criminal Cases Nos. 6434, 6436 and 6528;

3. GUILTY beyond reasonable doubt of the crime of syndicated and large-scale illegal recruitment, as charged, in the above-mentioned Criminal Cases Nos. 6429, 6431, 6433, 6439 and 6531;

4. GUILTY beyond reasonable doubt of the crime of estafa, as charged, in the above-mentioned Criminal Cases Nos. 6428, 6430, 6432, 6438 and 6530.

The Court hereby imposes upon the accused-spouses KARL REICHL and YOLANDA GUTIERREZ REICHL the following sentences:

1. For the 5 offenses, collectively, of syndicated and large-scale illegal recruitment in Criminal Cases Nos. 6429, 6431, 6433, 6438 and 6531, to suffer the penalty of life imprisonment, and to pay a fine of One Hundred Thousand Pesos (P100,000.00);

2. In Criminal Case No. 6428, there being no mitigating or aggravating circumstance, to suffer the indeterminate sentence of Six (6) Years of prision correctional, as minimum to Sixteen (16) Years of reclusion temporal, as maximum, and to indemnify the complainant Narcisa Hernandez in the amount ofP150,000.00;

3. In Criminal Case No. 6430, there being no mitigating or aggravating circumstance, to suffer the indeterminate sentence of six (6) years of prision correctional as minimum to eleven (11) years of prision mayor, as maximum and to indemnify the complainant Leonora Perez in the amount of P100,000.00;

4. In Criminal Case No. 6432, there being no mitigating or aggravating circumstance, to suffer the indeterminate sentence of six (6) years of prision correctional as minimum to sixteen (16) years of reclusion temporal, as maximum and to indemnify the complainant Melanie Bautista in the amount of P150,000.00;

5. In Criminal Case No. 6438, there being no mitigating or aggravating circumstance, to suffer the indeterminate sentence of six (6) years of prision correctional as minimum to fourteen (14) years of reclusion temporal as maximum and to indemnify the complainant Estela Abel de Manalo in the amount ofP130,000.00;

6. In Criminal Case No. 6530, there being no mitigating or aggravating circumstance, to suffer the indeterminate sentence of six (6) years or prision correctional as minimum to thirteen (13) years of reclusion temporal as maximum and to indemnify the complainant Charito Balmes in the amount of P121,300.00; and

7. To pay the costs.

SO ORDERED."

Accused-appellants appealed from the decision of the trial court. They raise the following errors:

"1. The trial court erred in finding accused-appellant Karl Reichl guilty of the crimes of estafa and illegal recruitment committed by syndicate and in large scale based on the evidence presented by the prosecution which miserably failed to establish guilt beyond reasonable doubt.

2. The trial court erred in convicting the accused-appellant of the crime of illegal recruitment on a large scale by cummulating five separate cases of illegal recruitment each filed by a single private complainant.

3. The trial court erred in rendering as a matter of course an automatic guilty verdict against accused-appellant for the crime of estafa after a guilty verdict in a separate crime for illegal recruitment. It is submitted that conviction in the latter crime does not ipso facto result in conviction in the former."22

The appeal is bereft of merit.

Article 38 of the Labor Code defines illegal recruitment as "any recruitment activities, including the prohibited practices enumerated under Article 34 of (the Labor Code), to be undertaken by non-licensees or non-holders of authority." The term "recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, including referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not, provided that any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement.23 The law imposes a higher penalty when the illegal recruitment is committed by a syndicate or in large

scale as they are considered an offense involving economic sabotage. Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme. It is deemed committed in large scale if committed against three (3) or more persons individually or as a group.24

In the case at bar, the prosecution was able to prove beyond reasonable doubt that accused-appellants engaged in activities that fall within the definition of recruitment and placement under the Labor Code. The evidence on record shows that they promised overseas employment to private complainants and required them to prepare the necessary documents and to pay the placement fee, although they did not have any license to do so. There is illegal recruitment when one who does not possess the necessary authority or license gives the impression of having the ability to send a worker abroad.25

Accused-appellants assert that they merely undertook to secure Austrian visas for private complainants, which act did not constitute illegal recruitment. They cite the document marked at Exhibit "J" stating that they promised to obtain Austrian tourist visas for private complainants. We are not convinced. Private complainants Narcisa Hernandez, Leonora Perez and Charito Balmes categorically stated that Karl and Yolanda Reichl told them that they would provide them overseas employment and promised them that they would be able to leave the country on a specified date. We do not see any reason to doubt the truthfulness of their testimony. The defense has not shown any ill motive for these witnesses to falsely testify against accused-appellants if it were not true that they met with the Reichl spouses and the latter represented themselves to have the capacity to secure gainful employment for them abroad. The minor lapses in the testimony of these witnesses pointed out by accused-appellants in their brief do not impair their credibility, especially since they corroborate each other on the material points, i.e., that they met with the three accused several times, that the three accused promised to give them overseas employment, and that they paid the corresponding placement fee but were not able to leave the country. It has been held that truth-telling witnesses are not always expected to give error-free testimonies considering the lapse of time and the treachery of human memory.26 Moreover, it was shown that Karl Reichl signed a document marked as Exhibit "C" where he promised to refund the payments given by private complainants for the processing of their papers. We are not inclined to believe Mr. Reichl's claim that he was forced by Francisco Hernandez to sign said document. There is no showing, whether in his testimony or in that of his wife, that private complainants threatened to harm them if he did not sign the document. Mr. Reichl is an educated man and it cannot be said that he did not understand the contents of the paper he was signing. When he affixed his signature thereon, he in effect acknowledged his obligation to ensure the departure of private complainants and to provide them gainful employment abroad. Such obligation arose from the promise of overseas placement made by him and his co-accused to private complainants. The admission made by accused-appellants in Exhibit "J" that they promised to obtain Austrian visas for private complainants does not negate the fact that they also promised to procure for them overseas employment. In fact, in Exhibit "J", accused-appellants admitted that each of the private complainants paid the amount of P50,000.00. However, in Exhibit "C", which was executed on a later date, accused-appellants promised to refund to each complainant an amount exceeding P150,000.00. This is an acknowledgment that accused-appellants received payments from the complainants not only for securing visas but also for their placement abroad.

Accused-appellants' defense of denial and alibi fail to impress us. The acts of recruitment were committed from June 1992 until January 1993 in Batangas City. Karl Reichl was in Manila from July 29, 1992 until September 19, 1992, and then he returned to the Philippines and stayed in Batangas from October 21, 1992. Yolanda Reichl, on the other hand, claimed that he was in Manila on the dates alleged in the various informations. It is of judicial notice that Batangas City is only a few hours' drive from Manila. Thus, even if the spouses were staying in Manila, it does not prevent them from going to Batangas to engage in their recruitment business. Furthermore, it appears that the three accused worked as a team and they conspired and cooperated with each other in recruiting domestic helpers purportedly to be sent to Italy. Francisco Hernandez introduced Karl and Yolanda Reichl to the job applicants as his business partners. Karl and Yolanda Reichl themselves gave assurances to private complainants that they would seek employment for them in Italy. Francisco Hernandez remitted the payments given by the applicants to the Reichl spouses and the latter undertook to process the applicants' papers. There being conspiracy, each of the accused shall be equally liable for the acts of his co-accused even if he himself did not personally take part in its execution.

Accused-appellants argue that the trial court erred in convicting accused-appellants of illegal recruitment in large scale by cummulating the individual informations filed by private complainants. The eight informations for illegal recruitment are worded as follows:

Criminal Case No. 6429

"That on or about July 14, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy. Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Narcisa Autor de Hernandez and to more than three other persons, job placement abroad, by reason of which said Narcisa Autor de Hernandez relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law."

Criminal Case No. 6431

"That on or about July 1992 and sometime prior and subsequent thereto at Dolor Subdivision, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Leonora Perez y Atienza and to more than three other persons, job placement abroad, by reason of which said Leonora Perez y Atienza relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED THOUSAND (P100,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law."

Criminal Case No. 6433

"That on or about June 26, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy. Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Melanie Bautista y Dolor and to more than three other persons, job placement abroad, by reason of which said Melanie Bautista y Dolor relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law. 1âwphi1.nêt

Contrary to Law."

Criminal Case No. 6435

"That on or about July 12, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy. Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Annaliza Perez y Atienza and to more than three other persons, job placement abroad, by reason of which said

Annaliza Perez y Atienza relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED SIXTY THOUSAND (P160,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law.

Criminal Case No. 6437

"That on or about August 15, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy. Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Edwin Coling y Coling and to more than three other persons, job placement abroad, by reason of which said Edwin Coling y Coling relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law."

Criminal Case No. 6439

"That on or about June 5, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy. Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Estela Abel de Manalo and to more than three other persons, job placement abroad, by reason of which said Estela Abel de Manalo relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED THIRTY THOUSAND (P130,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law."

Criminal Case No. 6529

"That on or about July 1992 and sometime prior and subsequent thereto at Brgy. Sta. Rita Karsada, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by enlisting, contracting, procuring, offering and promising for a fee to one Anicel Umahon y Delgado and to more than three other persons, job placement abroad, by reason of which said Anicel Umahon y Delgado relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED THIRTY THOUSAND (P130,000.00) PESOS, Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law."

Criminal Case No. 6531

"That on or about November 25, 1992 and sometime prior and subsequent thereto at No. 40 P. Zamora Street, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, knowing fully well that they are non-licensees nor holders of authority from the Department of Labor and Employment or any other authorized government entity, conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously engage in syndicated and large scale recruitment and placement activities by

enlisting, contracting, procuring, offering and promising for a fee to one Charito Balmes y Cantos and to more than three other persons, job placement abroad, by reason of which said Charito Balmes y Cantos relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED TWENTY ONE THOUSAND THREE HUNDRED PESOS (P121,300.00), Philippine Currency, to said accused, which acts constitute a violation of the said law.

Contrary to Law."

We note that each information was filed by only one complainant. We agree with accused-appellants that they could not be convicted for illegal recruitment committed in large scale based on several informations filed by only one complainant. The Court held in People vs. Reyes:27

"x x x When the Labor Code speaks of illegal recruitment 'committed against three (3) or more persons individually or as a group,' it must be understood as referring to the number of complainants in each case who are complainants therein, otherwise, prosecutions for single crimes of illegal recruitment can be cummulated to make out a case of large scale illegal recruitment. In other words, a conviction for large scale illegal recruitment must be based on a finding in each case of illegal recruitment of three or more persons whether individually or as a group."28

This, however, does not serve to lower the penalty imposed upon accused-appellants. The charge was not only for illegal recruitment committed in large scale but also for illegal recruitment committed by a syndicate. Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph of Article 38 of the Labor Code. It has been shown that Karl Reichl, Yolanda Reichl and Francisco Hernandez conspired with each other in convincing private complainants to apply for an overseas job and giving them the guaranty that they would be hired as domestic helpers in Italy although they were not licensed to do so. Thus, we hold that accused-appellants should be held liable for illegal recruitment committed by a syndicate which is also punishable by life imprisonment and a fine of one hundred thousand pesos (P100,000.00) under Article 39 of the Labor Code.

Finally, we hold that the prosecution also proved the guilt of accused-appellants for the crime of estafa. A person who is convicted of illegal recruitment may, in addition, be convicted of estafa under Art. 315 (2) of the Revised Penal Code provided the elements of estafa are present. Estafa under Article 315, paragraph 2 of the Revised Penal Code is committed by any person who defrauds another by using a fictitious name, or falsely pretends to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or by means of similar deceits executed prior to or simultaneously with the commission of the fraud. The offended party must have relied on the false pretense, fraudulent act or fraudulent means of the accused-appellant and as a result thereof, the offended party suffered damages.29 It has been proved in this case that accused-appellants represented themselves to private complainants to have the capacity to send domestic helpers to Italy, although they did not have any authority or license. It is by this representation that they induced private complainants to pay a placement fee of P150,000.00. Such act clearly constitutes estafa under Article 315 (2) of the Revised Penal Code.

IN VIEW WHEREOF, the appeal is DISMISSED. The Decision appealed from is hereby AFFIRMED.

Cost against appellants.

SO ORDERED.

Illegal Recruitment as an Offense Involving Economic Sabotage

FIRST DIVISION

[G.R. Nos. 115150-55.  September 27, 1996]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. REYDANTE CALONZO Y  AMBROSIO, accused-appellant.

D E C I S I O N

BELLOSILLO, J.:

REYDANTE CALONZO Y AMBROSIO was charged with Illegal Recruitment in Large Scale  and five (5) counts of Estafa  by  Bernardo Miranda,  Danilo de los Reyes,  Elmer Clamor,  Belarmino Torregrosa and Hazel de Paula.  On 5 April 1994 the Regional Trial Court of Pasig found the accused guilty as charged and sentenced -

1.  In Criminal Case No. 98850 for Estafa, to suffer an indeterminate prison term of eleven (11) years, eleven (11) months and eleven (11) days of prision mayor  to fifteen (15) years, eight (8) months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim Bernardo Miranda in the amount of P120,000.00 and to pay the costs.

2.  In Criminal Case No. 98851 for Estafa, to suffer an indeterminate prison term of eleven  (11)  years,  eleven (11) months and eleven (11) days of prision mayor  to fifteen (15) years, eight (8) months and twenty-one    (21)    days     of    reclusion   temporal,     to    reimburse     the complainant-victim Danilo de los Reyes in the amount of P120,000.00 and to pay the costs.

3.  In Criminal Case No. 98852 for Estafa, to suffer an indeterminate prison term of eleven (11) years, eleven (11) months and eleven (11) days of prision mayor  to fifteen (15) years, eight (8) months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim Elmer Clamor in the amount of P120,000.00 and to pay the costs.

4.  In Criminal Case No. 98853 for Estafa, to suffer an indeterminate prison term of nine (9) years, eleven (11) months and eleven (11) days of prision mayor to thirteen (13) years, eight (8) months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim Belarmino Torregrosa in the amount of P100,000.00 and to pay the costs.

5.  In Criminal Case No. 98854 for Estafa, to suffer an indeterminate prison term of eleven (11) years, eleven (11) months and eleven (11) days of prision mayor to fifteen (15) years, eight (8) months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim Hazel de Paula in the amount of P120,000.00 and to pay the costs.

6.  In Criminal Case No. 98855 for Illegal Recruitment (Large Scale), to suffer the penalty of life imprisonment, to pay a fine of One Hundred Thousand Pesos (P100,000.00) and to pay the costs.

In the successive service of his sentences, the accused shall be credited in full with the period of his preventive imprisonment.

The above terms shall also be subject to the application of the Three-Fold Rule.[1]

Accused-appellant in this appeal assails his conviction by the trial court.  He claims that the court below erred in disregarding the testimony of Nenita Mercado, an employee of the Philippine Overseas Employment Administration (POEA), who categorically stated that their records indicated that Calonzo never processed complainants' applications for employment abroad.  He concludes from that fact alone that he cannot be deemed to have engaged in the recruitment of workers for employment abroad.  

As regards the estafa cases,  accused-appellant contends that the court a quo  erred in giving credence to the testimonies of prosecution witnesses considering that the amounts claimed to have been collected by him did not correspond to the amounts indicated in the receipts presented by the complaining witnesses.

The antecedents:  Sometime in February 1992 Danilo de los Reyes and his brother-in-law Belarmino Torregrosa met Reydante Calonzo in the house of Loreta Castañeda at No. 10 P. Burgos Street, Pasig, Metro Manila.  In that meeting Calonzo lost no time in informing them that he could provide them employment abroad, particularly  Italy, for a fee.  Calonzo was so glib and persuasive that De los Reyes and Torregrosa were quickly convinced to cast their lot with him.  Upon returning home they took stock of their assets and resources and came up with the figures sufficient for the processing of  their applications for employment abroad.  Two months after their initial meeting, or on 13 April 1992, De los Reyes gave Calonzo P50,000.00.  He also pledged the Ford Fiera of his brother-in-law to Calonzo for P70,000.00 in order to come up with the P120,000.00 processing fee imposed by Calonzo. The latter then informed De los Reyes of his "scheduled" departure for Italy on 29 April 1992.  However, despite the lapse of the period, De los Reyes and Torregrosa remained in thePhilippines although their recruiter reiterated his promise to send them to Italy.  

On 1 May 1992, instead of sending them to Italy, they were billeted at Aloha Hotel along Roxas Boulevard.    The following day,  or on 2 May 1992,  they boarded a plane that was supposed to take them to Italy.  But Calonzo had another destination in mind.  They  landed in Bangkok instead where their visas for Italy, according to Calonzo, would be processed. They stayed at P.S. Guest Hotel  for one and a half months.  While in Bangkok the accused again collected money from them purportedly to defray the expenses for their visas.  They also incurred expenses for food and accommodation, and for overstaying, De los Reyes had to pay 2800 bahts to the immigration authorities only to discover to their utter dismay that Calonzo had already returned to the Philippines. 

In their helplessness in a foreign land they sought the help of Loreta Castañeda by calling her up in Manila.  Castañeda promptly fetched them from Bangkok and brought them back to the Philippines.  The day following their  arrival they went to the office of Calonzo on Padre Faura.  Despite their frustrations in Bangkok Calonzo still insisted that he would send them to Italy as he promised.    In their naivetè which was no match to the unmitigated audacity of Calonzo, De los Reyes and Torregrosa still clung to the promises of Calonzo hoping against hope that the latter would still fulfill them.  However the promises remained unfulfilled so they looked again for Calonzo.  But this time their quarry had already absconded.

They verified from the POEA whether Calonzo or his R. A. C. Business Agency  was duly authorized and licensed to recruit people for employment abroad.   The POEA certified that  R. A. C. Business Agency  was not licensed to recruit workers for overseas employment.

Torregrosa substantiated the above account.  He testified that he gave  Calonzo  a total of  P100,000.00.    On cross-examination   however he  stated  that  he  gave  such amount  on  27  April 1992 and not on 13  April 1992 as testified to by De los Reyes.  But the date appearing on the receipt marked Exhibit A is 13 April 1992.  Torregrosa also claimed that while in Bangkok he gave Calonzo an additional amount of US$100.00.

On her part, Hazel de Paula testified that she first met appellant and the other complainants at the house of Loreta Castañeda at No. 10 P. Burgos Street, Pasig, Metro Manila. Convinced that she would eventually be employed in Italy as a domestic helper she gave Calonzo P120,000.00.  Unlike the other complaining witnesses, she was not able to fly to Bangkok on 2 May 1992 as her passport was not yet available.  She left only on 6 May 1992 where she was met by Calonzo at the airport and brought to the P.S. Guest Hotel  where her companions who had arrived earlier were already billeted.  She said that while in Bangkok Calonzo asked money again from her.

Elmer Clamor, a 28-year old resident of Gen. Trias, Cavite, was similarly situated with Hazel de Paula.  Clamor narrated that he gave Calonzo  P120,000.00 for the

latter's commitment to send him to Italy,  and in fact while in Bangkok he gave Calonzo US$250.00 more.

Bernardo Miranda, a construction worker from Talisay, Batangas, was another victim of Calonzo.  Lured by the latter's assurances that he would be sent to Italy, he gave Calonzo a total of P120,000.00 for the processing of his application for work in Italy.  But,  like all the rest of them,  Miranda only reached Bangkok.  The promised job, his hard-earned money and Calonzo himself eventually disappeared.

Senior Labor Employment Officer Nenita Mercado of the POEA confirmed that neither Reydante Calonzo nor his R. A. C. Business Agency  was authorized to recruit workers for employment abroad.

Reydante Calonzo tells us his own story.  He admits being engaged in the consultancy business through his R. A. C. Business Agency  but denies any involvement in recruitment activities.  He admits knowing Loreta Castañeda and Leticia Solis as the two have sought his  assistance regarding their real estate business.  He denies knowing the complaining witnesses except Danilo de los Reyes and Belarmino Torregrosa who once visited him in his office.  While he disclaims the receipts presented by the prosecution as official receipts of his R. A. C. Business Agency  he admits that the  signatures thereon were similar to his.

We frustrate the expectations of the accused.  Article  13, par. (b),  of the Labor Code defines recruitment and placement as -

(A)ny act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not; Provided, that any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement.

Illegal recruitment is specifically defined in Art. 38 of the Code thus  -

(a)  Any recruitment  activities, including the prohibited practices enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of this Code  x x x x

(b)  Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage and shall be penalized in accordance with Article 39 hereof.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3)  or more persons conspiring and/or confederating  with one another in carrying out any  unlawful or   illegal transaction, enterprise or scheme defined under the first paragraph hereof.  Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group.

All the five (5) complaining witnesses met each other for the first time at the house of Loreta Castañeda.  They were not in any way acquainted with one another prior to that meeting  save for Danilo de los Reyes and his brother-in-law Belarmino Torregrosa.  They all came from different places, yet,  they were all united in pointing to the  Calonzo as the person who enticed them to apply for employment abroad.  Of course, Calonzo could not explain what motivated the complaining witnesses to file these cases against him.  The most that Calonzo could do on the witness stand was to deny all the charges against him.  Alas,  his denial is at most lame and cannot prevail over the positive assertions of the complaining witnesses.   In People v. Villafuerte [2] we ruled -

x x x The absence of evidence as to an improper motive actuating the principal witnesses of the prosecution strongly tends to sustain no improper motive existed and their testimony is worthy of

full faith and credit.  Accused-appellant's denial cannot prevail over the positive assertions of complainants who had no motive to testify falsely against her except to tell the truth.

Illegal recruitment in large scale is committed when a person "(a) undertakes any recruitment activity defined under Article 13(b) or any prohibited practice enumerated under Article 34 of the Labor Code; (b) does not have a license or authority to lawfully engage in the recruitment  and  placement  of  workers;   and  (c)   commits  the  same against  three or  more  persons,  individually  or  as  a  group."[3] The testimony of complainants evidently showed that Calonzo was engaged in    recruitment    activities   in   large    scale.  Firstly,he deluded complainants into believing that jobs awaited them in Italy by distinctly impressing upon them that he had the facility to send them for work abroad.  He even showed them his passport to lend credence to his claim.  To top it all, he brought them to Bangkok and not to Italy.      Neither  did  he  have  any  arrangements  in  Bangkok  for  the transfer of his recruits to Italy.  Secondly,  POEA likewise certified that neither Calonzo nor R. A. C. Business Agency  was licensed to recruit workers for employment abroad.  Appellant admitted this fact himself.  Thirdly, appellant recruited five (5) workers thus making the crime illegal recruitment in large scale constituting economic sabotage.

In his attempt to exculpate himself, although belatedly,  Calonzo denies having received money from the complainants.  But as against their positive testimonies, this denial of appellant is worthless and at most self-serving.  All the complaining witnesses testified that they gave their money to Calonzo through Loreta Castañeda who in turn gave the amounts to Calonzo in their presence.  In support thereof complainants even presented receipts issued by the  R. A. C. Business Agency  with Calonzo's signature affixed thereon.  Nobody corroborated Calonzo's denial.  Even Loreta who could have confirmed such denial testified that all the amounts given by the complainants were turned over by her to Calonzo.  The attempt of the defense at reinforcing such denial proved futile when it presented Carmeo Alix to testify that appellant owned another import-export business as it had no relevance  to his defense.

As regards the conviction of Calonzo for estafa on five (5) counts we ruled in People v. Turda[4] that recruitment  of persons for overseas employment without the necessary recruiting permit or authority from the POEA constitutes illegal recruitment;  however, where some other crimes or felonies are committed in the process,  conviction under the Labor Code  does  not  preclude  punishment  under other statutes.  In People v. Romero[5] we said that the elements of estafa were: (a) that the accused defrauded another by abuse of confidence or by means of deceit, and (b) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third person.  Corollarily,  Art. 315 of the Revised Penal Code provides for its penalty thus -

1st.  The penalty of prision correccional in its maximum period to prision mayor  in its minimum period, if the amount of the fraud is over P12,000 but does not exceed P22,000, and if such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional P10,000; but the total penalty which may be imposed shall not exceed twenty years.  In such a case, and in connection with the accessory penalties which may be imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor  or reclusion temporal, as the case may be.

In the case before us, we are convinced that Calonzo  defrauded complainants through deceit.  They were obviously misled into believing that he could provide them employment in Italy.  As a result, the five (5) complainants who desperately wanted to augment their income and improve their lot parted with their hard-earned money.  In Crim. Cases Nos. 98850, 98851, 98852 and 98854 the amount defrauded of each complainant was P120,000.00.  In consonance with Art. 315 of the Revised Penal Code, the imposable penalty is prision correccional  in its maximum period to prision mayor  in its minimum

period the range of which is four (4) years, two (2) months and one (1) day,  to five (5) years, five (5) months and ten (10) days as minimum, while the medium period is from five (5) years, five (5) months and eleven (11) days, to six (6) years, eight (8) months and  twenty  (20)  days, and the maximum is six (6) years, eight (8) months and twenty-one (21) days, to eight (8)  years.  Since the amount of P120,000.00 was defrauded in  each   case,   the   maximum   penalty  should   be   taken   from   the maximum period of the penalty prescribed,  plus one (1) year for every P10,000.00 in excess of P22,000.00 which, in these four (4) cases is equivalent to nine (9) additional years.  Hence, the maximum imposable penalty should be fifteen (15) years, eight (8) months and twenty-one (21) days, to seventeen (17) years of reclusion temporal  medium.   Applying the Indeterminate Sentence Law,  the minimum penalty shall be within the range of the penalty next lower in degree to that prescribed in the Code,  i.e.,prision correccional  minimum to prision correccional medium in any of its periods.  Prision correccional minimum to prision correccional  medium ranges from six (6) months and one (1) day,  to four (4) years and two (2) months.  Clearly, the penalty imposed by the court below in each of the aforesaid cases, which is eleven (11) years, eleven (11) months and eleven (11) days of prision mayor  medium, to fifteen (15) years, eight (8) months and twenty-one (21) days of reclusion temporal  medium, is properly within the range of the imposable penalty. 

The same principle would apply to Crim. Case No. 98853 where the amount defrauded was P100,000.00.   The trial court therefore correctly imposed the penalty of nine (9) years, eleven (11) months and eleven (11) days of prision mayor  medium, to thirteen (13) years, eight (8) months and twenty-one (21) days of reclusion temporal  minimum, which is properly within the range of the imposable penalty.

WHEREFORE, the judgment of the court a quo  finding  accused-appellant   REYDANTE  CALONZO   Y   AMBROSIO    guilty   of  Illegal Recruitment  in  Large Scale   in Crim. Case No. 98855 (G.R. No. 115155), and of Estafa  in Crim. Case No. 98850 (G.R. No. 115150), Crim. Case No. 98851 (G.R. No. 115151),  Crim. Case No. 98852 (G.R. No. 115152),  Crim. Case No. 98853 (G.R. No. 115153) and Crim. Case No. 98854 (G.R. No. 115154) as well as the corresponding penalties imposed by the court a quo  is AFFIRMED, with costs against accused-appellant.   

In the service of the various prison terms herein imposed upon accused-appellant,  the provisions of Art. 70 of the Revised Penal Code shall be observed. 

SO ORDERED.

Illegal Recruitment Elements

SECOND DIVISION 

[G.R. No. 186132 : February 27, 2012] 

PEOPLE OF THE PHILIPPINES, APPELLEE, VS. NESTOR TUGUINAY, APPELLANT.

D E C I S I O N 

BRION, J.:

We resolve the appeal, filed by accused Nestor Tuguinay (appellant), from the July 21, 2008 decision of the Court of Appeals (CA) in CA-G.R. H.C. CR- No. 02206.[1]

cralaw 

The RTC Ruling

In its October 29, 2003 decision,[2] the Regional Trial Court (RTC) of Baguio City, Branch 60, convicted the appellant of illegal recruitment in large scale[3] and four counts of estafa.[4] It gave full credence to the straightforward testimonies of complainants Ferdinand Aguilar y Pontino, Sakio Balicdang, Lim U. Tany and Jordan B. Bangcawayan, pointing to the appellant and his co-accused, Nida Bermudez,[5] as the persons who

recruited and promised them overseas employment in exchange for sums of money. It found that the appellant was not licensed to recruit workers for overseas employment, per the June 6, 2001 Certification of the Philippine Overseas Employment Administration. It noted that the appellant defrauded Aguilar, Balicdang, Tany and Bangcawayan in the amounts of P63,500.00, P75,000.00, P70,000.00 and P70,000.00, respectively. It rejected the appellant’s bare and uncorroborated denial.

For the crime of illegal recruitment in Criminal Case No. 19287-R, the RTC sentenced the appellant to suffer the penalty of life imprisonment and ordered him to pay a P100,000.00 fine. For each count of estafa committed against Aguilar, Tany and Bangcawayan in Criminal Case Nos. 19288-R, 19290-R and 19291-R, it sentenced the appellant to suffer an indeterminate penalty of 4 years and 2 months of prision correccional, as minimum, to 12 years of prision mayor, as maximum. For the crime of estafa committed against Balicdang in Criminal Case No. 19289-R, the RTC sentenced the appellant to suffer an indeterminate penalty of 4 years and 2 months of prision correccional, as minimum, to 13 years of reclusion temporal, as maximum. It did not impose any civil liability on the appellant, noting that he had already settled his civil obligations to the complainants.

The CA Ruling

On intermediate appellate review,[6] the CA affirmed the RTC's decision, giving full respect to the RTC's assessment of the testimonies and credibility of the complainants.

We now rule on the final review of the case.

Our Ruling

We deny the appeal, but modify the penalties imposed.  

The three elements of the crime of illegal recruitment in large scale, to wit: a) the offender has no valid license or authority required by law to enable him to lawfully engage in recruitment and placement of workers; b) the offender undertakes any of the activities within the meaning of "recruitment and placement" under Article 13(b) of the Labor Code, or any of the prohibited practices enumerated under Article 34 of the said Code (now Section 6 of Republic Act No. 8042); and c) the offender committed the same against three or more persons, individually or as a group, are present in this case.

The prosecution adduced proof beyond reasonable doubt that the appellant enlisted the four complainants for overseas employment without any license to do so. The four complainants adequately testified on the demand for placement fees made by the appellant, and the payments they made. No motive affecting their credibility was ever imputed against them. We, therefore, rule that the lower courts correctly found the appellant guilty of illegal recruitment in large scale.

Section 7(b) of Republic Act No. 8042 prescribes a penalty of life imprisonment and a fine of not less than P500,000.00 nor more than P1,000,000.00 if the illegal recruitment constitutes economic sabotage, i.e., illegal recruitment in large scale and illegal recruitment committed by a syndicate. The RTC, as affirmed by the CA, imposed upon the appellant the penalty of life imprisonment and a fine of only P100,000.00. Since the fine of P100,000.00 is below the minimum set by law, we increase the same to P500,000.00.

We likewise affirm the appellant’s conviction for the crime of estafa. The two elements of estafa – (a) that the accused defrauded another by abuse of confidence or by means of deceit, and (b) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third person – are also present in this case. The prosecution evidence duly proved that due to the appellant’s false representations of overseas jobs, the complainants paid placement fees to the appellant who failed to secure the promised overseas jobs.

Article 315 of the Revised Penal Code prescribes the penalty for estafa, when the amount of fraud is over P22,000.00, of prision correccional maximum to prision mayor minimum, adding one year to the maximum period for each additional P10,000.00, provided that the total penalty shall not exceed 20 years. Applying the Indeterminate Sentence Law (ISL), we take the minimum term from the penalty next lower than the minimum prescribed by law, or anywhere within prision correccional minimum and medium (i.e., from 6 months and 1 day to 4 years and 2 months). Thus, the lower courts correctly imposed the minimum term in the 4 counts of estafa at 4 years and 2 months of prision correccional, since this is within the range of prision correccional minimum and medium.

For the maximum term under the ISL, we take the maximum period of the prescribed penalty, adding one year of imprisonment for every P10,000.00 in excess of P22,000.00, provided that the total penalty shall not exceed 20 years. To compute the maximum period of the prescribed penalty, the time included in prision correccional maximum to prision mayor minimum shall be divided into three equal portions, with each portion forming a period. Following this computation, the maximum period for prision correccional maximum to prision mayor minimum is from 6 years, 8 months, and 21 days to 8 years. The incremental penalty, when proper, shall thus be added to anywhere from 6 years, 8 months, and 21 days to 8 years, at the discretion of the court. In computing the incremental penalty, the amount defrauded shall be subtracted by P22,000.00, the difference shall be divided by P10,000.00, and any fraction of a year is discarded.[7]

Upon review, we modify the maximum term of the indeterminate sentence imposed on the appellant in Criminal Case Nos. 19288-R to 19291-R.

In Criminal Case No. 19288-R, since the amount defrauded of P63,500.00 exceeds P22,000.00 by P41,500.00, 4 years shall be added to the maximum period of the prescribed penalty (anywhere between 6 years, 8 months, and 21 days to 8 years). In the absence of any aggravating circumstance, we add the 4 years of incremental penalty to the lowest of the maximum period, which is 6 years, 8 months and 21 days. The maximum term, therefore, of the appellant's indeterminate sentence in Criminal Case No. 19288-R is only 10 years, 8 months

and 21 days of prision mayor.

In Criminal Case No. 19289-R, since the amount defrauded of P75,000.00 exceeds P22,000.00 by P53,000.00, 5 years shall be added to the maximum period of the prescribed penalty (anywhere between 6 years, 8 months and 21 days to 8 years). In the absence of any aggravating circumstance, we add the 5 years of incremental penalty to the lowest of the maximum period, which is 6 years, 8 months and 21 days. The maximum term, therefore, of the appellant's indeterminate sentence in Criminal Case No. 19289-R is only 11 years, 8 months and 21 days of prision mayor.

In Criminal Case Nos. 19290-R and 19291-R, since each of the amounts defrauded of P70,000.00 exceeds P22,000.00 by P48,000.00, 4 years shall be added to the maximum period of the prescribed penalty (anywhere between 6 years, 8 months and 21 days to 8 years) in each case. In the absence of any aggravating circumstance in these cases, we add the 4 years of incremental penalty to the lowest of the maximum period, which is 6 years, 8 months and 21 days. The maximum term, therefore, of the appellant's indeterminate sentence in Criminal Case Nos. 19290-R and 19291-R is only 10 years, 8 months and 21 days of prision mayor.cralaw 

WHEREFORE, the July 21, 2008 decision of the Court of Appeals in CA-G.R. H.C. CR No. 02206 is hereby AFFIRMED with MODIFICATION. Appellant Nestor Tuguinay is found guilty beyond reasonable doubt of illegal recruitment in large scale in Criminal Case No. 19287-R and is sentenced to suffer the penalty of life imprisonment and to pay a fine of P500,000.00. He is likewise found guilty beyond reasonable doubt of four counts of estafa and sentenced to an indeterminate penalty of 4 years and 2 months of  prision correccional, as minimum, to 10 years, 8 months and 21 days of prision mayor, as maximum, in Criminal Case Nos. 19288-R, 19290-R and 19291-R; and an indeterminate penalty of 4 years and 2 months of  prision correccional, as minimum, to 11 years, 8 months and 21 days of  prision mayor, as maximum, in Criminal Case No. 19289-R.

SO ORDERED.

SECOND DIVISION

 CENTURY CANNING CORPORATION,                              Petitioner,                            - versus -    COURT OF APPEALS andGLORIA C. PALAD,

Respondents.

  G.R. No. 152894 Present: QUISUMBING, J.,     Chairperson,CARPIO,CARPIO MORALES,TINGA, andVELASCO, JR., JJ.    Promulgated: August 17, 2007

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

 D E C I S I O N

 

CARPIO, J.:

 

The Case

 

          This is a petition for review[1] of the Decision[2] dated 12 November 2001 and the

Resolution dated 5 April 2002 of the Court of Appeals in CA-G.R. SP No. 60379.

 

The Facts

         

          On 15 July 1997, Century Canning Corporation (petitioner) hired Gloria C. Palad (Palad)

as “fish cleaner” at petitioner’s tuna and sardines factory. Palad signed on 17 July 1997 an

apprenticeship agreement[3] with petitioner. Palad received an apprentice allowance of P138.75

daily. On 25 July 1997, petitioner submitted its apprenticeship program for approval to the

Technical Education and Skills Development Authority (TESDA) of the Department of Labor

and Employment (DOLE). On 26 September 1997, the TESDA approved petitioner’s

apprenticeship program.[4]

 

          According to petitioner, a performance evaluation was conducted on 15 November 1997,

where petitioner gave Palad a rating of  N.I. or “needs improvement” since she scored

only  27.75% based on a 100% performance indicator. Furthermore, according to the

performance evaluation, Palad incurred numerous tardiness and absences. As a consequence,

petitioner issued a termination notice[5] dated 22 November 1997 to Palad, informing her of her

termination effective at the close of business hours of 28 November 1997.

 

          Palad then filed a complaint for illegal dismissal, underpayment of wages, and non-

payment of pro-rated 13th month pay for the year 1997.

 

          On 25 February 1999, the Labor Arbiter dismissed the complaint for lack of merit but

ordered petitioner to pay Palad her last salary and her pro-rated 13 th month pay. The dispositive

portion of the Labor Arbiter’s decision reads:

 

          WHEREFORE, premises considered, judgment is hereby rendered declaring that the complaint for illegal dismissal filed by the complainant against the respondents in the above-entitled case should be, as it is hereby  DISMISSED for lack of merit. However, the respondents are hereby ordered to pay the complainant the amount of ONE THOUSAND SIX HUNDRED THIRTY-TWO PESOS (P1,632.00), representing her last salary and the amount of SEVEN THOUSAND TWO HUNDRED TWENTY EIGHT (P7,228.00) PESOS representing her prorated 13th month pay.             All other issues are likewise dismissed.             SO ORDERED.[6]

  

 

            On appeal, the National Labor Relations Commission (NLRC) affirmed with

modification the Labor Arbiter’s decision, thus:

 

            WHEREFORE, premises considered, the decision of the Arbiter dated 25 February 1999 is hereby MODIFIED in that, in addition, respondents are ordered to pay complainant’s backwages for two (2) months in the amount of P7,176.00

(P138.75 x 26 x 2 mos.). All other dispositions of the Arbiter as appearing in the dispositive portion of his decision are AFFIRMED.             SO ORDERED.[7]

   

          Upon denial of Palad’s motion for reconsideration, Palad filed a special civil action

for certiorari with the Court of Appeals. On 12 November 2001, the Court of Appeals rendered

a decision, the dispositive portion of which reads:

 

            WHEREFORE, in view of the foregoing, the questioned decision of the NLRC is hereby SET ASIDE and a new one entered, to wit:

             (a) finding the dismissal of petitioner to be illegal;

(b) ordering private respondent to pay petitioner her underpayment in wages;(c) ordering private respondent to reinstate petitioner to her former position without loss of seniority rights and to pay her full  backwages computed from the time compensation was withheld from her up to the time of her reinstatement;(d) ordering private respondent to pay petitioner attorney’s fees equivalent to ten (10%) per cent of the monetary award herein; and(e) ordering private respondent to pay the costs of the suit. SO ORDERED.[8]

 

 

 

The Ruling of the Court of Appeals

 

          The Court of Appeals held that the apprenticeship agreement which Palad signed was not

valid and binding because it was executed more than two months before the TESDA approved

petitioner’s apprenticeship program. The Court of Appeals cited Nitto Enterprises v. National

Labor Relations Commission,[9] where it was held that prior approval by the DOLE of the

proposed apprenticeship program is a condition sine qua non before an apprenticeship

agreement can be validly entered into.

 

          The Court of Appeals also held that petitioner illegally dismissed Palad. The Court of

Appeals ruled that petitioner failed to show that Palad was properly apprised of the required

standard of performance. The Court of Appeals likewise held that Palad was not afforded due

process because  petitioner did not comply with the twin requirements of notice and hearing.

 

 

The Issues

         

          Petitioner raises the following issues:

 

 1.      WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE

ERROR IN HOLDING THAT PRIVATE RESPONDENT WAS NOT AN APPRENTICE; and 

2.     WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT PETITIONER HAD NOT ADEQUATELY PROVEN THE EXISTENCE OF A VALID CAUSE IN TERMINATING THE SERVICE OF PRIVATE RESPONDENT.[10]

 

 

 

The Ruling of the Court

 

          The petition is without merit.

 Registration and Approval by the TESDA of Apprenticeship Program Required Before

Hiring of Apprentices

           The Labor Code defines an apprentice as a worker who is covered by a written

apprenticeship agreement with an employer.[11]  One of the objectives of Title II (Training and

Employment of Special Workers) of the Labor Code is to establish apprenticeship standards for

the protection of apprentices.[12]  In line with this objective, Articles 60 and 61 of the Labor

Code provide:

 

ART. 60. Employment of apprentices. — Only employers in the highly technical industries may employ apprentices and only in apprenticeable occupations approved by the Minister of Labor and Employment. (Emphasis supplied)  ART. 61. Contents of apprenticeship agreements. — Apprenticeship agreements, including the wage rates of apprentices, shall conform to the rules issued by the Minister of Labor and Employment. The period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75 percent of the applicable minimum wage, may be entered into only in accordance with apprenticeship programs duly approved by the Minister of Labor and Employment. The Ministry shall develop standard model programs of apprenticeship. (Emphasis supplied)

 

 

          In Nitto Enterprises v. National Labor Relations Commission,[13] the Court cited Article

61 of the Labor Code  and held that an apprenticeship program should first be approved by the

DOLE before an apprentice may be hired, otherwise the person hired will be considered a

regular employee. The Court held:

           

            In the case at bench, the apprenticeship agreement between petitioner and private respondent was executed on May 28, 1990 allegedly employing the latter as an apprentice in the trade of “care maker/molder.” On the same date, an apprenticeship program was prepared by petitioner and submitted to the Department of Labor and Employment. However, the apprenticeship agreement was filed only on June 7, 1990. Notwithstanding the absence of approval by the Department of Labor and Employment, the apprenticeship agreement was enforced the day it was signed.

            Based on the evidence before us, petitioner did not comply with the requirements of the law. It is mandated that apprenticeship agreements entered into by the employer and apprentice shall be entered only in accordance with the apprenticeship program duly approved by the Minister of Labor and Employment.

            Prior approval by the Department of Labor and Employment of the proposed apprenticeship program is, therefore, a condition sine qua non before an apprenticeship agreement can be validly entered into.

            The act of filing the proposed apprenticeship program with the Department of Labor and Employment is a preliminary step towards its final approval and does not instantaneously give rise to an employer-apprentice relationship.

            Article 57 of the Labor Code provides that the State aims to “establish a national apprenticeship program through the participation of employers, workers and government and non-government agencies” and “to establish apprenticeship standards for the protection of apprentices.” To translate such objectives into existence, prior approval of the DOLE to any apprenticeship program has to be secured as a condition sine qua non before any such apprenticeship agreement can be fully enforced. The role of the DOLE in apprenticeship programs and agreements cannot be debased.

            Hence, since the apprenticeship agreement between petitioner and private respondent has no force and effect in the absence of a valid apprenticeship program duly approved by the DOLE, private respondent’s assertion that he was hired not as an apprentice but as a delivery boy (“kargador” or “pahinante”) deserves credence. He should rightly be considered as a regular employee of petitioner as defined by Article 280 of the Labor Code x x x. (Emphasis supplied)[14]

  

          Republic Act No. 7796[15] (RA 7796),  which created the TESDA, has transferred the

authority over apprenticeship programs from the Bureau of Local Employment of the DOLE to

the TESDA.[16]  RA 7796 emphasizes  TESDA’s approval of the apprenticeship program as a

pre-requisite for the hiring of apprentices. Such intent is clear under Section 4 of RA 7796:

         SEC. 4. Definition of Terms. — As used in this Act: x x x j) “Apprenticeship” training within employment with compulsory related theoretical instructions involving a contract between an apprentice and an employer on an approved apprenticeable occupation;     

 k) “Apprentice” is a person undergoing training for an approved apprenticeable occupation during an established period assured by an apprenticeship agreement; l) “Apprentice Agreement” is a contract wherein a prospective employer binds himself to train the apprentice who in turn accepts the terms of training for a recognized apprenticeable occupation emphasizing the rights, duties and responsibilities of each party; m) “Apprenticeable Occupation” is an occupation officially endorsed by a tripartite body and approved for apprenticeship by the Authority [TESDA]; (Emphasis supplied)

 

 

          In this case, the apprenticeship agreement was entered into between the parties before

petitioner filed its apprenticeship program with the TESDA for approval. Petitioner and Palad

executed the apprenticeship agreement on 17 July 1997 wherein it was stated that the training

would start on 17 July 1997 and would end approximately in December 1997. [17]  On 25 July

1997, petitioner submitted for approval its apprenticeship program, which the TESDA

subsequently approved on 26 September 1997.[18]  Clearly, the apprenticeship agreement was

enforced even before the TESDA approved petitioner’s apprenticeship program. Thus, the

apprenticeship agreement is void because it lacked prior approval from the TESDA.

 

          The TESDA’s approval of the employer’s apprenticeship program is  required before the

employer is allowed to hire apprentices. Prior approval from the TESDA is necessary to ensure

that only employers in the highly technical industries may employ apprentices and only in

apprenticeable occupations.[19] Thus, under RA 7796, employers can only hire apprentices for

apprenticeable occupations which must be officially endorsed by a tripartite body and approved

for apprenticeship by the TESDA. This is to ensure the protection of apprentices and to obviate

possible abuses by prospective employers who may want to take advantage of the lower wage

rates for apprentices and circumvent the right of the employees to be secure in their

employment.

 

          The requisite TESDA approval of  the apprenticeship program prior to the hiring of

apprentices  was further emphasized by the DOLE with the issuance of Department Order No.

68-04 on 18 August 2004.  Department Order No. 68-04, which provides the guidelines in the

implementation of the Apprenticeship and Employment Program of the government,

specifically states that no enterprise shall be allowed to hire apprentices unless its

apprenticeship program is registered and approved by TESDA.[20]

 

 

          Since Palad is not considered an apprentice because the apprenticeship agreement was

enforced before the TESDA’s approval of petitioner’s apprenticeship program, Palad is deemed

a regular employee performing the job of a “fish cleaner.” Clearly, the job of a “fish cleaner” is

necessary in petitioner’s business as a tuna and sardines factory. Under Article 280[21] of the

Labor Code, an employment is deemed regular where the employee has been engaged to

perform activities which are usually necessary or desirable in the usual business or trade of the

employer.

                       

 

          Illegal Termination of Palad 

 

          We shall now resolve whether petitioner illegally dismissed Palad.

         

          Under Article 279[22] of the Labor Code, an employer may terminate the services of an

employee for just causes[23]         or for authorized causes.[24]Furthermore, under Article 277(b)[25] of the Labor Code, the employer must send the employee who is about to be terminated, a

written notice stating the causes for termination and must give the employee the opportunity to

be heard and to defend himself. Thus, to constitute valid dismissal from employment, two

requisites must concur: (1) the dismissal must be for a just or authorized cause; and (2) the

employee must be afforded an opportunity to be heard and to defend himself.[26]

 

          In this case, the Labor Arbiter held that petitioner terminated Palad for habitual

absenteeism and poor efficiency of performance. Under Section 25, Rule VI, Book II of the

Implementing Rules of the Labor Code, habitual absenteeism and poor efficiency of

performance are among the valid causes for which the employer may terminate the

apprenticeship agreement after the probationary period.

 

          However, the NLRC reversed the finding of the Labor Arbiter on the issue of the legality

of Palad’s termination:

 

            As to the validity of complainant’s dismissal in her status as an apprentice, suffice to state that the findings of the Arbiter that complainant was dismissed due to failure to meet the standards is nebulous.  What clearly appears is that complainant already passed the probationary status of the apprenticeship agreement of 200 hours at the time she was terminated on 28 November 1997 which was already the fourth month of the apprenticeship period of 1000 hours.  As such, under the Code, she can only be dismissed for cause, in this case, for poor efficiency of performance on the job or in the classroom for a prolonged period despite warnings duly given to the apprentice.             We noted that no clear and sufficient evidence exist to warrant her dismissal as an apprentice during the agreed period.  Besides the absence of any written warnings given to complainant reminding her of “poor performance,” respondents’ evidence in this respect consisted of an indecipherable or unauthenticated xerox of the performance evaluation allegedly conducted on  complainant.  This is of doubtful authenticity and/or credibility, being not only incomplete in the sense that appearing thereon is a signature (not that of complainant) side by side  with a date indicated as “1/16/98”.  From the looks of it, this signature is close to and appertains to the typewritten position of

“Division/Department Head”, which is below the signature of complainant’s immediate superior who made the evaluation indicated as “11-15-97.”             The only conclusion We can infer is that this evaluation was made belatedly, specifically, after the filing of the case and during the progress thereof in the Arbitral level, as shown that nothing thereon indicate that complainant was notified  of the results.  Its authenticity therefor, is a big question mark, and hence lacks any credibility. Evidence, to be admissible in administrative proceedings, must at least have a modicum of authenticity.  This, respondents failed to comply with.  As such, complainant is entitled to the payment of her wages for the remaining two (2) months of her apprenticeship agreement.[27] (Emphasis supplied) 

 

 

 

          Indeed, it appears that the Labor Arbiter’s conclusion that   petitioner validly terminated

Palad was based mainly on the performance evaluation allegedly conducted by petitioner.

However, Palad alleges that she had no knowledge of the performance evaluation conducted

and that she was not even informed of the result of the alleged performance evaluation.  Palad

also claims she did not receive a notice of dismissal, nor was she given the chance to explain.

According to petitioner, Palad did not receive the termination notice because Palad allegedly

stopped reporting for work after being informed of the result of the evaluation.

 

          Under Article 227 of the Labor Code, the employer has the burden of proving that the

termination was for a  valid or authorized cause.[28] Petitioner failed to substantiate its claim

that  Palad was terminated for valid reasons. In fact, the NLRC found that petitioner failed to

prove the authenticity of the performance evaluation which petitioner claims to have conducted

on Palad, where Palad received a performance rating of only 27.75%. Petitioner merely relies

on the performance evaluation to prove Palad’s inefficiency. It was likewise not shown that

petitioner ever apprised Palad of the performance standards set by the company. When the

alleged valid cause for the termination of employment is not clearly proven, as in this case, the

law considers the matter a case of illegal dismissal.[29]

 

          Furthermore, Palad was not accorded due process. Even if petitioner did conduct a

performance evaluation on Palad, petitioner failed to warn Palad of her alleged poor

performance. In fact, Palad denies any knowledge of the performance evaluation conducted and

of the result thereof.  Petitioner likewise admits that Palad did not receive the notice of

termination[30] because Palad allegedly stopped reporting for work. The records are bereft of

evidence to show that petitioner ever gave Palad the opportunity to explain and defend herself.

Clearly, the two requisites for a valid dismissal are lacking in this case.

 

          WHEREFORE, we  AFFIRM the Decision dated 12 November 2001 and the

Resolution dated 5 April 2002 of the Court of Appeals in CA-G.R. SP No. 60379.

 

          SO ORDERED.

EN BANC

[G.R. No. L-5458. September 16, 1953.]

LUZON STEVEDORING CO., INC., and VISAYAN STEVEDORE TRANSPORTATION CO., Petitioners, vs. THE PUBLIC SERVICE

COMMISSION and THE PHILIPPINE SHIPOWNERS ASSOCIATION, Respondents.

D E C I S I O N

TUASON, J.:

Petitioners apply for review of a decision of the Public Service Commission restraining them "from further operating their watercraft to transport goods for hire or compensation between points in the Philippines until the rates they propose to charge are approved by this Commission."

The facts are summarized by the Commission as follows:

". . . respondents are corporations duly organized and existing under the laws of the Philippines, mainly engaged in the stevedoring or lighterage and harbor towage business. At the same time, they are engaged in interisland service which consists of hauling cargoes such as sugar, oil, fertilizer and other commercial commodities which are loaded in their barges and towed by their tugboats from Manila to various points in the Visayan Islands, particularly in the Provinces of Negros Occidental and Capiz, and from said places to Manila. For this service respondents charge freightage on a unit price with rates ranging from P0.50 to P0.62 1/2 per bag or picul of sugar loaded or on a unit price per ton in the case of fertilizer or sand. There is no fixed route in the transportation of these cargoes, the same being left at the indication of the owner or shipper of the goods. The barge and the tugboats are manned by the crew of respondents and, in case of damage to the goods in transit caused by the negligence of said crews, respondents are liable therefor. The service for which respondents charge freightage covers the hauling or carriage of the goods from the point of embarkation to the point of disembarkation either in Manila or in any point in the Visayan Islands, as the case may be.

"The evidence also sufficiently establishes that respondents are regularly engaged in this hauling business serving a limited portion of the public. Respondent Luzon Stevedoring Company, Inc., has among its regular customers the San Miguel Glass Factory, PRATRA, Shell Co., of P.I., Ltd., Standard Oil Co., of New York and Philippine-Hawaiian; while respondent Visayan Stevedore Transportation Co., has among its regular customers the Insular Lumber, Shell Company, Ltd., Kim Kee Chua Yu & Co., PRATRA and Luzon Merchandising Corporation. During the period from January, 1949 and up to the present, respondent Luzon Stevedoring Co. Inc., has been rendering to PRATRA regularly and on many occasions such service by carrying fertilizer from Manila to various points in the Provinces of Negros Occidental and Capiz, such as Hinigatan, Silay, Fabrica, Marayo, Mambaquid, Victorias and Pilar, and on the return trip sugar was loaded

from said provinces to Manila. For these services, as evidenced by Exhibits A, A-1, A-2, A-3 and A-4, respondent Luzon Stevedoring Company, Inc., charged PRATRA at the rate of P0.60 per picul or bag of sugar and, according to Mr. Mauricio Rodriguez, chief of the division in charge of sugar and fertilizer of the PRATRA, for the transportation of fertilizer, this respondent charged P12 per metric ton. During practically the same period, respondent Visayan Stevedore Transportation Company transported in its barges and towed by its tugboats sugar for Kim Kee Chua Yu & Company coming from Victorias, Marayo and Pilar to Manila, and for Luzon Merchandising Corporation, from Hinigaran, Bacolod, Marayo and Victorias to Manila. For such service respondent Visayan Stevedore Transportation Company charge Kim Kee Chua Yu Company for freightage P0.60 per picul or bag as shown in Exhibits C, C-1, C-2, C-3, C-4, C- 5, C-6, C-7 and C-8, and Luzon Merchandising Corporation was also charged for the same service and at the same rate as shown in Exhibits B, B-1 and B-2."

It was upon these findings that the Commission made the order now sought to be reviewed, upon complaint of the Philippine Shipowners' Association charging that the then respondents were engaged in the transportation of cargo in the Philippines for hire or compensation without authority or approval of the Commission, having adopted, filed and collected freight charges at the rate of P0.60 per bag or picul, particularly sugar, loaded and transported in their lighters and towed by their tugboats between different points in the Province of Negros Occidental and Manila, which said rates resulted in ruinous competition with complainant.

Section 13 (b) of the Public Service Law (Commonwealth Act No. 146) defines public service thus:

"The term 'public service' includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes any common carrier, railroad, street railway, traction railway, subway, motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries, and small water craft, engaged in the transportation of passengers and freight, shipyard, marine railway, marine repair shop, warehouse, wharf or dock, ice plant, ice-refrigeretion plant, canal, irrigation system, sewerage, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, telephone, wire or wireless telegraph system and broadcasting radio stations."

It is not necessary, under this definition, that one holds himself out as serving or willing to serve the public in order to be considered public service.

In Luzon Brokerage Company vs. Public Service Commission (40 Off. Gaz., 7th Supplement, p. 271), this court declared that "Act 454 is clear in including in the definition of a public service that which is rendered for compensation, although limited exclusively to the customers of the petitioner."

In that case, the Luzon Brokerage Company, a customs broker, had been receiving, depositing and delivering goods discharged from ships at the pier to

its customers. As here, the Luzon Brokerage was then rendering transportation service for compensation to a limited clientele, not to the public at large.

In the United States where, it is said, there is no fixed definition of what constitutes public service or public utility, it is also held that it is not always necessary, in order to be a public service, that an organization be dedicated to public use, i.e., ready and willing to serve the public as a class. It is only necessary that it must in some way be impressed with a public interest; and whether the operation of a given business is a public utility depends upon whether or not the service rendered by it is of a public character and of public consequence and concern. (51 C. J. 5.) Thus, a business may be affected with public interest and regulated for public good although not under any duty to serve the public. (43 Am. Jur., 572.)

It can scarcely be denied that the contracts between the owners of the barges and the owners of the cargo at bar were ordinary contracts of transportation and not of lease. Petitioners' watercraft was manned entirely by crews in their employ and payroll, and the operation of the said craft was under their direction and control, the customers assuming no responsibility for the goods handled on the barges. The great preponderance of the evidence contradicts the assertion that there was any physical or symbolic conveyance of the possession of the tugboats and barges to the shippers. Whether the agreements were written or verbal, the manner of payment of freight charges, the question who loaded and unloaded the cargo, the propriety of the admission of certain receipts in evidence, etc., to all of which the parties have given much attention these are matters of form which do not alter the essential nature of the relationship of the parties to the transactions as revealed by the fundamental facts of record.

It is contended that "if the Public Service Act were to be construed in such manner as to include private lease contracts, said law would be unconstitutional," seemingly implying that, to prevent the law from being in contravention of the Constitution, it should be so read as to embrace only those persons and companies that are in fact engaged in public service" with its corresponding qualification of an offer to serve indiscriminately the public."

It has been already shown that the petitioners' lighters and tugboats were not leased, but used to carry goods for compensation at a fixed rate for a fixed weight. At the very least, they were hired, hired in the sense that the shippers did not have direction, control, and maintenance thereof, which is a characteristic feature of lease.

On the second proposition, the Public Service Commission has, in our judgment, interpreted the law in accordance with legislative intent. Commonwealth Act No. 146 declares in unequivocal language that an enterprise of any of the kinds therein enumerated is a public service if conducted for hire or compensation even if the operator deals only with a portion of the public or limited clientele.

It has been seen that public utility, even where the term is not defined by statute, is not determined by the number of people actually served. Nor does the mere fact that service is rendered only under contract prevent a company from being a public utility. (43 Am. Jur., 573.) On the other hand, casual or incidental service devoid of public character and interest, it must be admitted, is not brought within the category of public utility. The demarkation line is not

susceptible of exact description or definitions, each case being governed by its peculiar circumstances.

"It is impossible to lay down any general rule on the subject whether the rendering of incidental service to members of the public by an individual or corporation whose principal business is of a different nature constitute such person a public utility. In the result reached, the cases are in conflict, as the question involved depends on such factors as the extent of service, whether such person or company has held himself or itself out as ready to serve the public or a portion of the public generally, or in other ways conducted himself or itself as a public utility. Tn several cases, it has been held that the incidental service rendered to others constituted such person or corporation a public utility, but in other cases, a contrary decision has been reached." (43 Am. Jur., 573.)

The transportation service which was the subject of complaint was not casual or incidental. It had been carried on regularly for years at almost uniform rates of charges. Although the number of the petitioners' customers was limited, the value of goods transported was not inconsiderable. Petitioners did not have the same customers all the time embraced in the complaint, and there was no reason to believe that they would not accept, and there was nothing to prevent them from accepting, new customers that might be willing to avail of their service to the extent of their capacity. Upon the well-established facts as applied to the plain letter of Commonwealth Act No. 146, we are of the opinion that the Public Service Commission's order does not invade private rights of property or contract.

In at least one respect, the business complained of was a matter of public concern. The Public Service Law was enacted not only to protect the public against unreasonable charges and poor, inefficient service, but also to prevent ruinous competition. That, we venture to say, is the main purpose in bringing under the jurisdiction of the Public Service Commission motor vehicles, other means of transportation, ice plants, etc., which cater to a limited portion of the public under private agreements. To the extent that such agreements may tend to wreck or impair the financial stability and efficiency of public utilities who do offer service to the public in general, they are affected with public interest and come within the police power of the state to regulate.

Just as the legislature may not "declare a company or enterprise to be a public utility when it is not inherently such," a public utility may not evade control and supervision of its operation by the government by selecting its customers under the guise of private transactions.

For the rest, the constitutionality of Commonwealth Act No. 146 was upheld, implicitly in Luzon Brokerage Company vs. Public Service Commission, supra, and explicitly in Pangasinan Transportation Company vs. Public Service Commission (70 Phil., 221).

Were there serious doubts, the courts should still be reluctant to invalidate the Public Service Law or any provision thereof. Although the legislature can not, by its mere declaration, make something a public utility which is not in fact such, "the public policy of the state as announced by the legislature will be given due weight, and the determination of the legislature that a particular business is subject to the regulatory power, because the public welfare is dependent upon its proper conduct and regulation, will not lightly be disregarded by the courts." (51 C. J. 5.)

The objection to the designation of Attorney Aspillera as commissioner to take the evidence was tardy. It was made for the first time after decision was rendered, following a prolonged hearing in which the petitioners crossexamined the complainant's witnesses and presented their own evidence.

The point is procedural, not jurisdictional, and may be waived by express consent or acquiescence. So it was held in Everett Steamship Corporation vs. Chua Hiong, 90 Phil. 64 and La Paz Ice Plant and Cold Storage Company vs. Comision de Utilidades Pblicas et al., 89 Phil., 109.

Upon the foregoing considerations, the appealed order of the Public Service Commission is affirmed, with costs against the petitioners. chanroblesvirt

Employment of Apprentice

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 114337 September 29, 1995

NITTO ENTERPRISES, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and ROBERTO CAPILI, respondents.

 

KAPUNAN, J.:

This petition for certiorari under Rule 65 of the Rules of Court seeking to annul the decision 1 rendered by public respondent National Labor Relations Commission, which reversed the decision of the Labor Arbiter.

Briefly, the facts of the case are as follows:

Petitioner Nitto Enterprises, a company engaged in the sale of glass and aluminum products, hired Roberto Capili sometime in May 1990 as an apprentice machinist, molder and core maker as evidenced by an apprenticeship agreement 2 for a period of six (6) months from May 28, 1990 to November 28, 1990 with a daily wage rate of P66.75 which was 75% of the applicable minimum wage.

At around 1:00 p.m. of August 2, 1990, Roberto Capili who was handling a piece of glass which he was working on, accidentally hit and injured the leg of an office secretary who was treated at a nearby hospital.

Later that same day, after office hours, private respondent entered a workshop within the office premises which was not his work station. There, he operated one of the power press machines without authority and in the process injured his left thumb. Petitioner spent the amount of P1,023.04 to cover the medication of private respondent.

The following day, Roberto Capili was asked to resign in a letter 3 which reads:

August 2, 1990

Wala siyang tanggap ng utos mula sa superbisor at wala siyang experiensa kung papaano gamitin and "TOOL" sa pagbuhat ng salamin, sarili niyang desisyon ang paggamit ng tool at may disgrasya at nadamay pa ang isang sekretarya ng kompanya.

Sa araw ding ito limang (5) minute ang nakakalipas mula alas-singko ng hapon siya ay pumasok sa shop na hindi naman sakop ng kanyang trabaho. Pinakialaman at kinalikot ang makina at nadisgrasya niya ang kanyang sariling kamay.

Nakagastos ang kompanya ng mga sumusunod:

Emergency and doctor fee P715.00Medecines (sic) and others 317.04

Bibigyan siya ng kompanya ng Siyam na araw na libreng sahod hanggang matanggal ang tahi ng kanyang kamay.

Tatanggapin niya ang sahod niyang anim na araw, mula ika-30 ng Hulyo at ika-4 ng Agosto, 1990.

Ang kompanya ang magbabayad ng lahat ng gastos pagtanggal ng tahi ng kanyang kamay, pagkatapos ng siyam na araw mula ika-2 ng Agosto.

Sa lahat ng nakasulat sa itaas, hinihingi ng kompanya ang kanyang resignasyon, kasama ng kanyang comfirmasyon at pag-ayon na ang lahat sa itaas ay totoo.

 

Naiintindihan ko ang lahat ng nakasulat sa itaas, at ang lahat ng ito ay aking pagkakasala sa hindi pagsunod sa alintuntunin ng kompanya.

(Sgd.) Roberto CapiliRoberto Capili

On August 3, 1990 private respondent executed a Quitclaim and Release in favor of petitioner for and in consideration of the sum of P1,912.79. 4

Three days after, or on August 6, 1990, private respondent formally filed before the NLRC Arbitration Branch, National Capital Region a complaint for illegal dismissal and payment of other monetary benefits.

On October 9, 1991, the Labor Arbiter rendered his decision finding the termination of private respondent as valid and dismissing the money claim for lack of merit. The dispositive portion of the ruling reads:

WHEREFORE, premises considered, the termination is valid and for cause, and the money claims dismissed for lack of merit.

The respondent however is ordered to pay the complainant the amount of P500.00 as financial assistance.

SO ORDERED. 5

Labor Arbiter Patricio P. Libo-on gave two reasons for ruling that the dismissal of Roberto Capilian was valid. First, private respondent who was hired as an apprentice violated the terms of their agreement when he acted with gross negligence resulting in the injury not only to himself but also to his fellow worker. Second, private respondent had shown that "he does not have the proper attitude in employment particularly the handling of machines without authority and proper training. 6

On July 26, 1993, the National Labor Relations Commission issued an order reversing the decision of the Labor Arbiter, the dispositive portion of which reads:

WHEREFORE, the appealed decision is hereby set aside. The respondent is hereby directed to reinstate complainant to his work last performed with backwages computed from the time his wages were withheld up to the time he is actually reinstated. The Arbiter of origin is hereby directed to further hear complainant's money claims and to dispose them on the basis of law and evidence obtaining.

SO ORDERED. 7

The NLRC declared that private respondent was a regular employee of petitioner by ruling thus:

As correctly pointed out by the complainant, we cannot understand how an apprenticeship agreement filed with the Department of Labor only on June 7, 1990 could be validly used by the Labor Arbiter as basis to conclude that the complainant was hired by respondent as a plain "apprentice" on May 28, 1990. Clearly, therefore, the complainant was respondent's regular employee under Article 280 of the Labor Code, as early as May 28,1990, who thus enjoyed the security of tenure guaranteed in Section 3, Article XIII of our 1987 Constitution.

The complainant being for illegal dismissal (among others) it then behooves upon respondent, pursuant to Art. 227(b) and as ruled in Edwin Gesulgon vs. NLRC, et al. (G.R. No. 90349, March 5, 1993, 3rd Div., Feliciano, J.) to prove that the dismissal of complainant was for a valid cause. Absent such proof, we cannot but rule that the complainant was illegally dismissed. 8

On January 28, 1994, Labor Arbiter Libo-on called for a conference at which only private respondent's representative was present.

On April 22, 1994, a Writ of Execution was issued, which reads:

NOW, THEREFORE, finding merit in [private respondent's] Motion for Issuance of the Writ, you are hereby commanded to proceed to the premises of [petitioner] Nitto Enterprises and Jovy Foster located at No. l 74 Araneta Avenue, Portero, Malabon, Metro Manila or at any other places where their properties are located and effect the reinstatement of herein [private respondent] to his work last performed or at the option of the respondent by payroll reinstatement.

You are also to collect the amount of P122,690.85 representing his backwages as called for in the dispositive portion, and turn over such amount to this Office for proper disposition.

Petitioner filed a motion for reconsideration but the same was denied.

Hence, the instant petition — for certiorari.

The issues raised before us are the following:

I

WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT PRIVATE RESPONDENT WAS NOT AN APPRENTICE.

II

WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT PETITIONER HAD NOT ADEQUATELY PROVEN THE EXISTENCE OF A VALID CAUSE IN TERMINATING THE SERVICE OF PRIVATE RESPONDENT.

We find no merit in the petition.

Petitioner assails the NLRC's finding that private respondent Roberto Capili cannot plainly be considered an apprentice since no apprenticeship program had yet been filed and approved at the time the agreement was executed.

Petitioner further insists that the mere signing of the apprenticeship agreement already established an employer-apprentice relationship.

Petitioner's argument is erroneous.

The law is clear on this matter. Article 61 of the Labor Code provides:

Contents of apprenticeship agreement. — Apprenticeship agreements, including the main rates of apprentices, shall conform to the rules issued by the Minister of Labor and Employment. The period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75% per cent of the applicable minimum wage, may be entered into only in accordance with apprenticeship program duly approved by the Minister of Labor and Employment. The Ministry shall develop standard model programs of apprenticeship. (emphasis supplied)

In the case at bench, the apprenticeship agreement between petitioner and private respondent was executed on May 28, 1990 allegedly employing the latter as an apprentice in the trade of "care maker/molder." On the same date, an apprenticeship program was prepared by petitioner and submitted to the Department of Labor and Employment. However, the apprenticeship Agreement was filed only on June 7, 1990. Notwithstanding the absence of approval by the Department of Labor and Employment, the apprenticeship agreement was enforced the day it was signed.

Based on the evidence before us, petitioner did not comply with the requirements of the law. It is mandated that apprenticeship agreements entered into by the employer and apprentice shall be entered only in accordance with the apprenticeship program duly approved by the Minister of Labor and Employment.

Prior approval by the Department of Labor and Employment of the proposed apprenticeship program is, therefore, a condition sine quo non before an apprenticeship agreement can be validly entered into.

The act of filing the proposed apprenticeship program with the Department of Labor and Employment is a preliminary step towards its final approval and does not instantaneously give rise to an employer-apprentice relationship.

Article 57 of the Labor Code provides that the State aims to "establish a national apprenticeship program through the participation of employers, workers and government and non-government agencies" and "to establish apprenticeship standards for the protection of apprentices." To translate such objectives into existence, prior approval of the DOLE to any apprenticeship program has to be secured as a condition sine qua non before any such apprenticeship agreement can be fully enforced. The role of the DOLE in apprenticeship programs and agreements cannot be debased.

Hence, since the apprenticeship agreement between petitioner and private respondent has no force and effect in the absence of a valid apprenticeship program duly approved by the DOLE, private respondent's assertion that he was hired not as an apprentice but as a delivery boy ("kargador" or "pahinante") deserves credence. He should rightly be considered as a regular employee of petitioner as defined by Article 280 of the Labor Code:

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 or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. (Emphasis supplied)

and pursuant to the constitutional mandate to "protect the rights of workers and promote their welfare." 9

Petitioner further argues that, there is a valid cause for the dismissal of private respondent.

There is an abundance of cases wherein the Court ruled that the twin requirements of due process, substantive and procedural, must be complied with, before valid dismissal exists. 10 Without which, the dismissal becomes void.

The twin requirements of notice and hearing constitute the essential elements of due process. This simply means that the employer shall afford the worker ample opportunity to be heard and to defend himself with the assistance of his representative, if he so desires.

Ample opportunity connotes every kind of assistance that management must accord the employee to enable him to prepare adequately for his defense including legal representation. 11

As held in the case of Pepsi-Cola Bottling Co., Inc. v. NLRC: 12

The law requires that the employer must furnish the worker sought to be dismissed with two (2) written notices before termination of employee can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss him (Sec. 13, BP 130; Sec. 2-6 Rule XIV, Book V, Rules and Regulations Implementing the Labor Code as amended). Failure to comply with the requirements taints the dismissal with illegality. This procedure is mandatory, in the absence of which, any judgment reached by management is void and in existent (Tingson, Jr. vs. NLRC, 185 SCRA 498 [1990]; National Service Corp. vs. NLRC, 168 SCRA 122; Ruffy vs. NLRC. 182 SCRA 365 [1990]).

The fact is private respondent filed a case of illegal dismissal with the Labor Arbiter only three days after he was made to sign a Quitclaim, a clear indication that such resignation was not voluntary and deliberate.

Private respondent averred that he was actually employed by petitioner as a delivery boy ("kargador" or "pahinante").

He further asserted that petitioner "strong-armed" him into signing the aforementioned resignation letter and quitclaim without explaining to him the contents thereof. Petitioner made it clear to him that anyway, he did not have a choice. 13

Petitioner cannot disguise the summary dismissal of private respondent by orchestrating the latter's alleged resignation and subsequent execution of a Quitclaim and Release. A judicious examination of both events belies any spontaneity on private respondent's part.

WHEREFORE, finding no abuse of discretion committed by public respondent National Labor Relations Commission, the appealed decision is hereby AFFIRMED.

SO ORDERED.

Apprenticeship Agreement – validity

Republic of the PhilippinesSupreme Court

Manila 

THIRD DIVISION  

ATLANTA INDUSTRIES, INC.         G.R. No. 187320and/or ROBERT CHAN,

                                      Petitioners,                                                                        Present:                                                                                     CARPIO MORALES, J., Chairperson,                                                                    BRION,                                                                            

                                      BERSAMIN,                - versus -                                     VILLARAMA, JR., and                                                                   SERENO, JJ.                                                               Promulgated: APRILITO R. SEBOLINO,                    KHIM V. COSTALES,                                      January 26, 2011ALVIN V. ALMOITE, andJOSEPH S. SAGUN,                                      Respondents.x----------------------------------------------------------------------------------------x 

 D E C I S I O N

 BRION, J.:

           For resolution is the petition for review on certiorari[1] assailing the decision[2] and the

resolution[3] of the Court of Appeals (CA) rendered on November 4, 2008 and March 25, 2009,

respectively, in CA-G.R. SP. No. 99340.[4]

 

The Antecedents

 

          The facts are summarized below.

          In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim V.

Costales, Alvin V. Almoite, Joseph S. Sagun, Agosto D. Zaño, Domingo S. Alegria, Jr., Ronie

Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong, Jr., Leonardo L. dela Cruz,

Arnold A. Magalang, and Saturnino M. Mabanag filed several complaints for illegal dismissal,

regularization, underpayment, nonpayment of wages and other money claims, as well as claims

for moral and exemplary damages and attorney’s fees against the petitioners Atlanta Industries,

Inc. (Atlanta) and its President and Chief Operating Officer Robert Chan. Atlanta is a domestic

corporation engaged in the manufacture of steel pipes.

 

          The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig, but

were later transferred to Labor Arbiter Dominador B. Medroso, Jr.

 

          The complainants alleged that they had attained regular status as they were allowed to

work with Atlanta for more than six (6) months from the start of a purported apprenticeship

agreement between them and the company. They claimed that they were illegally dismissed

when the apprenticeship agreement expired.

 

          In defense, Atlanta and Chan argued that the workers were not entitled to regularization

and to their money claims because they were engaged as apprentices under a government-

approved apprenticeship program. The company offered to hire them as regular employees in

the event vacancies for regular positions occur in the section of the plant where they had

trained. They also claimed that their names did not appear in the list of employees (Master List)[5] prior to their engagement as apprentices.

 

          On May 24, 2005, dela Cruz, Magalang, Zaño and Chiong executed a Pagtalikod at

Pagwawalang Saysay before Labor Arbiter Cajilig.

 

The Compulsory Arbitration Rulings

 

          On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to dela

Cruz, Magalang, Zaño and Chiong, but found the termination of service of the remaining nine

to be illegal.[6] Consequently, the arbiter awarded the dismissed workers backwages, wage

differentials, holiday pay and service incentive leave pay amounting to P1,389,044.57 in the

aggregate.

 

          Atlanta appealed to the National Labor Relations Commission (NLRC). In the meantime,

or on October 10, 2006, Ramos, Alegria, Villagomez, Costales and Almoite allegedly entered

into a compromise agreement with Atlanta.[7] The agreement provided that except for

Ramos, Atlanta agreed to pay the workers a specified amount as settlement, and to acknowledge

them at the same time as regular employees.

 

          On December 29, 2006,[8] the NLRC rendered a decision, on appeal, modifying the ruling

of the labor arbiter, as follows: (1) withdrawing the illegal dismissal finding with respect to

Sagun, Mabanag, Sebolino and Pedregoza; (2) affirming the dismissal of the complaints of dela

Cruz, Zaño, Magalang and Chiong; (3) approving the compromise agreement entered into by

Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other claims.

 

          Sebolino, Costales, Almoite and Sagun  moved for the reconsideration of the decision,

but the NLRC denied the motion in its March 30, 2007[9] resolution. The four then sought relief

from the CA through a petition for certiorari under Rule 65 of the Rules of Court. They charged

that the NLRC committed grave abuse of discretion in: (1) failing to recognize their prior

employment with Atlanta; (2) declaring the second apprenticeship agreement valid; (3) holding

that the dismissal of Sagun, Mabanag, Sebolino and Melvin Pedregoza is legal; and (4)

upholding the compromise agreement involving Costales, Ramos, Villagomez, Almoite and

Alegria.

 

The CA Decision

 

          The CA granted the petition based on the following findings:[10]

 

1.                 The respondents were already employees of the company before they entered into

the first and second apprenticeship agreements – Almoite and Costales were employed as early

as December 2003 and, subsequently, entered into a first apprenticeship agreement from May

13, 2004 to October 12, 2004; before this first agreement expired, a second apprenticeship

agreement, from October 9, 2004 to March 8, 2005 was executed. The same is true with

Sebolino and Sagun, who were employed by Atlanta as early as March 3, 2004. Sebolino

entered into his first apprenticeship agreement with the company from March 20,

2004 to August 19, 2004, and his second apprenticeship agreement from August 20,

2004 to January 19, 2005. Sagun, on the other hand, entered into his first agreement from May

28, 2004 toOctober 8, 2004, and the second agreement from October 9, 2004 to March 8, 2005. 

2.                 The first and second apprenticeship agreements were defective as they were

executed in violation of the law and the rules.[11] The agreements did not indicate the trade or

occupation in which the apprentice would be trained; neither was the apprenticeship program

approved by the Technical Education and Skills Development Authority (TESDA).

3.                 The positions occupied by the respondents – machine operator, extruder operator

and scaleman – are usually necessary and desirable in the manufacture of plastic building

materials, the company’s main business. Costales, Almoite, Sebolino and Sagun were,

therefore, regular employees whose dismissals were illegal for lack of a just or authorized cause

and notice.

4.                 The compromise agreement entered into by Costales and Almoite, together with

Ramos, Villagomez and Alegria, was not binding on Costales and Almoite because they did not

sign the agreement.

 

The petitioners themselves admitted that Costales and Almoite were initially planned to

be a part of the compromise agreement, but their employment has been regularized as early

as January 11, 2006; hence, the company did not pursue their inclusion in the compromise

agreement.[12]

  

The CA faulted the NLRC for failing to appreciate the evidence regarding the

respondents’ prior employment with Atlanta. The NLRC recognized the prior employment of

Costales and Almoite on Atlanta’s monthly report for December 2003 for the CPS

Department/Section dated January 6, 2004.[13] This record shows that Costales and Almoite

were assigned to the company’s first shift from 7:00 a.m. to 3:00 p.m. The NLRC ignored

Sebolino and Sagun’s prior employment under the company’s Production and Work Schedule

for March 7 to 12, 2005 dated March 3, 2004,[14]  as they had been Atlanta’s employees as early

as March 3, 2004, with Sebolino scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00

p.m., while Sagun was scheduled to work for the same period but from 7:00 p.m. to 7:00

a.m.The CA noted that Atlanta failed to challenge the authenticity of the two documents before

it and the labor authorities.

 

Atlanta and Chan moved for reconsideration, but the CA denied the motion in a

resolution rendered on March 25, 2009.[15] Hence, the present petition.

The Petition

 

Atlanta seeks a reversal of the CA decision, contending that the appellate court erred in

(1) concluding that Costales, Almoite, Sebolino and Sagun were employed by Atlanta before

they were engaged as apprentices; (2) ruling that a second apprenticeship agreement is invalid;

(3) declaring that the respondents were illegally dismissed; and (4) disregarding the

compromise agreement executed by Costales and Almoite. It submits the following arguments:

 

First. The CA’s conclusion that the respondent workers were company employees before

they were engaged as apprentices was primarily based on the Monthly Report [16] and the

Production and Work Schedule for March 7-12, 2005,[17] in total disregard of the Master

List[18] prepared by the company accountant, Emelita M. Bernardo. The names of Costales,

Almoite, Sebolino and Sagun do not appear as employees in the Master List which “contained

the names of all the persons who were employed by and at petitioner.”[19]

 

Atlanta faults the CA for relying on the Production and Work Schedule and the Monthly

Report which were not sworn to, and in disregarding the Master List whose veracity was sworn

to by Bernardo and by Alex Go who headed the company’s accounting division. It maintains

that the CA should have given more credence to the Master List.

 

Second. In declaring invalid the apprenticeship agreements it entered into with the

respondent workers, the CA failed to recognize the rationale behind the law on apprenticeship.

It submits that under the law,[20] apprenticeship agreements are valid, provided they do not

exceed six (6) months and the apprentices are paid the appropriate wages of at least 75% of the

applicable minimum wage.

 

The respondents initially executed a five-month apprenticeship program with Atlanta, at

the end of which, they “voluntarily and willingly entered into another apprenticeship agreement

with the petitioner for the training of a second skill”[21] for five months; thus, the petitioners

committed no violation of the apprenticeship period laid down by the law.

 

Further, the apprenticeship agreements, entered into by the parties, complied with the

requisites under Article 62 of the Labor Code; the company’s authorized representative and the

respondents signed the agreements and these were ratified by the company’s apprenticeship

committee. The apprenticeship program itself was approved and certified by the TESDA. [22] The

CA, thus, erred in overturning the NLRC’s finding that the apprenticeship agreements were

valid.

 

Third. There was no illegal dismissal as the respondent workers’ tenure ended with the

expiration of the apprenticeship agreement they entered into. There was, therefore, no regular

employer-employee relationship between Atlanta and the respondent workers.

 

The Case for Costales, Almoite, Sebolino and Sagun

 

In a Comment filed on August 6, 2009,[23] Costales, Almoite, Sebolino and Sagun pray

for a denial of the petition for being procedurally defective and for lack of merit.

 

The respondent workers contend that the petition failed to comply with Section 4, Rule

45 of the Rules of Court which requires that the petition be accompanied by supporting material

portions of the records. The petitioners failed to attach to the petition a copy of the Production

and Work Schedule despite their submission that the CA relied heavily on the document in

finding the respondent workers’ prior employment with Atlanta.  They also did not attach a

copy of the compromise agreement purportedly executed by Costales and Almoite. For this

reason, the respondent workers submit that the petition should be dismissed.

 

          The respondents posit that the CA committed no error in holding that they were already

Atlanta’s employees before they were engaged as apprentices, as confirmed by the company’s

Production and Work Schedule.[24] They maintain that the Production and Work Schedule meets

the requirement of substantial evidence as the petitioners failed to question its authenticity.

They  point out that the schedule was prepared by Rose A. Quirit and approved by Adolfo R.

Lope, head of the company’s PE/Spiral Section. They argue that it was highly unlikely that the

head of a production section of the company would prepare and assign work to the

complainants if the latter had not been company employees.

 

          The respondent workers reiterate their mistrust of the Master List [25] as evidence that they

were not employees of the company at the time they became apprentices. They label the Master

List as “self-serving, dubious and even if considered as authentic, its content contradicts a lot of

petitioner’s claim and allegations,”[26] thus -

 

1.                 Aside from the fact that the Master List is not legible, it contains only the names

of inactive employees. Even those found by the NLRC to have been employed in the company

(such as Almoite, Costales and Sagun) do not appear in the list. If Costales and Almoite had

been employed with Atlanta since January 11, 2006, as the company claimed, [27] their names

would have been in the list, considering that the Master List accounts for all employees “as of

May 2006” – the notation carried on top of each page of the document.

2.                 There were no entries of employees hired or resigned in the years 2005 and 2006

despite the “as of May 2006” notation; several pages making up the Master List contain names

of employees for the years 1999 - 2004.

3.                 The fact that Atlanta presented the purported Master List instead of the payroll

raised serious doubts on the authenticity of the list. 

In sum, the respondent workers posit that the presentation of the Master List revealed the

“intention of the herein petitioner[s] to perpetually hide the fact of [their] prior employment.”[28]

 

On the supposed apprenticeship agreements they entered into, Costales, Almoite,

Sebolino and Sagun refuse to accept the agreements’ validity, contending that the company’s

apprenticeship program is merely a ploy “to continually deprive [them] of their rightful wages

and benefits which are due them as regular employees.”[29] They submit the following

“indubitable facts and ratiocinations:”[30]

 

1.                 The apprenticeship agreements were submitted to TESDA only in 2005 (with

dates of receipt on “1/4/05” & “2/22/05”[31]), when the agreements were supposed to have been

executed in April or May 2004. Thus, the submission was made long after the starting date of

the workers’ apprenticeship or even beyond the agreement’s completion/termination date, in

violation of Section 23, Rule VI, Book II of the Labor Code.

2.                 The respondent workers were made to undergo apprenticeship for occupations

different from those allegedly approved by TESDA. TESDA approvedAtlanta’s apprenticeship

program on “Plastic Molder”[32] and not for extrusion molding process, engineering, pelletizing

process and mixing process.

3.                 The respondents were already skilled workers prior to the apprenticeship program

as they had been employed and made to work in the different job positions where they had

undergone training. Sagun and Sebolino, together with Mabanag, Pedregoza, dela Cruz,

Chiong, Magalang and Alegria were even given production assignments and work schedule at

the PE/Spiral Section from May 11, 2004 to March 23, 2005, and some of them were even

assigned to the 3:00 p.m. – 11:00 p.m. and graveyard shifts (11:00 p.m. – 7:00 a.m.) during the

period.[33]

4.                 The respondent workers were required to continue as apprentices beyond six

months. The TESDA certificate of completion indicates that the workers’ apprenticeship had

been completed after six months. Yet, they were suffered to work as apprentices beyond that

period.

 Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally

dismissed, as the reason for the termination of their employment – notice of the completion of

the second apprenticeship agreement – did not constitute either a just or authorized cause under

Articles 282 and 283 of the Labor Code.

 

Finally, Costales and Almoite refuse to be bound by the compromise

agreement[34] that Atlanta presented to defeat the two workers’ cause of action. They claim that

the supposed agreement is invalid as against them, principally because they did not sign it.

 

The Court’s Ruling

 

The procedural issue

 

          The respondent workers ask that the petition be dismissed outright for the petitioners’

failure to attach to the petition a copy of the Production and Work Schedule and a copy of the

compromise agreement Costales and Almoite allegedly entered into — material portions of the

record that should accompany and support the petition, pursuant to Section 4, Rule 45 of the

Rules of Court.

 

            In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena[35] where

the Court addressed essentially the same issue arising from Section 2(d), Rule 42 of the Rules

of Court,[36] we held that the phrase “of the pleadings and other material portions of the record

xxx as would support the allegation of the petition clearly contemplates the exercise of

discretion on the part of the petitioner in the selection of documents that are deemed to be

relevant to the petition. The crucial issue to consider then is whether or not the documents

accompanying the petition sufficiently supported the allegations therein.”[37]

 

          As in Mariners, we find that the documents attached to the petition sufficiently support

the petitioners’ allegations. The accompanying CA decision[38] and resolution,[39] as well as

those of the labor arbiter[40] and the NLRC,[41] referred to the parties’ position papers and even to

their replies and rejoinders. Significantly, the CA decision narrates the factual antecedents,

defines the complainants’ cause of action, and cites the arguments, including the evidence the

parties adduced.  If any, the defect in the petition lies in the petitioners’ failure to provide

legible copies of some of the material documents mentioned, especially several pages in the

decisions of the labor arbiter and of the NLRC. This defect, however, is not fatal as the

challenged CA decision clearly summarized the labor tribunal’s rulings.  We, thus, find no

procedural obstacle in resolving the petition on the merits.

 

The merits of the case

 

          We find no merit in the petition. The CA committed no reversible error in nullifying the

NLRC decision[42] and in affirming the labor arbiter’s ruling,[43] as it applies to Costales,

Almoite, Sebolino and Sagun. Specifically, the CA correctly ruled that the four were illegally

dismissed because (1) they were already employees when they were required to undergo

apprenticeship and (2) apprenticeship agreements were invalid.

 

          The following considerations support the CA ruling.

 

          First. Based on company operations at the time material to the case, Costales, Almoite,

Sebolino and Sagun were already rendering service to the company as employees before they

were made to undergo apprenticeship. The company itself recognized the respondents’ status

through relevant operational records – in the case of Costales and Almoite, the CPS monthly

report for December 2003[44] which the NLRC relied upon and, for Sebolino and Sagun, the

production and work schedule for March 7 to 12, 2005[45] cited by the CA.

 

          Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first shift

(7:00 a.m. to 3:00 p.m.) of the Section’s work. The Production and Work Schedules, in addition

to the one noted by the CA, showed that Sebolino and Sagun were scheduled on different

shifts vis-à-vis the production and work of the company’s PE/Spiral Section for the periods July

5-10, 2004;[46] October 25-31, 2004;[47] November 8-14, 2004;[48] November 16-22, 2004;[49] January 3-9, 2005;[50] January 10-15, 2005;[51] March 7-12, 2005[52] and March 17-23, 2005.[53]

 

          We  stress  that  the  CA  correctly  recognized  the  authenticity  of

the  operational  documents,  for the failure of Atlanta to raise a challenge against

these documents  before  the  labor  arbiter, the NLRC and the CA itself.

The  appellate  court,  thus,  found the said  documents  sufficient  to establish the employment

of the respondents before their engagement as apprentices.

 

          Second. The Master List[54] (of employees) that the petitioners heavily rely upon as proof

of their position that the respondents were not Atlanta’s employees, at the time they were

engaged as apprentices, is unreliable and does not inspire belief.

 

          The list, consisting of several pages, is hardly legible. It requires extreme effort to sort out

the names of the employees listed, as well as the other data contained in the list. For this reason

alone, the list deserves little or no consideration. As the respondents also pointed out, the list

itself contradicts a lot of Atlanta’s claims and allegations, thus: it lists only the names of

inactive employees; even the names of those the NLRC found to have been employed by

Atlanta, like Costales and Almoite, and those who even Atlanta claims attained regular status on

January 11, 2006,[55] do not appear in the list when it was supposed to account for

all  employees “as of May 6, 2006.”  Despite the “May 6, 2006” cut off date, the list contains no

entries of employees who were hired or who resigned in 2005 and 2006. We note that the list

contains the names of employees from 1999 to 2004.

 

          We cannot fault the CA for ignoring the Master List even if Bernardo, its head office

accountant, swore to its correctness and authenticity.[56] Its substantive unreliability gives it very

minimal probative value. Atlanta would have been better served, in terms of reliable evidence,

if true copies of the payroll (on which the list was based, among others, as Bernardo claimed in

her affidavit) were presented instead.

 

          Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering

service to the company when they were made to undergo apprenticeship (as established by the

evidence) renders the apprenticeship agreements irrelevant as far as the four are concerned. This

reality is highlighted by the CA finding that the respondents occupied positions such as machine

operator, scaleman and extruder operator - tasks that are usually necessary and desirable

in Atlanta’s usual business or trade as manufacturer of plastic building materials. [57] These tasks

and their nature characterized the four as regular employees under Article 280 of the Labor

Code. Thus, when they were dismissed without just or authorized cause, without notice, and

without the opportunity to be heard, their dismissal was illegal under the law.[58]

 

          Even if we recognize the company’s need to train its employees through apprenticeship,

we can only consider the first apprenticeship agreement for the purpose. With the expiration of

the first agreement and the retention of the employees, Atlanta had, to all intents and purposes,

recognized the completion of their training and their acquisition of a regular employee status.

To foist upon them the second apprenticeship agreement for a second skill which was not even

mentioned in the agreement itself,[59] is a violation of the Labor Code’s implementing

rules[60] and is an act manifestly unfair to the employees, to say the least. This we cannot allow.

 

          Fourth. The compromise agreement[61] allegedly entered into by Costales and Almoite,

together with Ramos, Villagomez and Alegria, purportedly in settlement of the case before the

NLRC, is not binding on Costales and Almoite because they did not sign it. The company itself

admitted[62] that while Costales and Almoite were initially intended to be a part of the

agreement, it did not pursue their inclusion “due to their regularization as early as January 11,

2006.”[63]

 

          WHEREFORE, premises considered, we hereby DENY the petition for lack of merit.

The assailed decision and resolution of the Court of Appeals areAFFIRMED. Costs against the

petitioner Atlanta Industries, Inc.

 

SO ORDERED.

Apprentices without Compensation

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 75112 October 16, 1990

FILAMER CHRISTIAN INSTITUTE, petitioner, vs.HONORABLE COURT OF APPEALS, HONORABLE ENRIQUE P. SUPLICO, in his capacity as Judge of the Regional Trial Court,. Branch XIV, Roxas City and the late POTENCIANO KAPUNAN, SR., as substituted by his heirs, namely: LEONA KAPUNAN TIANGCO, CICERO KAPUNAN, JESUS KAPUNAN, SANTIAGO KAPUNAN, POTENCIANO KAPUNAN, JR., PAZ KAPUNAN PUBLICO, SUSA KAPUNAN GENUINO and ERLINDA KAPUNAN TESORO, respondents.

Aquilina B. Brotarlo for petitioner.

Rhodora G. Kapunan for the Substituted Heirs of the late respondent.

 

FERNAN, C.J.:

This is a petition for review of the decision 1 of the Court of Appeals affirming the judgment of the Regional Trial Court (RTC) of Roxas City, Branch 14 in Civil Case No. V-4222 which found petitioner Filamer Christian Institute and Daniel Funtecha negligent and therefore answerable for the resulting injuries caused to private respondent Potenciano Kapunan, Sr.

Private respondent Potenciano Kapunan, Sr., an eighty-two-year old retired schoolteacher (now deceased), was struck by the Pinoy jeep owned by petitioner Filamer and driven by its alleged employee, Funtecha, as Kapunan, Sr. was walking along Roxas Avenue, Roxas City at 6:30 in the evening of October 20, 1977. As a result of the accident, Kapunan, Sr. suffered multiple injuries for which he was hospitalized for a total of twenty (20) days.

Evidence showed that at the precise time of the vehicular accident, only one headlight of the jeep was functioning. Funtecha, who only had a student driver's permit, was driving after having persuaded Allan Masa, the authorized driver, to turn over the wheels to him. The two fled from the scene after the incident. A tricycle driver brought the unconscious victim to the hospital.

Thereafter, Kapunan, Sr. instituted a criminal case against Funtecha alone in the City Court of Roxas City for serious physical injuries through reckless imprudence. Kapunan, Sr. reserved his right to file an independent civil action. The inferior court found Funtecha guilty as charged and on appeal, his conviction was affirmed by the then Court of First Instance of Capiz. 2

Pursuant to his reservation, Kapunan, Sr. commenced a civil case for damages 3 before the RTC of Roxas City. Named defendants in the complaint were petitioner Filamer and Funtecha. Also included was Agustin Masa, the director and president of Filamer Christian Institute, in his personal capacity in that he personally authorized and allowed said Daniel Funtecha who was his houseboy at the time of the incident, to drive the vehicle in question despite his knowledge and awareness that the latter did not have the necessary license or permit to drive said vehicle. His son, Allan Masa, who was with Funtecha at the time of the accident, was not impleaded as a co-defendant. 4

On December 14, 1983, the trial court rendered judgment finding not only petitioner Filamer and Funtecha to be at fault but also Allan Masa, a non-party. Thus:

WHEREFORE, finding the averments in the complaint as supported by preponderance of evidence to be reasonable and justified, and that defendants Daniel Funtecha, Filamer Christian Institute and Allan Masa are at fault and negligent of the acts complained of which causes (sic) injury to plaintiff, judgment is hereby rendered in favor of the plaintiff and against the defendants, namely: Daniel Funtecha and Filamer Christian Institute, the employer whose liability is primary and direct, jointly and severally, to pay plaintiff the following:

(1) to pay the sum of TWO THOUSAND NINE HUNDRED FIFTY PESOS AND FIFTY CENTAVOS (P2,950.50) as medical expenses (Exh. "A");

(2) to pay TWO HUNDRED FORTY ONE PESOS (P241.00) as doctor's fee (Exh. "C");

(3) to pay THREE HUNDRED NINETY PESOS (P390.00) as additional expenses incurred for thirty-nine days at P10.00 a day, for remuneration of plaintiff's helper while recuperating;

(4) to pay FOUR THOUSAND PESOS (P4,000.00) as Court litigation expenses;

(5) to pay THREE THOUSAND PESOS (P3,000.00) as loss of earnings capacity;

(6) to pay TWENTY THOUSAND (P20,000.00) pesos as moral damages;

(7) to pay FOUR THOUSAND FIVE HUNDRED PESOS (P4,500.00) as attorney's fees;

(8) to pay TWENTY THOUSAND PESOS (P20,000.00)as insurance indemnity on the policy contract;

and without prejudice to the right of defendant Filamer Christian Institute to demand from co-defendant Daniel Funtecha part-time employee and/or Allan Masa a full time employee reimbursement of the damages paid to herein plaintiff.

The defendant Agustin Masa as director of defendant Filamer Christian Institute has also failed to exercise the diligence required of a good father of a family in the supervision of his employee Allan Masa, being his son. However, the court absolved defendant Agustin Masa from any personal liability with respect to the complaint filed against him in his personal and private capacity, cause he was not in the vehicle during the alleged incident.

For failure to prove their respective counterclaims filed by the defendant Daniel Funtecha, Dr. Agustin Masa, and Filamer Christian Institute, as against the herein plaintiff, same are hereby dismissed.

The Zenith Insurance Corporation as third party defendant has failed to prove that there was a policy violation made by the defendant Filamer Christian Institute which absolves them from liability under the aforesaid insurance policy. The record shows that the defendant Daniel Funtecha while driving the said vehicle was having a student drivers license marked Exh. "1" and accompanied by Allan Masa who is the authorized driver of said vehicle with a professional drivers license as shown by Exh. "3".

This Court finds that defendant Daniel Funtecha while driving the said vehicle is considered as authorized driver in accordance with the policy in question marked Exh. "2-Masa and FCI".

Finding the averments in the third party complaint filed by defendant Filamer Christian Institute as supported by preponderance of evidence as shown by their exhibits to be reasonable and justified, judgment is hereby rendered in favor of the said defendant and third party plaintiff Filamer Christian Institute as against third party defendant Zenith Insurance Corporation.

The Zenith Insurance Corporation as third party defendant is hereby ordered to pay in favor of the defendant and third party plaintiff, Filamer Christian Institute, the following:

(1) to pay TWENTY THOUSAND PESOS (P20,000.00) as third party liability as provided in the Zenith Insurance Corporation policy (Exh. "2");

(2) to pay TEN THOUSAND PESOS (P10,000.00)as moral damages;

(3) to pay FOUR THOUSAND PESOS (P4,000.00) as Court litigation and actual expenses;

(4) to pay THREE THOUSAND PESOS (P3,000.00) as attorney's fees;

The defendants Daniel Funtecha, Filamer Christian Institute and third party defendant Zenith Insurance Corporation are hereby ordered jointly and severally, to pay the costs of the suit. 5

Only petitioner Filamer and third-party defendant Zenith Insurance Corporation appealed the lower court's judgment to the Court of Appeals and as a consequence, said lower court's decision became final as to Funtecha. For failure of the insurance firm to pay the docket fees, its appeal was dismissed on September 18, 1984. On December 17, 1985, the Appellate Court rendered the assailed judgment affirming the trial court's decision in toto.6 Hence the present recourse by petitioner Filamer.

It is petitioner Filamer's basic contention that it cannot be held responsible for the tortious act of Funtecha on the ground that there is no existing employer-employee relationship between them. We agree.

The Civil Code provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions but also for those of persons for whom one is responsible.

xxx xxx xxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

xxx xxx xxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observe all the diligence of a good father of a family to prevent damage. (Emphasis supplied).

The legal issue in this appeal is whether or not the term "employer" as used in Article 2180 is applicable to petitioner Filamer with reference to Funtecha.

In disclaiming liability, petitioner Filamer has invoked the provisions of the Labor Code, 7 specifically Section 14, Rule X of Book III which reads:

Sec. 14. Working scholars. — There is no employer-employee relationship between students on the one hand, and schools, colleges or universities on the other, where students work for the latter in exchange for the privilege to study free of charge; provided the students are given real opportunity, including such facilities as may be reasonable, necessary to finish their chosen court under such arrangement. (Emphasis supplied).

It is manifest that under the just-quoted provision of law, petitioner Filamer cannot be considered as Funtecha's employer. Funtecha belongs to that special category of students who render service to the school in exchange for free tuition Funtecha worked for petitioner for two hours daily for five days a week. He was assigned to clean the school passageways from 4:00 a.m. to 6:00 a.m. with sufficient time to prepare for his 7:30 a.m. classes. As admitted by Agustin Masa in open court, Funtecha was not included in the company payroll. 8

The wording of Section 14 is clear and explicit and leaves no room for equivocation. To dismiss the implementing rule as one which governs only the "personal relationship" between the school and its students and not where there is already a third person involved, as espoused by private respondents, is to read into the law something that was not legislated there in the first place. The provision of Section 14 is obviously intended to eliminate an erstwhile gray area in labor relations and seeks to define in categorical terms the precise status of working scholars in relation to the learning institutions in which they work for the privilege of a free education.

But even if we were to concede the status of an employee on Funtecha, still the primary responsibility for his wrongdoing cannot be imputed to petitioner Filamer for the plain reason that at the time of the accident, it has been satisfactorily shown that Funtecha was not acting within the scope of his supposed employment. His duty was to sweep the school passages for two hours every morning before his regular classes. Taking the wheels of the Pinoy jeep from the authorized driver at 6:30 in the evening and then driving the vehicle in a reckless manner resulting in multiple injuries to a third person were certainly not within the ambit of his assigned tasks. In other words, at the time of the injury, Funtecha was not engaged in the execution of the janitorial services for which he was employed, but for some purpose of his own. It is but fair therefore that Funtecha should bear the full brunt of his tortious negligence. Petitioner Filamer cannot be made liable for the damages he had caused.

Private respondents' attempt to hold petitioner Filamer directly and primarily answerable to the injured party under Article 2180 of the Civil Code would have prospered had they proceeded against Allan

Masa, the authorized driver of the Pinoy jeep and undisputably an employee of petitioner. It was Allan's irresponsible act of entrusting the wheels of the vehicle to the inexperienced Funtecha which set into motion the chain of events leading to the accident resulting in injuries to Kapunan, Sr. But under the present set of circumstances, even if the trial court did find Allan guilty of negligence, such conclusion would not be binding on Allan. It must be recalled that Allan was never impleaded in the complaint for damages and should be considered as a stranger as far as the trial court's judgment is concerned. It is axiomatic that no man shall be affected by a proceeding to which he is a stranger. 9

WHEREFORE, in view of the foregoing, the decision under review of the Court of Appeals is hereby SET ASIDE. The complaint for damages 10 is ordered DISMISSED as against petitioner Filamer Christian Institute for lack of cause of action. No costs.

SO ORDERED.

Managerial Employees not entitled to Overtime Play

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

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

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

D E C I S I O N

REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the managerial staff under Article 82, Book III of the same Code, and hence are not entitled to overtime rest day and holiday pay.

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor, Community Development Officer, Employment and Training Supervisor, Assistant Safety and

Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to department heads. The JE Program was designed to rationalized the duties and functions of all positions, reestablish levels of responsibility, and recognize both wage and operational structures. Jobs were ranked according to effort, responsibility, training and working conditions and relative worth of the job. As a result, all positions were re-evaluated, and all employees including the members of respondent union were granted salary adjustments and increases in benefits commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of respondent union were treated in the same manner as rank-and file employees. As such, they used to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the implementation of the JE Program, the following adjustments were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which are considered managerial staff for purposes of compensation and benefits; (2) there was an increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for rest day/holiday work.

On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the bargaining representative of all the supervisory employees at the NASUREFCO Batangas Sugar Refinery.

Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein respondent union filed a complainant with the executive labor arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to —

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay enjoyed by them instead of the P100.00 special allowance which was implemented on June 11, 1988; and

2. pay the individual members of complainant union the difference in money value between the P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time during which the benefits were being paid to the supervisors has accused the payment thereof to ripen into contractual obligation; at the complainants cannot be estopped from questioning the validity of the new compensation package despite the fact that they have been receiving the benefits therefrom, considering that respondent union was formed only a year after the implementation of the Job Evaluation Program, hence there was no way for the individual supervisors to express their collective response thereto prior to the formation of the union; and the comparative computations presented by the private respondent union showed that the P100.00 special allowance given NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of respondent union are not managerial employees, as defined under Article 212 (m) of the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that these supervisory employees are merely exercising recommendatory powers subject to the evaluation, review and final action by their department heads; their responsibilities do not require the exercise of discretion and independent judgment; they do not participate in the formulation of management policies nor in the hiring or firing of employees; and their main function is to carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was denied in a resolution of public respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission committed a grave abuse of discretion in refusing to recognized the fact that the members of respondent union are members of the managerial staff who are not entitled to overtime, rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits due to rank-and-file employees together with those due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be ascertained first whether or not the union members, as supervisory employees, are to be considered as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline employees. Supervisory employees are those who, in the interest of the employer effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling within any of those above definitions are considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in ruling that the latter are not managerial employees, adopted the definition stated in the aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are entitled to overtime, rest day and holiday pay, said employees should be considered as "officers or members of the managerial staff" as defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)

xxx xxx xxx

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify for exemption under the condition set forth herein:

xxx xxx xxx

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

(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to the hiring and firing and as to the promotion or any other change of status of other employees are given particular weight.

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

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

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

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii) execute under general supervision special assignments and tasks; and

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not directly and closely related to the performance of the work described in paragraphs (1), (2), and above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may not be occupying managerial positions, they are clearly officers or members of the managerial staff because they meet all the conditions prescribed by law and, hence, they are not entitled to overtime, rest day and supervisory employees under Article 212 (m) should be made to apply only to the provisions on Labor Relations, while the right of said employees to the questioned benefits should be considered in the light of the meaning of a managerial employee and of the officers or members of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III of the implementing rules. In other words, for purposes of forming and joining unions, certification elections, collective bargaining, and so forth, the union members are supervisory employees. In terms of working conditions and rest periods and entitlement to the questioned benefits, however, they are officers or members of the managerial staff, hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the circumstances of the particular case, In determining whether an employee is within the terms of the statutes, the criterion is the character of the work performed, rather than the title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that these supervisory employees are under the direct supervision of their respective department superintendents and that generally they assist the latter in planning, organizing, staffing, directing, controlling communicating and in making decisions in attaining the company's set goals and objectives. These supervisory employees are likewise responsible for the effective and efficient operation of their respective departments. More specifically, their duties and functions include, among others, the following operations whereby the employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting scheduled and manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary action on erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for their development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and working conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all NASUREFCO employees, recommends revisions or modifications to said rules when deemed necessary, and initiates and prepares reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the performance of work directly related to management policies of their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3) they regularly and directly assist the managerial employee whose primary duty consist of the management of a department of the establishment in which they are employed (4) they execute, under general supervision, work along specialized or technical lines requiring special training, experience, or knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities which are not directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be considered as officers and members of the managerial staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is admitted that these union members are supervisory employees and this is one instance where the nomenclatures or titles of their jobs conform with the nature of their functions. Hence, to distinguish them from a managerial employee, as defined either under Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here seeks a determination of whether or not these supervisory employees ought to be considered as officers or members of the managerial staff. The distinction, therefore, should have been made along that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to the union members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-and-file employees such as overtime, rest day and holiday pay, simply because they were treated in the same manner as rank-and-file employees, and their basic pay was nearly on the same level as those of the latter, aside from the fact that their specific functions and duties then as supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it lucidly explained:

"But, complainants no longer occupy the same positions they held before the JE Program. Those positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were classified correctly and continue to receive overtime, holiday and restday pay. As to them, the practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in most cases their organizational positions re-designated to confirm their superior rank and duties. Thus, after the JE program, complainants cannot be said to occupy the same positions." 9

It bears mention that this positional submission was never refuted nor controverted by respondent union in any of its pleadings filed before herein public respondent or with this Court. Hence, it can be safely concluded therefrom that the members of respondent union were paid the questioned benefits for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they could not be categorically classified as members or officers of the managerial staff considering that they were then treated merely on the same level as rank-and-file. Consequently, the payment thereof could not be construed as constitutive of voluntary employer practice, which cannot be now be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowingly fully well that said employees are not covered by the law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently establish that petitioner has been motivated or is wont to give these benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private respondent union were re-classified under levels S-5 S-8 which were considered under the program as managerial staff purposes of compensation and benefits, that they occupied re-evaluated positions, and that their basic pay was increased by an average of 50% of their basic salary prior to the JE Program. In other words, after the JE Program there was an ascent in position, rank and salary. This in essence is a promotion which is defined as the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law

requires prior compliance with the conditions set forth therein. With the promotion of the members of respondent union, they occupied positions which no longer met the requirements imposed by law. Their assumption of these positions removed them from the coverage of the law, ergo, their exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which attach to their former positions, there was nothing to prevent them from refusing to accept their promotions and their corresponding benefits. As the sating goes by, they cannot have their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management, provided it is done in good faith. In the case at bar, private respondent union has miserably failed to convince this Court that the petitioner acted implementing the JE Program. There is no showing that the JE Program was intended to circumvent the law and deprive the members of respondent union of the benefits they used to receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of employment. This flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in the conduct of its business. Such management prerogative may be availed of without fear of any liability so long as it is exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating on circumventing the rights of employees under special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion, and the basic complaint of private respondent union is DISMISSED.

Employees paid Commissions

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 92174 December 10, 1993

BOIE-TAKEDA CHEMICALS, INC., petitioner, vs.

HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and Employment, respondent.

G.R. No. L-102552 December 10, 1993

PHILIPPINE FUJI XEROX CORP., petitioner, vs.

CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and Employment, and PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents.

Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc. and Phil Xerox Corp.

The Solicitor General for public respondents.

NARVASA, C.J.:

What items or items of employee remuneration should go into the computation of thirteenth month pay is the basic issue presented in these consolidated petitions. Otherwise stated, the question is whether or not the respondent labor officials in computing said benefit, committed "grave abuse of discretion amounting to lack of jurisdiction," by giving effect to Section 5 of the Revised Guidelines on the implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated by then Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling petitioner's contention that said provision constituted a usurpation of legislative power because not justified by or within the authority of the law sought to be implemented besides being violative of the equal protection of the law clause of the Constitution.

Resolution of the issue entails, first, a review of the pertinent provisions of the laws and implementing regulations.

Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows:

Sec 1. All employees are hereby required to pay all their employees receiving basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered by this Decree.

The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth month pay" and the employers exempted from giving it, to wit:

Sec. 2. Definition of certain terms. — . . .

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

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

Sec. 3. Employers covered. — . . . (The law applies) to all employers except to:

xxx xxx xxx

c) Employers already paying their employers a 13-month pay or more in calendar year or is equivalent at the time of this issuance;

xxx xxx xxx

e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned.

xxx xxx xxx

The term "its equivalent" as used in paragraph (c) shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than 1/12th of the employee's basic salary, the employer shall pay the difference.

Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by Minister Ople whichinter alia set out items of compensation not included in the computation of the 13th month pay, viz.:

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

On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of P1,000.00 a month set by the latter, as follows:

Section 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.

Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among other things, defined with particularity what remunerative items were and were not embraced in the concept of 13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed wage plus commission. The relevant provisions read:

4. Amount and payment of 13th Month Pay.

xxx xxx xxx

The basic salary of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by the employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

xxx xxx xxx

5. 13th Month Pay for Certain Types of Employees.

(a) Employees Paid by Results. — Employees who are paid on piece work basis are by law entitled to the 13th month pay.

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay based on their total earnings during the calendar year, i.e., on both their fixed or guaranteed wage and commission.

This was the state of the law when the controversies at bar arose out of the following antecedents:

(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of petitioner Boie-Takeda Chemicals, Inc. by Laborand Development Officer Reynaldo B. Ramos under Inspection AuthorityNo. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its medical representatives in the computation of their 13th month pay, Ramos served a Notice of Inspection Results 1 on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda within ten (10) calendar days from notice to effect restitution or correction of "the underpayment of 13th month pay for the year(s) 1986, 1987 and 1988 of Med Rep (Revised Guidelines on the Implementation of 13th month pay # 5) in the total amount of P558,810.89."

Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing the view "that the commission paid to our medical representatives are not to be included in the computation of the 13th month pay . . . (since the) law and its implementing rules speak of REGULAR or BASIC salary and therefore exclude all other remunerations which are not part of the REGULAR

salary." It pointed out that, "if no sales is (sic) made under the effort of a particular representative, there is no commission during the period when no sale was transacted, so that commissions are not and cannot be legally defined as regular in nature. 2

Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and 16, 1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda, and the matter had perforce to be resolved on the basis of the evidence at hand. On July 24, 1989, Director Piezas issued an Order 3directing Boie-Takeda:

. . . to pay . . . (its) medical representatives and its managers the total amount of FIVE HUNDRED SIXTY FIVE THOUSAND SEVEN HUNDRED FORTY SIX AND FORTY SEVEN CENTAVOS (P565,746.47) representing underpayment of thirteenth (13th) month pay for the years 1986, 1987, 1988, inclusive, pursuant to the . . . revised guidelines within ten (10) days from receipt of this Order.

A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August 3, 1989. Treated as an appeal, it was resolved onJanuary 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the July 24, 1989 Order with modification that the sales commissions earned by Boie-Takeda's medical representatives before August 13, 1989, the effectivity date of Memorandum Order No. 28 and its Implementing Guidelines, shall be excluded in the computation of their 13th month pay. 5

Hence the petition docketed as G.R. No. 92174.

(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji Xerox Corp. on September 7, 1989 pursuant to Routine Inspection Authority No. NCR-LSED-RI-494-89. In his Notice of Inspection Results, 6 addressed to the Manager, Mr. Nicolas O. Katigbak, Senior Labor and Employment Officer Nicanor M. Torres noted the following violation committed by Philippine Fuji Xerox Corp., to wit:

Underpayment of 13th month pay of 62 employees, more or less — pursuant to Revised Guidelines on the Implementation of the 13th month pay law for the period covering 1986, 1987 and 1988.

Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation within five (5) working days from notice.

No action having been taken thereon by Philippine Fuji Xerox,Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor Secretary Franklin Drilon requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were summoned to appear before Labor Employment and Development Officer Mario F. Santos, NCR Office, Department of Labor for a conciliation conference. When no amicable settlement was reached, the parties were required to file their position papers.

Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23, 1990, 7 disposing as follows:

WHEREFORE, premises considered, Respondent PHILIPPINE FUJI XEROX is hereby ordered to restitute to its salesmen the portion of the 13th month pay which arose out of the non-implementation of the said revised guidelines, ten (10) days from receipt hereof, otherwise,MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is hereby Ordered to proceed to the premises of the Respondent for the purpose of computing the said deficiency (sic) should respondent fail to heed his Order.

Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of merit. Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No. 92174 as involving the same issue.

In their almost identically-worded petitioner, petitioners, through common counsel, attribute grave abuse of discretion to respondent labor officials

Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned Orders of January 17, 1990 and October 10, 1991, respectively. They maintain that under P.D. 851, the 13th month pay is based solely on basic salary. As defined by the law itself and clarified by the implementing and Supplementary Rules as well as by the Supreme Court in a long line of decisions, remunerations which do not form part of the basic or regular salary of an employee, such as commissions, should not be considered in the computation of the 13th month pay. This being the case, the Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then Secretary Drilon providing for the inclusion of commissions in the 13th month pay, were issued in excess of the statutory authority conferred by P.D. 851. According to petitioners, this conclusion becomes even more evident when considered in light of the opinion rendered by Labor Secretary Drilon himself in "In Re: Labor Dispute at the Philippine Long Distance Telephone Company" which affirmed the contemporaneous interpretation by then Secretary Ople that commissions are excluded from the basic salary. Petitioners further contend that assuming that Secretary Drilon did not exceed the statutory authority conferred by P.D. 851, still the Revised Guidelines are null and void as they violate the equal protection of the law clause.

Respondents through the Office of the Solicitor General question the propriety of petitioners' attack on the constitutionality of the Revised Guidelines in a petition for certiorari which, they contend, should be confined purely to the correction of errors and/or defects of jurisdiction, including matters of grave abuse of discretion amounting to lack or excess of jurisdiction and not extend to a collateral attack on the validity and/or constitutionality of a law or statute. They aver that the petitions do not advance any cogent reason or state any valid ground to sustain the allegation of grave abuse of discretion, and that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has already been amended by Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986 so that commissions are now imputed into the computation of the 13th Month Pay. They add that the Revised Guidelines issued by then Labor Secretary Drilon merely clarified a gray area occasioned by the silence of the law as to the nature of commissions; and worked no violation of the equal protection clause of the Constitution, said Guidelines being based on reasonable classification. Respondents point to the case of Songco vs. National Labor Relations Commission, 183 SCRA 610, wherein the Court declared that Article 97(f) of the Labor Code is explicit that commission is included in the definition of the term "wage".

We rule for the petitioners.

Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or abrogate P.D. 851. As may be gleaned from the language of the Memorandum Order No. 28, it merely "modified" Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of 13th Month Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and while entitlement to said benefit was no longer limited to employees receiving a monthly basic salary of not more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the employee-recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic salary" as defined in P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28.

In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the coverage of the term "basic salary" as used in P.D. 851. We said at some length:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th month pay. Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No. 174;

b) Profit-sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 Presidential Decree 851 issued by then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the computation of the 13th month pay.

The exclusion of the cost-of-living allowances under Presidential Decree 525 and Letter of Instructions No. 174, and profit-sharing payments indicate the intention to strip basic salary of other payments which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any and all additions which may be in the form of allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay.

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

The all embracing phrase "earnings and other remunerations" which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on rest days and special holidays, pays for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the computation of the 13th month pay. Then the exclusionary provision would prove to be idle and with no purpose.

This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions:

Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day provided that the employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at least twenty-five (25%) percent thereof.

It is clear that overtime pay is an additional compensation other than and added to the regular wage or basic salary, for reason of which such is categorically excluded from the definition of basic salary under the Supplementary Rules and Regulations Implementing Presidential Decree 851.

In Article 93 of the same Code, paragraph

c) work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%) of the regular wage of the employee.

It is likewise clear the premiums for special holiday which is at least 30% of the regular wage is anadditional pay other than and added to the regular wage or basic salary. For similar reason, it shall not be considered in the computation of the 13th month pay.

Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common, generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such additional payments as bonuses and overtime. 8 This is how the term was also understood in the case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes providing that

pension should not less than 50 percent of "basic salary" at the time of retirement, the quoted words meant the salary that an employee (e.g., a policeman) was receiving at the time he retired without taking into consideration any extra compensation to which he might be entitled for extra work. 9

In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the "basic salary."

Respondents would do well to distinguish this case from Songco vs. National Labor Relations Commission, supra, upon which they rely so heavily. What was involved therein was the term "salary" without the restrictive adjective "basic". Thus, in said case, we construed the term in its generic sense to refer to all types of "direct remunerations for services rendered," including commissions. In the same case, we also took judicial notice of the fact "that some salesmen do not receive any basic salary but depend on commissions and allowances or commissions alone, although an employer-employee relationship exists," which statement is quite significant in that it speaks of a "basic salary" apart and distinct from "commissions" and "allowances". Instead of supporting respondents' stand, it would appear that Songco itself recognizes that commissions are not part of "basic salary."

In including commissions in the computation of the 13th month pay, the second paragraph of Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules cannot add to or detract from the provisions of the law it is designed to implement. Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law they are intended to carry into effect. They cannot widen its scope. An administrative agency cannot amend an act of Congress. 10

Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these petitions.

WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5 (a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November 126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of the law said Guidelines were issued to implement, hence issued with grave abuse of discretion correctible by the writ of prohibition andcertiorari. The assailed Orders of January 17, 1990 and October 10, 1991 based thereon are SET ASIDE.

SO ORDERED.

epublic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS,respondents.

R E S O L U T I O N

FELICIANO, J.:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition forCertiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent National Labor Relations Commission (NLRC),

which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month pay to private respondent employees computed on the basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B.Trajano, in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of Section 5 (a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union.

In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation, and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case.

Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions must fail.

The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on 15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed.

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases present quite different factual situations (although the same word "commissions" was used or invoked) the legal characterizations of which must accordingly differ.

The Third Division in Durplicators found that:

In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation.

In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note the following facts on record:

Salesmen's Total Earnings and 13th Month Pay For the Year 1986 2

Name of Total Amount Paid Montly FixedSalesman Earnings as 13th Month Pay Wages x 12 3

Baylon, P76,610.30 P1,350.00 P16,200.00Benedicto

Bautista 90,780.85 1,182.00 14,184.00Salvador

Brito, 64,382.75 1,238.00 14,856.00Tomas

Bunagan, 89,287.75 1,266.00 15,192.00Jorge

Canilan, 74,678.17 1,350.00 16,200.00Rogelio

Dasig, 54,625.16 1,378,00 16,536.00Jeordan

Centeno, 51,854.15 1,266.04 15,192.00Melecio, Jr.

De los Santos 73,551.39 1,322.00 15,864.00Ricardo

del Mundo, 108,230.35 1,406.00 16,872.00Wilfredo

Garcia, 93,753.75 1,294.00 15,528.00Delfin

Navarro, 98,618.71 1,266.00 15,192.00Ma. Teresa

Ochosa, 66,275.65 1,406.00 16,872.00Rolano

Quisumbing, 101,065.75 1,406.00 16,872.00Teofilo

Rubina, 42,209.73 1,266.00 15,192.00Emma

Salazar, 64,643.65 1,238.00 14,856.00Celso

Sopelario, 52,622.27 1,350.00 16,200.00Ludivico

Tan, 30,127.50 1,238.00 14,856.00Leynard

Talampas, 146,510.25 1,434.00 17,208.00Pedro

Villarin, 41,888.10 1,434.00 17,208.00Constancio

Carrasco, 50,201.20 403.75*Cicero

Punzalan, 24,351.89 1,266.00 15,192.00Reynaldo

Poblador, 25,516.75 323.00*Alberto

Cruz, 32,950.45 323.00*Danilo

Baltazar, 15,681.35 323.00*Carlito

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay.

In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these were paid to the medical representatives and rank-and-file employees as "productivity bonuses." 4 The Second Division characterized these payments as additional monetary benefits not properly included in the term "basic salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms:

As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . . . . From the legal point of view a bonus is not and mandable and enforceable obligation. It is so when It is made part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . . . 6 (Emphasis supplied)

In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 7 the Court amplified:

. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its payment. If it is an 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 a certain amount of productivity achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or actual work accomplished. If the desired goal of production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v.National Labor Relations Commission: 9

A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10(Emphasis supplied)

If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay.

It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified physicians and inform much physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz.:

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

We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properlyexcluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay.

We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides no legal basis for including within the term "commission" there used additional payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however, correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid.

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b) aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be entertained.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.

Service Incentive Leaves

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 107994 August 14, 1995

PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-TUCP, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents.

 

KAPUNAN, J.:

This is a petition for certiorari seeking to reverse the decision of the National Labor Relations Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union and in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of petitioner for payment of 13th month pay to the drivers and conductors of respondent company.

Petitioner Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc. Petitioner union instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for payment of 13th month pay in behalf of the drivers and conductors of respondent company's Visayan operation on the ground that although said drivers and conductors are compensated on a "purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are automatically entitled to the basic minimum pay mandated by law should said commission be less than their basic minimum for eight (8) hours work. 1

In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and conductors are compensated on a purely commission basis, they are not entitled to 13th month pay pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay Law. 2 It further contended that Section 2 of Article XIV of the Collective Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that "drivers and conductors paid on a purely commission are not legally entitled to 13th month pay." Said CBA, being the law between the parties, must be respected, respondent opined.

On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint. 3

The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed 4 so was the motion for reconsideration of the said decision. 5

Hence, the present petition.

The principal issue posed for consideration is whether or not the bus drivers and conductors of respondent Vallacar Transit, Inc. are entitled to 13th month pay.

We rule in the affirmative.

It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay" Law, was promulgated. The same prescribed payment of 13th month pay in the following terms:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered by this Decree.

The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and Employment on December 22, 1975, defined the following basic terms:

xxx xxx xxx

(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of an employee within a calendar year;

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

xxx xxx xxx

On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative authority, issued Memorandum Order No. 28 which provided as follows:

xxx xxx xxx

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.

xxx xxx xxx

In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a) of the said issuance read:

xxx xxx xxx

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earning(s) during the calendar year, i.e., on both their fixed and guaranteed wage and commission.

xxx xxx xxx

(emphasis ours)

From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage. This is correctly construed in the MOLE Explanatory Bulletin No. 86-12.

In the case at bench, while the bus drivers and conductors of respondent company are considered by the latter as being compensated on a commission basis, they are not paid purely by what they receive as commission. As admitted by respondent company, the said bus drivers and conductors are automatically entitled to the basic minimum pay mandated by law in case the commissions they earned be less than their basic minimum for eight (8) hours work. 6 Evidently therefore, the commissions form part of the wage or salary of the bus drivers and conductors. A contrary interpretation would allow an employer to skirt the law and would result in an absurd situation where an employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is technically referred to by his employer per the CBA as an employee compensated on a purely commission basis. Such would be a narrow interpretation of the law, certainly not in accord with the liberal spirit of our labor laws. Moreover, what is controlling is not the label attached to the remuneration that the employee receives but the nature of the remuneration 7 and the purpose for which the 13th month pay was given to alleviate the plight of the working masses who are receiving low wages. This is extant from the "WHEREASES" of PD 851, to wit:

WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-wide inflation.

WHEREAS, there has been no increase in the legal minimum wage since 1970.

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year.

Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to them under the law.

Commission is the recompense, compensation, reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. 8 While said commissions may be in the form of incentives or encouragement to inspire said bus drivers and conductors to put a little more zeal and industry on their jobs, still, it is safe to say that the same are direct remunerations for services rendered, given the small remuneration they receive for the services they render, 9 which is precisely the reason why private respondent allowed the drivers and conductors a guaranteed minimum wage. The conclusion is ineluctable that said commissions are part of their salary. In Philippine Duplicators, Inc. v. National Labor Relations Commission, 10 we had the occasion to estate that:

. . . Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as used in P.D. No. 851 and Memorandum Order No. 28) in the following terms:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in term of money, 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 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 reasonable 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.

In the instant case, there is no question that the sales commissions earned by salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary structure was intended for the

benefit of petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each or its salesmen for rendering services to petitioner corporation. 11

In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commissions be less than the statutory minimum, and commissions only in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor Relations Commission is hereby REVERSED and SET ASIDE. The case is remanded to the labor Arbiter for the proper computation of 13th month pay.

SO ORDERED.

[G.R. No. 156367.  May 16, 2005]

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA, respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

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

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio.  Respondent was paid on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela.  Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondent’s pleas for reconsideration, the same was ignored by management.  After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent’s employment was replete with offenses involving reckless imprudence, gross negligence, and dishonesty.  To support its claim, petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s employment was terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision, [4] the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to stand on.  It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the following:

a.    his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at P78,117.87;

b.    his service incentive leave pay for all the years he had been in service with the respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.[5]

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:

“Section 3. Employers covered. – The Decree shall apply to all employers except to:

xxx         xxx       xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific work, irrespective of the time consumed in the performance thereof. xxx.”

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the award of 13th month pay to the complainant.

…

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay.  The other findings are AFFIRMED.[6]

In other words, the award of service incentive leave pay was maintained.  Petitioner thus sought a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with the Court of Appeals which was subsequently denied by theappellate court in a Decision dated 06 May 2002, the dispositive portion of which reads:WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto.  No costs.[7]

Hence, the instant petition.

ISSUES

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

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

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:

Art. 95.  RIGHT TO SERVICE INCENTIVE LEAVE

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

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1.  Coverage. – This rule shall apply to all employees except:

…

(d)  Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.  According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as “field personnel.”  The phrase “other employees whose performance is unsupervised by the employer” must not be understood as a separate classification of employees to which service incentive leave shall not be granted.  Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those “whose actual hours of work in the field cannot be determined with reasonable certainty.”[8]

The same is true with respect to the phrase “those who are engaged on task or contract basis, purely commission basis.”  Said phrase should be related with “field personnel,” applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow. [9] Hence, employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of service incentive leave just because he was paid on purely commission basis is misplaced.  What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.

According to Article 82 of the Labor Code, “field personnel” shall refer to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty.  This definition is further elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association[10] which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service or performing specific work.  If required to be at specific places at specific times, employees including drivers cannot be said to be field personnel despite the fact that they are performing work away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee would ever be considered a field personnel because every employer, in one way or another, exercises control over his employees.  Petitioner further argues that the only criterion that should be considered is the nature of work of the employee in that, if the employee’s job requires that he works away from the principal office like that of a messenger or a bus driver, then he is inevitably a field personnel.

We are not persuaded.  At this point, it is necessary to stress that the definition of a “field personnel” is not merely concerned with the location where the employee regularly performs his duties but also with the fact that the employee’s performance is unsupervised by the employer.  As discussed above, field personnel are those who regularly perform their duties away from the principal place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty.  Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with reasonable certainty by the employer.  In so doing, an inquiry must be made as to whether or not the employee’s time and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and theconductor’s reports.  There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or conductor.  They too, must be at specific place as [sic] specified time, as they generally observe prompt departure and arrival from their point of origin to their point of destination.  In each and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times and arrive at the estimated proper time.  These, are present in the case at bar.  The

driver, the complainant herein, was therefore under constant supervision while in the performance of this work.  He cannot be considered a field personnel.[11]

We agree in the above disquisition.  Therefore, as correctly concluded by the appellate court, respondent is not a field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of petitioner’s business.  Accordingly, respondent is entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to respondent’s claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. [12]

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a cause of action transpired.  Stated differently, in the computation of the three-year prescriptive period, a determination must be made as to the period when the act constituting a violation of the workers’ right to the benefits being claimed was committed.  For if the cause of action accrued more than three (3) years before the filing of the money claim, said cause of action has already prescribed in accordance with Article 291.[13]

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits being claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription.  The amount that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits withheld within three (3) years before the filing of the complaint.[14]

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee.  In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year.[15] Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC:[16]

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions.  Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that “[e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.”  Service incentive leave is a right which accrues to every employee who has served “within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy,

or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year.”  It is also“commutable to its money equivalent if not used or exhausted at the end of the year.”  In other words, an employee who has served for one year is entitled to it.  He may use it as leave days or he may collect its monetary value.  To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.[17] [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation.  Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman’s welfare should be the primordial and paramount consideration.[18] The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.[19]

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation until his employment was terminated by petitioner.  Neither did petitioner compensate his accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that respondent demanded from his former employer commutation of his accumulated leave credits. His cause of action to claim the payment of his accumulated service incentive leave thus accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits. 

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the time the employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal. Since respondent had filed his money claim after only one month from the time of his dismissal, necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED.  The assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

epublic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-58870 December 18, 1987

CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner, vs.HON. BLAS OPLE, in his capacity as Minister, Ministry of Labor and Employment, JULIUS ABELLA, ARSENIO ABELLANA, RODRIGO ALIWALAS, ZOSIMO ALMOCERA, GERONIDES ANCOG, GREGORIO ASIA, ROGER BAJARIAS, BERNARDO BALATAYO, JR., BASILIO CABALLES, DEMOCRITO TEVES, VOLTAIRE DELA CERNA, ROBERTO COBARRUBIAS, VILMA GOMEZ CHUA, RUBEN GALLITO, EDGARDO CONCEPCION, VICTOR COQUILLA, JOSE DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO GONZALES, JEOGINA GOZO, MIGUEL CABALLES, CONSUELO JAVELOSA, QUILIANO LASCO, FRANKLIN LAUTA, JUSTINIANA LARGO, RONALD LICUPA, ALAN MILANO, MARIA MONSANTO, REYNALDO NOYNAY, RAMON PARADELA, NATALIO PLAZA, LUZPURA QUIROGA, NOE RODIS, COSMENIA SAAVEDRA, LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO TABANAG, LUCINO TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES, ERNESTO VILLANUEVA, DOLORES VILLONDO, EDWARD YAP, ROWENA VIVARES, DOLORES SANANAM, RODRIGO BACALSO, YOLANDA TABLANTE, ROMERO BALATUCAN, CARMELITA LADOT, PANFILO CANETE, EMMANUEL CHAVEZ, JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO CUNANAN, RENE BURT LLANTO, GIL BATAYOLA, VICENTE DELANTE, CANDELARIO DE DIOS, JOSE MA. ESTELLA, NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME, RAYMUNDO ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA BLANCO, FE DELMUNDO, ELNORA MONTERA, MORRISON MONTESCLAROS, ELEAZAR PANIAMOGAN, BERNARDO PILAPIL, RODOLFO POL, DEMOSTHENES REDOBLE, PACHECO ROMERO, DELLO SABANAL, SARAH SALINAS, RENATO SOLATORIO, EDUARDO TABLANTE, EMMANUEL TAN, FELICISIMO TESALUNA, JOSE VERALLO, JR., MAGDALENO VERGARA, ESMERALDA ABARQUEZ, MAC ARTHUR DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE ELIZORDO ALCANTARA, REOSEBELLA AMPER, ZENAIDA BACALSO, ELIZA BADANA, GEORGIA BAS, ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON CASENAS, REGINO CASTANEDA, GEORGE CATADA, CARMENCITA G. CHAVEZ, LORETIA CUNANAN, FLORES DELFIN, TERESITA ESPINO, ELVIE GALANZA, AMADEA GALELA, TERESITA. JUNTILLA, LEONARDA KAPUNGAN, ADORACION LANAWAN, LINDA LAYAO, GERARDO LAYSON, VIRGILIO LIBETARIO, RAYMOND PAUL LOGARTA, NORMA LUCERO, ANATOLIA MENDEZ, ELIODORO MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA OLIVARES, GEORGE ORAIS, CRISPINA PALANG, GRETA PEGARIDO, MELBA QUIACHON, REMEDIOS QUIROS, VIRGINIA RANCES, EDNA DELOS REYES, VICENTE TAN, EMERGENCIA ROSELL, JULIETA TATING, MERCIA TECARRO, FELISA VERGARA, WEMINA VILLACIN, MACRINA YBARSABAL, MILAGROS CATALAN, JULIETA AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO, ASUNCION ABAYAN, ESTHER CARREON, ECHEVARRE, BUENAFE SAMSON, CONCEPCION GONZALES, VITALIANA VENERACION, LEONCIA ABELLAR, REYNITA VILLACARLOS. respondents.

No. L-68345 December 18, 1987

DIVINE WORD COLLEGE OF LEGAZPI, petitioner, vs.The Honorable Deputy Minister of Labor and Employment, VICENTE LEOGARDO, JR., the HONORABLE REGIONAL DIRECTOR (Regional Office No. 5) of the Ministry of Labor & Employment GERARDO S. CASTILLO, CECILIA MANUEL and other alleged complainants, respondents.

Nos. L-69224-5 December 18, 1987

FAR EASTERN UNIVERSITY EMPLOYEES LABOR UNION, petitioner, vs.FAR EASTERN UNIVERSITY and the NATIONAL LABOR RELATIONS COMMISSION, respondents.

No. 70832 December 18, 1987

GREGORIO T. FABROS, ROGELIO B. DE GUZMAN, CRESENCIANO ESPINO, JOSE RAMOS SUNGA, BAYLON BANEZ FERNANDO ELESTERIO, ISMAEL TABO, AMABLE TUIBEO CELSO TUBAY, RAFAEL HERNANDEZ, GERONIMO JASARENO, MEL BALTAZAR, MA. LOURDES

PASCUAL, T. DEL ROSARIO ACADEMY TEACHERS and EMPLOYEES ASSOCIATION, DENNIS MONTE, BECKY TORRES, LOIDA VELASCO, ROMLY NERY, DAISY N. AMPIG, PATRICIO DOLORES, ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners, vs.The HON. JAIME C. LAYA, in his capacity as Minister of Education, Culture and Sports, respondents.

No. L-76524 December 18, 1987

JASMIN BISCOCHO, ROWENA MARIANO, AGNES GALLEGO, MA. ANA ORDENES, ISABEL DE LEON, LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA ORTIZ, ANGELINA ROXAS, BITUIN DE PANO, ELIZABETH ORDEN, APOLLO ORDEN, GUILLERMA CERCANO, IMELDA CARINGAL, EFREN BATIFORA, ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ, OSCAR RODRIGUEZ, JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS, DOLORES PALMA, ANTONINA CRUS, CONRADO BANAYAT, TERESITA LORBES, and CORAZON MIRANDA, petitioners, vs.THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and Employment, ESPIRITU SANTO PAROCHIAL SCHOOL AND ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION,respondents.

No. 76596 December 18, 1987

RICARDO C. VALMONTE and CORAZON BADIOLA, petitioners, vs.THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and Employment, ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION, and ESPIRITU SANTO PAROCHIAL SCHOOL,respondents.

 

CORTES, J.:

Six cases involving various private schools, their teachers and non-teaching school personnel, and even parents with children studying in said schools, as well as the then Minister of Labor and Employment, his Deputy, the National Labor Relations Commission, and the then Minister of Education, Culture and Sports, have beenconsolidated in this single Decision in order to dispose of uniformly the common legal issue raised therein, namely, the allocation of the incremental proceeds of authorized tuition fee increases of private schools provided for in section 3 (a) of Presidential Decree No. 451, and thereafter, under the Education Act of 1982 (Batas Pambansa Blg. 232).

Specifically, the common problem presented by these cases requires an interpretation of section 3(a) of Pres. Decree No. 451 which states:

SEC. 3. Limitations. — The increase in tuition or other school fees or other charges as well as the new fees or charges authorized under the next preceding section shall be subject to the following conditions;(a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%)per centum of the proceeds is allocated for increase in salaries or wages of the members of the faculty and all other employees of the school concerned, and the balance for institutional development, student assistance and extension services, and return to investments: Provided That in no case shall the return to investments exceed twelve (12%) per centum of the incremental proceeds;

xxx xxx xxx

In addition, there is also a need for a pronouncement on the effect of the subsequent enactment of B.P. Blg. 232 which provides for the allocation of tuition fee increases in section 42 thereof.

In a nutshell, the present controversy was precipitated by the claims of some school personnel for allowances and other benefits and the refusal of the private schools concerned to pay said

allowances and benefits on the ground that said items should be deemed included in the salary increases they had paid out of the 60% portion of the proceeds from tuition fee increases provided for in section 3 (a) of Pres. Decree No. 451. The interpretation and construction of laws being a matter of judicial power and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93 Phil. 696 (1953)], this Court has been called upon to resolve the controversy.

In the process of reading and at times, having to decipher, the numerous pleadings filed in the six cases, the Court found that the main issue has been approached by the parties from almost diametrical points, thereby bringing into focus three sub-issues: first, whether or not allowances and other fringe benefits of faculty members and other school employees may be charged against the 60% portion of the tuition fee increases provided for in section 3(a) of Pres. Dec. No. 451: second, whether or not the same items may be charged against said portion under the provisions of B.P. Blg. 232: and, third, whether or not schools and their employees may enter into a collective bargaining agreement allocating more than 60% of said incremental proceeds for salary increases and other benefits of said employees. After these sub-issues have been resolved, the Court will tackle the other incidents attending the individual cases, seriatim.

The factual antecedents that brought these cases before this Tribunal are as follows:

I.. FACTUAL BACKGROUND OF EACH CASE

A.

CEBU INSTITUTE OF TECHNOLOGY CASEThis case originated from a Complaint filed with the Regional Office No. VII of the Ministry of Labor on February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private respondents, Panfilo Canete, et al., teachers of CIT, for non-payment of: a) cost of living allowances (COLA) under Pres. Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month pay differentials and c) service incentive leave. By virtue of an Order issued by the then Deputy Minister of Labor Carmelo C. Noriel, a labor-management committee composed of one representative each from the Ministry of Labor and Employment (MOLE), the Minister of Education, Culture and Sports (MECS), and two representatives each from CIT and from the teachers was created. Said committee was to ascertain compliance with the legal requirements for the payment of COLA, thirteenth (13th) month pay and service incentive leave [Rollo, p. 84].

The position taken by CIT during the conference held by the labor management committee was that it had paid the allowances mandated by various decrees but the same had been integrated in the teacher's hourly rate. It alleged that the payment of COLA by way of salary increases is in line with Pres. Dec. No. 451. It also claimed in its position paper that it had paid thirteenth month pay to its employees and that it was exempt from the payment of service incentive leave to its teachers who were employed on contract basis [Rollo, pp. 85-86].

After the report and recommendation of the committee, herein public respondent, then Minister of Labor and Employment issued the assailed Order dated September 29, 1981 and held that the basic hourly rate designated in the Teachers' Program is regarded as the basic hourly rate of teachers exclusive of the COLA, and that COLA should not be taken from the 60% incremental proceeds of the approved increase in tuition fee. The dispositive portion of the Order reads:

PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the following:

1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;

2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and

3) Service incentive leave from l978 upto l981.

CIT is further directed to integrate into the basic salaries of its teachers and (sic) COLA under P.D.'s 525 and 1123 starting on January 1981, pursuant to P.D. 1751. For purposes of integration, the hourly rate shown in its Teachers' Program for school year 198182 shall be considered as the basic hourly rate.

SO ORDERED.

Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with Preliminary Injunction and/or Restraining Order. The Court issued a Temporary Restraining Order on December 7, 1981 against the enforcement of the questioned Order of the Minister of Labor and Employment.

B.

DIVINE WORD COLLEGE OF LEGAZPI CASE

Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner Divine Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were charged to the 60% incremental proceeds of tuition fee increase, the Labor Regulation Section of Regional Office No. V (Legazpi City) of the Ministry of Labor and Employment conducted an inspection of the employment records of said school. On the basis of the report on the special inspection that the school did not comply with Pres. Dec. No. 451, herein respondent Regional Director issued an Order dated May 30, 1983, requiring compliance by the Divine Word College. The latter filed a Memorandum of Appeal from said Order which the Regional Director treated as a Motion for Reconsideration. Upon failure of the school to comply with the aforesaid Order, another Order (August 2, 1983) was issued by herein respondent Regional Director requiring herein petitioner to pay the faculty members- complainants (herein private respondents) the amounts indicated therein or the total sum of Six Hundred Seventeen Thousand Nine Hundred Sixty Seven Pesos and Seventy Seven Centavos (P 617,967.77). Petitioner's Motion for Reconsideration of the Order was denied.

On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the Regional Director,viz:

xxx xxx xxx

Coming now to the substantial merit of the case, we share the view that the emergency allowances due the complainants under the several presidential decrees (PD's 525, 1123, etc.) cannot be charged by the respondent against the 60% of the incremental proceeds from increase in tuition fees authorized under PD 451, not only because as per decision of the Supreme Court (UE vs. UE Faculty Association, et. al., G.R. No. 57387, September 30, 1982) said allowances whether mandated by law or secured by collective bargaining should be taken only from the return to investment referred to in the decree if the school has no other resources to grant the allowances but not from the 60% incremental proceeds, but also because to hold otherwise would, to our mind, inevitably result in the loss of one benefit due the complainants-that is the salary or wage increase granted them by PD 451.

In other words, we believe that by paying the complainants' allowances out of the 60% incremental proceeds intended for their salary increase they are practically being deprived of one benefit-their share in the 60% incremental proceeds in terms of salary or wage increase.

WHEREFORE, for the reasons abovestated, the Order appealed from is hereby AFFIRMED, and the appeal DISMISSED, for lack of merit.

SO ORDERED.

(Annex "K " to Petition; Rollo, p. 108, 110).

This special civil action of certiorari and Prohibition with Preliminary Injunction questions the interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres. Dec. No. 45 1, as set forth in the assailed Order.

On March 25, 1985, after considering the allegations, issues and arguments adduced in the Petition as well as the Comment thereon of the public respondent and dispensing with the private respondents' Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p. 198). On April 26, 1985, petitioner filed a Motion for Reconsideration with Motion to Consider the Case En Banc. On June 26, 1985 the First Division of the Court referred the case to the Court En Banc for

consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C. Laya, etc. " since it involves the same issue on the application of 60% incremental proceeds of authorized tuition fee increases [Rollo, p. 235]. The Court EN BANC resolved to accept the case. (Resolution of July 16, 1985). These cases were further consolidated with other cases involving the same issues.

C.

FAR EASTERN UNIVERSITY CASE

On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a complaint against respondent University for non-payment of legal holiday pay and under-payment of the thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the Union President, in his personal capacity, filed another complaint for violation of Pres. Dec. No. 451 against the same respondent.

The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980, Labor Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of which is quoted hereunder:

RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10) days from receipt hereof, to:

1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to the present; and

2. Pay the 13th month pay differential of complainant's for the covered period December 16, 1975 to December 17, 1978, date of filing of complaint for non-payment of legal holiday pay and under payment of the 13th month pay, and thereafter. Barred forever are money claims beyond three (3) years from the time the course (sic) of action occurred. Respondent's formula on transportation allowance which was deducted from the 13th month pay is thus subject to this prescriptive period, for purposes of computation of differentials for the 13th month pay.

The claim under PD 451 is hereby dismissed for lack of merit.

SO ORDERED.

(Annex " E " to Petition; Rollo, p. 55, 65-66).

Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent Commission disposed of the appeal in the following manner:

RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A. Aquino in the instant case dated March 10, 1980 is hereby Modified in the sense that complainant's claims for legal holiday pay and 13th month pay are likewise dismissed for lack of merit and the dismissal of the claim under P.D. 451 is hereby Affirmed en (sic) toto.

(Annex "A" to Petition: Rollo, p. 24, 35).

Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit on November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing the abovementioned decision of the Commissioner.

D.

FABROS CASE

This petition is in the nature of a class suit brought by petitioners in behalf of the faculty members and other employees of more than 4000 private schools nationwide. Petitioners seek to enjoin the implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the ground that the said order is null and void for being contrary to Pres. Dec. No. 451 and the rulings of the Supreme Court in the cases of University of the East v. UE Faculty Association [G.R. No. L-57387, September

20, 1982, 117 SCRA 5541, University of Pangasinan Faculty Union v. University of Pangasinan and NLRC [G.R. No. 63122, February 20, 1984, 127 SCRA 691 ], St. Louis University Faculty Club v. NLRC and St. Louis University [G.R. No. 65585, September 28, 1984, 132 SCRA 380].

On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law. On the matter of tuition and other school fees of private schools, section 42 of said law provides as follows:

Sec. 42. Tuition and other School Fees. — Each private School shall determine its rate of tuition and other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be collectible, and their application or use authorized subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports. (Emphasis supplied).

Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of Education Jaime C. Laya promulgated on April 1, 1985 the disputed MECS Order No. 25, s. 1985 entitled Rules and Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act of 1982, Relative to Student Fees for School Year 1985-1986. The relevant portions of said Order are quoted hereunder:

7. Application or Use of Tuition and

Other School Fees or Charges.

7.1. The proceeds from tuition fees and other school charges as well as other income of each school shall be treated as an institutional fund which shall be administered and managed for the support of school purposes strictly: Provided, That for the purpose of generating additional financial resources or income for the operational support and maintenance of each school two or more schools may pool their institutional funds, in whole or in part, subject to the prior approval of their respective governing boards.

7.2. Tuition fees shag be used to cover the general expenses of operating the school in order to allow it to meet the minimum standards required by the Ministry or any other higher standard, to which the school aspires. They may be used to meet the costs of operation for maintaining or improving the quality of instruction/training/research through improved facilities and through the payment of adequate and competitive compensation for its faculty and support personnel, including compliance with mandated increases in personnel compensation and/or allowance.

7.3. Tuition fees shag be used to cover minimum and necessary costs including the following: (a) compensation of school personnel such as teaching or academic staff, school administrators, academic non-teaching personnel, and non-academic personnel, (b) maintenance and operating expenses, including power and utilities, rentals, depreciation, office supplies; and (c) interest expenses and installment payments on school debts.

7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or wages, allowances and fringe benefits of faculty and support staff, including cost of living allowance, imputed costs of contributed services, thirteenth (13th) month pay, retirement fund contributions, social security, medicare, unpaid school personnel claims and payments as may be prescribed by mandated wage orders. collective bargaining agreements and voluntary employer practices, Provided That increases in fees specifically authorized for the purposes listed in paragraph 4.3.3 hereof shall be used entirely for those purposes. (Italics supplied).

7.5. Other student fees and charges as may be approved, including registration, library, laboratory, athletic, application, testing fees and charges shall be used exclusively for the indicated purposes, including (a) the acquisition and maintenance of equipment, furniture and fixtures, and buildings, (b) the payment of debt amortization and interest charges on debt incurred for school laboratory, athletic, or other purposes, and (c) personal services and maintenance and operating expenses incurred to operate the facilities or services for which fees and charges are collected.

The Petition prayed for the issuance of a temporary restraining order which was granted by this Court after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as follows:

After due consideration of the allegations of the petition dated May 22, 1985 and the arguments of the parties, the Court Resolved to ISSUE, effective immediately and continuing until further orders from this Court, a TEMPORARY RESTRAINING ORDER enjoining the respondent from enforcing or implementing paragraphs 7.4 to 7.5 of MECS Order No. 25, s. 1985, which provide for the use and application of sixty per centum (60%) of the increases in tuition and other school fees or charges authorized by public respondent for the school year 1985-1986 in a manner inconsistent with section 3(a), P.D. No. 451, (which allocates such 60% of the increases exclusively "for increases in salaries or wages of the members of the faculty and other employees of the school concerned.") and directing accordingly that such 60% of the authorized increases shall be held in escrow by the respective colleges and universities, i.e., shall be kept intact and not disbursed for any purpose pending the Court's resolution of the issue of the validity of the aforementioned MECS Order in question.

(Rollo, p. 21).

In the same resolution, the Philippine Association of Colleges and Universities (PACU) was impleaded as respondent.

Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved for the lifting of the temporary restraining order as to them. In separate resolutions, this Court granted their prayers.

Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle University-South, through their respective counsels, manifested that for the school year 1985-1986, tuition fee increase was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the tuition fee increases shall answer for salary increase. However, a budgeted salary increase, exclusive of living allowances and other benefits, was approved for the same school year which when computed amounts to more than the 60%.

This Court granted the motions in separate resolutions lifting the temporary restraining order with respect to these schools in order that they may proceed with the implementation of the general salary increase for their employees.

In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and the University itself joined in a petition seeking for leave that 49% of the increase in tuition and other fees for school year 1985-1986 be released. Petitioners manifested that the remaining balance shall continue to be held in escrow by the University.

In a resolution dated January 28, 1986, the Court resolved as follows:

Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985 is hereby ordered LIFTED with respect to Saint Louis University of Baguio City in order that it may proceed immediately with the implementation of salary increases for its employees.

D.

BISCOCHO CASE

The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association were parties to a labor dispute which arose from a deadlock in collective bargaining. The parties entered into conciliation proceedings. The union went on strike after efforts at the conciliation failed. Subsequently, a return to work agreement was forged between the parties and both agreed to submit their labor dispute to the jurisdiction of the Minister of Labor.

In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment issued an Order dated April 14, 1986 which provides for the following:

IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the strike staged by the Union to be legal and orders the following:

a) the School to submit the pertinent record of employment of Romualdo Noriego to the Research and Information Division of the NLRC for computation of his underpayment of wages and for the parties to abide by the said computation;

b) the School to submit all pertinent record of collections of tuition fee increases for school year (sic) 1982-1983, 1983-1984 and 1984-1985 to the Research and Information Division of the NLRC for proper computation and for equal distribution of the amount to all employees and teachers during the abovementioned school year (sic) as their salary adjustment under P.D. 461;

c) the parties to wait for the final resolution of the illegal dismissal (case) docketed as NLRC NCR Case No. 5-1450-85 and to abide by the said resolution;

d) to furnish the MECS a copy of this order for them to issue the guidelines in the implementation of PRODED Program;

e) the parties to execute a collective bargaining agreement with an economic package equivalent to 90% of the proceeds from tuition fee increases for school year 1985-1986 and another 90% for school year 1986-1987 and 85% for school year 1987-1988. The amount aforementioned shall be divided equally to all members of the bargaining unit as their respective salary adjustments. Such other benefits being enjoyed by the members of the bargaining unit prior to the negotiation of the CBA shall remain the same and shall not be reduced.

f) the School to deduct the amount equivalent to ten (10%) per cent of the backwages payable to all members of the bargaining unit as negotiation fee and to deliver the same to the Union Treasurer for proper disposition (Emphasis supplied).

SO ORDERED.

(Rollo, pp. 16-17)

Pursuant to the said order, private respondent Union agreed to incorporate in their proposed collective bargaining agreement (CBA) with the School the following:

2) The Union and School Administration will incorporate the following in their CBA -

1) The computation of the tuition fee increase shall be gross to gross from which the corresponding percentage of 90% will be taken. The resulting amount will be divided among 141.5 employees for 1985-86 and 132.5 employees for 1986-87.

1/2 of the resulting increase will be added to basic and divided by 13.3 to arrive at monthly increase in basic. The other 1/2 will be divided by 12.3 to arrive at monthly increase in living allowance.

xxx xxx xxx

4) xxx

Upon request/demand of the Union, School win deduct from backwages of managerial employees and others outside the bargaining unit what Union win charge its own members in the form of attorney's fees, special assessment and union dues/agency fee.

5) The signing of the CBA and payment of backwages and others shall be on November 26, 1986 at the Espiritu Santo Parochial School Library.

(Rollo, pp. 3-4).

The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the respondent School, filed the present petition for prohibition to restrain the implementation of the April 14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant thereto. They contend that said Order and agreements affect their rights to the 60% incremental proceeds under Pres. Dec. No. 451 which provide for the exclusive application of the 60% incremental proceeds to basic salary.

Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on November 25, 1986 ". . . enjoining the respondents from enforcing, implementing and proceeding with the questioned order of April 14, 1986 and collective bargaining agreement executed between respondents Union and the School Administration in pursuance thereof." [Rollo, p. 20].

F.

VALMONTE CASE

This Petition was filed by parents with children studying at respondent school, Espiritu Santo Parochial School to nullify the Order dated April 14, 1986 issued by public respondent, then Minister of Labor and Employment, specifically paragraphs (e) and (f) thereof, quoted in the Biscocho case.

The award contained in the said Order is the result of the assumption of jurisdiction by the public respondent over a labor dispute involving the private respondents school and faculty association. The latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of its members for additional economic benefits. After numerous conciliation conferences held while the union was on strike, the parties voluntarily agreed that the public respondent shall assume jurisdiction over all the disputes between them. As to the subject matter of the instant case, the public respondent found that the latest proposals of the respondent school was to give 85% of the proceeds from tuition fee increases for the school years to be divided among the teachers and employees as salary adjustments. What the respondent faculty association offered to accept was a package of 95% for school year 1985-1986, 90% for school year 1986- 1987. The respondent school offered to strike the middle of the two positions, hence the Order complained of by the petitioners [See Annex "A", Petition; Rollo, pp. 9, 14-15; Comment of the Respondent Faculty Association: Rollo, p. 26].

II. RESOLUTION OF THE COMMON LEGAL ISSUE

This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet intertwined, and all deserving, and demanding, the protection of the State. On one arm of the balance hang the economic survival of private schools and the private school system, undeniably performing a complementary role in the State's efforts to maintain an adequate educational system in the country. Perched precariously on the other arm of the same balance is the much-needed financial uplift of schoolteachers, extolled for all times as the molders of the minds of youth, hence of every nation's future. Ranged with them with needs and claims as insistent are other school personnel. And then, anxiously waiting at the sidelines, is the interest of the public at large, and of the State, in the continued availability to all who desire it, high-standard education consistent with national goals, at a reasonable and affordable price.

Amidst these opposing forces the task at hand becomes saddled with the resultant implications that the interpretation of the law would bear upon such varied interests. But this Court can not go beyond what the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking body. That is not the same as saying what the law should be or what is the correct rule in a given set of circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to question the policies adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every unjust situation that may arise from the application of a particular law. It is for the legislature to enact remedial legislation if that be necessary in the premises. But as always, with apt judicial caution and cold neutrality, the Court must carry out the delicate function of interpreting the law, guided by the Constitution and existing legislation and mindful of settled jurisprudence. The Court's function is therefore limited, and accordingly, must confine itself to the judicial task of saying what the law is, as enacted by the lawmaking body.

FIRST SUB-ISSUE

A. Whether or not allowances and other fringe benefits of employees may be charged against the 60% portion of the incremental proceeds provided for in sec. 3(a) of Pres. Dec. No. 451.

1. Arguments raised in the Cebu Institute of Technology case

In maintaining its position that the salary increases it had paid to its employees should be considered to have included the COLA, Cebu Institute of Technology (CIT) makes reference to Pres. Dec. No. 451 and its Implementing Rules. The line of reasoning of the petitioner appears to be based on the major premise that under said decree and rules, 60% of the incremental proceeds from tuition fee increases may be applied to salaries, allowances and other benefits of teachers and other school personnel. In support of this major premise, petitioner cites various implementing rules and regulations of the then Minister of Education, Culture and Sports, to the effect that 60% of the incremental proceeds may be applied to salaries, allowances and other benefits for members of the faculty and other school personnel [Petition citing Implementing Rules and Regulations of Pres. Dec. No. 451 of various dates; Rollo, pp. 318-320]. Petitioner concludes that the salary increases it had granted the CIT teachers out of the 60% portion of the incremental proceeds of its tuition fee increases from 1974-1980 pursuant to Pres. Dec. No. 451 and the MECS implementing rules and regulations must be deemed to have included the COLA payable to said employees for those years [Rollo, pp. 911].

With leave of Court, the Philippine Association of Colleges and Universities, filed its Memorandum as Intervenor in support of the proposition that schools may pay the COLA to faculty members and other employees out of the 60% of the increase in tuition fees. In addition to the arguments already set forth in the memorandum of the petitioner CIT, intervenor PACU attacks the Decision of this Court in University of the East v. University of the East Faculty Association et. all G.R. No. 57387 as "not doctrinal" and inapplicable to the CIT case. The Court held in the UE case, which was promulgated on September 30, 1982, during the pendency of these cases, that:

... allowances and benefits should be chargeable to the return to investment referred to in Sec. 3(a), if the schools should happen to have no other resources than incremental proceeds of authorized tuition fee increases ... (See Dispositive Portion of the Decision)

Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA and other fringe benefits should not be charged against the 60% incremental proceeds of the authorized tuition fee increase.

The Solicitor General, on the other hand, argues in support of the Order of the public respondent that Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary increases of teachers and non- teaching supportive personnel of the school concerned, and that the Decree does not provide that said salary increases would take the place of the COLA [Rollo, p. 244-245]. He cites as authority for this stance, two (2) memoranda of the then President dated June 6, 1978 and March 30, 1979 both of which provide that the 60% incremental proceeds of tuition fee increases "shall be allocated for the increase in the salaries of teachers and supportive personnel. " Anent the U.E. case, the Solicitor General states that the Supreme Court in deciding said case took note of the stand of the Office of the President that the 60% incremental proceeds shall be solely applied to salaries of faculty members and employees.

On August 7, 1986, considering the supervening events, including the change of administration, that have transpired during the pendency of these cases, the Court required the Solicitor General to state whether or not he maintains the action and position taken by his predecessor-in-office. In his Compliance with said Resolution, the Solicitor General Manifested the position that:

a. If the tuition fee increase was collected during the effectivity oil Presidential Decree No. 451, 60% thereof shall answer exclusively for salary increase of school personnel. Other employment benefits shall be covered by the 12% allocated for return of investment, this is in accordance with the ruling of this Honorable Court in University of the East vs. U.E. Faculty Association, et. al (117 SCRA 554), ... and reiterated in University of Pangasinan Faculty Union v. University of Pangasinan, et. al. (127 SCRA 691) and St. Louis Faculty Club u. NLRC (132 SCRA 380).

b. If the salary increase was collected during the effectivity of Batas Pambansa Blg. (sic) 232, 60% thereof shall answer not only for salary increase of school personnel but also for other employment benefits.

(Rollo, at pp. 513-514)

2. Arguments raised in the Divine Word College Case

Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th month pay and other personnel benefits decreed by law, must be deemed chargeable against the 60% portion allocated for increase of salaries or wages of faculty and all other school employees. In support of this stance, petitioner points out that said personnel benefits are not included in the enumeration of the items for which the balance (less 60%) or 40% portion of the incremental proceeds may be alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner likewise cites the interpretation of the respondent Minister of Education, Culture and Sports embodied in the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13, 1987; Rollo, p. 30], that the 60% incremental proceeds of authorized tuition fee increases may be applied to increases in emoluments and/or benefits for members of faculty, including staff and administrative employees of the school as the valid interpretation of the law, as against that made by the respondent Deputy Minister of Labor in the assailed Order. If the latter interpretation is upheld, petitioner would go as far as questioning the constitutionality of Pres. Dec. No. 451 upon the ground that the same discriminates against the petitioner and other private schools as a class of employers. According to the petitioner, the discrimination takes the form of requiring said class of employers to give 60% of their profits to their employees in addition to the COLA mandated by law, while other employers have to contend only with salary increases and COLA [Petition; Rollo, p. 46].

With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom upon the ground that the Court's interpretation of a law cannot be applied retroactively to parties who have relied upon the previous administrative interpretation which has not been declared invalid or unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further argues on this point that if the court had intended to invalidate the MECS interpretation of the Decree, it should have positively stated so in the Decision [Petition; Rollo, p. 50].

The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar, the ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases of University of Pangasinan Faculty Union v. University of Pangasinan et all and St. Louis Faculty Club v. NLRC, et al.

Public respondents Deputy Minister of Labor and Employment and Regional Director of the MOLE (Region V) likewise attack the validity of the Revised Implementing Rules and Regulations of Pres. Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60% of incremental proceeds from tuition fee hikes for retirement plan, faculty development and allowances. They argue that said rules and regulations were invalid for having been promulgated in excess of the rule-making authority of the then Minister of Education under Pres. Dec. No. 451 which mandates that the 60% of incremental proceeds from tuition fee hikes should be allotted solely for salary increases [Comment; Rollo, pp. 184-185]. Finally, with respect to the issue on the allege unconstitutionality of Pres. Dec. No. 451, the public respondents posit that a legislation (such as Pres. Dec. No. 451) which affects a particular class does not infringe the constitutional guarantee of equal protection of the law as long as it applies uniformly and without discrimination to everyone of that class [Comment; Rollo, p. 14].

3. Arguments raised in the Far Eastern University case

It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is a defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty, Association et al. and of University of Pangasinan Faculty Union v. University of Pangasinan and NLRC (supra). The Union submits that monetary benefits, other than increases in basic salary, are not chargeable to the 60% incremental proceeds.

The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the Labor Code which provides a definition of the term "wages" to support its position that "salaries or wages" as used in Pres. Dec. No. 451 should be interpreted to include other benefits in terms of money.

As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance with this Court's resolution dated August 7, 1986 requiring him to manifest whether public respondents maintain the position they have taken in these consolidated cases. The resolution of September 25, 1986 required petitioners to Comment on said Compliance.

The Comment dated December 6, 1986 was received by this Court after petitioner Union was required to show cause why no disciplinary action should be taken against them for failure to comply earlier. The Union agreed with the position taken by the Solicitor General that under Pres. Dec. No. 451, 60% of the tuition fee increases, shall answer exclusively for salary increase. However, it expressed disagreement with the opinion that during the effectivity of B.P. Blg. 232, the 60% ncremental proceeds shall answer not only for salary increases but also for other employment benefits. The Union argues that whereas "Pres. Dec. No. 451 is a law on a particular subject, viz., increase of tuition fee by educational institutions and how such increase shall be allocated B.P. Blg. 232 is not a law on a particular subject of increase of tuition fee . . . ; at most it is a general legislation on tuition fee as it touches on such subject in general, " [Comment on Compliance; Rollo, p. 376], Suppletory to its argument that B.P. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the Union also invokes the principle that a special or particular law cannot be repealed by a general law.

RESOLUTION OF THE FIRST SUB-ISSUE

This Court has consistently held, beginning with the University of the East case, that if the schools have no resources other than those derived from tuition fee increases, allowances and benefits should be charged against the proceeds of tuition fee increases which the law allows for return on investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60% portion allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was reiterated in the University of Pangasinan case and in the Saint Louis Universitycase.

There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of Pres. Dec. No. 451 imposes among the conditions for the approval of tuition fee increases, the allocation of 60% per cent of the incremental proceeds thereof for increases in salaries or wages of school personnel and not for any other item such as allowances or other fringe benefits. As aptly put by the Court in University of Pangasinan Faculty Union v. University of Pangasinan, supra:

... The sixty (60%) percent incremental proceeds from the tuition increase are to be devoted entirely to wage or salary increases which means increases in basic salary. The law cannot be construed to include allowances which are benefits over and above the basic salaries of the employees. To charge such benefits to the 60% incremental proceeds would be to reduce the increase in basic salary provided by law, an increase intended also to help the teachers and other workers tide themselves and their families over these difficult economic times. [Italics supplied] (127 SCRA 691, 702).

This interpretation of the law is consistent with the legislative intent expressed in the Decree itself, i.e., to alleviate the sad plight of private schools and that of their personnel wrought by slump in enrollment and increasing operational costs on the part of the schools, and the increasing costs of living on the part of the personnel (Preamble, Pres. Dec. No. 451). While coming to the aid of the private school system by simplifying the procedure for increasing tuition fees, the Decree imposes as a condition for the approval of any such increase in fees, the allocation of 60% of the incremental proceeds thereof, to increases in salaries or wages of school personnel. This condition makes for a quid pro quo of the approval of any tuition fee hike by a school, thereby assuring the school personnel concerned, of a share in its proceeds. The condition having been imposed to attain one of the main objectives of the Decree, which is to help the school personnel cope with the increasing costs of living, the same cannot be interpreted in a sense that would diminish the benefit granted said personnel.

In the light of existing laws which exclude allowances from the basic salary or wage in the computation of the amount of retirement and other benefits payable to an employee, this Court will not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e. to include allowances in the concept of salaries or wages.

As to the alleged implementing rules and regulations promulgated by the then MECS to the effect that allowances and other benefits may be charged against the 60% portion of the proceeds of tuition fee

increases provided for in Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that these were issued ultra vires, and therefore not binding upon this Court.

The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the Decree and to the imposition of limitations upon the approval of tuition fee increases, to wit:

SEC. 4. Rules and Regulations. — The Secretary of Education and Culture is hereby authorized, empowered and directed to issue the requisite rules and regulations for the effective implementation of this Decree. He may, in addition to the requirements and limitations provided for under Sections 2 and 3 hereof, impose other requirements and limitations as he may deem proper and reasonable.

The power does not allow the inclusion of other items in addition to those for which 60% of the proceeds of tuition fee increases are allocated under Section 3(a) of the Decree.

Rules and regulations promulgated in accordance with the power conferred by law would have the force and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555 (1962)] if the same are germane to the subjects of the legislation and if they conform with the standards prescribed by the same law [People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450]. Since the implementing rules and regulations cited by the private schools adds allowances and other benefits to the items included in the allocation of 60% of the proceeds of tuition fee increases expressly provided for by law, the same were issued in excess of the rule-making authority of said agency, and therefore without binding effect upon the courts. At best the same may be treated as administrative interpretations of the law and as such, they may be set aside by this Court in the final determination of what the law means.

SECOND SUB-ISSUE

B. Whether or not allowances and other fringe benefits may be charged against the 60% portion of the incremental proceeds of tuition fee increases upon the effectivity of the Education Act of 1982 (B.P. Blg. 232).

1. Arguments raised in the Fabros case

In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the proceeds from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there is no conflict between section 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any semblance of inconsistency to deduce a case of a repeal by implication: second, Pres. Dec. No. 451 is a specific law upon a particular subject-the purposes and distribution of the incremental proceeds of tuition fee increases, while B.P. Blg. 232 is a general law on the educational system; as such, a specific law is not repealed by a subsequent general law in the absence of a clear intention; and third, Pres. Dec. No. 451 is still the only law on the subject of tuition fee increases there being no prescription or provision in section 42 of B.P. Blg. 232 or elsewhere in the law. They furthermore aver that the disputed MECS Order which imposed additional burdens against the 60% incremental proceeds of tuition fee increases are not provided in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical result as intimated by petitioners is that the inclusion of paragraph 7.4 and related paragraphs 7 to 7.3 and 7.5 in the questioned MECS order contravenes the statutory authority granted to the public respondent, and the same are therefore, void.

Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985, complies with the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres. Dec. No. 451. PACU notes that theUniversity of the East case invoked by petitioners is not applicable because the issue in that case does not involve the effect of B.P. Blg. 232 on Pres. Dec. No. 451.

The Solicitor General, representing the public respondent, after giving a summary of the matters raised by petitioner and respondent PACU, points out that the decisive issue in this case is whether B.P. Big. 232 has repealed Pres. Dec. No. 451 because on the answer to this question depends the validity of MECS Order No. 25, s. 1985. Public respondent holds the view consistent with that of PACU on the matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support this contention, the Solicitor General compared the respective provisions of the two laws to show the inconsistency and incompatibility which would result in a repeal by implication.

RESOLUTION OF THE SECOND SUB-ISSUE

On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:

SEC. 42. Tuition and Other School Fees. — Each private school shall determine its rate of tuition and other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be collectible and their application or use authorized, subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports. (Emphasis supplied).

The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985 revived the old controversy on the application and use of the incremental proceeds from tuition fee increases. As can be gleaned from the pleadings and arguments of the parties in these cases, one side, composed of the teachers and other employees of the private schools, insist on the applicability of section 3(a) of Pres. Dec. No. 451 as interpreted arid applied in the University of the East, University of Pangasinan and St Louis University cases, while the private schools uphold the view that the matter of allocating the incremental proceeds from tuition fee increases is governed by section 42 of B.P. Blg. 232 as implemented by the MECS Rules and Regulations. As stated, the latter's argument is premised on the allegation that B.P. Blg. 232 impliedly repealed Pres. Dec. No. 451.

On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in the Fabros case, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.

In recognition of the vital role of private schools in the country's educational system, the government has provided measures to regulate their activities. As early as March 10, 1917, the power to inspect private schools, to regulate their activities, to give them official permits to operate under certain conditions and to revoke such permits for cause was granted to the then Secretary of Public Instruction by Act No. 2706 as amended by Act No. 3075 and Commonwealth Act No. 180. Republic Act No. 6139, enacted on August 31, 1970, provided for the regulation of tuition and other fees charged by private schools in order to discourage the collection of exorbitant and unreasonable fees. In an effort to simplify the "cumbersome and time consuming" procedure prescribed under Rep. Act No. 6139 and "to alleviate the sad plight of private schools," Pres. Dec. No. 451 was enacted on May 11, 1974. While this later statute was being implemented, the legislative body envisioned a comprehensive legislation which would introduce changes and chart directions in the educational system, hence, the enactment of B.P. Blg. 232. What then was the effect of B.P. Blg. 232 on Pres. Dec. No. 451?

The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section 3(a) thereof, finds evident irreconcilable differences.

Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), where section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to determine its rate of tuition and other school fees or charges.

Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be applied or used to augment the salaries and wages of members of the faculty and other employees of the school, while B.P. Blg. 232 provides that the increment shall be applied or used in accordance with the regulations promulgated by the MECS.

A closer look at these differences leads the Court to resolve the question in favor of repeal. As pointed out by the Solicitor General, three aspects of the disputed provisions of law support the above conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to apportion the incremental proceeds of the tuition fee increases; such power is delegated to the Ministry of Education and Culture under B.P. Blg. 232.Second, Pres. Dec. No. 451 limits the application or use of the increment to salary or wage increase, institutional development, student assistance and extension services and return on investment, whereas B.P. Blg. 232 gives the MECS discretion to determine the application or use of the increments. Third, the extent of the application or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined percentage allocations; 60% for wage and salary increases, 12% for return in investment and the balance of 28% to institutional development, student assistance and extension services, while under B.P. Blg. 232, the extent of the allocation or use of the increment is likewise left to the discretion of the MECS.

The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg. 232 which cover the same subject matter, are so clearly inconsistent and incompatible with each other that there is no other conclusion but that the latter repeals the former in accordance with section 72 of B.P. Blg. 232 to wit:

Sec. 72. Repealing clause. — All laws or parts thereof inconsistent with any provision of this Act shall be deemed repealed or modified, as the case may be.

Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the above conclusion:

Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other school fees or charges and their use and application, although the latter is broader in scope as it covers other aspects of the education system. We note substantial differences or inconsistencies between the provisions of the two laws. P.D. No. 451 prescribes certain limitations in the increase of tuition and other school fees and their application, whereas the latter law, B.P. Blg. 232 s silent on the matter. Under P.D. 451, rates of tuition/school fees need prior approval of the Secretary of Education, Culture (now Minister of Education, Culture and Sports), who also determines the reasonable rates for new school fees, whereas under B.P. Blg. 232, each private school determines its rate of tuition and other school fees or charges. P.D. No. 451 authorizes the Secretary of Education and Culture to issue requisite rules and regulations to implement the said Decree and for that purpose, he is empowered to impose other requirements and limitations as he may deem proper and reasonable in addition to the limitations prescribed by the Decree for increases in tuition fees and school charges, particularly, the limitations imposed in the allocation of increases in fees and charges, whereas under B.P. Blg. 232, the collection and application or use of rates and charges adopted by the school are subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports without any mention of the statutory limitations on the application or use of the fees or charges. The authority granted to private schools to determine its rates of tuition and unconditional authority vested in the Ministry of Education, Culture and Sports to determine by rules and regulations the collection and application or use of tuition or fees rates and charges under B.P. Big. 232 constitute substantial and irreconcilable incompatibility with the provisions of P.D. No. 451, which should be for that reason deemed to have been abrogated by the subsequent legislation.

Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the establishment and maintenance of an integrated system of education and as such, covers the entire subject matter of the earlier law, P.D. No. 451. The omission of the limitations or conditions imposed in P.D. No. 451 for increases in tuition fees and school charges is an indication of a legislative intent to do away with the said limitations or conditions. (Crawford, supra, p. 674). It has also been said that —

an act which purports to set out in full all that it intends to contain, operates as a repeal of anything omitted which was contained in the old act and not included in the amendatory act." (People vs. Almuete 69 SCRA 410; People vs. Adillo 68 SCRA 90) (Ministry of Justice, Op. No. 16, s. 1985).

Having concluded that under B.P. Big. 232 the collection and application or use of tuition and other school fees are subject only to the limitations under the rules and regulations issued by the Ministry, the crucial point now shifts to the said implementing rules.

The guidelines and regulations on tuition and other school fees issued after the enactment of B.P. Blg. 232 consistently permit the charging of allowances and other benefits against the 60% incremental proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s. 1987. The pertinent portion of the latest order reads thus:

In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other staff, including accruals to cost of living allowance, 13th month pay, social security, medicare and retirement contribution and increases as may be provided in mandated wage orders, collective bargaining agreements or voluntary employer practices.

The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground that the additional burdens charged against ". . . the 60% of the proceeds of the increases in tuition fees constitute both as [sic] an excess of statutory authority and as (sic) a substantial impairment of the accrued, existing and protected rights and benefits of the members of faculty and non-academic personnel of private schools." Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged that these additional burdens under the MECS Order are not provided in the law itself, either in section 42 of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except increases in salaries in the latter provision.

Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-making authority to fill in the details on the application or use of tuition fees and other school charges. In the same vein is section 70 of the same law which states:

SEC. 70. Rule-making Authority. — The Minister of Education, Culture and Sports charged with the administration and enforcement of this Act, shall promulgate the necessary implementing rules and regulations.

Contrary to the petitioners' insistence that the questioned rules and regulations contravene the statutory authority granted to the Minister of Education, this Court finds that there was a valid exercise of rule-making authority.

The statutory grant of rule-making power to administrative agencies like the Secretary of Education is a valid exception to the rule on non-delegation of legislative power provided two conditions concur, namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and 2) said statute fixes a standard to which the latter must conform [Vigan Electric Light Co., Inc. v. Public Service Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G. R. No. L-23825, December 24, 1965].

The Education Act of 1982 is "an act providing for the establishment and maintenance of an integrated system for education " with the following basic policy:

It is the policy of the State to establish and maintain a complete, adequate and integrated system of education relevant to the goals of national development. Toward this end, the government shall ensure, within the context of a free and democratic system, maximum contribution of the educational system to the attainment of the following national development goals:

1. To achieve and maintain an accelerating rate of economic development and social progress;

2. To assure the maximum participation of all the people in the attainment and enjoyment of the benefits of such growth; and

3. To achieve and strengthen national unity and consciousness and preserve, develop and promote desirable cultural, moral and spiritual values in a changing world.

The State shall promote the right of every individual to relevant quality education, regardless of sex, age, creed, socioeconomic status, physical and mental conditions, racial or ethnic origin, political or other affiliation. The State shall therefore promote and maintain equality of access to education as well as the enjoyment of the benefits of education by all its citizens.

The State shall promote the right of the nation's cultural communities in the exercise of their right to develop themselves within the context of their cultures, customs, traditions, interests and belief, and recognizes education as an instrument for their maximum

participation in national development and in ensuring their involvement in achieving national unity. (Section 3, Declaration of Basic Policy).

With the foregoing basic policy as well as, specific policies clearly set forth in its various provisions, the Act is complete in itself and does not leave any part of the policy-making, a strictly legislative function, to any administrative agency.

Coming now to the presence or absence of standards to guide the Minister of Education in the exercise of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October 24, 1970, 35 SCRA 481, 497] is relevant:

The standard may be either expressed or implied. If the former, the non-delegation objection is easily met. The standard though does not have to be spelled out specifically. It could be implied from the policy and purpose of the act considered as a whole. In the Reflector Law, clearly the legislative objective is public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads." (Italics supplied).

Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164, July 31, 1987], the Court held that the necessary standards are set forth in Section 1 of the 1959 Medical Act, i.e., "the standardization and regulation of medical education" as well as in other provisions of the Act. Similarly, the standards to be complied with by Minister of Education in this case may be found in the various policies set forth in the Education Act of 1982.

MECS Order No. 25, s. 1985 touches upon the economic relationship between some members and elements of the educational community, i.e., the private schools and their faculty and support staff. In prescribing the minimum percentage of tuition fee increments to be applied to the salaries, allowances and fringe benefits of the faculty and support staff, the Act affects the economic status and the living and working conditions of school personnel, as well as the funding of the private schools.

The policies and objectives on the welfare and interests of the various members of the educational community are found in section 5 of B.P. Blg. 232. which states:

SEC. 5. Declaration of Policy and Objectives. — It is likewise declared government policy to foster, at all times, a spirit of shared purposes and cooperation among the members and elements of the educational community, and between the community and other sectors of society, in the realization that only in such an atmosphere can the true goals and objectives of education be fulfilled.

Moreover, the State shall:

1. Aid and support the natural right and duty of parents in the rearing of the youth through the educational system.

2. Promote and safeguard the welfare and interests of the students by defining their rights and obligations, according them privileges, and encouraging the establishment of sound relationships between them and the other members of the school community.

3. Promote the social and economic status of an school personnel, uphold their rights, define their obligations, and improve their living and working conditions and career prospects.

4. Extend support to promote the viability of those institutions through which parents, students and school personnel seek to attain their educational goals.

On the other hand, the policy on the funding of schools in general, are laid down in section 33:

SEC. 33. Declaration of Policy. — It is hereby declared to be a policy of the State that the national government shall contribute to the financial support of educational programs pursuant to the goals of education as declared in the Constitution. Towards this end, the government shall:

1. Adopt measures to broaden access to education through financial assistance and other forms of incentives to schools, teachers, pupils and students; and

2. Encourage and stimulate private support to education through, inter alia, fiscal and other assistance measures.

Given the abovementioned policies and objectives, there are sufficient standards to guide the Minister of Education in promulgating rules and regulations to implement the provisions of the Education Act of 1982, As in the Ericta and Tablarin cases, there is sufficient compliance with the requirements of the non-delegation principle.

THIRD SUB-ISSUE

C. Whether or not schools and their employees may enter into a collective bargaining agreement allocating more than 60% of said incremental proceeds for salary increases and other benefits of said employees.

1. Arguments raised in the Biscocho and Valmonte cases

Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent Minister of Labor directing the execution of a CBA between the school and the respondent Espiritu Santo Parochial School Faculty Association which provides for an economic package equivalent to 90% of the proceeds of tuition fee increases for school year 1985-1986, another 90% for school year 1986-1987 and 85% for school year 1987-1988. Pursuant to said Order, petitioners in the Biscocho case alleged that the parties had agreed to incorporate in their CBA a provision which allocates one-half (1/2) of the 90% portion of the proceeds or 45% to increases in the monthly basic salaries and the other one-half (1/2) or 45% to increases in monthly living allowance.

The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite reasons. In theBiscocho case, the controversy springs from what petitioners perceive to be a diminution of the benefits to be received by the school employees insofar as the CBA allocates only 45% for salary increases instead of 60%, which petitioners claim to be the portion set aside by Pres. Dec. No. 451 for that purpose. Parenthetically, the case questions the allocation of the remaining 45% of the 90% economic package under the CBA, to allowances. Stripped down to its essentials, the question is whether or not the 90% portion of the proceeds of tuition fee increases alloted for the economic package may be allocated for both salary increases and allowances.

On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the execution of a CBA which would allocate more than 60% of the proceeds of tuition fee increases for salary increases of school employees. Furthermore, petitioners question the authority of the then Minister of Labor and Employment to issue the aforequoted Order insofar as this allocates the tuition fee increases of the respondent private school. According to them, only the Minister of Education, Culture and Sports has the authority to promulgate rules and regulations on the use of tuition fees and increases thereto, pursuant to the provisions of B.P. Blg. 232. They further argue that the assailed Order collides with the provisions of Pres. Dec. No. 451 insofar as it allocates 90% of the tuition fee increases for salary adjustments of the members of the bargaining unit which exceeds the 60% of the said increases allocated by the Decree for the same purpose.

Before delving further into the questions raised, this Court notes that in the Valmonte case, respondent Minister and respondent Faculty Association raise a procedural objection to the filing of the Petition: the standing of the petitioners to bring this suit. Both respondents decry the petitioners' lack of the interest required in Rule 65 of the Rules of Court for the filing of the Petition for certiorari and Prohibition, since the latter do not appear to be in any way aggrieved by the enforcement of the Order. Petitioners-parents did not even participate in the proceedings below which led to the issuance of the assailed Order.

This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and 2), only a person aggrieved by the act or proceeding in question may file a petition for certiorari and/or prohibition. TheValmonte petition fails to indicate how the petitioners would be aggrieved by the assailed Order. It appears that the petitioners are not parties and never at any time intervened in the conciliation conferences and arbitration proceedings before the respondent Minister. The parties therein, who stand to be directly affected by the Order of the respondent Minister, do not contest the

validity of said Order. The petition does not even state that petitioners act as representative of the parents' association in the School or in behalf of other parents similarly situated.

If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have intervened and moved for a reconsideration of respondent Minister's Order before filing the instant petition. Petitioners failed to show that the case falls under any one of the recognized exceptions to the rule that a motion for reconsideration should first be availed of before filing a petition for certiorari and prohibition.

In view of the foregoing, the resolution of the third sub-issue will be based mainly on the arguments raised in theBiscocho case.

RESOLUTION OF THE THIRD SUB-ISSUE

The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition fee increases applied for by the respondent Espiritu Santo Parochial School for school years 1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232, the allocation of the proceeds of any authorized tuition fee increase must be governed by specific rules and regulations issued by the Minister (now Secretary) of Education pursuant to his broadened rule making authority under section 42 of the new law. Thus, insofar as the proceeds of the authorized tuition fee increases for school year 1985-1986 are concerned, the allocation must conform with the pertinent section of MECS Order No. 25, s. 1985, to wit:

7. Application or Use of Tuition and Other School Fees or Charges.

xxx xxx xxx

7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or wages, allowances and fringe benefits of faculty and support staff, including cost of living allowance, imputed costs of contributed services, thirteenth (13th) month pay, retirement fund contributions, social security, medicare, unpaid school personnel claims, and payments as may be prescribed by mandated wage orders, collective bargaining agreements and voluntary employer practices:Provided, That increases in fees specifically authorized for the purposes fisted in paragraph 4.3.3 hereof shall be used entirely for those purposes.

xxx xxx xxx

With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable rules are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order No. 25, s. 1985, the pertinent portion of which is quoted above.

Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988, DECS Order No. 37, s. 1987 must apply:

c. Allocation of lncremental Proceeds

(1) In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other staff, including accruals to cost of living allowance, 13th month pay, social security, medicare and retirement contributions and increases as may be provided in mandated wage orders, collective bargaining agreements or voluntary employer practices.

(2) Provided, that in all cases of increase the allocation of the incremental proceeds shall be without prejudice to the Supreme Court cases on the interpretation and applicability of existing legislations on tuition and other fees especially on the allocation and use of any incremental proceeds of tuition and other fees increases. (Emphasis supplied).

xxx xxx xxx

Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232, the 60% portion of the proceeds of tuition fee increases may now be allotted for both salaries and allowances and other benefits. The 60% figure is, however, a minimum which means that schools and their employees may agree on a larger portion, or in this case, as much as 90% for salaries and allowances and other benefits. This is not in anyway to allow diminution or loss of the portion allotted for institutional development of the school concerned. Thus, paragraph 7.5 of MECS Order No. 25, series of 1985 specifically provides that other student fees and charges like registration, library, laboratory or athletic fees shall be used exclusively for the purposes indicated.

III RESOLUTION OF THE SPECIFIC ISSUES

CEBU INSTITUTE OF TECHNOLOGY CASE

Petitioner assigns three other errors in the petition for certiorari:

1

RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER DATED SEPTEMBER 29,1981 WITHOUT CONDUCTING A FORMAL INVESTIGATION AND ARBITRATION PROCEEDINGS.

2

PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED AND/OR NOT OBLIGED TO PAY SERVICE INCENTIVE LEAVE.

3

PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS FOR COLA AND SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR EXTINGUISHED BY PRESCRIPTION.

1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued without the benefit of a hearing and was merely based on the report of the labor management committee which is allegedly without power to pass upon the issues raised. On this premise, petitioner claims that it was denied its right to due process.

Petitioner's contention is without merit. The Labor Management Committee was empowered to investigate the complaint against the petitioner for non-payment of the cost of living allowance, 13th month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee, petitioner was represented by its counsel, registrar and assistant accountant and in the conferences that were held, the representatives of the petitioner were present. Furthermore, the petitioner's position paper submitted to the committee reflects that in all the deliberations, it was never denied the right to present evidence and be heard on all the issues raised, particularly to demonstrate that it had complied with the various COLA, 13th month pay and service incentive leave decrees. The evidence presented during the conferences and the position paper of the parties were made the basis of the committee's report and recommendation which in turn became the basis of the order of the Minister of Labor directing the petitioner to pay the complainants their COLA and service incentive leave benefits.

It could not therefore be contended that the petitioner was deprived of his right to be heard when it appears on the record that it was permitted to ventilate its side of the issues. There was sufficient compliance with the requirements of due process. In the face of the well- settled principle that administrative agencies are not strictly bound by the technical rules of procedure, this Court dismisses the petitioner's claim that formal investigative and arbitration proceedings should be conducted. "While a day in court is a matter of right in judicial proceedings, in administrative proceedings it is otherwise since they rest upon different principles." [Cornejo v. Gabriel and Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and L-49035, December 19,1981, 110 SCRA 438].

2. Going now to the matter of service incentive leave benefits, petitioner claims that private respondents are engaged by the school on a contract basis as shown by the individual teachers contract which defines the nature, scope and period of their employment; hence, they are not entitled to the said benefit according to Rule V of the Implementing Rules and Regulations of the Labor Code to wit:

Sec. 1. Coverage. — This rule [on Service Incentive Leave] shall apply to all employees, except:

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(d) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; (MOLE Rules and Regulations, Rule V, Book III)

The phrase "those who are engaged on task or contract basis" should however, be related with "field personnel " applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow, [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA 379]. Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave benefit cannot therefore be sustained.

3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the same are barred by laches and/or extinguished by prescription according to Article 291 of the Labor Code which provides:

Art. 291. Money claims. — All money claims arising from employer-employee , relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.

All money claims accruing prior to the effectivity of this Code shall be filed with the appropriate entities established under this Code within one (1) year from the date of effectivity, and shall be processed or determined in accordance with implementing rules and regulations of the Code; otherwise, they shall be forever barred.

xxx xxx xxx

Considering that the complaint alleging non-payment of benefits was filed only on February 11, 1981, petitioner argues that prescription has already set in.

From the aforequoted provision, it is not fully accurate to conclude that the entire claims for COLA and service incentive leave are no longer recoverable. This Court finds no reason to disturb the following pronouncement of the Minister of Labor:

xxx xxx xxx

Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974, for the months of August, September and October 1974 must be filed within one (1) year from November 1, 1974, otherwise they shall be considered prescribed; claims under the same decree that accrued on or after November 1, 1974 should be initiated within three (3) years from the date of accrual thereof, otherwise the same shall be deemed extinguished. Although this particular claim was filed on February 11, 1981, petitioners herein are entitled to COLA under P.D. 525 from February 1978 up to the present since the COLA that accrued in February 1978 has not yet prescribed at the time that the claim was filed in February 1981. In the same vein, petitioners herein should be granted COLA under P.D. 1123 from February 1978 up to 1981 inasmuch as said decree became effective only on May 11, 1977. Further, petitioners are entitled to the full

amount of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It must be pointed out that the earliest of the just cited four (4) decrees, i.e., P.D. 1614, just took effect on April 1, 1979. Thus, the prescriptive period under Art. 292 of the Labor Code, as amended, does not as yet apply to money claims under the just mentioned decrees.

DIVINE WORD COLLEGE CASE

In assailing the disputed Order, petitioner contends that the public respondents acted with grave and patent abuse of discretion amounting to lack of jurisdiction in that:

1. The Regional Director has no jurisdiction over money claims arising from employer-employee relationship; and

2. The Regional Director and Deputy Minister of Labor adopted the report of the Labor Standards Division without affording the petitioner the opportunity to be heard.

1. Petitioner school claims that the case at bar is a money claim and should therefore be within the original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor Code, as amended.

It appears from the record, however, that the original complaint filed by ten (10) faculty members of the Divine Word College was for non-compliance with Pres. Dec. No. 451 and with Labor Code provisions on service incentive leave, holiday and rest day pay and which complaint specifically prayed that an inspection of the College be conducted.

Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly authorized representatives (which includes Regional Directors) are accorded the power to investigate complaints for non- compliance with labor laws, particularly those which deal with labor standards such as payment of wages and other forms of compensation, working hours, industrial safety, etc. This is provided for in article 128 of the Labor Code, as amended:

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.

(b) The Secretary of Labor 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 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 order, except in cases where the employer contests the findings of the labor regulations officer and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the normal course of inspection. (Emphasis supplied).

Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases restates inter alia that "(L)abor standards cases arising from violation of labor standards laws discovered in the course of inspection or complaints where employer-employee relations still exist" are under the exclusive original jurisdiction of the Regional Director.

Even assuming that respondent Regional Director was without jurisdiction to entertain the case at bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in the proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional Director.

2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore denied due process.

There is no dispute that an inspection of the College was conducted after a complaint by some faculty members was filed with the Regional Office of the Ministry of Labor and Employment. A report was submitted on the basis of the findings contained therein. Petitioner was furnished a copy of said report to which it filed a comment. Finding this to be without merit, the Regional Director issued an order giving petitioner ten (10) days to manifest its compliance with the findings, otherwise, another would be issued to enforce payment. Petitioner appealed but instead of resolving the memorandum of appeal, which the Regional Director treated as a motion for reconsideration, said Director issued another Order dated August 2, 1983 directing the payment of the employees' share in the sixty (60%) percent incremental proceeds. Petitioner moved for a reconsideration of the latest order which the Regional Director, however, denied, thereby elevating the case to the Office of the Minister of Labor and Employment.

The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the inspection conducted. It submitted a comment thereto, which was in effect its position paper. The arguments therein and evidence attached thereto were considered by respondent Regional Director in the order issued subsequently. They, therefore, had ample opportunity to present their side of the controversy.

What due process contemplates is not merely the existence of an actual hearing. The "right to be heard" focuses more on the substance rather than the form. In the case at bar, petitioner was actually heard through the pleadings that it filed with the Regional Office V. As it itself admitted in its petition that it was afforded the right to be heard on appeal [See Rollo, p. 581, petitioner cannot therefore insist that it was denied due process.

FAR EASTERN UNIVERSITY CASE

Two other issues are raised in this petition, to wit:

1

WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS 'EQUIVALENT TO 13TH-MONTH PAY UNDER PRES. DEC. NO. 851.

2

WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY WITHDRAWN AFTER BEING PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.

1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of Pres. Dec. No. 851 which requires all employers "to pay all their employees receiving a basic salary of not more than Pl,000 a month, regardless of the nature of the employment, a 13th- month pay" (Sec. 1). However, "employer[s] already paying their employees a 13th-month pay or its equivalent are not covered" (Sec. 2). (Emphasis supplied)

The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:

SEC. 3. Employees. — The Decree shall apply to all employers except to: ...

c) Employers already paying their employees 13th-month or more in a calendar year or its equivalent at the time of this issuance; ...

xxx xxx xxx

The term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employer, as well as non-monetary benefits. Where an employer pays less than 1/1 2th of the employees basic salary, the employer shall pay the difference.

In the case at bar, the 13th month pay is paid in the following manner:

FOR REGULAR EMPLOYEES:

Transportation Allowance (TA)

50% of basic for the first year of service plus additional 5% every year thereafter but not to exceed 100% of basic salary

Christmas Bonus (CB)

50% of basic salary for the first year of service plus additional 5% every year thereafter but not to exceed 100% of basic salary.

For employees who have served the University for more than 10 years, the University pays them emoluments equivalent to the 14 months salaries.

13th Month Pay Formula:

Monthly Rate x No. of

months served for the year

Less TA/CB = 13th Mo. pay

12 months

FOR CASUAL EMPLOYEES:

13th Month Pay Formula:

Add salaries from 16 December of previous year to 15th December of present year [and] divide by 12 months = 13th Mo. Pay (Rollo, pp. 60, 72).

The University's answer to the Union's claim of underpayment of the 13th month pay is that the "transportation allowance" paid to its employees partakes the nature of a mid-year bonus which under section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and Regulations is equivalent to the 13th month pay,

The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants reasoning that:

CLEARLY, transportation allowance cannot be considered as equivalent" of 13th month pay as it is neither a Christmas bonus, mid-year bonus, profit sharing payment, or other cash bonuses, pursuant to paragraphs (c) and (e), Section 3 of PD 851. The regularity of its payment further cements this proposition.

PERFORCE, complainants are underpaid of their 13th month pay in an amount equivalent to 50% of their basic salary for the lst year of service, plus additional 5% every year thereafter but not to exceed 100% of their basic salary which, per respondent's formula, corresponds to their transportation allowance. (Rollo, p. 61).

On appeal, the Third Division of the National Labor Relations Commission reversed the Labor Arbiter's ruling by dismissing the complainant's claim for underpayment of the 13th month pay for lack of merit. The NLRC ruled that:

From the above findings and conclusion, it is clear that insofar as employees with ten (10) years of service or more are concerned, they receive the equivalent of one (1) month pay for Christmas bonus and another one (1) month pay as transportation allowance or a total of fourteen (14) months salary in a year. Obviously, this group of employees are fully paid of their 13th month pay and are not therefore subject to the instant claim. As it is only those with less than ten (10) years of service are included or encompassed by the Labor Arbiter's resolution on this particular issue. With this clarification, we shall now proceed to discuss the crux of the controversy, that is, the

determination of whether or not the so designated "transportation allowance" being paid to the employees should be considered among those deemed equivalent to 13th month pay. As adverted earlier, the Labor Arbiter opined that it cannot be so considered as the equivalent of 13th month pay.

xxx xxx xxx

In passing upon the issue, we deemed it best to delve deeper into the nature and intendment of the transportation allowances as designated by both the complainants and the respondent. Complainants claim that the transportation allowance they enjoy has always been called and termed allowance and never as bonus since the time the same was given to them. They assert that it simply was intended as an allowance and not a bonus. It would appear however that complainants do not dispute respondent's stand that transportation allowance is being paid only every March of each year as distinguished from other allowances that are being paid on a monthly basis or on a bimonthly basis; that the amount of transportation allowance to be paid is dependent on the length of service of the employee concerned (i.e. 50% basic in the first year and additional 5% for each succeeding years, etc.); that the said method of computing the amount of the transportation allowance to be paid the complainants is Identical to that used in determining Christmas bonus (respondent's exhibit 8) that the reason behind said transportation allowance is to financially assist employees in meeting their tax obligations as the same become due on or about the month of March of each year.

xxx xxx xxx

We are inclined to believe and so hold that by the manner by which said transportation allowance is being paid (only once a year) as well as the method in determining the amount to be paid (similar to Christmas bonus) and considering further the reason behind said payment (easing the burden of taxpayer-employee), the said transportation allowance given out by respondent while designating as such, partakes the nature of a mid-year bonus. It bears to note in passing that in providing for transportation allowance, respondent was not compelled by law nor by the CBA (Annex "A" of respondent's Appeal) as nowhere in the CBA nor in the Labor Code can be found any provision on transportation allowance. It was therefore a benefit that stemmed out purely from the voluntary act and generosity of the respondent FEU. Moreover, said transportation allowance is only being paid once a year. On the other hand, regular allowances not considered as 13th month pay equivalent under P.D. 851, to our mind, refer to those paid on regular intervals and catering for specific employees' needs and requirements that recur on a regular basis. Verily, if the intendment behind the disputed transportation allowance is to answer for the daily recurring transportation expenses of the employees, the same should have been paid to employees on regular periodic intervals. All indications, as we see it, point out to conclusion that the disputed transportation allowance, while dominated as such apparently for lack of better term, is in fact a form of bonus doled out by the respondent during the month of March every year.

Hence, we hold that it is one of those that can very well be considered as equivalent to the 13th month pay (Rollo, pp. 73, 74, 75, 76).

This Court sustains the aforequoted view of public respondent. The benefit herein designated as "transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where this does not amount to 1/12 of the employees basic salary, the employer shall pay the difference.

The evident intention of the law was to grant an additional income in the form of a 13th month pay to employees not already receiving the same. This Court ruled in National Federation of Sugar Workers (NFSW) v. Ovejera[G.R. No. 59743, May 31, 1982, 114 SCRA 354].

Otherwise put, the intention was to grant some relief — not to all workers — but only to the unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever name called: but it was not envisioned that a double burden would be imposed on the employer already paying his employees a 13th month pay or its equivalent — whether out of pure generosity or on the basis of a binding agreement

and, in the latter case, regardless of the conditional character of the grant (such as making the payment dependent on profit), so long as there is actual payment. Otherwise, what was conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay.

xxx xxx xxx

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses for the purpose of determining liability for the 13th month pay. To require employers (already giving their employees a 13th month salary or its equivalent) to give a second 13th month pay would be unfair and productive of undesirable results. To the employer who had acceded and is already bound to give bonuses to his employees, the additional burden of a 13th month pay would amount to a penalty for his munificence or liberality. The probable reaction of one so circumstanced would be to withdraw the bonuses or resist further voluntary grants for fear that if and when a law is passed giving the same benefits, his prior concessions might not be given due credit; and this negative attitude would have an adverse impact on the employees (pp.369,370).

The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938 (1982)], citing the ruling in the above case also pointed out that:

To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed create an absurd situation whereby an employer who started giving his employees the 13th month pay only because of the unmistakable force of the law would be in a far better position than another who, by his own magnanimity or by mutual agreement, had long been extending his employees the benefits contemplated under PD No. 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about such oppressive situation. (p. 944)

2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which took effect six months thereafter). Section 28 thereof provides that:

Section 28. A new provision is hereby substituted in lieu of the original provision of Article 258 of the same Code to read as follows:

Art. 258. Right to holiday pay-

(a) Every worker shall be paid his regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;

(b) The term "holiday" as used in this Chapter, shall include: New Year's day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty fifth and thirtieth of December and the day designated by law for holding a general election.

(c) When employer may require work on holidays. The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent twice his regular rate.

Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres. Dec. No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the Rules and Regulations Implementing the Labor Code, as amended, was released the pertinent portion of which states that:

Section 2. Status of employees paid by the month. — Employees who are uniformly paid by the month, irrespective of the number of working days therein, with a salary of not less than the statutory or established minimum wage shall be presumed to be paid for all days in the month whether worked or not.

For this purpose, the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve.

(e) Section 3. Holiday Pay. — Every employer shall pay his employees their regular daily wage for any unworked regular holiday.

As used in the Rule, the term 'holiday' shall exclusively refer to: New Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of December and the day designated by law for a general election or national referendum or plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976).

After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to clarify further the right to holiday pay, thus:

The Rules Implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal holidays. Before PD 850. the number of working days a year in a firm was considered important in determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he was definitely already paid. If he was working for less than 313, there was no certainty whether the ten (10) paid legal holidays were already paid to him or not.

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In the case of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to the benefit.

Under the rules implementing PD 850, this policy has been fully clarified to eliminate controversies on the entitlement of monthly paid employees. The new determining rule is this: If the monthly paid employee is receiving not less than P 240, the maximum monthly minimum wage, and his monthly pay is uniform from January to December, he is presumed to be already paid the ten (10) paid legal holidays. However, if deductions are made from his monthly salary on account of holidays in months where they occur, then he is entitled to the ten (10) legal holidays.

These new interpretations must be uniformly and consistently upheld.

This issuance shall take effect immediately.

In the meantime, respondent University paid its employees holiday pay for the following days:

DATE HOLIDAYS PAID

June 9, 1975 for the previous nine legal holidays

August, 1975 for the previous June 12 and July 4

Jan. 14, 1976 or the previous Nov. 30, Dec. 25

and 30 and Jan. 1

After January 14, 1976, however, the University ceased paying the holiday pay allegedly by reason of Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of its employees was, as of 1976, more than P 240.00 without deductions from their monthly salary on account of holidays in months where they occurred and that therefore, by virtue of Policy Instruction No. 9, they were no longer entitled to the ten paid legal holidays.

Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly been the reason that prompted the University to withdraw such benefits from its faculty and employees because said implementing rule was issued only on April 23, 1976 or four months later.

The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment of the 10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an employer practice that can no longer be withdrawn." [Decision; Rollo, p. 59].

As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC held that:

Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the legal holiday pay preceded the effectivity of the Rules and Regulations Implementing P.D. 850 and which rules took effect on February 16, 1976. Hence, his conclusion that the payment of the legal holiday pay stemmed out from company practice and not from law. Tracing back, however, the payments made by respondent of said holiday pay will show that, if ever, the same was made pursuant to P.D. 570-A which took effect on November 1, 1974. Noteworthy is the undisputed fact that respondent first paid its employees legal holiday pay in June 1975 corresponding to nine (9) legal holidays. It bears to note that from the time of the effectivity of P.D. 570-A which was in November of 1974 up to June of 1975, the time respondent first paid legal holiday pay for nine (9) legal holidays, there, were indeed more or less nine legal holidays that transpired to wit: November 30, 1974, December 25, 1974, December 30, 1974, January 1, 1975, February 27, 1975 (Referendum Day), Maundy Thursday of 1975, Good Friday of 1975, April 9, 1975 and finally, May 1st of 1975. We are therefore inclined to lend credence to respondent's claim that the payment of legal holiday pay was in fact made pursuant to law, P.D. 570-A in particular, it is not one that arose out of company practice or policy.

Finding that said payment was made based on an honest although erroneous interpretation of law, which interpretation was later on corrected by the issuance (sic) of Policy Instruction No. 9 and which issuance prompted respondent to withdraw the holiday pay benefits extended to the employees who were paid on a regular monthly basis, and finding further that under Policy Instructions No. 9, said subject employees are deemed paid their holiday pay as they were paid on a monthly basis at a wage rate presumably above the statutory minimum, we believe and so hold that the withdrawal of said holiday pay benefit was valid and justifiable under the circumstances (Rollo, pp. 33-4).

This Court cannot sustain the foregoing decision of public respondent. Said decision relied on Section 2, Rule IV, Book Ill of the implementing rules and on Policy Instruction No. 9 which were declared by this Court to be null and void in Insular Bank of Asia and America Employee's Union (IBAAEU) v. Inciong (G.R. No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of the issue at hand, this Court reiterates the ruling in that case, to wit:

WE agree with the petitioner's contention that Section 2, Rule IV, Book Ill of the implementing rules and Policy Instruction No. 9 issued by the then Secretary of Labor are nun and void since in the guise of clarifying the Labor Code's provision on holiday pay, they in fact amended them by enlarging the scope of their exclusion.

xxx xxx xxx

It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal the law must be taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and explicit — it provides for both the coverage of and exclusion from the benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid employees, when the law clearly states that every worker shall be paid their regular holiday pay. This is a flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that "All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor. " Moreover, it shall always be presumed that the legislature intended to enact a valid and permanent statute which would have the most beneficial effect that its language permits (Orlosky vs. Haskell, 155 A. 112). (pp. 673-4).

BISCOCHO CASE

At issue also in this petition is whether the 60% incremental proceeds may be subjected to attorney's fees, negotiation fees, agency fees and the like.

The Court notes the fact that there are two classes of employees among the petitioners: (1) those who are members of the bargaining unit and (2) those who are not members of the bargaining unit. The first class may be further subdivided into two: those who are members of the collective bargaining agent and those who are not.

It is clear that the questioned Order of the respondent Minister applies only to members of the bargaining unit. The CBA prepared pursuant to said Order, however, covered employees who are not members of the bargaining unit, although said CBA had not yet been signed at the time this petition was filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of employees outside the bargaining unit should be nullified as this does not conform to said order which directed private respondents to execute a CBA covering only members of the bargaining unit.

Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic package involved therein, employees who are non- members of the bargaining unit should not be assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the resulting collective bargaining agreement does not apply to them. It should be clear, however, that while non-members of the bargaining unit are not entitled to the economic package provided by said order, they are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of increases in tuition or other school fees or charges.

As far as assessment of fees against employees of the collective bargaining unit who are not members of the collective bargaining agent is concerned, Article 249 of the Labor Code, as amended by B.P. Blg. 70, provides the rule:

Art. 249. Unfair labor practices of employers.-

xxx xxx xxx

(e) ... Employees of an appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such non- union members accept the benefits under the collective agreement . . .

Employees of the collective bargaining unit who are not members of the collective bargaining agent have to pay the foregoing fees if they accept the benefits under the collective bargaining agreement and if such fees are not unreasonable. Petitioners who are members of the bargaining unit failed to show that the equivalent of ten (10%) percent of their backwages sought to be deducted is unreasonable.

WHEREFORE, the Court rules:

CEBU INSTITUTE OF TECHNOLOGY CASE

In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September 29, 1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its teaching staff the following:

(1) Cost of living allowance under Pres. Dec.Nos.525 and 1123 from February 1978 up to 1981;

(2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and

(3) Service incentive leave due them from 1978.

The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED and SET ASIDE. No costs.

DIVINE WORD COLLEGE CASE

The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent Deputy Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984 are SUSTAINED insofar as said Orders denied the payment of the emergency cost of living allowances of private respondents faculty teachers of the Divine Word College of Legazpi out of the sixty (60%) incremental proceeds of tuition and other school fee increases collected during the effectivity of Pres. Dec. No. 451. The Rules and Regulations implementing Pres. Dec. No. 451 are hereby declared invalid for being ultra vires No costs.

FAR EASTERN UNIVERSITY CASE

The Decision of public respondent National Labor Relations Commission dated September 18, 1984 isREVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern University Employee Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of holiday pay. Private respondent Far Eastern University is therefore ordered to pay its employees the following:

(1) Their sixty (60) percent share in the increases in tuition and other school fees or charges which shall be allocated exclusively for increase in salaries or wages if the tuition or other school fee increase was collected during the effectivity of Pres. Dec. No. 451;

(2) Their claim for holiday pay which was withdrawn since January 14, 1976 up to the present.

The Decision of respondent National Labor Relations Commission, however, is SUSTAINED insofar as it denied petitioner's claim for thirteenth (1 3th month pay. No costs.

FABROS CASE

In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS Order No. 25. s. 1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of sixty (60%) percent of the increases in tuition and other school fees or charges, having been issued pursuant to B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID. The Temporary Restraining Order issued by this Court dated May 29, 1985 is LIFTED and SET ASIDE. No costs.

BISCOCHO CASE

The assailed portions of the Order of the Minister of Labor and Employment dated April 14, 1986 are AFFIRMED. The collective bargaining agreement prepared pursuant thereto should, however, be MODIFIED to cover only members of the bargaining unit. Only petitioners who are members of the collective bargaining unit, if they accept the benefits under the resulting collective bargaining agreement, shall be charged ten (10%) percent of the payable backwages as negotiation fees. The Temporary Restraining Order dated November 25, 1986 is LIFTEDand SET ASIDE. No costs.

VALMONTE CASE

The petition in G.R. No. 76596 is DISMISSED for lack of merit.

Effective September 1, 1982, the application and use of the proceeds from increases in tuition fees and other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as implemented by the Rules and Regulations issued by the then Ministry, now Department of Education, Culture and Sports. SO ORDERED.

Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and Sarmiento, JJ., concur.

Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

Republic of the Philippines

Supreme CourtManila

 

SECOND DIVISION  C. PLANAS COMMERCIAL   G.R. No. 144619and/or MARCIAL COHU,                                 Petitioners,   Present:  

   

              - versus -     *PUNO, Chairman,        AUSTRIA-MARTINEZ,        CALLEJO, SR.,NATIONAL LABOR RELATIONS       TINGA, andCOMMISSION (Second Division),   **CHICO-NAZARIO, JJ.ALFREDO OFIALDA,    DIOLETO MORENTE   Promulgated:and RUDY ALLAUIGAN,                                 Respondents.        November 11, 2005

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

D E C I S I O N  

AUSTRIA-MARTINEZ, J.: 

 

Before us is a petition for review on certiorari filed by C. Planas Commercial and/or

Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA) dated January

19, 2000[1] which affirmed in toto the decision of the National Labor Relations Commission

(NLRC) and the Resolution dated August 15, 2000[2]denying petitioners’ motion for

reconsideration.

On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private

respondents) together with 5 others[3] filed a complaint for underpayment of wages, nonpayment

of overtime pay, holiday pay, service incentive leave pay and premium pay for holiday and rest

day and night shift differential against petitioners with the Arbitration Branch of the NLRC. 

The case was docketed as NLRC Case No. 00-09-05804-93.[4]

 

In their position paper, private respondents alleged that petitioner Cohu, owner of  C.

Planas Commercial, is engaged in wholesale of plastic products and fruits of different kinds

with more than 24 employees; that private respondents were hired by petitioners on January 14,

1990, May 14, 1990 and July 1, 1991, respectively, as helpers/laborers; that they were paid

below the minimum wage law for the past 3 years; that they were required to work for more

than 8 hours a day without overtime pay; that they never enjoyed holiday pay and did not have a

rest day as they worked for 7 days a week; and they were not paid service incentive leave pay

although they had been working for more than one year.  Private respondent Ofialda asked for

night shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more than

one year.   

 

Petitioners filed their comment admitting that private respondents were their helpers who

used to accompany the delivery trucks and helped in the loading and unloading of merchandise

being distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that

private respondents stopped working with petitioners sometime in September 1993 as they were

already working in other establishments/stalls in Divisoria; that they only worked for 6 days a

week; that they were not entitled to holiday and service incentive leave pays for they were

employed in a retail and service establishment regularly employing less than ten workers.   

On December 6, 1994, a decision[5] was rendered by the Labor Arbiter dismissing private

respondents’ money claims for lack of factual and legal basis.  He made the following findings: The basic issue raised before us is whether or not complainants are entitled to

the money claims. The rule in this jurisdiction is that employers who are regularly employing not

more than ten workers in retail establishments are exempt from the coverage of the minimum wage law.

 In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules

of Court, it is incumbent upon the party to support affirmative allegation that an employer regularly employs more than ten (10) workers.

 In the case at bar, complainants failed to substantiate their claim that the

respondent establishment regularly employs twenty (sic) (24) workers. Accordingly, we have no factual basis to grant salary differentials to

complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of the Implementing Rules of the Labor Code, complainants are not entitled to legal holiday pay and service incentive leave pay.

 We also do not have sufficient factual basis to award overtime pay and

premium pay for holiday and rest day because complainants failed to substantiate that they rendered overtime and during rest days.[6]

  

Private respondents filed their appeal with the NLRC which was opposed by petitioners. 

However, pending the appeal, private respondents Morente[7] and Allauigan[8] filed their

respective motions to dismiss with release and quitclaim before the NLRC.

 

On September 30, 1997, the NLRC rendered its decision,[9] the dispostive portion of

which reads: WHEREFORE,  in view of all the foregoing considerations, the decision

appealed from should be, as it is hereby, MODIFIED by directing the respondent to pay Alfredo Ofialda, Diolito Morente and Rudy Allauigan the total amount of

Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00) representing their combined salary differentials, holiday pay, and service incentive leave pay.  

  

The NLRC made the following ratiocinations: … On claims for underpayment/non-payment of legally mandated wages and

fringe benefits where exemption from coverage of the minimum wage law is put up as a defense, he who invokes such an exemption (usually the employer) has the burden of showing the basis for the exemption like for instance the fact of employing regularly less than ten workers.

 In the instant case, complainants alleged that despite employing more than

twenty-four (24) workers in his establishment,  hence covered by the minimum wage law, nevertheless the individual respondent did not pay his workers the legal rates and benefits due them since their employment.  By way of answer, respondents countered that they employ less than ten (10) persons, hence the money claims of complainants lack factual and legal basis.             Stated differently, against complainants’ charge of underpayment in wages and non-payment of fringe benefits legally granted to them, the respondents raised the defense of exemption from coverage of the minimum wage law and in support thereof alleged that they regularly employed less than ten (10) workers to serve as basis for their exemption under the law, they (respondents) must prove that they employed less than ten workers, instead of more than twenty-four (24) workers as alleged by the complainants.             However, apart from their allegation, respondents presented no evidence to show the number of workers they employed regularly.  This failure is fatal to respondents’ defense.  This in turn brings us to the question of whether the complainants were underpaid and unpaid of legal holiday pay and service incentive leave pay due them.             Stated earlier are the different amounts that each complainant was receiving by way of salary on certain periods of their employment with respondents, which amounts according to complainants are “way below the minimum wage then prevailing.”  Considering that respondents failed to present the payrolls or vouchers which could prove otherwise, the money claims deserve favorable consideration.             Taking note of the 3 year prescription, the period covered is from September 14, 1990 to September 14, 1993 when the instant case was filed, and based on a 6-day work per week, the underpayment (salary differential), legal holiday pay, and service incentive leave pay due to complainants, as computed, are as follows:   

  Salary Diff. Holiday Pay SILP1. A. OFIALDA          

P14,934.00              P2,362.00            P1,180.00

2. D. MORENTE           

23,964.00                3,258.00              1,730.00

3. R. ALLAUIGAN        22,609.00                3,258.00              1,730.00           

With respect to the other claims, i.e., overtime pay and premium pay for holiday and rest day, We find no reason to disturb the Labor Arbiter’s ruling thereon,

that there is no sufficient factual basis to award the claims because complainants failed to substantiate that they rendered overtime and during rest days. These claims, unlike claims for underpayment and non-payment of fringe benefits mandated by law, need to be proven by the claimants.[10]

       

Petitioners filed a petition for certiorari[11] with prayer for temporary restraining order

and preliminary injunction before this Court on November 26, 1997.  Respondents were

required to file their Comment but only public respondent NLRC, through the Solicitor General,

complied therewith.  In a Resolution dated June 28, 1999,[12] the petition was referred to the CA

pursuant to our ruling in St. Martin Funeral Homes vs. NLRC.

 

On January 19, 2000,[13] the CA denied the petition for lack of merit and affirmed in

toto the NLRC decision.  It said: 

Having claimed exemption from the coverage of the minimum wage laws or order, it was incumbent upon petitioner to prove such claim.  Apart from simply denying private respondents’ allegation that it employs more than 24 workers in its business, petitioner failed to adduce evidence to prove that it is, indeed, a “retail establishment” which employs less than ten (10) employees. Its failure to present records of its workers and their respective wages gives rise to the presumption that these are adverse to its claims.  Indeed, it is hard to believe that petitioner does not keep such records.  More so, considering private respondents claim that petitioner “employs more than  twenty four (24) employees and engaged in both wholesale and retail business of fruits by volume on CONTAINER BASIS, not by price of fruit, but by container size retail, involving millions of pesos capital, fruits coming from China, Australia and the United States” (p. 170, Rollo).

 Needless to say, the inclusion of respondents Morente and Allauigan in the

NLRC award is in order.  In its decision, public respondent awarded P75,125.00, representing the combined salary differentials, holiday pay and service incentive leave pay of all three (3) private respondents.  Of this, P28,952.00 is earmarked for respondent Morente, and P27,597.00 for respondent Allauigan, both of whom executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from petitioner.

 On this score, the Court quotes with approval the arguments advanced by the

Solicitor General thus: 

While a compromise agreement or amicable settlement is not against public policy per se it must be shown however that it was “voluntarily entered into and represents a reasonable settlement, and the consideration for the quitclaim is credible and reasonable” (Santiago v. NLRC, 198 SCRA 111 [1991]).  For the law usually looks with disfavor upon quitclaims and releases executed by employees usually resulting from a compromise with their employers.  (Velasco v. DOLE, 200 SCRA 201 [1991]).  This is so because the employers and the employees obviously do not stand on equal footing.  Driven against the wall by the employer, the employee is in no position to resist the money offered.  (Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).                     Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:

 In the absence of any showing that the compromise settlement and

the quitclaims and releases entered into and made by the employees were free, fair and reasonable- especially as to the amount or consideration given by the employer in exchange therefore, the fact that they executed the same and received their monetary benefits thereunder does not militate against them.  The Law does not consider as valid any agreement to receive less compensation than what a worker is entitled to receive. 

 In the case at bar, it will be noticed that the vouchers dated September 13, 1995 and September 20, 1996 (pp. 194 and 197, NLRC Record), submitted by petitioners (pp. 191-192, Record), show that private respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to receiveP28,952.00 and P27,597.00, respectively.  Under the circumstances, subject compromise settlements cannot be considered valid and binding upon the NLRC as they do not represent fair and reasonable settlements, nor do they demonstrate voluntariness on the part of private respondents Morente and Allauigan.  These employees should still be paid the full amounts of their salary differentials, holiday pay and service incentive leave pay less the amounts they had already received under the compromise settlements with petitioners (pp. 174-175, Rollo).            Parenthetically, the Court notes that petitioner availed itself of this remedy

without first seeking a reconsideration of the assailed decision.  As a general rule, certiorari will not lie unless an inferior court, has through a motion for reconsideration, a chance to correct the errors imputed to it. While the rule admits of exceptions, petitioner has not shown any reason for this Court not to apply said rule, which would have justified outright dismissal of the petition were it not for the Court’s desire to resolve the case not on a technicality but on the merits.[14]    

  

Petitioners’ motion for reconsideration was denied in a Resolution dated August 15,

2000.[15]

 

Hence, the instant petition for review on certiorari filed by petitioners. 

 

Petitioners insist that C. Planas Commercial is a retail establishment principally engaged

in the sale of plastic products and fruits to the customers for personal use, thus exempted from

the application of the minimum wage law; that it merely leases and occupies a stall in the

Divisoria Market and the level of its business activity requires and sustains only less than ten

employees at a time.  Petitioners contend that private respondents were paid over and above the

minimum wage required for a retail establishment, thus the Labor Arbiter is correct in ruling

that private respondents’ claim for underpayment has no factual and legal basis.  Petitioners

claim that since private respondents alleged that petitioners employed 24 workers, it was

incumbent upon them to prove such allegation which private respondents failed to do.  

 

Petitioners also contend that the CA erred in applying strictly the rules of evidence

against them by holding that it was incumbent upon them to prove that their company is

exempted from the minimum wage law.  They contend that they could not present records of

their workers and their respective wages because by the very nature of their business, the

system of management is very loose and informal, thus salaries and wages are paid by merely

handing the money to the worker without the latter being required to sign anything as proof of

receipt.  Thus, it would be unreasonable to insist upon petitioner to present documents that they

do not possess or keep in the first place.     

 

We are not persuaded.

 

R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory

minimum wage rate of all workers and employees in the private sector.  Section 4 of the Act

provides for exemption from the coverage, thus: 

Sec. 4. 

. . .(c) Exempted from the provisions of this Act are household or domestic helpers

and persons employed in the personal service of another, including family drivers. Retail/service establishments regularly employing not more than ten (10)

workers may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission.  Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board.

 In the event that applications for exemptions are not granted, employees shall

receive the appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per month retroactive to the effectivity of this Act.

  

Clearly, for a retail/service establishment to be exempted from the coverage of the

minimum wage law, it must be shown that the establishment is regularly employing not more

than ten (10) workers and had applied for exemptions with and as determined by the appropriate

Regional Board in accordance with the applicable rules and regulations issued by the

Commission.  Petitioners’ main defense in controverting private respondents’ claim for

underpayment of wages is that they are exempted from the application of the minimum wage

law, thus the burden of proving[16] such exemption rests on petitioners.  Petitioners had not

shown any evidence to show that they had applied for such exemption and if they had applied,

the same was granted.

 

 In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that petitioners

therein are not entitled to service incentive leave pay inasmuch as establishment employing less

than ten (10) employees are exempted by the Labor Code and the Implementing Rules from

paying service incentive leave pay, we held:      

…..the clear policy of the Labor Code is to include all establishments, except a few classes, under the coverage of the provision granting service incentive leave to workers.  Private respondents' claim is that they fell within the exception.  Hence, it was incumbent upon them to prove that they belonged to a class excepted by law from the general rule.  Specifically, it was the duty of respondents, not of petitioners, to prove that there were less than ten (10) employees in the company.  Having failed to discharge its task, private respondents must be deemed to be covered by the general rule, notwithstanding the failure of petitioners to allege the exact number of employees of the corporation.  In other words, petitioners must be deemed entitled to service incentive leave.[18]

  

Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners are also

involved in a case filed by one of its employees, we ruled:Petitioners invoke the exemption provided by law for retail establishments

which employ not more than ten (10) workers to justify their non-liability for the salary differentials in question.  They insist that PLANAS is a retail establishment leasing a very small and cramped stall in the Divisoria market which cannot accommodate more than ten (10) workers in the conduct of its business.

We are unconvinced.  The records disclose de los Reyes' clear entitlement to salary differentials.  Well-settled is the rule that factual findings of labor officials who are deemed to have acquired expertise in matters within their jurisdiction are generally accorded not only respect but even finality and bind this Court when supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.  Thus, as long as their decisions are devoid of any unfairness or arbitratriness in the process of their deduction from the evidence proferred by the parties before them, all that is left is our stamp of finality by affirming the factual findings made by them.  In this case, the award of salary differentials by the NLRC in favor of de los Reyes was made pursuant to RA 6727 otherwise known as the Wage Rationalization Act, and the Rules Implementing Wage Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.

 Petitioners claim exemption under the aforestated law.  However, the best proof

that they could have adduced was their approved application for exemption in accordance with applicable guidelines issued by the Commission.  Section 4, subpar. (c) of RA 6727 categorically provides:

 Retail/service establishments regularly employing not more than ten (10) workers

may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission.  Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board.  In the event that applications for exemptions are not granted, employees shall receive the appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per month retroactive to the effectivity of this Act (emphasis supplied). Extant in the records is the fact that petitioners had persistently raised the

matter of their exemption from any liability for underpayment without substantiating it by showing compliance with the aforecited provision of law.  It bears stressing that the NLRC affirmed the Labor Arbiter’s award of salary differentials due to

underpayment on the ground that de los Reyes' claim therefor was not even denied or rebutted by petitioners.

 More importantly, NLRC correctly upheld the Labor Arbiter's finding

that PLANAS employed around thirty (30) workers.  We have every reason to believe that petitioners need at least thirty (30) persons to conduct their business considering that Manager Cohu did not submit any employment record to prove otherwise.  As employer, Manager Cohu ought to be the keeper of the employment records of all his workers.  Thus, it was well within his means to refute any monetary claim alleged to be unpaid.  His inability to produce the payrolls from their files without any satisfactory explanation can be interpreted no less as suppression of vital evidence adverse to PLANAS.

            Petitioners aver that the CA erred in ruling that private respondents Morente and

Allauigan are still entitled to monetary awards despite the latter’s execution of release and

quitclaims because the settlement was not voluntarily entered into by private respondents.  

Petitioners insist that both private respondents Morente and Allauigan voluntarily entered into

an amicable settlement with them on September 17 and 18, 1995, respectively; that they were

the ones who initiated the talks for settlement and who pegged the amount; that they both

voluntarily appeared before the Labor Arbiter to move for the dismissal of their case insofar as

their claims are concerned as well as submitted to the Labor Arbiter their respective quitclaims

and releases which were duly subscribed before the Labor Arbiter and duly notarized.

 

          We find merit in petitioners’ argument.

 

It has been held that not all quitclaims are per se invalid or against public policy, except

(1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible

person, or (2) where the terms of settlement are unconscionable on their face.   In these cases,

the law will step in to annul the questionable transactions.[20]  Such quitclaim and release

agreements are regarded as ineffective to bar the workers from claiming the full measure of

their legal rights.[21]

 

We find these two instances not present in private respondents Allauigan and Morente’s

case.  They failed to refute petitioners’ allegation that the settlement was voluntarily made as

they had not filed any pleadings before the CA.  Notably, we have required private respondents

to file their comment on the instant petition, however, they failed to do so.  They were then

required to show cause why they should not be disciplinarily dealt with or held in contempt. [22] 

However, they still failed to file their comment, thus, they were imposed a fine

of P1,000.00[23] which was subsequently increased to P2,000.00 as there was still no

compliance.  In a Resolution dated July 22, 2002, the Court ordered the National Bureau of

Investigation to arrest and detain private respondents and the private respondents to file their

comment.[24]  As private respondents could not be located at their given address and they are not

known in their locality, the order of arrest and commitment was returned unserved, [25] thus the

Court required the Office of the Solicitor General to file the comment in behalf of all the

respondents.[26]  The Court finds such inaction on the part of private respondents Allauigan and

Morente an indication that they already relented in their claims and gives credence to

petitioners’ claim that they had voluntarily executed the release and quitclaim and the motion to

dismiss.   

 

          The CA found that the subject compromise agreements are  not valid considering that

they did not represent the fair and reasonable settlements, i.e., that private respondent Allauigan

was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to

receive P28,952.00 and P27,597.00, respectively.

 

We do not agree.  It bears stressing that at the time of the execution of the release and

quitclaim, the case filed by private respondents against petitioners was already dismissed by the

Labor Arbiter and it was pending appeal before the NLRC.  Private respondents could have

executed the release and quitclaim because of a possibility that their appeal with the NLRC may

not be successful.  Since there was yet no decision rendered by the NLRC when the quitclaims

were executed, it could not be said that the amount of the settlement is unconscionable.   In any

event, no deception has been established that would justify the annulment of private

respondents quitclaims.[27]  In Mercer vs. NLRC,[28] we held that: 

In Samaniego v. NLRC, we ruled that: “A quitclaim executed in favor of a company by an employee amounts to a valid and binding compromise agreement between them."

 Recently, we held that in the absence of any showing that petitioner was

"coerced or tricked" into signing the above-quoted Quitclaim and Release or that the consideration thereof was very low, she is bound by the conditions thereof.

  

          As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment

of P14,934.00 as salary differential, P2,362.00 as legal holiday pay andP1,180.00 as service

incentive leave pay, all in the total amount of P18,476.00.

 

          WHEREFORE, the petition is PARTLY GRANTED.  The Decision of the Court of

Appeals dated January 19, 2000 and its Resolution dated August 15, 2000

are AFFIRMED with MODIFICATION that petitioners are ordered to pay private respondent

Alfredo Ofialda the total amount of P18,476.00 and the monetary awards in favor of private

respondents Rudy Allauigan and Dioleto Morente are hereby DELETED.     

 

          SO ORDERED. 

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-12444             February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners, vs.CEBU SEAMEN'S ASSOCIATION, INC., respondent.

Pedro B. Uy Calderon for petitioners.Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine coastwise transportation, employing therein several steamships of Philippine registry. They had a collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September 12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No. 740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay; that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and officers were not required to pay their meals and that because Captain Carlos Asensi had refused to yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.The petitioners' shipping companies, answering, averred that very much below 30 of the men and officers in their employ were members of the respondent union; that the work on board a vessel is one of comparative ease; that petitioners have suffered financial losses in the operation of their vessels and that there is no law which provides for the payment of sick leave or vacation leave to employees or workers of private firms; that as regards the claim for overtime pay, the petitioners have always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the fact that it does not apply to those who provide means of transportation; that the shipowners and operators in Cebu were paying the salaries of their officers and men, depending upon the margin of profits they could realize and other factors or circumstances of the business; that in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the contract between said officer and the petitioners, his services were terminated.A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual findings of the Court of Industrial Relations should not be disturbed, if supported by substantial evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.

1. First assignment of error. — The respondent court erred in holding that it had jurisdiction over case No. 740-V, notwithstanding the fact that those who had dispute with the petitioners, were less than thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in case No. 740-V, respondent Union had more than thirty members actually working with the companies, and the court declared itself with jurisdiction to take cognizance of the case. Against this order, the herein petitioners did not file a motion for reconsideration or a petition for certiorari. The finding of fact made by the CIR became final and conclusive, which We are not now authorized to alter or modify. It is axiomatic that once the CIR had acquired jurisdiction over a case, it continues to have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of the Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the time of the filing of the petition, the respondent union had a total membership of 159, working with the herein petitioners, who were presumed interested in or would be benefited by the outcome of the case (NAMARCO v. CIR, L-

17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the contention of herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only 7 witnesses testified, does not warrant the conclusion that the employees who had some dispute with the present petitioners were less than 30. The ruling of the CIR, with respect to the question of jurisdiction is, therefore, correct.

2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping articles, the herein petitioners have bound themselves to supply the crew with provisions and with such "daily subsistence as shall be mutually agreed upon" between the master and the crew, no deductions for meals could be made by the aforesaid petitioners from their wages or salaries.

3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule, which section 19 thereof is the exception, the cost of said meals may not be legally deducted from the wages or salaries of the aforesaid crew members by the herein petitioners.

4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of meals from the wages or salaries after August 4, 1951, is illegal and same should be reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's business, all the crew of their vessels have been signing "shipping articles" in which are stated opposite their names, the salaries or wages they would receive. All seamen, whether members of the crew or deck officers or engineers, have been furnished free meals by the ship owners or operators. All the shipping articles signed by the master and the crew members, contained, among others, a stipulation, that "in consideration of which services to be duly performed, the said master hereby agrees to pay to the said crew, as wages, the sums against their names respectively expressed in the contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b], shipping articles), and during the duration of the contract "the master of the vessel will provide each member of the crewsuch daily subsistence as shall be mutually agreed daily upon between said master and crew; or, in lieu of such subsistence the crew may reserve the right to demand at the time of execution of these articles that adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of the respective salaries or wages, set opposite the names of the crew members, the petitioners bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which include food.This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After this date, however, the companies began deducting the cost of meals from the wages or salaries of crew members; but no such deductions were made from the salaries of the deck officers and engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges on the legality of such deductions. While the petitioners herein contend that the deductions are legal and should not be reimbursed to the respondent union, the latter, however, claims that same are illegal and reimbursement should be made.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

We hold that such deductions are not authorized. In the coastwise business of transportation of passengers and freight, the men who compose the complement of a vessel are provided with free meals by the shipowners, operators or agents, because they hold on to their work and duties, regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk ahead in the midst of the high seas."

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —

(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of any interested party result in a different determination of the fair and reasonable value, the furnishing of meals shall be valued at not more than thirty centavos per meal for agricultural employees and not more than fortycentavos for any other employees covered by this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily

for agricultural workers and not more than forty centavos daily for other employees covered by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees, Congress took into account the meals furnished by employers and that in fixing the rate of forty centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the daily wage, otherwise, no rate for meals should have been provided.

However, section 19, same law, states —

SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an employee of the right to seek fair wages, shorter working hours and better working conditions nor justify an employer in violating any other labor law applicable to his employees, in reducing the wage now paid to any of his employees in excess of the minimum wage established under this Act, or in reducing supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f) and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are no supplements given, within the meaning and contemplation of section 19, but merely facilities, section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized. And even if there is such a conflict, the respondent CIR should resolve the same in favor of the safety and decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew members in question, were mere "facilities" which should be deducted from wages, and not "supplements" which, according to said section 19, should not be deducted from such wages, because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined as follows —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. "Facilities", on the other hand, are items of expense necessary for the laborer's and his family's existence and subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind of the benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering, therefore, as definitely found by the respondent court that the meals were freely given to crew members prior to August 4, 1951, while they were on the high seas "not as part of their wages but as a necessary matter in the maintenance of the health and efficiency of the crew personnel during the voyage", the deductions therein made for the meals given after August 4, 1951, should be returned to them, and the operator of the coastwise vessels affected should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27, 1955, the company used to pay to its drivers and conductors, who were assigned outside of the City limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food. Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the company. The order CIR to the company to continue granting this privilege, was upheld by this Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep. Act No. 602, is of no moment, because such circumstance was already taken into consideration by Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily furnished by the employer to the employees. If We are to follow the theory of the herein petitioners, then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum

wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will adversely affect said crew member. Such interpretation does not conform with the avowed intention of Congress in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to pay for their meals or food, while the deck officers and marine engineers receiving higher pay and provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31, 1955).

Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444; in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito; and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have worked overtime and had not been paid for such services. Severino Pepito categorically stated that he worked during the late hours of the evening and during the early hours of the day when the boat docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa), are incompetent and unreliable. And considering the established fact that the work of Severino Pepito was continuous, and during the time he was not working, he could not leave and could not completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444, which states "When the work is not continuous, the time during which the laborer is not working and can leave his working place and can rest completely shall not be counted", find no application in his case.

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi to his former position, considering the fact that said officer had been employed since January 9, 1953, as captain of a vessel belonging to another shipping firm in the City of Cebu.

The CIR held —

Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and that his failure to report for work is not sufficient cause for his absolute dismissal, respondents are hereby ordered to reinstate him to his former job without back salary but under the same terms and conditions of employment existing prior to his lay-off, without loss of seniority and other benefits already acquired by him prior to March 20, 1952. This Court is empowered to reduce the punishment meted out to an erring employee (Standard Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new trial, and in overruling petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid defense and the same is based on three orders of the WAS (Wage Administration Service), dated November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The motion for new trial is without merit. Having the said wage Orders in their possession, while the case was pending decision, it was not explained why the proper move was not taken to introduce them before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation of meals and facilities, are irrelevant to the present issue, it having been found and held that the meals or food in question are not facilities but supplements. The original petition in the CIR having been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to express its views on the matter. At any rate, the admission of the three wage orders have not altered the decision reached in this case.

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.

Wages

Republic of the PhilippinesSupreme Court

Manila 

SECOND DIVISION  C. PLANAS COMMERCIAL   G.R. No. 144619and/or MARCIAL COHU,                                 Petitioners,   Present:  

   

              - versus -     *PUNO, Chairman,        AUSTRIA-MARTINEZ,        CALLEJO, SR.,NATIONAL LABOR RELATIONS       TINGA, andCOMMISSION (Second Division),   **CHICO-NAZARIO, JJ.ALFREDO OFIALDA,    DIOLETO MORENTE   Promulgated:and RUDY ALLAUIGAN,                                 Respondents.        November 11, 2005

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

D E C I S I O N  

AUSTRIA-MARTINEZ, J.: 

 

Before us is a petition for review on certiorari filed by C. Planas Commercial and/or

Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA) dated January

19, 2000[1] which affirmed in toto the decision of the National Labor Relations Commission

(NLRC) and the Resolution dated August 15, 2000[2]denying petitioners’ motion for

reconsideration.

On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private

respondents) together with 5 others[3] filed a complaint for underpayment of wages, nonpayment

of overtime pay, holiday pay, service incentive leave pay and premium pay for holiday and rest

day and night shift differential against petitioners with the Arbitration Branch of the NLRC. 

The case was docketed as NLRC Case No. 00-09-05804-93.[4]

 

In their position paper, private respondents alleged that petitioner Cohu, owner of  C.

Planas Commercial, is engaged in wholesale of plastic products and fruits of different kinds

with more than 24 employees; that private respondents were hired by petitioners on January 14,

1990, May 14, 1990 and July 1, 1991, respectively, as helpers/laborers; that they were paid

below the minimum wage law for the past 3 years; that they were required to work for more

than 8 hours a day without overtime pay; that they never enjoyed holiday pay and did not have a

rest day as they worked for 7 days a week; and they were not paid service incentive leave pay

although they had been working for more than one year.  Private respondent Ofialda asked for

night shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more than

one year.   

 

Petitioners filed their comment admitting that private respondents were their helpers who

used to accompany the delivery trucks and helped in the loading and unloading of merchandise

being distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that

private respondents stopped working with petitioners sometime in September 1993 as they were

already working in other establishments/stalls in Divisoria; that they only worked for 6 days a

week; that they were not entitled to holiday and service incentive leave pays for they were

employed in a retail and service establishment regularly employing less than ten workers.   

On December 6, 1994, a decision[5] was rendered by the Labor Arbiter dismissing private

respondents’ money claims for lack of factual and legal basis.  He made the following findings: The basic issue raised before us is whether or not complainants are entitled to

the money claims. The rule in this jurisdiction is that employers who are regularly employing not

more than ten workers in retail establishments are exempt from the coverage of the minimum wage law.

 In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules

of Court, it is incumbent upon the party to support affirmative allegation that an employer regularly employs more than ten (10) workers.

 In the case at bar, complainants failed to substantiate their claim that the

respondent establishment regularly employs twenty (sic) (24) workers. Accordingly, we have no factual basis to grant salary differentials to

complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of the Implementing Rules of the Labor Code, complainants are not entitled to legal holiday pay and service incentive leave pay.

 We also do not have sufficient factual basis to award overtime pay and

premium pay for holiday and rest day because complainants failed to substantiate that they rendered overtime and during rest days.[6]

  

Private respondents filed their appeal with the NLRC which was opposed by petitioners. 

However, pending the appeal, private respondents Morente[7] and Allauigan[8] filed their

respective motions to dismiss with release and quitclaim before the NLRC.

 

On September 30, 1997, the NLRC rendered its decision,[9] the dispostive portion of

which reads: WHEREFORE,  in view of all the foregoing considerations, the decision

appealed from should be, as it is hereby, MODIFIED by directing the respondent to pay Alfredo Ofialda, Diolito Morente and Rudy Allauigan the total amount of Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00) representing their combined salary differentials, holiday pay, and service incentive leave pay.  

  

The NLRC made the following ratiocinations: … On claims for underpayment/non-payment of legally mandated wages and

fringe benefits where exemption from coverage of the minimum wage law is put up as a defense, he who invokes such an exemption (usually the employer) has the burden of showing the basis for the exemption like for instance the fact of employing regularly less than ten workers.

 In the instant case, complainants alleged that despite employing more than

twenty-four (24) workers in his establishment,  hence covered by the minimum wage law, nevertheless the individual respondent did not pay his workers the legal rates and benefits due them since their employment.  By way of answer, respondents countered that they employ less than ten (10) persons, hence the money claims of complainants lack factual and legal basis.             Stated differently, against complainants’ charge of underpayment in wages and non-payment of fringe benefits legally granted to them, the respondents raised the defense of exemption from coverage of the minimum wage law and in support thereof alleged that they regularly employed less than ten (10) workers to serve as basis for their exemption under the law, they (respondents) must prove that they employed less than ten workers, instead of more than twenty-four (24) workers as alleged by the complainants.             However, apart from their allegation, respondents presented no evidence to show the number of workers they employed regularly.  This failure is fatal to respondents’ defense.  This in turn brings us to the question of whether the complainants were underpaid and unpaid of legal holiday pay and service incentive leave pay due them.             Stated earlier are the different amounts that each complainant was receiving by way of salary on certain periods of their employment with respondents, which amounts according to complainants are “way below the minimum wage then prevailing.”  Considering that respondents failed to present the payrolls or vouchers which could prove otherwise, the money claims deserve favorable consideration.             Taking note of the 3 year prescription, the period covered is from September 14, 1990 to September 14, 1993 when the instant case was filed, and based on a 6-day work per week, the underpayment (salary differential), legal holiday pay, and service incentive leave pay due to complainants, as computed, are as follows:   

  Salary Diff. Holiday Pay SILP1. A. P14,934.00              P2,362.00            P1,180.00

OFIALDA          2. D. MORENTE           

23,964.00                3,258.00              1,730.00

3. R. ALLAUIGAN        22,609.00                3,258.00              1,730.00           

With respect to the other claims, i.e., overtime pay and premium pay for holiday and rest day, We find no reason to disturb the Labor Arbiter’s ruling thereon, that there is no sufficient factual basis to award the claims because complainants failed to substantiate that they rendered overtime and during rest days. These claims, unlike claims for underpayment and non-payment of fringe benefits mandated by law, need to be proven by the claimants.[10]

       

Petitioners filed a petition for certiorari[11] with prayer for temporary restraining order

and preliminary injunction before this Court on November 26, 1997.  Respondents were

required to file their Comment but only public respondent NLRC, through the Solicitor General,

complied therewith.  In a Resolution dated June 28, 1999,[12] the petition was referred to the CA

pursuant to our ruling in St. Martin Funeral Homes vs. NLRC.

 

On January 19, 2000,[13] the CA denied the petition for lack of merit and affirmed in

toto the NLRC decision.  It said: 

Having claimed exemption from the coverage of the minimum wage laws or order, it was incumbent upon petitioner to prove such claim.  Apart from simply denying private respondents’ allegation that it employs more than 24 workers in its business, petitioner failed to adduce evidence to prove that it is, indeed, a “retail establishment” which employs less than ten (10) employees. Its failure to present records of its workers and their respective wages gives rise to the presumption that these are adverse to its claims.  Indeed, it is hard to believe that petitioner does not keep such records.  More so, considering private respondents claim that petitioner “employs more than  twenty four (24) employees and engaged in both wholesale and retail business of fruits by volume on CONTAINER BASIS, not by price of fruit, but by container size retail, involving millions of pesos capital, fruits coming from China, Australia and the United States” (p. 170, Rollo).

 Needless to say, the inclusion of respondents Morente and Allauigan in the

NLRC award is in order.  In its decision, public respondent awarded P75,125.00, representing the combined salary differentials, holiday pay and service incentive leave pay of all three (3) private respondents.  Of this, P28,952.00 is earmarked for respondent Morente, and P27,597.00 for respondent Allauigan, both of whom executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from petitioner.

 On this score, the Court quotes with approval the arguments advanced by the

Solicitor General thus: 

While a compromise agreement or amicable settlement is not against public policy per se it must be shown however that it was “voluntarily entered into and represents a reasonable settlement, and the consideration for the quitclaim is credible and reasonable” (Santiago v. NLRC, 198 SCRA 111 [1991]).  For the law usually looks with disfavor upon quitclaims and releases executed by employees usually resulting from a compromise with their employers.  (Velasco v. DOLE, 200

SCRA 201 [1991]).  This is so because the employers and the employees obviously do not stand on equal footing.  Driven against the wall by the employer, the employee is in no position to resist the money offered.  (Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).                     Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates: 

In the absence of any showing that the compromise settlement and the quitclaims and releases entered into and made by the employees were free, fair and reasonable- especially as to the amount or consideration given by the employer in exchange therefore, the fact that they executed the same and received their monetary benefits thereunder does not militate against them.  The Law does not consider as valid any agreement to receive less compensation than what a worker is entitled to receive. 

 In the case at bar, it will be noticed that the vouchers dated September 13, 1995 and September 20, 1996 (pp. 194 and 197, NLRC Record), submitted by petitioners (pp. 191-192, Record), show that private respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to receiveP28,952.00 and P27,597.00, respectively.  Under the circumstances, subject compromise settlements cannot be considered valid and binding upon the NLRC as they do not represent fair and reasonable settlements, nor do they demonstrate voluntariness on the part of private respondents Morente and Allauigan.  These employees should still be paid the full amounts of their salary differentials, holiday pay and service incentive leave pay less the amounts they had already received under the compromise settlements with petitioners (pp. 174-175, Rollo).            Parenthetically, the Court notes that petitioner availed itself of this remedy

without first seeking a reconsideration of the assailed decision.  As a general rule, certiorari will not lie unless an inferior court, has through a motion for reconsideration, a chance to correct the errors imputed to it. While the rule admits of exceptions, petitioner has not shown any reason for this Court not to apply said rule, which would have justified outright dismissal of the petition were it not for the Court’s desire to resolve the case not on a technicality but on the merits.[14]    

  

Petitioners’ motion for reconsideration was denied in a Resolution dated August 15,

2000.[15]

 

Hence, the instant petition for review on certiorari filed by petitioners. 

 

Petitioners insist that C. Planas Commercial is a retail establishment principally engaged

in the sale of plastic products and fruits to the customers for personal use, thus exempted from

the application of the minimum wage law; that it merely leases and occupies a stall in the

Divisoria Market and the level of its business activity requires and sustains only less than ten

employees at a time.  Petitioners contend that private respondents were paid over and above the

minimum wage required for a retail establishment, thus the Labor Arbiter is correct in ruling

that private respondents’ claim for underpayment has no factual and legal basis.  Petitioners

claim that since private respondents alleged that petitioners employed 24 workers, it was

incumbent upon them to prove such allegation which private respondents failed to do.  

 

Petitioners also contend that the CA erred in applying strictly the rules of evidence

against them by holding that it was incumbent upon them to prove that their company is

exempted from the minimum wage law.  They contend that they could not present records of

their workers and their respective wages because by the very nature of their business, the

system of management is very loose and informal, thus salaries and wages are paid by merely

handing the money to the worker without the latter being required to sign anything as proof of

receipt.  Thus, it would be unreasonable to insist upon petitioner to present documents that they

do not possess or keep in the first place.     

 

We are not persuaded.

 

R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory

minimum wage rate of all workers and employees in the private sector.  Section 4 of the Act

provides for exemption from the coverage, thus: 

Sec. 4. 

. . .(c) Exempted from the provisions of this Act are household or domestic helpers

and persons employed in the personal service of another, including family drivers. Retail/service establishments regularly employing not more than ten (10)

workers may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission.  Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board.

 In the event that applications for exemptions are not granted, employees shall

receive the appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per month retroactive to the effectivity of this Act.

  

Clearly, for a retail/service establishment to be exempted from the coverage of the

minimum wage law, it must be shown that the establishment is regularly employing not more

than ten (10) workers and had applied for exemptions with and as determined by the appropriate

Regional Board in accordance with the applicable rules and regulations issued by the

Commission.  Petitioners’ main defense in controverting private respondents’ claim for

underpayment of wages is that they are exempted from the application of the minimum wage

law, thus the burden of proving[16] such exemption rests on petitioners.  Petitioners had not

shown any evidence to show that they had applied for such exemption and if they had applied,

the same was granted.

 

 In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that petitioners

therein are not entitled to service incentive leave pay inasmuch as establishment employing less

than ten (10) employees are exempted by the Labor Code and the Implementing Rules from

paying service incentive leave pay, we held:      

…..the clear policy of the Labor Code is to include all establishments, except a few classes, under the coverage of the provision granting service incentive leave to workers.  Private respondents' claim is that they fell within the exception.  Hence, it was incumbent upon them to prove that they belonged to a class excepted by law from the general rule.  Specifically, it was the duty of respondents, not of petitioners, to prove that there were less than ten (10) employees in the company.  Having failed to discharge its task, private respondents must be deemed to be covered by the general rule, notwithstanding the failure of petitioners to allege the exact number of employees of the corporation.  In other words, petitioners must be deemed entitled to service incentive leave.[18]

  

Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners are also

involved in a case filed by one of its employees, we ruled:Petitioners invoke the exemption provided by law for retail establishments

which employ not more than ten (10) workers to justify their non-liability for the salary differentials in question.  They insist that PLANAS is a retail establishment leasing a very small and cramped stall in the Divisoria market which cannot accommodate more than ten (10) workers in the conduct of its business.

We are unconvinced.  The records disclose de los Reyes' clear entitlement to salary differentials.  Well-settled is the rule that factual findings of labor officials who are deemed to have acquired expertise in matters within their jurisdiction are generally accorded not only respect but even finality and bind this Court when supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.  Thus, as long as their decisions are devoid of any unfairness or arbitratriness in the process of their deduction from the evidence proferred by the parties before them, all that is left is our stamp of finality by affirming the factual findings made by them.  In this case, the award of salary differentials by the NLRC in favor of de los Reyes was made pursuant to RA 6727 otherwise known as the Wage Rationalization Act, and the Rules Implementing Wage Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.

 Petitioners claim exemption under the aforestated law.  However, the best proof

that they could have adduced was their approved application for exemption in accordance with applicable guidelines issued by the Commission.  Section 4, subpar. (c) of RA 6727 categorically provides:

 Retail/service establishments regularly employing not more than ten (10) workers

may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission.  Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board.  In the event that applications for exemptions are not granted, employees shall receive the appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per month retroactive to the effectivity of this Act (emphasis supplied). 

Extant in the records is the fact that petitioners had persistently raised the matter of their exemption from any liability for underpayment without substantiating it by showing compliance with the aforecited provision of law.  It bears stressing that the NLRC affirmed the Labor Arbiter’s award of salary differentials due to underpayment on the ground that de los Reyes' claim therefor was not even denied or rebutted by petitioners.

 More importantly, NLRC correctly upheld the Labor Arbiter's finding

that PLANAS employed around thirty (30) workers.  We have every reason to believe that petitioners need at least thirty (30) persons to conduct their business considering that Manager Cohu did not submit any employment record to prove otherwise.  As employer, Manager Cohu ought to be the keeper of the employment records of all his workers.  Thus, it was well within his means to refute any monetary claim alleged to be unpaid.  His inability to produce the payrolls from their files without any satisfactory explanation can be interpreted no less as suppression of vital evidence adverse to PLANAS.

            Petitioners aver that the CA erred in ruling that private respondents Morente and

Allauigan are still entitled to monetary awards despite the latter’s execution of release and

quitclaims because the settlement was not voluntarily entered into by private respondents.  

Petitioners insist that both private respondents Morente and Allauigan voluntarily entered into

an amicable settlement with them on September 17 and 18, 1995, respectively; that they were

the ones who initiated the talks for settlement and who pegged the amount; that they both

voluntarily appeared before the Labor Arbiter to move for the dismissal of their case insofar as

their claims are concerned as well as submitted to the Labor Arbiter their respective quitclaims

and releases which were duly subscribed before the Labor Arbiter and duly notarized.

 

          We find merit in petitioners’ argument.

 

It has been held that not all quitclaims are per se invalid or against public policy, except

(1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible

person, or (2) where the terms of settlement are unconscionable on their face.   In these cases,

the law will step in to annul the questionable transactions.[20]  Such quitclaim and release

agreements are regarded as ineffective to bar the workers from claiming the full measure of

their legal rights.[21]

 

We find these two instances not present in private respondents Allauigan and Morente’s

case.  They failed to refute petitioners’ allegation that the settlement was voluntarily made as

they had not filed any pleadings before the CA.  Notably, we have required private respondents

to file their comment on the instant petition, however, they failed to do so.  They were then

required to show cause why they should not be disciplinarily dealt with or held in contempt. [22] 

However, they still failed to file their comment, thus, they were imposed a fine

of P1,000.00[23] which was subsequently increased to P2,000.00 as there was still no

compliance.  In a Resolution dated July 22, 2002, the Court ordered the National Bureau of

Investigation to arrest and detain private respondents and the private respondents to file their

comment.[24]  As private respondents could not be located at their given address and they are not

known in their locality, the order of arrest and commitment was returned unserved, [25] thus the

Court required the Office of the Solicitor General to file the comment in behalf of all the

respondents.[26]  The Court finds such inaction on the part of private respondents Allauigan and

Morente an indication that they already relented in their claims and gives credence to

petitioners’ claim that they had voluntarily executed the release and quitclaim and the motion to

dismiss.   

 

          The CA found that the subject compromise agreements are  not valid considering that

they did not represent the fair and reasonable settlements, i.e., that private respondent Allauigan

was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to

receive P28,952.00 and P27,597.00, respectively.

 

We do not agree.  It bears stressing that at the time of the execution of the release and

quitclaim, the case filed by private respondents against petitioners was already dismissed by the

Labor Arbiter and it was pending appeal before the NLRC.  Private respondents could have

executed the release and quitclaim because of a possibility that their appeal with the NLRC may

not be successful.  Since there was yet no decision rendered by the NLRC when the quitclaims

were executed, it could not be said that the amount of the settlement is unconscionable.   In any

event, no deception has been established that would justify the annulment of private

respondents quitclaims.[27]  In Mercer vs. NLRC,[28] we held that: 

In Samaniego v. NLRC, we ruled that: “A quitclaim executed in favor of a company by an employee amounts to a valid and binding compromise agreement between them."

 Recently, we held that in the absence of any showing that petitioner was

"coerced or tricked" into signing the above-quoted Quitclaim and Release or that the consideration thereof was very low, she is bound by the conditions thereof.

  

          As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment

of P14,934.00 as salary differential, P2,362.00 as legal holiday pay andP1,180.00 as service

incentive leave pay, all in the total amount of P18,476.00.

 

          WHEREFORE, the petition is PARTLY GRANTED.  The Decision of the Court of

Appeals dated January 19, 2000 and its Resolution dated August 15, 2000

are AFFIRMED with MODIFICATION that petitioners are ordered to pay private respondent

Alfredo Ofialda the total amount of P18,476.00 and the monetary awards in favor of private

respondents Rudy Allauigan and Dioleto Morente are hereby DELETED.     

 

          SO ORDERED.

DEDUCTIBILITY OF FACILITIES OR SUPPLEMENTS FROM WAGES

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-12444             February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners, vs.CEBU SEAMEN'S ASSOCIATION, INC., respondent.

Pedro B. Uy Calderon for petitioners.Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine coastwise transportation, employing therein several steamships of Philippine registry. They had a collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September 12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No. 740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay; that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and officers were not required to pay their meals and that because Captain Carlos Asensi had refused to yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.

The petitioners' shipping companies, answering, averred that very much below 30 of the men and officers in their employ were members of the respondent union; that the work on board a vessel is one of comparative ease; that petitioners have suffered financial losses in the operation of their vessels and that there is no law which provides for the payment of sick leave or vacation leave to employees or workers of private firms; that as regards the claim for overtime pay, the petitioners have always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the fact that it does not apply to those who provide means of transportation; that the shipowners and operators in Cebu were paying the salaries of their officers and men, depending upon the margin of profits they could realize and other factors or circumstances of the business; that in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the contract between said officer and the petitioners, his services were terminated.

A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual findings of the Court of Industrial Relations should not be disturbed, if supported by substantial evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.

1. First assignment of error. — The respondent court erred in holding that it had jurisdiction over case No. 740-V, notwithstanding the fact that those who had dispute with the petitioners, were less than thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in case No. 740-V, respondent Union had more than thirty members actually working with the companies, and the court declared itself with jurisdiction to take cognizance of the case. Against this order, the herein petitioners did not file a motion for reconsideration or a petition for certiorari. The finding of fact made by the CIR became final and conclusive, which We are not now authorized to alter or modify. It is axiomatic that once the CIR had acquired

jurisdiction over a case, it continues to have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of the Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the time of the filing of the petition, the respondent union had a total membership of 159, working with the herein petitioners, who were presumed interested in or would be benefited by the outcome of the case (NAMARCO v. CIR, L-17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the contention of herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only 7 witnesses testified, does not warrant the conclusion that the employees who had some dispute with the present petitioners were less than 30. The ruling of the CIR, with respect to the question of jurisdiction is, therefore, correct.

2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping articles, the herein petitioners have bound themselves to supply the crew with provisions and with such "daily subsistence as shall be mutually agreed upon" between the master and the crew, no deductions for meals could be made by the aforesaid petitioners from their wages or salaries.

3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule, which section 19 thereof is the exception, the cost of said meals may not be legally deducted from the wages or salaries of the aforesaid crew members by the herein petitioners.

4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of meals from the wages or salaries after August 4, 1951, is illegal and same should be reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's business, all the crew of their vessels have been signing "shipping articles" in which are stated opposite their names, the salaries or wages they would receive. All seamen, whether members of the crew or deck officers or engineers, have been furnished free meals by the ship owners or operators. All the shipping articles signed by the master and the crew members, contained, among others, a stipulation, that "in consideration of which services to be duly performed, the said master hereby agrees to pay to the said crew, as wages, the sums against their names respectively expressed in the contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b], shipping articles), and during the duration of the contract "the master of the vessel will provide each member of the crewsuch daily subsistence as shall be mutually agreed daily upon between said master and crew; or, in lieu of such subsistence the crew may reserve the right to demand at the time of execution of these articles that adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of the respective salaries or wages, set opposite the names of the crew members, the petitioners bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which include food.

This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After this date, however, the companies began deducting the cost of meals from the wages or salaries of crew members; but no such deductions were made from the salaries of the deck officers and engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges on the legality of such deductions. While the petitioners herein contend that the deductions are legal and should not be reimbursed to the respondent union, the latter, however, claims that same are illegal and reimbursement should be made.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

We hold that such deductions are not authorized. In the coastwise business of transportation of passengers and freight, the men who compose the complement of a vessel are provided with free meals by the shipowners, operators or agents, because they hold on to their work and duties, regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk ahead in the midst of the high seas."

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —

(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of any interested party result in a different determination of the fair and reasonable value, the furnishing of meals shall be valued at not more than thirty centavos per meal for agricultural employees and not more than fortycentavos for any other employees covered by this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily for agricultural workers and not more than forty centavos daily for other employees covered by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees, Congress took into account the meals furnished by employers and that in fixing the rate of forty centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the daily wage, otherwise, no rate for meals should have been provided.

However, section 19, same law, states —

SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an employee of the right to seek fair wages, shorter working hours and better working conditions nor justify an employer in violating any other labor law applicable to his employees, in reducing the wage now paid to any of his employees in excess of the minimum wage established under this Act, or in reducing supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f) and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are no supplements given, within the meaning and contemplation of section 19, but merely facilities, section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized. And even if there is such a conflict, the respondent CIR should resolve the same in favor of the safety and decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew members in question, were mere "facilities" which should be deducted from wages, and not "supplements" which, according to said section 19, should not be deducted from such wages, because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined as follows —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. "Facilities", on the other hand, are items of expense necessary for the laborer's and his family's existence and subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind of the benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering, therefore, as definitely found by the respondent court that the meals were freely given to crew members prior to August 4, 1951, while they were on the high seas "not as part of their wages but as a necessary matter in the maintenance of the health and efficiency of the crew personnel during the voyage", the deductions therein made for the meals given after August 4, 1951, should be returned to them, and the operator of the coastwise vessels affected should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27, 1955, the company used to pay to its drivers and conductors, who were assigned outside of the City limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food. Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the company. The order CIR to the company to continue granting this privilege, was upheld by this Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep. Act No. 602, is of no moment, because such circumstance was already taken into consideration by Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily furnished by the employer to the employees. If We are to follow the theory of the herein petitioners, then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will adversely affect said crew member. Such interpretation does not conform with the avowed intention of Congress in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to pay for their meals or food, while the deck officers and marine engineers receiving higher pay and provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31, 1955).

Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444; in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito; and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have worked overtime and had not been paid for such services. Severino Pepito categorically stated that he worked during the late hours of the evening and during the early hours of the day when the boat docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa), are incompetent and unreliable. And considering the established fact that the work of Severino Pepito was continuous, and during the time he was not working, he could not leave and could not completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444, which states "When the work is not continuous, the time during which the laborer is not working and can leave his working place and can rest completely shall not be counted", find no application in his case.

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi to his former position, considering the fact that said officer had been employed since January 9, 1953, as captain of a vessel belonging to another shipping firm in the City of Cebu.

The CIR held —

Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and that his failure to report for work is not sufficient cause for his absolute dismissal, respondents are hereby ordered to reinstate him to his former job without back salary but under the same terms and conditions of employment existing prior to his lay-off, without loss of seniority and other benefits already acquired by him prior to March 20, 1952. This Court is empowered to reduce the punishment meted out to an erring employee (Standard Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new trial, and in overruling petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid defense and the same is based on three orders of the WAS (Wage Administration Service), dated November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The motion for new trial is without merit. Having the said wage Orders in their possession, while the case was pending decision, it was not explained why the proper move was not taken to introduce them before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation

of meals and facilities, are irrelevant to the present issue, it having been found and held that the meals or food in question are not facilities but supplements. The original petition in the CIR having been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to express its views on the matter. At any rate, the admission of the three wage orders have not altered the decision reached in this case.

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.

[G.R. No. 157634.  May 16, 2005]

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners, vs. ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROÑOLA, respondents.

D E C I S I O N

PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals (CA)[1] in CA-G.R. SP No. 68642, entitled “Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.,” and the Resolution [2] denying petitioners’ motion for reconsideration. The assailed CA decision reversed the NLRC Decision which had dismissed all of respondents’ complaints,[3] and reinstated the Joint Decision of the Labor Arbiter[4] which ruled that respondents were illegally dismissed and entitled to their money claims.

The facts, culled from the records, are as follows:[5]

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner Pacita O. Po,[6] whose mother, petitioner Josefa Po Lam, manages the establishment.[7] The hotel and restaurant employed about sixteen (16) employees.

Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following people, all respondents in this case, with the following jobs:[8]

1. Wenefredo Loveres Accountant and Officer-in-charge2. Paterno Llarena Front Desk Clerk3. Gregorio Nicerio Supervisory Waiter4. Amado Macandog Roomboy5. Luis Guades Utility/Maintenance Worker6. Santos Broñola Roomboy7. Teodoro Laurenaria Waiter8. Eduardo Alamares Roomboy/Waiter9. Lourdes Camigla Cashier10. Chona Bumalay Cashier11. Jose Atractivo Technician12. Amado Alamares Dishwasher and Kitchen Helper13. Roger Burce Cook14. Rolando Adana Waiter15. Miguel Torrefranca Cook16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on March 31, 1997.[9] The operation of the restaurant was continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at Peñaranda Street, Legazpi City.[10] Only nine (9) of the sixteen (16) employees continued working in the Mayon Restaurant at its new site.[11]

On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages and other money claims against petitioners, as follows:[12]

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal, underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave  pay (SILP) and claims for separation pay plus damages;

Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages; nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest day; SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift differential pay;

Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay, SILP, and damages;[13] and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay for holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the employees. The Labor Arbiter awarded substantially all of respondents’ money claims, and held that respondents Loveres, Macandog and Llarena were entitled to separation pay, while respondents Guades, Nicerio and Alamares were entitled to their retirement pay.  The Labor Arbiter also held that based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the proper respondent in these cases.

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a petition for certiorari with the CA which rendered the now assailed decision.

After their motion for reconsideration was denied, petitioners now come to this Court, seeking the reversal of the CA decision on the following grounds:

I.   THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF THE NLRC WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE DESPITE AMPLE AND SUFFICIENT EVIDENCE SHOWING THAT THE NLRC DECISION IS INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE;

II.  THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE JOINT DECISION OF THE LABOR ARBITER WHICH RULED THAT PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY

PRIVATE RESPONDENTS WERE OUT OF WORK WAS NOT DUE TO THE FAULT OF PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF PETITIONERS.

III.  THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE AWARD OF MONETARY BENEFITS BY THE LABOR ARBITER IN HIS JOINT DECISION IN FAVOR OF THE PRIVATE RESPONDENTS, INCLUDING THE AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE RESPONDENTS, DESPITE THE FACT THAT THE PRIVATE RESPONDENTS HAVE NOT PROVEN BY SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO AND ESPECIALLY THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE PETITIONERS.

IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PACITA ONG PO IS THE OWNER OF THE BUSINESS ESTABLISHMENT, PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING THE CERTIFICATE OF REGISTRATION OF THE BUSINESS ESTABLISHMENT ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A PUBLIC DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF COMPLAINANTS-PRIVATE RESPONDENTS.[14]

In essence, the petition calls for a review of the following issues:

1.    Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel & Restaurant, and the proper respondent in this case?

2.    Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?

3.    Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay?

It is petitioners’ contention that the above issues have already been threshed out sufficiently and definitively by the NLRC. They therefore assail the CA’s reversal of the NLRC decision, claiming that based on the ruling in Castillo v. NLRC,[15] it is non sequitur that the CA should re-examine the factual findings of both the NLRC and the Labor Arbiter, especially as in this case the NLRC’s findings are allegedly supported by substantial evidence.

We do not agree.

There is no denying that it is within the NLRC’s competence, as an appellate agency reviewing decisions of Labor Arbiters, to disagree with and set aside the latter’s findings.[16]But it stands to reason that the NLRC should state an acceptable cause therefore, otherwise it would be a whimsical, capricious, oppressive, illogical, unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the extraordinary writ of certiorari.[17] And when the factual findings of the Labor Arbiter and the NLRC are diametrically opposed and this disparity of findings is called into question, there is, necessarily, a re-examination of the factual findings to ascertain which opinion should be sustained. [18] As ruled inAsuncion v. NLRC,[19]

Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and respect, we are constrained to take a second look at the facts before us because of the diversity in the opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court.[20]

The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial evidence.

Moreover, it is explicit in Castillo v. NLRC [21]  that factual findings of administrative bodies like the NLRC are affirmed only if they are supported by substantial evidence that is manifest in the decision and on the records.   As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor Arbiter.  Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not automatically call for a full review of the facts by this Court.  The NLRC’s decision, so long as it is not bereft of substantial support from the records, deserves respect from this Court. As a rule, the original and exclusive jurisdiction to review a decision or resolution of respondent NLRC in a petition for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of discretion.  Thus, the NLRC’s factual findings, if supported by substantial evidence, are entitled to great respect and even finality, unless petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated. (citations omitted)[22]

After careful review, we find that the reversal of the NLRC’s decision was in order precisely because it was not supported by substantial evidence. 

1.         Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review, agreed with the Labor Arbiter that notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the complaints filed by the employees. The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant.  There were conflicting documents submitted by Josefa herself.  She was ordered to submit additional documents to clearly establish ownership of the hotel and restaurant, considering the testimonies given by the [respondents] and the non-appearance and failure to submit her own position paper by Pacita Po.  But Josefa did not comply with the directive of the Labor Arbiter.  The ruling of the Supreme Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the evidence[,] if produced, would operate to his prejudice, and support the case of his adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter relied also on the testimonies of the witnesses, during the hearing of the instant case.  When the conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same should be respected by appellate tribunals, since he is in a better position to assess and evaluate the credibility of the contending parties.[23] (citations omitted)

Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant.  They allege that the documents they submitted to the Labor Arbiter sufficiently and clearly establish the fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They contend that petitioner Josefa Po Lam’s participation was limited to merely (a) being the overseer; (b) receiving the month-to-month and/or year-to-year financial reports prepared and submitted by respondent Loveres; and (c) visitation of the premises. [24] They also put emphasis on the admission of the respondents in their position paper submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the

owner.[25] This, they claim, is a judicial admission and is binding on respondents.  They protest the reliance the Labor Arbiter and the CA placed on their failure to submit additional documents to clearly establish ownership of the hotel and restaurant, claiming that there was no need for petitioner Josefa Po Lam to submit additional documents considering that the Certificate of Registration is the best and primary evidence of ownership.

We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa Po Lam is merely the overseer is not borne out by the evidence.

First.  It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter.  Despite receipt of the Labor Arbiter’s notice and summons, other notices and Orders, petitioner Pacita Po failed to appear in any of the proceedings with the Labor Arbiter in these cases, nor file her position paper. [26] It was only on appeal with the NLRC that Pacita Po signed the pleadings.[27] The apathy shown by petitioner Pacita Po is contrary to human experience as one would think that the owner of an establishment would naturally be concerned when ALL her employees file complaints against her.

Second. The records of the case belie petitioner Josefa Po Lam’s claim that she is merely an overseer. The findings of the Labor Arbiter on this question were based on credible, competent and substantial evidence. We again quote the Joint Decision on this matter:

Mayon Hotel and Restaurant is a [business name] of an enterprise.  While [petitioner] Josefa Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased the same from one Palanos in 1981, Josefa failed to submit the document of sale from said Palanos to Pacita as allegedly the sale was only verbal although the license to operate said hotel and restaurant is in the name of Pacita which, despite our Order to Josefa to present the same, she failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences were submitted by Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary evidences also that were submitted by Josefa showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo).  While Josefa explained her participation and interest in the business as merely to help and assist her daughter as the hotel and restaurant was near the former’s store, the testimonies of [respondents] and Josefa as well as her demeanor during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and Restaurant.  [Respondents] testified that it was Josefa who exercises all the acts and manifestation of ownership of the hotel and restaurant like transferring employees from the Greatwall Palace Restaurant which she and her husband Roy Po Lam previously owned; it is Josefa to whom the employees submits (sic) reports, draws money for payment of payables and for marketing, attending (sic) to Labor Inspectors during ocular inspections.  Except for documents whereby Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the record shows any circumstance or manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant.  The least that can be said is that it is absurd for a person to purchase a hotel and restaurant in the very heart of the City of Legazpi verbally.  Assuming this to be true, when [petitioners], particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the hotel and restaurant, considering the testimonies of [respondents], the former should [have] submitted the lease contract between the owner of the building where Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly establish ownership by the latter of said enterprise.  Josefa failed.  We are not surprised why some employers employ schemes to mislead Us in order to evade liabilities.  We therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in these cases.[28]

Petitioners’ reliance on the rules of evidence, i.e., the certificate of registration being the best proof of ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true nature of petitioner Josefa Po Lam’s involvement in the enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore

within his jurisdiction to require the additional documents to ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.

Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical rules of procedure may be relaxed in labor cases to serve the demand of substantial justice.[29] The rule of evidence prevailing in court of law or equity shall not be controlling in labor cases and it is the spirit and intention of the Labor Code that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process. [30] Labor laws mandate the speedy administration of justice, with least attention to technicalities but without sacrificing the fundamental requisites of due process.[31]

Similarly, the fact that the respondents’ complaints contained no allegation that petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of judicial admissions to respondents — who are but lowly employees - would be to exact compliance with technicalities of law that is contrary to the demands of substantial justice. Moreover, the issue of ownership was an issue that arose only during the course of the proceedings with the Labor Arbiter, as an incident of determining respondents’ claims, and was well within his jurisdiction.[32]

Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on the issue of ownership.[33] The essence of due process in administrative proceedings is simply an opportunity to explain one’s side or an opportunity to seek reconsideration of the action or ruling complained of. [34] And there is nothing in the records which would suggest that petitioners had absolute lack of opportunity to be heard.[35] Obviously, the choice not to present evidence was made by petitioners themselves.[36]

But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on appeal with the NLRC, nothing was submitted to negate the Labor Arbiter’s finding that Pacita Po is not the real owner of the subject hotel and restaurant.  Indeed, no such evidence was submitted in the proceedings with the CA nor with this Court. Considering that petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence which would shed more light on this issue. We therefore agree with the CA that the failure to submit could only mean that if produced, it would have been adverse to petitioners’ case.[37] 

Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel & Restaurant.

2.         Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broñola.[38]

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents Loveres, Macandog and Llarena.  As respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years old respectively at the time of the dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code as amended.[39] The Labor Arbiter ruled that respondent Atractivo was not entitled to separation pay because he had been transferred to work in the restaurant operations in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also awarded damages.[40]

The NLRC reversed the Labor Arbiter, finding that “no clear act of termination is attendant in the case at bar” and that respondents “did not submit any evidence to that effect, but the finding and conclusion of the Labor Arbiter [are] merely based on his own surmises and conjectures.”[41] In turn, the NLRC was reversed by the CA.

It is petitioners contention that the CA should have sustained the NLRC finding that none of the above-named respondents were illegally dismissed, or entitled to separation or retirement pay. According to petitioners, even the Labor Arbiter and the CA admit that when the illegal dismissal case was filed by respondents on April 1997, they had as yet no cause of action. Petitioners therefore conclude that the filing by respondents of the illegal dismissal case was premature and should have been dismissed outright by the Labor Arbiter.[42] Petitioners also claim that since the validity of respondents’ dismissal is a factual question, it is not for the reviewing court to weigh the conflicting evidence.[43]

We do not agree. Whether respondents are still working for petitioners IS a factual question. And the records are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel operations and transferred its restaurant operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the other hand, was also laid-off when the Elizondo Street operations closed, as were all the other respondents.  Since then, respondents have not been permitted to work nor recalled, even after the construction of the new premises at Peñaranda Street and the reopening of the hotel operations with the restaurant in this new site.  As stated by the Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the complaint was filed:[44]

[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of the hotel.  After more than one year from the temporary closure of Mayon Hotel and the temporary transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be transferred has been finally constructed and the same is operated as a hotel with bar and restaurant nevertheless, none of [respondents] herein who were employed at Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were recalled by [petitioner] to continue their services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not filed an amended complaint to question the cessation of their employment after the closure of Mayon Hotel & Restaurant on March 31, 1997.[45]

The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted factual finding by ruling that respondents have not introduced any evidence to show that they were illegally dismissed, and that the Labor Arbiter’s finding was based on conjecture.[46] It was a serious error that the NLRC did not inquire as to the legality of the cessation of employment. Article 286 of the Labor Code is clear — there is termination of employment when an otherwise bona fide suspension of work exceeds six (6) months.[47] The cessation of employment for more than six months was patent and the employer has the burden of proving that the termination was for a just or authorized cause.[48]

Moreover, we are not impressed by any of petitioners’ attempts to exculpate themselves from the charges.  First, in the proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal because the lay-off was merely temporary (and due to the expiration of the lease contract over the old premises of the hotel).  They specifically invoked Article 286 of the Labor Code to argue that the claim for separation pay was premature and without legal and factual basis. [49] Then, because the Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded the six-month period provided for in Article 286, petitioners raise this novel argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is misplaced, considering that the reason why private respondents were out of work was not due to the fault of petitioners.  The failure of petitioners to reinstate the private respondents to their former

positions should not likewise be attributable to said petitioners as the private respondents did not submit any evidence to prove their alleged illegal dismissal.  The petitioners cannot discern why they should be made liable to the private respondents for their failure to be reinstated considering that the fact that they were out of work was not due to the fault of petitioners but due to circumstances beyond the control of petitioners, which are the termination and non-renewal of the lease contract over the subject premises.  Private respondents, however, argue in their Comment that petitioners themselves sought the application of Article 286 of the Labor Code in their case in their Position Paper filed before the Labor Arbiter.  In refutation, petitioners humbly submit that even if they invoke Article 286 of the Labor Code, still the fact remains, and this bears stress and emphasis, that the temporary suspension of the operations of the establishment arising from the non-renewal of the lease contract did not result in the termination of employment of private respondents and, therefore, the petitioners cannot be faulted if said private respondents were out of work, and consequently, they are not entitled to their money claims against the petitioners. [50]

It is confounding how petitioners have fashioned their arguments.  After having admitted, in effect, that respondents have been laid-off since April 1997, they would have this Court excuse their refusal to reinstate respondents or grant them separation pay because these same respondents purportedly have not proven the illegality of their dismissal.

Petitioners’ arguments reflect their lack of candor and the blatant attempt to use technicalities to muddle the issues and defeat the lawful claims of their employees.  First, petitioners admit that since April 1997, when hotel operations were suspended due to the termination of the lease of the old premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted to work. Second, even after six months of what should have been just a temporary lay-off, the same respondents were still not recalled to work.  As a matter of fact, the Labor Arbiter even found that as of the time when he rendered his Joint Decision on July 2000 — or more than three (3) years after the supposed “temporary lay-off,” the employment of all of the respondents with petitioners had ceased, notwithstanding that the new premises had been completed and the same operated as a hotel with bar and restaurant.   This is clearly dismissal — or the permanent severance or complete separation of the worker from the service on the initiative of the employer regardless of the reasons therefor.[51]

On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the complaint, respondents had  no cause of action to file the case for illegal dismissal.  According to the CA and the Labor Arbiter, the lay-off of the respondents was merely temporary, pending construction of the new building at Peñaranda Street.[52]

While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence on record belie any claim of petitioners that the lay-off of respondents on that same date was merely temporary. On the contrary, we find substantial evidence that petitioners intended the termination to be permanent.  First, respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel operations in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel operations, and petitioners’ allegations that the employees assigned to the hotel operations knew about this beforehand.  Second, in their position paper submitted to the Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the employer-employee relationship was merely suspended, and therefore the claim for separation pay was premature and without legal or factual basis. [53] But they made no mention of any intent to recall these respondents to work upon completion of the new premises.  Third, the various pleadings on record show that petitioners held respondents, particularly Loveres, as responsible for mismanagement of the establishment and for abuse of trust and confidence.  Petitioner Josefa Po Lam’s affidavit on July 21, 1998, for example, squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner Mayon Hotel &

Restaurant to sustain “continuous losses until it is closed.” She then asserts that respondents “are not entitled to separation pay for they were not terminated and if ever the business ceased to operate it was because of losses.” [54] Again, petitioners make the same allegation in their memorandum on appeal with the NLRC, where they alleged that three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining consistent losses, and these were solely attributed to respondents, but most especially due to Loveres’s mismanagement and abuse of petitioners’ trust and confidence.[55] Even the petition filed in this court made reference to the separation of the respondents due to “severe financial losses and reverses,” again imputing it to respondents’ mismanagement.[56] The vehemence of petitioners’ accusation of mismanagement against respondents, especially against Loveres, is inconsistent with the desire to recall them to work.  Fourth, petitioners’ memorandum on appeal also averred that the case was filed “not because of the business being operated by them or that they were supposedly not receiving benefits from the Labor Code which is true, but because of the fact that the source of their livelihood, whether legal or immoral, was stopped on March 31, 1997, when the owner of the building terminated the Lease Contract.” [57] Fifth, petitioners had inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring to the closure,[58] i.e., in the petition filed with this court, they assert that there is no illegal dismissal because there was “only a temporary cessation or suspension of operations of the hotel and restaurant due to circumstances beyond the control of petitioners, and that is, the non-renewal of the lease contract...” [59] And yet, in the same petition, they also assert that: (a) the separation of respondents was due to severe financial losses and reverses leading to the closure of the business; and (b) petitioner Pacita Po had to close shop and was bankrupt and has no liquidity to put up her own building to house Mayon Hotel & Restaurant. [60] Sixth, and finally, the uncontroverted finding of the Labor Arbiter that petitioners terminated all the other respondents, by not employing them when the Hotel and Restaurant transferred to its new site on Peñaranda Street.[61] Indeed, in this same memorandum, petitioners referred to all respondents as “former employees of Mayon Hotel & Restaurant.”[62]

These factors may be inconclusive individually, but when taken together, they lead us to conclude that petitioners really intended to dismiss all respondents and merely used the termination of the lease (on Rizal Street premises) as a means by which they could terminate their employees.

Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners’ claim that severe business losses justified their failure to reinstate respondents.  The evidence to prove this fact is inconclusive.  But more important, serious business losses do not excuse the employer from complying with the clearance or report required under Article 283 of the Labor Code and its implementing rules before terminating the employment of its workers.[63] In the absence of justifying circumstances, the failure of petitioners to observe the procedural requirements set out under Article 284, taints their actuations with bad faith, especially since they claimed that they have been experiencing losses in the three years before 1997. To say the least, if it were true that the lay-off was temporary but then serious business losses prevented the reinstatement of respondents, then petitioners should have complied with the requirements of written notice.  The requirement of law mandating the giving of notices was intended not only to enable the employees to look for another employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.[64]

And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord its employees some relief in the form of severance pay.[65]

While we recognize the right of the employer to terminate the services of an employee for a just or authorized cause, the dismissal of employees must be made within the parameters of law and pursuant to the tenets of fair play. [66] And in termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a just or authorized cause.[67] Where there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a matter of illegal dismissal.[68]

Under these circumstances, the award of damages was proper.  As a rule, moral damages are recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.[69] We believe that the dismissal of the respondents was attended with bad faith and meant to evade the lawful obligations imposed upon an employer.

To rule otherwise would lead to the anomaly of respondents being terminated from employment in 1997 as a matter of fact, but without legal redress. This runs counter to notions of fair play, substantial justice and the constitutional mandate that labor rights should be respected.   If doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter — the employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.[70]It is a time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the former’s favor. [71] The policy is to extend the doctrine to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection of labor.[72]

We therefore reinstate the Labor Arbiter’s decision with the following modifications:

(a)    Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos Broñola cannot be granted separation pay as he made no such claim);

(b)    Retirement pay for respondents Guades,  Nicerio, and Alamares, who at the time of dismissal were entitled to their retirement benefits pursuant to Article 287 of the Labor Code as amended;[73] and

(c)    Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola.

3.         Money claims

The CA held that contrary to the NLRC’s ruling, petitioners had not discharged the burden of proving that the monetary claims of the respondents have been paid. [74] The CA thus reinstated the Labor Arbiter’s grant of respondents’ monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal dismissal, then respondents are not entitled to their monetary claims or separation pay and damages. Petitioners’ arguments are not only tiring, repetitive and unconvincing, but confusing and confused — entitlement  to labor standard benefits is a separate and distinct concept from payment of separation pay arising from illegal dismissal, and are governed by different provisions of the Labor Code.

We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their complaint, position paper, affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that petitioners have failed to pay them.  It was therefore petitioners’ burden to prove that they have paid these money claims.  One who pleads payment has the burden of proving it, and even where the employees must allege nonpayment, the general rule is that the burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove non payment. [75] This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., affidavits executed by some of respondents during an ocular inspection conducted by an inspector of the DOLE; notices of inspection result and Facility Evaluation Orders issued by DOLE, are not sufficient to prove payment. [76] Despite repeated orders from the Labor Arbiter, [77] petitioners failed to submit the pertinent employee files, payrolls, records, remittances and other similar documents  which  would show that respondents rendered work entitling them to payment for overtime work, night shift differential, premium pay for work on holidays and rest day, and payment of these as well as the COLA and the SILP – documents which are  not in respondents’ possession but in the custody and absolute control of petitioners.[78] By choosing not to fully and completely disclose information and present the necessary documents to prove payment of labor standard benefits due to respondents, petitioners failed to discharge the burden of proof.[79] Indeed, petitioners’ failure to submit the necessary documents which as employers are in their possession, inspite of orders to do so, gives rise to the presumption that their presentation is prejudicial to its cause.[80] As aptly quoted by the CA:

[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the evidence, if produced, would operate to his prejudice, and support the case of his adversary.[81]

Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should have been included in reckoning the payment of respondents’ wages.  They state that although on the surface respondents appeared to receive minimal wages, petitioners had granted respondents other benefits which are considered part and parcel of their wages and are allowed under existing laws.[82] They claim that these benefits make up for whatever inadequacies there may be in compensation. [83] Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of facilities provided by the employer through an appropriate Facility Evaluation Order issued by the Regional Director of the DOLE.[84] Petitioners also aver that they give five (5) percent of the gross income each month as incentives. As proof of compliance of payment of minimum wages, petitioners submitted the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.[85]

The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of respondents’ minimum wage.  As stated in the Labor Arbiter’s decision:[86]

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified for purposes of considering the same as part of their wages, We cannot consider the cost of meals in the Orders as applicable to [respondents].  [Respondents] were not interviewed by the DOLE as to the quality and quantity of food appearing in the applications of [petitioners] for facility evaluation prior to its approval to determine whether or not [respondents] were indeed given such kind and quantity of food.  Also, there was no evidence that the quality and quantity of food in the Orders were voluntarily accepted by [respondents].  On the contrary; while some [of the

respondents] admitted that they were given meals and merienda, the quality of food serve[d] to them were not what were provided for in the Orders and that it was only when they filed these cases that they came to know about said Facility Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998).  [Petitioner] Josefa herself, who applied for evaluation of the facility (food) given to [respondents], testified that she did not inform [respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could not be deducted without compliance with certain legal requirements. As stated in Mabeza   v. NLRC ,[87] the employer simply cannot deduct the value from the employee's wages without satisfying the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are charged at fair and reasonable value.  The records are clear that petitioners failed to comply with these requirements.  There was no proof of respondents’ written authorization. Indeed, the Labor Arbiter found that while the respondents admitted that they were given meals and merienda, the quality of food served to them was not what was provided for in the Facility Evaluation Orders and it was only when they filed the cases that they came to know of this supposed Facility Evaluation Orders.[88] Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the facilities she had applied for.[89]

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter therefore erred when he ruled that the cost of the meals actually provided to respondents should be deducted as part of their salaries, on the ground that respondents have availed themselves of the food given by petitioners. [90] The law is clear that mere availment is not sufficient to allow deductions from employees’ wages.

More important, we note the uncontroverted testimony of respondents on record that they were required to eat in the hotel and restaurant so that they will not go home and there is no interruption in the services of Mayon Hotel & Restaurant.  As ruled in Mabeza, food or snacks or other convenience provided by the employers are deemed as supplements if they are granted for the convenience of the employer. The criterion in making a distinction between a supplement and a facility does not so much lie in the kind (food, lodging) but the purpose.[91] Considering, 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 petitioners’ business.[92] The deduction of the cost of meals from respondents’ wages, therefore, should be removed.

We also do not agree with petitioners that the five (5) percent of the gross income of the establishment can be considered as part of the respondents’ wages.  We quote with approval the Labor Arbiter on this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the same cannot be considered as part of their wages in determining their claims for violation of labor standard benefits.  Although called profit share[,] such is in the nature of share from service charges charged by the hotel.  This is more explained by [respondents] when they testified that what they received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo).  Also, [petitioners] failed to submit evidence that the amounts received by [respondents] as profit share are to be considered part of their wages and had been agreed by them prior to their employment.  Further, how can the amounts receive[d] by [respondents] be considered as profit share when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of the gross receipt of an enterprise.  Profits are realized after expenses are deducted from the gross income.

On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter.  We note that petitioners themselves have admitted that the establishment employs “more or less sixteen (16) employees,”[93] therefore they are estopped from claiming that the applicable minimum wage should be for service establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense to payment of labor standard benefits.  The employer cannot exempt himself from liability to pay minimum wages because of poor financial condition of the company.  The payment of minimum wages is not dependent on the employer’s ability to pay.[94]

Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.

4.         Conclusion

There is no denying that the actuations of petitioners in this case have been reprehensible. They have terminated the respondents’ employment in an underhanded manner, and have used and abused the quasi-judicial and judicial processes to resist payment of their employees’ rightful claims, thereby protracting this case and causing the unnecessary clogging of dockets of the Court. They have also forced respondents to unnecessary hardship and financial expense.  Indeed, the circumstances of this case would have called for exemplary damages, as the dismissal was effected in a wanton, oppressive or malevolent manner,[95] and public policy requires that these acts must be suppressed and discouraged.[96]

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00 each to all respondents. While it is true that other forms of damages under the Civil Code may be awarded to illegally dismissed employees, [97] any award of moral damages by the Labor Arbiter cannot be based on the Labor Code but should be grounded on the Civil Code.[98] And the law is clear that exemplary damages can only be awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory damages.[99]

As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broñola specifically claimed damages from petitioners, then only they are entitled to exemplary damages.[sjgs1]

Finally, we rule that attorney’s fees in the amount to P10,000.00 should be granted to each respondent.  It is settled that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's fees.[100] This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED.  The Decision of January 17, 2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following MODIFICATIONS:

(1)     Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres, Macandog and Llarena;

(2)     Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3)     Removing the deductions for food facility from the amounts due to all respondents;

(4)     Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola;

(5)     Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola; and

(6)     Granting attorney’s fees of P10,000.00 each to all respondents. 

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits awarded and due to the employees concerned in accordance with the decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with copies furnished to the parties.

SO ORDERED.

GRATUITY, ALLOWANCES AND BONUS

SECOND DIVISION 

 LEPANTO CERAMICS, INC.,                                       Petitioner,    

 - versus -     LEPANTO CERAMICS EMPLOYEES ASSOCIATION,                                  Respondent.   

  G.R. No. 180866  Present: CARPIO, J.,       Chairperson,BRION,DEL CASTILLO,ABAD, andPEREZ, JJ.  Promulgated: March 2, 2010

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D E C I S I O N  

PEREZ, J.:  

Before this Court is a Petition for Review on Certiorari under Rule 45[1] of the 1997

Rules of Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the:

(1) Decision[2] of the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which

affirmed in toto the decision of the Voluntary Arbitrator[3] granting the members of the

respondent association a Christmas Bonus in the amount of Three Thousand Pesos (P3,000.00),

or the balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year 2002, and the (2)

Resolution[4] of the same court dated 13 December 2007 denying Petitioner’s Motion for

Reconsideration.

 

The facts are:

 

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and

operating by virtue of Philippine Laws.  Its business is primarily to manufacture, make, buy and

sell, on wholesale basis, among others, tiles, marbles, mosaics and other similar products.[5]

 

Respondent Lepanto Ceramics Employees Association (respondent Association) is a

legitimate labor organization duly registered with the Department of Labor and Employment. It

is the sole and exclusive bargaining agent in the establishment of petitioner.[6]

 

In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the

respondent Association.[7] 

 

Subsequently, in September 1999, petitioner and respondent Association entered into a

Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a

Christmas gift package/bonus to the members of the respondent Association. [8]  The Christmas

bonus was one of the enumerated “existing benefit, practice of traditional rights” which “shall

remain in full force and effect.”

 

The text reads:Section 8. – All other existing benefits, practice of traditional rights

consisting of Christmas Gift package/bonus, reimbursement of transportation expenses in case of breakdown of service vehicle and medical services and safety devices by virtue of company policies by the UNION and employees shall remain in full force and effect.

 Section 1.  EFFECTIVITY

 This agreement shall become effective on September 1, 1999 and shall

remain in full force and effect without change for a period of four (4) years or up to August 31, 2004 except as to the representation aspect which shall be effective for a period of five (5) years.  It shall bind each and every employee in the bargaining unit including the present and future officers of the Union.

 

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash.  Instead,

petitioner gave each of the members of respondent Association Tile Redemption Certificates

equivalent to P3,000.00.[9]  The bonus for the year 2002 is the root of the present

dispute.  Petitioner gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a

cash advance to interested employees equivalent to one (1) month salary payable in one year.[10]  The respondent Association objected to the P600.00 cash benefit and argued that this was in

violation of the CBA it executed with the petitioner.

 

The parties failed to amicably settle the dispute.  The respondent Association filed a

Notice of Strike with the National Conciliation Mediation Board, Regional Branch No. IV,

alleging the violation of the CBA.  The case was placed under preventive mediation.  The

efforts to conciliate failed.  The case was then referred to the Voluntary Arbitrator for resolution

where the Complaint was docketed as Case No. LAG-PM-12-095-02. 

 

        In support of its claim, respondent Association insisted that it has been the traditional

practice of the company to grant its members Christmas bonuses during the end of the calendar

year, each in the amount of P3,000.00 as an expression of gratitude to the employees for their

participation in the company’s continued existence in the market.  The bonus was either in cash

or in the form of company tiles.  In 2002, in a speech during the Christmas celebration, one of

the company’s top executives assured the employees of said bonus.  However, the Human

Resources Development Manager informed them that the traditional bonus would not be given

as the company’s earnings were intended for the payment of its bank loans.  Respondent

Association argued that this was in violation of their CBA. 

 

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus

had no basis as the same was not a demandable and enforceable obligation.  It argued that the

giving of extra compensation was based on the company’s available resources for a given year

and the workers are not entitled to a bonus if the company does not make profits.   Petitioner

adverted to the fact that it was debt-ridden having incurred net losses for the years 2001 and

2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the company’s

accumulated losses amounted to over P2.7 billion.  Petitioner further argued that the grant of a

one (1) month salary cash advance was not meant to take the place of a bonus but was meant to

show the company’s sincere desire to help its employees despite its precarious financial

condition.  Petitioner also averred that the CBA provision on a “Christmas gift/bonus” refers to

alternative benefits.  Finally, petitioner emphasized that even if the CBA contained an

unconditional obligation to grant the bonus to the respondent Association, the present difficult

economic times had already legally released it therefrom pursuant to Article 1267 of the Civil

Code.[11]

 

The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner

is bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the

bonus was given prior  to the effectivity of the CBA between the parties and that the financial

losses of the company is not a sufficient reason to exempt it from granting the same.  It stressed

that the CBA is a binding contract and constitutes the law between the parties.   The Voluntary

Arbitrator further expounded that since the employees had already been given P600.00 cash

bonus, the same should be deducted from the claimed amount of P3,000.00, thus leaving a

balance of P2,400.00.  The dispositive portion of the decision states, viz:

 Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay

the members of the complainant union LCEA their respective Christmas bonus in the amount of three thousand (P3,000.00) pesos for the year 2002 less the P600.00 already given or a balance of P2,400.00.[12]

  

Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in

an Order dated 27 June 2003, in this wise:

 The Motion for Reconsideration filed by the respondent in the above-entitled

case which was received by the Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on Grievance Machinery and Voluntary Arbitration; Amending The Implementing Rules of Book V of the Labor Code of the Philippines; to wit:

 Section 7.  Finality of Award/Decision − The decision, order,

resolution or award of the voluntary arbitrator or panel of voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties and it shall not be subject of a motion for reconsideration.[13]

  

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under

Rule 65 of the Rules of Court docketed as CA-G.R. SP No. 78334.[14]As adverted to earlier, the

Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court

also denied petitioner’s motion for reconsideration.

 

In affirming respondent Association’s right to the Christmas bonus, the Court of Appeals

held:

 In the case at bar, it is indubitable that petitioner offered private respondent a

Christmas bonus/gift in 1998 or before the execution of the 1999 CBA which incorporated the said benefit as a traditional right of the employees.  Hence, the grant of said bonus to private respondent can be deemed a practice as the same has not been given only in the 1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant of a Christmas bonus/gift as a practice or tradition as stated in the CBA.  x x x. 

 x x x x Evidently, the argument of petitioner that the giving of a Christmas bonus is a

management prerogative holds no water.  There were no conditions specified in the CBA for the grant of said benefit contrary to the claim of petitioner that the same is justified only when there are profits earned by the company.  As can be gleaned from the CBA, the payment of Christmas bonus was not contingent upon the realization of profits.  It does not state that if the company derives no profits, there are no bonuses to be given to the employees.  In fine, the payment thereof was not related to the profitability of business operations. 

 Moreover, it is undisputed that petitioner, aside from giving the mandated

13th month pay, has further been giving its employees an additional Christmas bonus at the end of the year since 1998 or before the effectivity of the CBA in September 1999.  Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought about the filing of the complaint for alleged non-payment of the 2002 Christmas bonus does not involve the exercise of management prerogative as the same was given

continuously on or about Christmas time pursuant to the CBA. Consequently, the giving of said bonus can no longer be withdrawn by the petitioner as this would amount to a diminution of the employee’s existing benefits.[15]

  

Not to be dissuaded, petitioner is now before this Court.  The only issue before us is

whether or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that

the petitioner is obliged to give the members of the respondent Association a Christmas bonus

in the amount of P3,000.00 in 2002.[16]

 

We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of

labor officials, who are deemed to have acquired expertise in matters within their respective

jurisdictions, are generally accorded not only respect but even finality, and bind us when

supported by substantial evidence. This is the rule particularly where the findings of both the

arbitrator and the Court of Appeals coincide.[17]

 

As a general proposition, an arbitrator is confined to the interpretation and application of

the CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate

only in so far as it draws its essence from the CBA.[18]  That was done in this case.

     

By definition, a “bonus” is a gratuity or act of liberality of the giver. It is something given

in addition to what is ordinarily received by or strictly due the recipient. A bonus is 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.[19]  

 

A bonus is also granted by an enlightened employer to spur the employee to greater

efforts for the success of the business and realization of bigger profits.[20] 

 

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be

enforceable, it must have been promised by the employer and expressly agreed upon by the

parties.[21] Given that the bonus in this case is integrated in the CBA, the same partakes the

nature of a demandable obligation.  Verily, by virtue of its incorporation in the CBA, the

Christmas bonus due to respondent Association has become more than just an act of generosity

on the part of the petitioner but a contractual obligation it has undertaken.[22]

 

         A CBA refers to a negotiated contract between a legitimate labor organization and the

employer, concerning wages, hours of work and all other terms and conditions of employment

in a bargaining unit.  As in all other contracts, the parties to a CBA may establish such

stipulations, clauses, terms and conditions as they may deem convenient, provided these are not

contrary to law, morals, good customs, public order or public policy.[23]

 

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the

parties and they are obliged to comply with its provisions. [24]  This principle stands strong and

true in the case at bar.

 

A reading of the provision of the CBA reveals that the same provides for the giving of a

“Christmas gift package/bonus” without qualification. Terse and clear, the said provision did

not state that the Christmas package shall be made to depend on the petitioner’s financial

standing. The records are also bereft of any showing that the petitioner made it clear during

CBA negotiations that the bonus was dependent on any condition. Indeed, if the petitioner and

respondent Association intended that the P3,000.00 bonus would be dependent on the company

earnings, such intention should have been expressed in the CBA.

 

It is noteworthy that in petitioner’s 1998 and 1999 Financial Statements, it took note that

“the 1997 financial crisis in the Asian region adversely affected the Philippine economy.”[25]

 

From the foregoing, petitioner cannot insist on business losses as a basis for disregarding

its undertaking.  It is manifestly clear that petitioner was very much aware of the imminence

and possibility of business losses owing to the 1997 financial crisis.  In 1998, petitioner suffered

a net loss of P14,347,548.00.[26] Yet it gave aP3,000.00 bonus to the members of the respondent

Association. In 1999, when petitioner’s very own financial statement reflected that “the positive

developments in the economy have yet to favorably affect the operations of the

company,”[27] and reported a loss of P346,025,733.00,[28] it entered into the CBA with the

respondent Association whereby it contracted to grant a Christmas gift package/bonus to the

latter.  Petitioner supposedly continued to incur losses in the years 2000[29] and 2001. Still and

all, this did not deter it from honoring the CBA provision on Christmas bonus as it continued to

give P3,000.00 each to the members of the respondent Association in the years 1999, 2000 and

2001.  

 

All given, business losses are a feeble ground for petitioner to repudiate its obligation

under the CBA. The rule is settled that any benefit and supplement being enjoyed by the

employees cannot be reduced, diminished, discontinued or eliminated by the employer. The

principle of non-diminution of benefits is founded on the constitutional mandate to protect the

rights of workers and to promote their welfare and to afford labor full protection.[30]

 

 Hence, absent any proof that petitioner’s consent was vitiated by fraud, mistake or

duress, it is presumed that it entered into the CBA voluntarily and had full knowledge of the

contents thereof and was aware of its commitments under the contract.

 

The Court is fully aware that implementation to the letter of the subject CBA provision

may further deplete petitioner’s resources.  Petitioner’s remedy though lies not in the Court’s

invalidation of the provision but in the parties’ clarification of the same in subsequent CBA

negotiations. Article 253 of the Labor Code is relevant:Art. 253.  Duty to bargain collectively when there exists a collective

bargaining agreement. - When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the sixty (60)-day period and/or until a new agreement is reached by the parties. 

 

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The

Decision of the Court of Appeals dated 5 April 2006 and the Resolution of the same court

dated 13 December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.   

 

SO ORDERED.ECOND DIVISION

  DEPARTMENT OF BUDGET AND                          G.R. No. 169726MANAGEMENT, represented bySec. Emilia T. Boncodin,                                         Present:                                  Petitioner,                                                                                                        CARPIO, J., Chairperson,                                                                                                CARPIO MORALES,*

                                                                             BRION,                  - versus -                                                 ABAD,  and                                                                                  PEREZ, JJ.  OLIVIA D. LEONES,                                         Promulgated:                                 Respondent.                         March 18, 2010x --------------------------------------------------------------------------------------- x

  

D E C I S I O N  CARPIO, J.:  

The Case

 

          This resolves the petition for review[1] of the Decision[2] of the Court of Appeals finding

respondent Olivia D. Leones entitled to representation and transportation allowance. 

  

  The Facts  

Before 1996, respondent Olivia D. Leones (respondent) was the Municipal Treasurer

of Bacnotan, La Union.  In December 1996, respondent was reassigned to the Office of the

Provincial Treasurer, La Union, pending resolution of administrative cases filed against her.[3] As Municipal Treasurer, respondent received, on top of her salary, representation and

transportation allowance (RATA).  The Municipality of Bacnotan stopped paying RATA to

respondent upon her reassignment to the Provincial Government.

 

After unsuccessfully obtaining administrative relief,[4] respondent filed a mandamus suit

with the Regional Trial Court of San Fernando City, La Union (trial court) against petitioner

Department of Budget and Management (DBM) and then mayor of Bacnotan,

Ma. Minda Fontanilla (Fontanilla), to compel payment of RATA. The trial court dismissed the

petition for non-exhaustion of administrative remedies. On appeal by respondent,[5] the Court of

Appeals affirmed the dismissal. As respondent no longer pursued the case, the trial court’s

ruling became final on 30 June 2003.

         

However, respondent again sought an opinion, this time from the DBM Secretary, on her

entitlement to RATA. In its reply dated 3 September 2003 (Opinion), the DBM found

respondent entitled to RATA only for 1999 under the General Appropriation Act (GAA) for

that year which, unlike previous and succeeding years, did not require “actual performance of

x x x functions” as condition for receipt of RATA.

                    Assailing the Opinion, respondent filed a petition for certiorari with the Court of Appeals.  Respondent contended that her non-receipt of RATA violates the rule on non-dimunition of salary in reassignments.

       The Ruling of the Court of Appeals

 

          In its Decision dated 24 May 2005, the Court of Appeals granted respondent’s petition

and ordered the DBM and Fontanilla to pay respondent RATA for the duration of her

reassignment. Sustaining respondent’s theory, the Court of Appeals characterized RATA as part

of salary, thus subject to the rule on non-dimunition of salary in reassignments.[6] The Court of

Appeals found erroneous the DBM’s reliance on the GAAs requiring actual performance of

functions as precondition for payment of RATA because respondent’s salary was charged

against the local budget of Bacnotan and not against the national budget.[7]

          The DBM’s motion for reconsideration equally proved unsuccessful.[8]

         

HENCE, THIS PETITION. 

The DBM argues that RATA is not part of salary and does not attach to the position but is

paid based on the actual performance of functions. Hence, respondent, not having been in the

actual performance of her functions as treasurer of Bacnotan during her reassignment to the La

Union treasurer’s office, is not entitled to receive RATA except for 1999 because the GAA for

that year did not require actual performance of functions as condition for payment of RATA.

         

THE ISSUE 

          The question is whether, after her reassignment to the La Union treasurer’s office,

respondent, the treasurer of Bacnotan, was entitled to receive RATA.

 The Ruling of the Court

 

          We hold that respondent was entitled to receive RATA after her reassignment, not

because the allowance forms part of her salary, but because the discontinuance of payment

lacks legal basis.

 RATA Distinct from Salary

 

 

          The DBM correctly characterizes RATA as allowance distinct from salary. Statutory law,[9] as implemented by administrative issuances[10] and interpreted in decisions,[11] has consistently

treated RATA as distinct from salary. Unlike salary which is paid for services rendered, RATA

belongs to a basket of allowances[12] to defray expenses deemed unavoidable in the discharge of

office.[13] Hence,  RATA is paid only to certain officials who, by the nature of their offices, incur

representation and transportation expenses.

 

However, the foregoing does not inexorably lead to the conclusion that under all

circumstances and despite lack of legal basis, RATA is paid only if the RATA-entitled officer

actually discharges his office.  First, it became necessary to distinguish allowances (such as

RATA) from salary mainly because under Section 12 of the Compensation and Position

Classification Act of 1989 (RA 6758)[14] (applicable to all public sector employees), all forms of

“financial assistance” and “allowances”[15] were integrated to the standardized salaries except for

certain allowances specified by RA 6758 (such as RATA) and as determined by regulation.[16]Second,  non-performance of duties may result from compliance with orders devoid of the

employee’s volition such as suspension, termination resulting in reinstatement, or, as here,

reassignment. At any rate, the denial of RATA must be grounded on relevant and specific

provision of law.

 No Law Justifies Denial of RATA for

REASSIGNED LOCAL GOVERNMENT OFFICIALS

 

          The DBM concedes that as Municipal Treasurer, respondent was entitled to receive (and

did receive) RATA because such position is  equivalent to a head of a municipal government

department.[17] However, the DBM contends that  respondent’s reassignment to La Union

treasurer’s office cut off this entitlement. As bases for this claim, the DBM invokes

the GAAs from 1996 to 2005 (except in 1999[18]) uniformly providing (in different sections[19])

thus:

 

          [T]he following officials and those of equivalent rank as may be determined by the Department of Budget and Management while in the actual performance of their respective functions are hereby granted monthly commutable representation and transportation allowances payable from the programmed appropriations provided for their respective offices not exceeding the rates indicated below x x x. (Emphasis supplied)

 As secondary basis, the DBM calls the Court’s attention to Section 3.3.1 of the National

Compensation Circular No. 67 (Section 3.3.1), dated 1 January 1992, which provides:

 

3.3. The officials and employees referred  to in Sections 2.1, 2.2 and 2.3 hereof shall no longer be authorized to continue to collect RATA in the following instances:

  

3.3.1 When on full-time detail with another organizational unit of the same agency, another agency, or special project for one (1) full calendar month or more, except when the duties and responsibilities they perform are comparable with those of their regular positions, in which case, they may be authorized to continue to collect RATA on a reimbursable basis, subject to the availability of funds[.] (Emphasis supplied)

 and contends that respondent falls under the general rule thus justifying the cessation of her

RATA payment.                   None of these rules supports the DBM’s case.         

On the relevance of the GAAs, the Court of Appeals correctly pointed out that they find

no application to a local government official like respondent whose compensation and

allowances are funded by local appropriation laws passed by

the Sangguniang Bayan of Bacnotan. It is the municipal ordinances of Bacnotan, providing for

the annual budget for its operation, which govern respondent’s receipt of RATA. Although the

records do not contain copies of the relevant Bacnotanbudget ordinances, we find

significant Fontanilla’s referral to the DBM of respondent’s April 2002 letter requesting RATA

payment.[20] Evidently, Bacnotan’s annual budgetary appropriations for 1996 to 2005 contained

no provision similar to the provisions in the GAAs the DBM now cites;

otherwise, Fontanilla would have readily invoked them to deny respondent’s request. 

 

The DBM tries to go around this insuperable obstacle by distinguishing payment from

the conditions for the payment and theorizes that although respondent’s salary and allowances

were charged against Bacnotan’s annual budget, they were subject to the condition contained in

the GAAs for 1996-2005 linking the payment of RATA to the actual performance of duties.[21] The Court cannot subscribe to this theory without ignoring the wall dividing the vertical

structure of government in this country and a foundational doctrine animating local governance.

 

Although the Philippines is a unitary State, the present Constitution (as in the past)

accommodates within the system the operation of local government units with

enhanced administrative autonomy and autonomous regions with limited political autonomy.[22] Subject to the President’s power of general supervision[23] and exercising delegated powers,

these units and regions operate much like the national government, with their own executive

and legislative branches, financed by locally generated and nationally allocated funds disbursed

through budgetary ordinances passed by their local legislative councils. The DBM’s submission

tinkers with this design by making provisions in national budgetary laws automatically

incorporated in local budgetary ordinances, thus reducing local legislative councils — from the

provinces down to the barangays — and the legislative assembly of the

Autonomous Region in Muslim Mindanao, to mere extensions of Congress. Although

novel, the theory is anathema to the present vertical structure of Philippine government and to

any notion of local autonomy which the Constitution mandates.

 

Nor can the DBM anchor its case on Section 3.3.1. The National Compensation Circular

No. 67, which the DBM issued, is entitled “Representation and Transportation Allowances

of National Government Officials and Employees,” thus excluding local government officials

like respondent from its ambit. At any rate, respondent falls under the exception clause in

Section 3.3.1, having been reassigned to another unit of the same agency with duties and

responsibilities “comparable” to her previous position.

 

Respondent was reassigned to La Union treasurer’s office within the same

“agency,”[24] namely, the Department of Finance, because local treasuries remain under the

control of the Secretary of Finance[25] (unlike some offices which were devolved to the local

governments[26]).  Paragraphs (d) and (e) of Section 470  ofRepublic Act No. 7160 (RA 7160),

the Local Government Code of 1991, provide the functions of “The treasurer”:

 

      (d) The treasurer shall take charge of the treasury office, perform the duties provided for under Book II of this Code, and shall:

             (1) Advise the governor or mayor, as the case may be, the sanggunian, and other local government and national officials concerned regarding disposition of local government funds, and on such other matters relative to public finance;

             (2) Take custody of and exercise proper management of the funds of the local government unit concerned;

             (3) Take charge of the disbursement of all local government funds and such other funds the custody of which may be entrusted to him by law or other competent authority;     (4) Inspect private commercial and industrial establishments within the jurisdiction of the local government unit concerned in relation to the implementation of tax ordinances, pursuant to the provisions under Book II of this Code;             (5) Maintain and update the tax information system of the local government unit;             (6) In the case of the provincial treasurer, exercise technical supervision over all treasury offices of component cities and municipalities; and

     (e) Exercise such other powers and perform such other duties and functions as may be prescribed by law or ordinance. (Emphasis supplied)

  

Thus, irrespective of the level of the local government unit involved, no distinction exists

in the functions of local treasurers except in the technical supervision by the provincial treasurer

over subordinate treasury offices. Logically, the employees in all local treasuries perform

comparable functions within the framework of Section 70 (d) and (e). Hence, the DBM’s casual

claim that “the facts at hand do not reflect that the functions performed by respondent during

the period of her reassignment were comparable to those she performed prior to her

reassignment”[27] finds no basis in fact or in law. In terms of performing comparative functions,

the reassignment here is no different from that of a RATA-entitled officer of the Department of

Science and Technology who, as Chief of the Finance and Management Division, was

reassigned to the Directors’ Office, Finance and Management Service Office. We considered

the officer entitled to RATA despite the reassignment for lack of basis for the non-payment.[28] Indeed, for an employee not to fall under the exception in Section 3.3.1, the functions

attached to the new office must be so alien to the functions pertaining to the former office as to

make the two absolutely unrelated or non-comparable.

 

Before disposing of this matter, we highlight the element of

inequity undergirding the DBM’s case. By insisting that, as requisite for her receipt of RATA,

respondent must discharge her office as Bacnotan’s treasurer while on reassignment at the La

Union treasurer’s office, the DBM effectively punishes respondent for acceding to her

reassignment. Surely, the law could not have intended to place local government officials like

respondent in the difficult position of having to choose between disobeying a reassignment

order or keeping an allowance. As we observed  in a parallel case:

 

[O]n petitioner’s contention that RATA should be allowed only if private respondent is performing the duties of her former office, the CSC correctly explained that private respondent was ‘reassigned to another office and thus her inability to perform the functions of her position as Division Chief is beyond her control and not of her own volition.[’] x x x[29]

  

The DBM itself acknowledged the harshness of its position by carving in Section 3.3.1 an

exception for national government officials performing comparable duties while on

reassignment, cushioning the deleterious financial effects reassignments bring to the employee

with due regard to the state of the government’s coffers. 

 

          WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 24 May 2005

and the Resolution dated 15 September 2005 of the Court of Appeals.           SO ORDERED.

 

PAYMENT BY RESULTS

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 111042 October 26, 1999

AVELINO LAMBO and VICENTE BELOCURA, petitioners,vs.NATIONAL LABOR RELATIONS COMMISSION and J.C. TAILOR SHOP and/or JOHNNY CO, respondents.

MENDOZA, J.:

This is a petition for certiorari to set aside the decision 1 of the National Labor Relations Commission (NLRC) which reversed the awards made by the Labor Arbiter in favor of petitioners, except one for P4,992.00 to each, representing 13th month pay.

The facts are as follows.

Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3, 1985, respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the case of the other 100 employees of private respondents, petitioners were paid on a piece-work basis, according to the style of suits they made. Regardless of the number of pieces they finished in a day, they were each given a daily pay of at least P64.00.

On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal and sought recovery of overtime pay, holiday pay, premium pay on holiday and rest day, service incentive leave pay, separation pay, 13th month pay, and attorney’s fees. 1âwphi1.nêt

After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty of illegal dismissal and accordingly ordered them to pay petitioners’ claims. The dispositive portion of the Labor Arbiter’s decision reads:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring the complainants to have been illegally dismissed and ordering the respondents to pay the complainants the following monetary awards:

AVELINO LAMBO VICENTE BELOCURA

I. BACKWAGES P64,896.00 P64,896.00

II. OVERTIME PAY 13,447.90 13,447.90

III. HOLIDAY PAY 1,399.30 1,399.30

IV. 13TH MONTH PAY 4,992.00 4,992.00

V. SEPARATION PAY 9,984.00 11,648.00

—————— ——————

TOTAL P94,719.20 P96,383.20 = P191,102.40

Add: 10% Attorney's Fees 19,110.24

——————

GRAND TOTAL P210,212.64

=========

or a total aggregate amount of TWO HUNDRED TEN THOUSAND TWO HUNDRED TWELVE AND 64/100 (P210,212.64).

All other claims are dismissed for lack of merit.

SO ORDERED. 2

On appeal by private respondents, the NLRC reversed the decision of the Labor Arbiter. It found that petitioners had not been dismissed from employment but merely threatened with a closure of the business if they insisted on their demand for a "straight payment of their minimum wage," after petitioners, on January 17, 1989, walked out of a meeting with private respondents and other employees. According to the NLRC, during that meeting, the employees voted to maintain the company policy of paying them according to the volume of work finished at the rate of P18.00 per dozen of tailored clothing materials. Only petitioners allegedly insisted that they be paid the minimum wage and other benefits. The NLRC held petitioners guilty of abandonment of work and accordingly dismissed their claims except that for 13th month pay. The dispositive portion of its decision reads:

WHEREFORE, in view of the foregoing, the appealed decision is hereby vacated and a new one entered ordering respondents to pay each of the complainants their 13th month pay in the amount of P4,992.00. All other monetary awards are hereby deleted.

SO ORDERED. 3

Petitioners allege that they were dismissed by private respondents as they were about to file a petition with the Department of Labor and Employment (DOLE) for the payment of benefits such as Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they abandoned their work.

The petition is meritorious.

First. There is no dispute that petitioners were employees of private respondents although they were paid not on the basis of time spent on the job but according to the quantity and the quality of work produced by them. There are two categories of employees paid by results: (1) those whose time and performance are supervised by the employer. (Here, there is an element of control and supervision over the manner as to how the work is to be performed. A piece-rate worker belongs to this category especially if he performs his work in the company premises.); and (2) those whose time and performance are unsupervised. (Here, the employer’s control is over the result of the work. Workers on pakyao and takay basis belong to this group.) Both classes of workers are paid per unit accomplished. Piece-rate payment is generally practiced in garment factories where work is done in the company premises, while payment on pakyao and takay basis is commonly observed in the agricultural industry, such as in sugar plantations where the work is performed in bulk or in volumes difficult to quantify. 4 Petitioners belong to the first category, i.e., supervised employees.

In determining the existence of an employer-employee relationship, the following elements must be considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct. 5 Of these elements, the most important criterion is whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is to be accomplished. 6

In this case, private respondents exercised control over the work of petitioners. As tailors, petitioners worked in the company’s premises from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. The mere fact that they were paid on a piece-rate basis does not negate their status as regular employees of private respondents. The term "wage" is broadly defined in Art. 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the essence of the relations. 7 Nor does the fact that petitioners are not covered by the SSS affect the employer-employee relationship.

Indeed, the following factors show that petitioners, although piece-rate workers, were regular employees of private respondents: (1) within the contemplation of Art. 280 of the Labor Code, their work as tailors was necessary or desirable in the usual business of private respondents, which is engaged in the tailoring business; (2) petitioners worked for private respondents throughout the year, their employment not being dependent on a specific project or season; and, (3) petitioners worked for private respondents for more than one year. 8

Second. Private respondents contend, however, that petitioners refused to report for work after learning that the J.C. Tailoring and Dress Shop Employees Union had demanded their (petitioners’) dismissal for conduct unbecoming of employees. In support of their claim, private respondents presented the affidavits 9 of Emmanuel Y. Caballero, president of the union, and Amado Cabañero, member, that petitioners had not been dismissed by private respondents but that practically all employees of the company, including the members of the union had asked management to terminate the services of petitioners. The employees allegedly said they were against petitioners’ request for change of the mode of payment of their wages, and that when a meeting was called to discuss this issue, a petition for the dismissal of petitioners was presented, prompting the latter to walk out of their jobs and instead file a complaint for illegal dismissal against private respondents on January 17, 1989, even before all employees could sign the petition and management could act upon the same.1âwphi1.nêt

To justify a finding of abandonment of work, there must be proof of a deliberate and unjustified refusal on the part of an employee to resume his employment. The burden of proof is on the employer to show an unequivocal intent on the part of the employee to discontinue employment. 10 Mere absence is not sufficient. It must be accompanied by manifest acts unerringly pointing to the fact that the employee simply does not want to work anymore. 11

Private respondents failed to discharge this burden. Other than the self-serving declarations in the affidavits of their two employees, private respondents did not adduce proof of overt acts of petitioners showing their intention to abandon their work. On the contrary, the evidence shows that petitioners lost no time in filing the case for illegal dismissal against private respondent. This fact negates any intention on their part to sever their employment relationship. 12 Abandonment is a matter of intention; it cannot be inferred or presumed from equivocal acts. 13

Third. Private respondents invoke the compromise agreement, 14 dated March 2, 1993, between them and petitioner Avelino Lambo, whereby in consideration of the sum of P10,000.00, petitioner absolved private respondents from liability for money claims or any other obligations.

To be sure, not all quitclaims are per se invalid or against public policy. But those (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person or (2) where the terms of settlement are unconscionable on their face are invalid. In these cases, the law will step in to annul the questionable transaction.15 However, considering that the Labor Arbiter had given petitioner Lambo a total award of P94,719.20, the amount of P10,000.00 to cover any and all monetary claims is clearly unconscionable. As we have held in another case, 16 the subordinate position of the individual employee vis-a-vis management renders him especially vulnerable to its blandishments, importunings, and even intimidations, and results in his improvidently waiving benefits to which he is clearly entitled. Thus, quitclaims, waivers or releases are looked upon with disfavor for being contrary to public policy and are ineffective to bar claims for the full measure of the workers’ legal rights. 17 An employee who is merely constrained to accept the wages paid to him is not precluded from recovering the difference between the amount he actually received and that amount which he should have received.

Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th month pay, separation pay and attorney’s fees, corresponding to 10% of the total monetary awards, in favor of petitioners.

As petitioners were illegally dismissed, they are entitled to reinstatement with backwages. Considering that petitioners were dismissed from the service on January 17, 1989, i.e., prior to March 21, 1989, 18 the Labor Arbiter correctly applied the rule in the Mercury Drug case, 19 according to which the recovery of backwages should be limited to three years without qualifications or deductions. Any award in excess of three years is null and void as to the excess. 20

The Labor Arbiter correctly ordered private respondents to give separation pay. Considerable time has lapsed since petitioners’ dismissal, so that reinstatement would now be impractical and hardly in the best interest of the parties. In lieu of reinstatement, separation pay should be awarded to petitioners at the rate of one month salary for every year of service, with a fraction of at least six (6) months of service being considered as one (1) year. 21

The awards for overtime pay, holiday pay and 13th month pay are in accordance with our finding that petitioners are regular employees, although paid on a piece-rate basis. 22 These awards are based on the following computation of the Labor Arbiter:

AVELINO LAMBO

I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.

P 64.00/day x 26 days =

1,664.00/mo. x 36 mos. = P59,904.00

13th Mo. Pay:

P1,664.00/yr. x 3 yrs. = 4,992.00 P64,896.00

————

II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89

Jan. 17/86 - April 30/87 = 15 mos. & 12 day =

(15 mos. x 26 days + 12 days) = 402 days

*2 hours = 25%

402 days x 2 hrs./days = 804 hrs.

P 32.00/day ÷ 8 hrs. =

4.00/hr. x 25% =

1.00/hr. + P4.00/hr. =

5.00/hr. x 804 hrs. = 4,020.00

May 1/87 - Sept. 30/87 = 4 mos. & 26 days =

(4 mos. x 26 days + 26 days) = 130 days

130 days x 2 hrs./day = 260 hrs.

P 41.00/day ÷ 8 hrs. =

5.12/hr. x 25% =

1.28/hr. + P5.12/hr. =

6.40/hr. x 260 hrs. = P1,664.00

Oct. 1/87 - Dec. 13/87 = 2 mos. & 11 days =

(2 mos. x 26 days + 11 days) = 63 days

63 days x 2 hrs./day = 126 hrs.

P 49.00/day ÷ 8 hrs. =

6.12/hr. x 25% =

1.53/hr. + P6.12/hr. =

7.65/hr. x 126 hrs. = P963.90

Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days =

(13 mos. x 26 days + 2 days) = 340 days

340 days x 2 hrs./day = 680 hrs.

P 64.00/day ÷ 8 hrs. =

8.00/hr. x 25% =

2.00/hr. + P8.00/hr =

10.00/hr. x 680 hrs. = P6,800.00 P13,447.90

III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89

Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs

P 32.00/day x 200% =

64.00/day x 12 days = 768.00

32.00/day x 12 days = (384.00) P384.00

32.00/day x 30% = ————

9.60/day x 8 days = 76.80 460.80

———

May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs

P 41.00/day x 200% =

82.00/day 3 days = 246.00

41.00/day x 3 days = (123.00) P123.00

41.00/day x 30% = ————

12.30/day x 3 days = 36.90 159.90

————

Oct. 1/87 - Dec. 13/87 = 1 RH

P 49.00/day x 200% =

98.00/day x 1 day = P98.00

49.00/day x 1 day = (49.00) 49.00

————

Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs

P 64.00/day x 200% =

128.00/day x 9 days = P1,152.00

64.00/day x 9 days = (576.00) P576.00

64.00/day x 30% = ————

19.20/day x 8 days = 153.60 729.60 1,399.30

——— ———

IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.

P 64.00/day x 26 days =

1,664.00/yr. x 3 yrs. = 4,992.00

V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6 yrs.

P1,664.00/mo. x 6 yrs. = 9,984.00

————

TOTAL AWARD OF AVELINO LAMBO P94,719.20

========

VICENTE BELOCURA

I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.

Same computation as A. Lambo P64,896.00

II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89

Same computation as A. Lambo 13,447.90

III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89

Same computation as A. Lambo 1,399.30

IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89

Same computation as A. Lambo 4,992.00

V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7 yrs.

P1,664.00/mo. x 7 yrs. = 11,648.00

—————

TOTAL AWARD OF VICENTE BELOCURA P96,383.20

=========

SUMMARY

AVELINO LAMBO VICENTE BELOCURA

———————— —————————

I. BACKWAGES P64,896.00 P64,896.00

II. OVERTIME PAY 13,447.90 13,447.90

III. HOLIDAY PAY 1,399.30 1,399.30

IV. 13TH MO. PAY 4,992.00 4,992.00

V. SEPARATION PAY 9,984.00 11,648.00

————— —————

TOTAL P94,719.20 P96,383.20

= P191,102.40

ADD: 10% Attorney's Fees 19,110.24

—————

GRAND TOTAL P210,212.64

=========

Except for the award of attorney’s fees in the amount of P19,110.24, the above computation is affirmed. The award of attorney’s fees should be disallowed, it appearing that petitioners were represented by the Public Attorney’s Office. With regard to petitioner Avelino Lambo, the amount of P10,000.00 paid to him under the compromise agreement should be deducted from the total award of P94,719.20. Consequently, the award to each petitioner should be as follows:

AVELINO LAMBO VICENTE BELOCURA

———————— —————————

I. BACKWAGES P64,896.00 P64,896.00

II. OVERTIME PAY 13,447.90 13,447.90

III. HOLIDAY PAY 1,399.30 1,399.30

IV. 13TH MONTH PAY 4,992.00 4,992.00

V. SEPARATION PAY 9,984.00 11,648.00

————— —————

P 94,719.20

Less 10,000.00

—————

TOTAL P84,719.20 P96,383.20

GRAND TOTAL P181,102.40

=========

WHEREFORE, the decision of the National Labor Relations Commission is SET ASIDE and another one is RENDERED ordering private respondents to pay petitioners the total amount of One Hundred Eighty-One Thousand One Hundred Two Pesos and 40/100 (P181,102.40), as computed above. 1âwphi1.nêt

SO ORDERED.

SEVILLA TRADING COMPANY, petitioner, vs. A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNION–SUPER, respondents.

D E C I S I O N

PUNO, J.:

On appeal is the Decision[1] of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 sustaining the Decision[2] of Accredited Voluntary Arbitrator Tomas E. Semana dated 13 November 2000, as well as its subsequent Resolution [3] dated 06 March 2002 denying petitioner’s Motion for Reconsideration.

The facts of the case are as follows:

For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for short), a domestic corporation engaged in trading business, organized and existing under Philippine laws, added to the base figure, in its computation of the 13 th-month pay of its employees, the amount of other benefits received by the employees which are beyond the basic pay.  These benefits included:

(a)     Overtime premium for regular overtime, legal and special holidays;

(b)     Legal holiday pay, premium pay for special holidays;

(c)     Night premium;

(d)     Bereavement leave pay;

(e)     Union leave pay;

(f)      Maternity leave pay;

(g)     Paternity leave pay;

(h)     Company vacation and sick leave pay; and

(i)      Cash conversion of unused company vacation and sick leave.

Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the computation and payment of the 13th-month pay and other benefits.  When it changed its person in charge of the payroll in the process of computerizing its payroll, and after audit was conducted, it allegedly discovered the error of including non-basic pay or other benefits in the base figure used in the computation of the 13th-month pay of its employees.  It cited the Rules and Regulations Implementing P.D. No. 851 (13th-Month Pay Law), effective December 22, 1975, Sec. 2(b) which stated that:

“Basic salary” shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to P.D. No. 525 or Letter of Instruction No. 174, profit-sharing payments, and all allowances and monetary benefits

which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

Petitioner then effected a change in the computation of the thirteenth month pay, as follows: 

13th-month pay = net basic pay                               12 months

where:

net basic pay = gross pay – (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth month pay are the following:

a)      Overtime premium for regular overtime, legal and special holidays;

b)      Legal holiday pay, premium pay for special holidays;

c)      Night premium;

d)      Bereavement leave pay;

e)      Union leave pay;

f)       Maternity leave pay;

g)      Paternity leave pay;

h)      Company vacation and sick leave pay; and

i)        Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees’ thirteenth month pay.  The daily piece-rate workers represented by private respondent Sevilla Trading Workers Union – SUPER (Union, for short), a duly organized and registered union, through the Grievance Machinery in their Collective Bargaining Agreement, contested the new computation and reduction of their thirteenth month pay.  The parties failed to resolve the issue.

On March 24, 2000, the parties submitted the issue of “whether or not the exclusion of leaves and other related benefits in the computation of 13 th-month pay is valid” to respondent Accredited Voluntary Arbitrator Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and Mediation Board, for consideration and resolution.

The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of employees’ benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed that paid leaves, like sick leave, vacation leave, paternity leave, union leave, bereavement leave, holiday pay and other leaves with pay in the CBA should be included in the base figure in the computation of their 13th-month pay.

On the other hand, petitioner insisted that the computation of the 13 th-month pay is based on basic salary, excluding benefits such as leaves with pay, as per P.D. No. 851, as amended.  It maintained that, in adjusting its computation of the 13th-month pay, it merely rectified the mistake its personnel committed in the previous years.

A.V.A. Semana decided in favor of the Union.  The dispositive portion of his Decision reads as follows:

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:

1.       The company is hereby ordered to include sick leave and vacation leave, paternity leave, union leave, bereavement leave and other leave with pay in the CBA, premium for work done on rest days and special holidays, and pay for regular holidays in the computation of the 13th-month pay to all covered and entitled employees;

2.       The company is hereby ordered to pay corresponding backwages to all covered and entitled employees arising from the exclusion of said benefits in the computation of 13th-month pay for the year 1999.

Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000.  It filed before the Court of Appeals, a “Manifestation and Motion for Time to File Petition for Certiorari” on January 19, 2001.  A month later, on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure for the nullification of the Decision of the Arbitrator.  In addition to its earlier allegations, petitioner claimed that assuming the old computation will be upheld, the reversal to the old computation can only be made to the extent of including non-basic benefits actually included by petitioner in the base figure in the computation of their 13th-month pay in the prior years.  It must exclude those non-basic benefits which, in the first place, were not included in the original computation.  The appellate court denied due course to, and dismissed the petition.

Hence, this appeal.  Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:

1.  THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD COMPUTATION OF THE 13TH-MONTH PAY ON THE BASIS THAT THE OLD COMPUTATION HAD RIPENED INTO PRACTICE IS WITHOUT LEGAL BASIS.

2.  IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLE DAMAGE TO EMPLOYERS.[4]

First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision of the arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a petition for certiorari under Rule 65.  Section 1 of Rule 43 states:

RULE 43

Appeals from the Court of Tax Appeals and

Quasi-Judicial Agencies to the Court of Appeals

SECTION 1. Scope. — This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law. [Emphasis supplied.]

It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a substitute for an appeal, where the latter remedy is available, as it was in this case. Petitioner Sevilla Trading failed to file an appeal within the fifteen-day reglementary

period from its notice of the adverse decision of A.V.A. Semana.  It received a copy of the decision of A.V.A. Semana on December 20, 2000, and should have filed its appeal under Rule 43 of the 1997 Rules of Civil Procedure on or before January 4, 2001.  Instead, petitioner filed on January 19, 2001 a “Manifestation and Motion for Time to File Petition for Certiorari,” and on February 19, 2001, it filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.  Clearly, petitioner Sevilla Trading had a remedy of appeal but failed to use it.

A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a petition for review on certiorari under Rule 45 (Rule 43, in the case at bar) of the Rules of Court.  Rule 65 is an independent action that cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that under Rule 45 (Rule 43, in the case at bar), especially if such loss or lapse was occasioned by one’s own neglect or error in the choice of remedies.[5]

Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla Trading filed its petition for certiorari on February 19, 2001.  More particularly, the decision of A.V.A. Semana became final and executory upon the lapse of the fifteen-day reglementary period to appeal, or on January 5, 2001.  Hence, the Court of Appeals is correct in holding that it no longer had appellate jurisdiction to alter, or much less, nullify the decision of A.V.A. Semana.

Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a proper action, we still find no grave abuse of discretion amounting to lack or excess of jurisdiction committed by A.V.A. Semana.  “Grave abuse of discretion” has been interpreted to mean “such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.” [6] We find nothing of that sort in the case at bar.

On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with law and jurisprudence.  A.V.A. Semana is correct in holding that petitioner’s stance of mistake or error in the computation of the thirteenth month pay is unmeritorious.  Petitioner’s submission of financial statements every year requires the services of a certified public accountant to audit its finances.  It is quite impossible to suggest that they have discovered the alleged error in the payroll only in 1999.  This implies that in previous years it does not know its cost of labor and operations.  This is merely basic cost accounting.  Also, petitioner failed to adduce any other relevant evidence to support its contention.  Aside from its bare claim of mistake or error in the computation of the thirteenth month pay, petitioner merely appended to its petition a copy of the 1997-2002 Collective Bargaining Agreement and an alleged “corrected” computation of the thirteenth month pay.  There was no explanation whatsoever why its inclusion of non-basic benefits in the base figure in the computation of their 13th-month pay in the prior years was made by mistake, despite the clarity of statute and jurisprudence at that time.

The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs. NLRC,[7] which petitioner Sevilla Trading invokes.  In that case, this Court decided on the proper computation of the cost-of-living allowance (COLA) for monthly-paid employees.  Petitioner Corporation, pursuant to Wage Order No. 6 (effective 30 October 1984), increased the COLA of its monthly-paid employees by multiplying the P3.00 daily COLA by 22 days, which is the number of working days in the company.  The Union disagreed with the computation, claiming that the daily COLA rate of P3.00 should be multiplied by 30 days, which has been the practice of the company for several years.  We upheld the contention of the petitioner corporation.  To answer the Union’s contention of company practice, we ruled that:

Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner.  To be considered as such, it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate . . .  The test of long practice has been enunciated thus:

. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not covered by the law requiring payment of holiday pay.” (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, 94 SCRA 270 [1979])

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage Orders.  It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly equivalent was laid down.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law . . .

In the above quoted case, the grant by the employer of benefits through an erroneous application of the law due to absence of clear administrative guidelines is not considered a voluntary act which cannot be unilaterally discontinued.  Such is not the case now.  In the case at bar, the Court of Appeals is correct when it pointed out that as early as 1981, this Court has held in San Miguel Corporation vs. Inciong[8] that:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th-month pay.  Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the computation of the 13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction No. 174 and profit sharing payments indicate the intention to strip basic salary of other payments which are properly considered as “fringe” benefits.  Likewise, the catch-all exclusionary phrase “all allowances and monetary benefits which are not considered or integrated as part of the basic salary” shows also the intention to strip basic salary of any and all additions which may be in the form of allowances or “fringe” benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more empathic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay.

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

The all-embracing phrase “earnings and other remunerations” which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on rest days and special holidays, pay for regular holidays and night differentials.  As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month pay.  If they were not so excluded, it is hard to find any “earnings and other remunerations” expressly excluded in the computation of the 13th-month pay.  Then the exclusionary provision would prove to be idle and with no purpose.

In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the construction or application of the law.  When petitioner Sevilla Trading still included over the years non-basic benefits of its employees, such as maternity leave pay, cash equivalent of unused vacation and sick leave, among others in the computation of the 13th-month pay, this may only be construed as a voluntary act on its part.  Putting the blame on the petitioner’s payroll personnel is inexcusable.

In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:[9]

The “Supplementary Rules and Regulations Implementing P.D. No. 851” which put to rest all doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules.  And yet, petitioner computed and paid the thirteenth month pay, without excluding the subject items therein until 1981.  Petitioner continued its practice in December 1981, after promulgation of the aforequoted San Miguel decision on February 24, 1981, when petitioner purportedly “discovered” its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees’ thirteenth month pay, without the payments for sick, vacation and maternity leave, premium for work done on rest days and special holidays, and pay for regular holidays.  The considerable length of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

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

With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not laid down any rule requiring a specific minimum number of years.  In the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions,[10] the company practice lasted for six (6) years.  In another case, Davao Integrated Port Stevedoring Services vs. Abarquez,[11] the employer, for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers.  While in Tiangco vs. Leogardo, Jr.,[12] the employer carried on the practice of giving a fixed monthly emergency

allowance from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy which cannot be peremptorily withdrawn.  In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay for at least two (2) years.  This, we rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

IN VIEW WHEREOF, the petition is DENIED.  The Decision of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 and its Resolution dated 06 March 2002 are hereby AFFIRMED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 163419             February 13, 2008

TSPIC CORPORATION, petitioner, vs.TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS,1CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,2 MARIO SALMORIN, LOIDA COMULLO,3 MARIE ANN DELOS SANTOS,4 JUANITA YANA, and SUZETTE DULAY, respondents.

D E C I S I O N

VELASCO, JR., J.:

The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern dealings between labor and management. Seemingly conflicting provisions should be harmonized to arrive at an interpretation that is within the parameters of the law, compassionate to labor, yet, fair to management.

In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the October 22, 2003 Decision5 and April 23, 2004 Resolution6 of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001 Decision7 of Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57.

TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication, automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.

In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)8 for the years 2000 to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January 2002. Section 1, Article X of the CBA provides, as follows:

Section 1. Salary/ Wage Increases.––Employees covered by this Agreement shall be granted salary/wage increases as follows:

a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to ten percent (10%) of their basic monthly salary as of December 31, 1999.

b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000.

c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to eleven percent (11%) of their basic monthly salary as of December 31, 2001.

The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase, including the wage distortion adjustment, granted by the COMPANY on November 1, 1999 as per Wage Order No. NCR-07.

The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under future Wage Orders, that may be issued after Wage Order No. NCR-07, and shall be considered as correction of any wage distortion that may have been brought about by the said future Wage Orders. Thus the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after Wage Order No. NCR-07.

Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary. Accordingly, the following nine (9) respondents (first group) who were already regular employees received the said increase in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas.9

The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Sec. 2 of the CBA provides:

SECTION 2. Regularization Increase.––A covered daily paid employee who acquires regular status within the year subsequent to the effectivity of a particular salary/wage increase mentioned in Section 1 above shall be granted a salary/wage increase in proportionate basis as follows:

Regularization Period Equivalent Increase

-       1st Quarter     100%

-       2nd Quarter       75%

-       3rd Quarter       50%

-       4th Quarter       25%

Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000, i.e., during the second quarter and subsequent to the January 1, 2000 wage increase under this Agreement, will be entitled to a wage increase equivalent to seventy-five percent (75%) of ten percent (10%) of his basic pay. In the same manner, an employee who acquires regular status on December 1, 2000 will be entitled to a salary increase equivalent to twenty-five percent (25%) of ten percent (10%) of his last basic pay.

On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement shall be granted regularization increase equivalent to 10% of his regular basic salary.

Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-0810 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group), were increased to PhP 250.00 effective November 1, 2000.

On various dates during the last quarter of 2000, the above named 17 employees attained regular employment11and received 25% of 10% of their salaries as granted under the provision on regularization increase under Article X, Sec. 2 of the CBA.

In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were senior to the above-listed recently regularized employees, received less wages.

On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s Human Resources Department notified 24 employees,12 namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA.

The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from employees constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union failed to reach an agreement.

Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts of the management in making deductions from the salaries of the affected employees constituted diminution of pay.

On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC violated Art. 10013 of the Labor Code. The fallo reads:

WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is hereby rendered in favor of the Union and the named individual employees and against the company, thereby ordering the [TSPIC] to pay as follows:

1) to the sixteen (16) newly regularized employees named above, the amount of P12,642.24 a month or a total of P113,780.16 for nine (9) months or P7,111.26 for each of them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every month after 30 September 2001, until full payment, with legal interests for every month of delay;

2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their respective amount of entitlements, according to the Union’s correct computation, ranging from P110.22 per month (or P991.98 for nine months) to P450.58 a month (or P4,055.22 for nine months), as well as corresponding monthly entitlements after 30 September 2001, plus legal interests until full payment,

3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly entitlements after 30 September 2001, plus legal interest until full payment,

4) Attorney’s fees equal to 10% of all the above monetary awards.

The claim for exemplary damages is denied for want of factual basis.

The parties are hereby directed to comply with their joint voluntary commitment to abide by this Award and thus, submit to this Office jointly, a written proof of voluntary compliance with this DECISION within ten (10) days after the finality hereof.

SO ORDERED.14

TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.

Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate court, through its October 22, 2003 Decision, dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPIC’s computation allowing PhP 287 as daily wages to the newly regularized employees to be correct, noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the appellate court that the deduction was a result of a system error in the automated payroll system. The CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said employees should have received the minimum wage of PhP 250. The CA held that when respondents became regular employees on November 29, 2000, they should be allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10% increase for the year 2002 should also be made applicable to them.15

TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.

TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPIC’s decision to deduct the alleged overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of the Labor Code?

TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed, inasmuch as it completely disregarded the "crediting provision" contained in the last paragraph of Sec. 1, Art. X of the CBA.

We find TSPIC’s contention meritorious.

A Collective Bargaining Agreement is the law between the parties

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions.16 We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:

A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law. 17

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of their stipulations shall control.18 However, sometimes, as in this case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically provided in the CBA that "the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases under future wage orders that may be issued after Wage Order No. 7." The Union, on the other hand, insists that the "crediting" provision of the CBA finds no application in the present case, since at the time WO No. 8 was issued, the probationary employees (second group) were not yet covered by the CBA, particularly by its crediting provision.

As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued.19 Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve.20 Absurd and illogical interpretations should also be avoided. Considering that the parties have unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement must prevail and be given full effect.

Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000. The 12% salary increase is granted to all employees who (1) are regular employees and (2) are within the bargaining unit.

Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted under WO No. 7 and the correction of the wage distortion for November 1999.

The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under future wage orders, that may be issued after WO No. 7, and shall be considered as correction of the wage distortions that may be brought about by the said future wage orders. Thus, the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.

Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with the last paragraph which specifically states that the salary increases for the years 2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting provisions should be harmonized to give effect to all.21 Likewise, when general and specific provisions are inconsistent, the specific provision shall be paramount to and govern the general provision.22 Thus, it may be reasonably concluded that TSPIC granted the salary increases under the condition that any wage order that may be subsequently issued shall be credited against the previously granted increase. The intention of the parties is clear: As long as an employee is qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase, the amount shall be credited against any wage order issued after WO No. 7.

Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They have received their regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then be allowed to avoid the crediting provision which is an accompanying condition.

Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was issued after WO No. 7. Thus, respondents rightfully received the 12% salary increase for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited that 12% increase against the increase granted by WO No. 8.

Proper formula for computing the salaries for the year 2001

Thus, the proper computation of the salaries of individual respondents is as follows:

(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No. 8, the computation is as follows:

For respondents Jerico Alipit and Glen Batula:23

Wage rate before WO No. 8………………………… PhP 234.67

Increase due to WO No. 8 setting the minimum wage at PhP 250.……………... 15.33

Total Salary upon effectivity of WO No. PhP 250.00

8………….

Increase for 2001 (12% of 2000 salary)…….....……. PhP 30.00

Less the wage increase under WO No. 8……………. 15.33

Total difference between the wage increase for 2001 and the increase granted under WO No. 8.. PhP 14.67

Wage rate by December 2000………………………. PhP 250.00

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8…….. 14.67

Total (Wage rate range beginning January 1, 2001) PhP 264.67

For respondents Ser John Hernandez and Rachel Novillas:24

Wage rate range before WO No. 8………………….. PhP 234.68

Increase due to WO No. 8 setting the minimum wage at PhP 250……………… 15.32

Total Salary upon effectivity of WO No. 8.………… PhP 250.00

Increase for 2001 (12% of 2000 salary)…………….. PhP 30.00

Less the wage increase under WO No. 8…………… 15.32

Total difference between the wage increasefor 2001 and the increase granted under WO No. 8… PhP 14.68

Wage rate by December 2000………………………. PhP 250.00

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8…… 14.68

Total (Wage rate range beginning January 1, 2001) PhP 264.68

For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:25

Wage rate range before WO No. 8………….. PhP 240.26

Increase due to WO No. 8 setting the minimum wage at PhP 250……… 9.74

Total Salary upon effectivity of WO No. 8…. PhP 250.00

Increase for 2001 (12% of 2000 salary)…………… PhP 30.00

Less the wage increase under WO No. 8…………… 9.74

Total difference between the wage increase for 2001and the increase granted under WO No. 8………… PhP 20.26

Wage rate by December PhP 250.00

2000………………………

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8…… 20.26

Total (Wage rate range beginning January 1, 2001) PhP 270.26

For respondents Ma. Fe Flores and Fe Capistrano:26

Wage rate range before WO No. 8…………… PhP 245.85

Increase due to WO No. 8 setting the minimum wage at PhP 250……….. 4.15

Total Salary upon effectivity of WO No. 8…... PhP 250.00

Increase for 2001 (12% of 2000 salary)…………… PhP 30.00

Less the wage increase under WO No. 8………......... 4.15

Total difference between the wage increase for 2001and the increase granted under WO No. 8………… PhP 25.85

Wage rate by December 2000……………………… PhP 250.00

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8…… 25.85

Total (Wage rate range beginning January 1, 2001) PhP 275.85

(2) With regard to the second group of employees, who attained regular employment status after the implementation of WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance with the CBA, is as follows:

Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8 from the minimum wage per the wage order to arrive at the wage increase, thus:

Minimum Wage per Wage Order…………..

PhP 250.00

Wage rate before Wage Order…………….. 223.50

Wage Increase………………………………. PhP 26.50

Upon attainment of regular employment status, the employees’ salaries were increased by 25% of 10% of their basic salaries, as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25, computed as follows:

Wage rate after WO No. 8………………………………. PhP 250.00

Regularization increase (25 % of 10% of basic salary) 6.25

Total (Salary for the end of year 2000) PhP 256.25

………………….

To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees’ salaries as of December 31, 2000; then subtract from that amount, the amount increased in salaries as granted under WO No. 8 in accordance with the crediting provision of the CBA, to arrive at the increase in salaries for the year 2001 of the recently regularized employees. Add the result to their salaries as of December 31, 2000 to get the proper salary beginning January 1, 2001, thus:

Increase for 2001 (12% of 2000 salary)………………... PhP 30.75

Less the wage increase under WO No. 8………………. 26.50

Difference between the wage increasefor 2001 and the increase granted under WO No. 8…… PhP 4.25

Wage rate after regularization increase………………... PhP 256.25

Plus total difference between the wage increase andthe increase granted under WO No. 8…………………. 4.25

Total (Wage rate beginning January 1, 2001)…………. PhP 260.50

With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and second group of employees is cured. The first group of employees who attained regular employment status before the implementation of WO No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending on their wage rate before the implementation of WO No. 8. The second group that attained regular employment status after the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50 starting January 1, 2001.

Diminution of benefits

TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their salaries does not constitute diminution of benefits.

We agree with TSPIC.

Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.27

As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason of a mistake in the construction or application of a "doubtful or difficult question of law". (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code may be said to have resulted by virtue of the correction.28

Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for the year 2001 against the salary increase granted under WO No. 8, all in accordance with the CBA.

Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally deducted by TSPIC from the employees’ salaries. It was also compassionate and fair that TSPIC deducted the overpayment in installments over a period of 12 months starting from the date of the initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which was in excess of what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this Decision.

As a last word, it should be reiterated that though it is the state’s responsibility to afford protection to labor, this policy should not be used as an instrument to oppress management and capital.29 In resolving disputes between labor and capital, fairness and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have always been guided by the State policy enshrined in the Constitution: social justice and protection of the working class. Social justice does not, however, mandate that every dispute should be automatically decided in favor of labor. In any case, justice is to be granted to the deserving and dispensed in the light of the established facts and the applicable law and doctrine.30

WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their salary increases in accordance with this Decision, as follows:

Name of Employee Daily Wage Rate

No. of Working Days

in a Month

No. of Months in a

Year

Total Salary for 2001

Nimfa Anilao 260.5 26 12 81,276.00Rose Subardiaga 260.5 26 12 81,276.00Valerie Carbon 260.5 26 12 81,276.00Olivia Edroso 260.5 26 12 81,276.00Maricris Donaire 260.5 26 12 81,276.00Analyn Azarcon 260.5 26 12 81,276.00Rosalie Ramirez 260.5 26 12 81,276.00Julieta Rosete 260.5 26 12 81,276.00Janice Nebre 260.5 26 12 81,276.00Nia Andrade 260.5 26 12 81,276.00Catherine Yaba 260.5 26 12 81,276.00Diomedisa Erni 260.5 26 12 81,276.00Mario Salmorin 260.5 26 12 81,276.00Loida Camullo 260.5 26 12 81,276.00Marie Ann Delos Santos

260.5 26 12 81,276.00

Juanita Yana 260.5 26 12 81,276.00Suzette Dulay 260.5 26 12 81,276.00Jerico Alipit 264.67 26 12 82,577.04Glen Batula 264.67 26 12 82,577.04Ser John Hernandez 264.68 26 12 82,580.16Rachel Novillas 264.68 26 12 82,580.16Amy Durias 270.26 26 12 84,321.12Claire Evelyn Velez 270.26 26 12 84,321.12Janice Olaguir 270.26 26 12 84,321.12Maria Fe Flores 275.85 26 12 86,065.20Fe Capistrano 275.85 26 12 86,065.20

The award for attorney’s fees of ten percent (10%) of the total award is MAINTAINED.

SO ORDERED.