Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

L-48605 December 14, 1981 DOMNA N. VILLAVERT, petitioner, vs. EMPLOYEES' COMPENSATION COMMISSION & GOVERNMENT SERVICE INSURANCE SYSTEM (Philippine Constabulary), respondents. FERNANDEZ, J.: This is a petition to review the decision of the Employees' Compensation Commission in ECC Case No. 0692, entitled "Domna N. Villavert, appellant versus Government Service Insurance System (Philippine Constabulary), respondents," affirming the decision of the Government Service Insurance System denying the claim for death 1 benefits. The petitioner, Domna N. Villavert, is the mother of the late, Marcelino N. Villavert who died of acute hemorrhagic pancreatitis on December 12, 1975 employed as a Code Verifier in the Philippine Constabulary. She filed a claim for income benefits for the death of her son under P.D. No. 626 as amended with the Government Service Insurance System on March 18, 1976. The said claim was denied by the Government Service Insurance System on the ground that acute hemorrhagic pancreatitis is not an occupational disease and that the petitioner had failed to show that there was a causal connection between the fatal ailment of Marcelino N. Villavert and the nature of his employment. The petitioner appealed to the Employees' Compensation Commission which affirmed on May 31, 1978 the decision of the respondent, Government Service Insurance System, denying the claim. The record shows that in addition to his duties as Code Verifier, Marcelino N. Villavert also performed the duties of a computer operator and clerk typist. In the morning of December 11, 1975, Marcelino reported as usual to the Constabulary Computer Center at Camp Crame, Quezon City. He performed his duties not only as code verifier but also handled administrative functions, computer operation and typing jobs due to shortage of civilian personnel. Although he was complaining of chest pain and headache late in the afternoon of December 11, 1975, after a whole day of strenuous activities, Marcelino was still required to render overtime service until late in the evening of the same day, typing voluminous classified

communications, computing allowances and preparing checks for the salary of Philippine Constabulary and Integrated National Police personnel throughout the country for distribution on or before December 15, 1975. He went home late at night and due to fatigue, he went to bed as soon as he arrived without taking his meal. Shortly thereafter, Marcelino was noticed by his mother, the herein petitioner, gasping for breath, perspiring profusely, and mumbling incoherent words. The petitioner tried to wake him up and after all efforts to bring him to his senses proved futile, she rushed Marcelino to the UE Ramon Magsaysay Memorial Hospital where he was pronounced dead at 5:30 o'clock in the morning of December 12, 1975 without regaining consciousness. The case of death was acute hemorrhagic pancreatitis. To support the claim that Marcelino N. Villavert died of acute hemorrhagic pancreatitis as a result of his duties as a code verifier, computer operator and typist of the Philippine Constabulary, the petitioner submitted the following certification of Lt. Colonel Felino C. Pacheco Jr., commanding officer, of the Philippine Constabulary, which reads: THIS IS TO CERTIFY that MARCELINO N. VILLAVERT, a regular employee of the Constabulary Computer Center, had been performing the following duty assignments in this office in addition to his appointment as Coder Verifier before his death; a. Computer Operator As computer operator he was subject to excessive heat and cold; b. Clerk TypistAs typist he was responsible for typing important communications not only for the office of the Constabulary Computer Center but also for other posts, including engagement speeches of the Chief of Constabulary and other ranking officers of the Command; c. Due to the shortage of qualified civilian personnel to handle the task, he was given excessive work responsibilities in the office which could have aggravated his ailment. d. That more often he took his meals irregularly late in view of the nature of his work especially during the preparation of checks for the salary of the Philippine Constabulary and the National Integrated Police personnel throughout the country; e. He used to perform rotation duties, thereby leaving him in sufficient time to consult the Constabulary Medical Dispensary for routine physical check up about his health.

f. That subject employee never drinks alcoholic liquor, neither smokes nor engages on immoral habits during his lifetime. g. That he died in line of duty after retiring from his night shift. This certification is being issued in behalf of legal heirs in order to justify their claim for payment of benefits from the Employees' Compensation to reciprocate the services rendered by the late 2 Marcelino N. Villavert, a loyal and dedicated public servant. The foregoing certification of Lt. Col. Felino C. Pacheco, Jr. was corroborated by the affidavit of Rustico P. Valenzuela, Chief Clerk of the Constabulary Computer Center, which reads: I, RUSTICO P. VALENZUELA, Master Sergeant, Philippine Constabulary, Filipino of legal age, married and presently Chief Clerk of the Constabulary Computer Center, Camp Crame, Quezon City after having been duly sworn to in accordance to law hereby depose and say: a. That as Chief Clerk I am responsible to my Commanding Officer about the accounting, detail, duties, etc. of all military and civilian personnel in the office and therefore the duties of the late Marcelino N. Villavert are personally known to me prior to his death; b. That the late Marcelino N. Villavert although was appointed as Coder Verifier, still he was instructed to perform extra additional workload due to shortage of qualified civilian personnel to handle administrative function, he being a graduate of the Computer Operator and an expert typist which is seldom found among the qualities of civilian personnel assigned in the Constabulary Computer Center; c. That the late Marcelino N. Villavert was complaining of chest pain and headache prior to his death but because of an urgent call to the service, although it necessitated his rest; he was obliged to go on strenuous duty on the night of December 11, 1975, typing voluminous classified communications, compute allowances and prepare checks for the salary of Philippine Constabulary and Integrated National Police personnel throughout the country for distribution on or before December 15, 1975, scheduled payday, thereby aggravating his ailment due to excessive work, disposed to

heat and cold, operating computer machine and over fatigue that caused his sudden death; d. That the late Marcelino N. Villavert before his death have insufficient time to consult the Medical Dispensary for routine physical check-up due to the rotation of his duties and therefore no record of his physical examination could be found in this Headquarters; e. That the death of late Marcelino N. Villavert was service connected in view of the fact that he died while in the performance of his official duties. Affiant further sayeth none. IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of August 1977 at Quezon City. (SGD) RUSTICO P. VALENZUEL Affiant SUBSCRIBED AND SWORN to before me this 22nd day of August 1977 at Quezon City, Metro Manila. Affiant exhibited his Residence Certificate No. A-1183510 issued at Taguig, Metro Manila on January 10, 1977. (SGD) ENRIQUE C VILLANUEVA JR 1Lt. PC Administrative Officer
3

The Government Service Insurance System and the Employees' Compensation Commission denied the claim for compensation on the ground that the petitioner did not present evidence that the illness of Marcelino N. Villavert, acute hemorrhagic pancreatitis, was caused or aggravated by the nature of his duties as employee of the Philippine Constabulary. The Employees' Compensation Commission, citing a book on medicine, said: In medical science, acute hemorrhagic pancreatitis is "acute inflammation with hemorrhagic necrosis of the pancreas." It occurs most commonly in association with alcoholism. The onset of the symptoms often occurs during or shortly after bouts of alcoholic intoxication. It also occurs in association with biliary tract disease. Occasionally, it occurs as a complication of peptic ulcer, mumps,

viral hepatitis or following the use of drugs such as glucocorticoids, or chlorothiazide. It is sometimes associated with metabolic disorders such as hyperpidemia and hyperparathyroidism. It may also be associated with a genetic type of pancreatitis with onset in childhood. Trauma is a relatively frequent cause of pancreatitis; it may result from a severe blow to the abdomen, a penetrating injury from a bullet or knife wound, inadvertent trauma from surgical procedures in the upper abdomen or rarely, electric shock. Approximately 20% of the patients have no apparent underlying or predisposing cause. (Principles of Internal Medicine by Harrison, 4 7th Edition, pp. 157) However, the Medico Legal Officer of the National Bureau of Investigation stated that the exact cause of acute hemorrhagic pancreatitis is still unknown despite extensive researches in this field, although most research data are agreed that physical and mental stresses are strong causal factors in the development of the 5 disease. From the foregoing facts of record, it is clear that Marcelino N. Villavert died of acute hemorrhagic pancreatitis which was directly caused or at least aggravated by the duties he performed as coder verifier, computer operator and clerk typist of the Philippine Constabulary. There is no evidence at all that Marcelino N. Villavert had a "bout of alcoholic intoxication" shortly before he died. Neither is there a showing that he used drugs. It should be noted that Article 4 of the Labor Code of the Philippines, as amended, provides that "All doubts in the implementation and interpretation of this Code, including its implementing rules and regulations shall be resolved in favor of labor." WHEREFORE, the decision of the Employees' Compensation Commission sought to be reviewed is set aside and judgment is hereby rendered ordering the Government Service Insurance System to pay the petitioner death benefits in the amount of SIX THOUSAND PESOS (P6,000.00). SO ORDERED.

SECTION 1. xxxxxxxxx (b) For the sickness and the resulting disability or death to be compensable, the sickness must be the result of an occupational disease annotated under Annex "A" of these rules with the conditions set therein satisfied; otherwise, proof must be shown that the risk of contracting the disease is increased by the working conditions (emphasis supplied). The cause of death of petitioner's son was acute hemorrhagic pancreatitis. This disease is not one of those listed, even under the additional listing, as an occupational disease in Annex "A" of the Amended Rules on Employees Compensation. Neither did petitioner present evidence to prove that the risk of contracting hemorrhagic pancreatitis was increased by the working conditions surrounding her son's employment as code verifier, computer operator and typist of the Philippine Constabulary. For which reasons, the Government Service Insurance System and the Employees' Compensation Commission denied the claim for compensation. That physical and mental stresses are strong causal factors in the development of the disease, as stated by the Medico Legal Officer of the National Bureau of Investigation is not scientifically confirmed "research data." Medical science still associates the disease with alcoholism, binary tract disease, the use of drugs, or trauma, among others. In fact, the exact cause is still unknown. Medical reports indicate that approximately 20% of the patients suffering from that disease have no apparent underlying or predisposing cause. The illness of petitioner's son not having been caused nor aggravated by the nature of his duties as an employee of the Philippine Constabulary, petitioner's claim is not compensable under explicit provisions of existing laws. Separate Opinions MELENCIO-HERRERA, J., dissenting.

Teehankee (Chairman), Makasiar, Guerrero and Plana, JJ., concur. Separate Opinions MELENCIO-HERRERA, J., dissenting. Section 1 (b), Rule III of the Amended Rules on Employees' Compensation explicitly provides: Section 1 (b), Rule III of the Amended Rules on Employees' Compensation explicitly provides: SECTION 1. xxxxxxxxx

(b) For the sickness and the resulting disability or death to be compensable, the sickness must be the result of an occupational disease annotated under Annex "A" of these rules with the conditions set therein satisfied; otherwise, proof must be shown that the risk of contracting the disease is increased by the working conditions (emphasis supplied). The cause of death of petitioner's son was acute hemorrhagic pancreatitis. This disease is not one of those listed, even under the additional listing, as an occupational disease in Annex "A" of the Amended Rules on Employees Compensation. Neither did petitioner present evidence to prove that the risk of contracting hemorrhagic pancreatitis was increased by the working conditions surrounding her son's employment as code verifier, computer operator and typist of the Philippine Constabulary. For which reasons, the Government Service Insurance System and the Employees' Compensation Commission denied the claim for compensation. That physical and mental stresses are strong causal factors in the development of the disease, as stated by the Medico Legal Officer of the National Bureau of Investigation is not scientifically confirmed "research data." Medical science still associates the disease with alcoholism, binary tract disease, the use of drugs, or trauma, among others. In fact, the exact cause is still unknown. Medical reports indicate that approximately 20% of the patients suffering from that disease have no apparent underlying or predisposing cause. The illness of petitioner's son not having been caused nor aggravated by the nature of his duties as an employee of the Philippine Constabulary, petitioner's claim is not compensable under explicit provisions of existing laws. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-50999 March 23, 1990 JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners, vs NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents. Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel. Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.: This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc., RespondentAppellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service. The antecedent facts are as follows: Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment due to financial losses. This application was seasonably opposed by petitioners alleging that the company is not suffering from any losses. They alleged further that they are being dismissed because of their membership in the union. At the last hearing of the case, however, petitioners manifested that they are no longer contesting their dismissal. The parties then agreed that the sole issue to be resolved is the basis of the separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least P40,000. In addition, they received commissions for every sale they made. The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of which petitioners are members, contains the following provision (p. 71, Rollo): ARTICLE XIV Retirement Gratuity Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or permanent lay-off not due to the fault of said employee shall receive from the company a retirement gratuity in an amount equivalent to one (1) month's salary per year of service. One month of salary as used in this paragraph shall be

deemed equivalent to the salary at date of retirement; years of service shall be deemed equivalent to total service credits, a fraction of at least six months being considered one year, including probationary employment. (Emphasis supplied) On the other hand, Article 284 of the Labor Code then prevailing provides: Art. 284. Reduction of personnel. The termination of employment of any employee due to the installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar causes, shall entitle the employee affected thereby to separation pay. In case of termination due to the installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied) In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide: xxx Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to prevent losses or other similar causes, or where the employee suffers from a disease and his continued employment is prohibited by law or is prejudicial to his health or to the health of his co-employees, the employee shall be entitled to termination pay equivalent at least to his one month salary, or to one-half month pay for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year. xxx Sec. 10. Basis of termination pay. The computation of the termination pay of an employee as provided herein shall be based on his latest salary rate, unless the same was reduced by the employer to defeat the intention of the Code, in which case the basis of computation shall be the rate before its deduction. (Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo): RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the complainants separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service that they have worked with the company. SO ORDERED. The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit. Hence, the present petition. On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by the decision appealed from" since he had "received, to his full and complete satisfaction, his separation pay," resolved to dismiss the petition as to him. The issue is whether or not earned sales commissions and allowances should be included in the monthly salary of petitioners for the purpose of computation of their separation pay. The petition is impressed with merit. Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether under the Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be added together. They cited Article 97(f) of the Labor Code which includes commission as part on one's salary, to wit; (f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and 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 reasonable value' shall not include

any profit to the employer or to any person affiliated with the employer. Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include commission in the computation of separation pay, it could have explicitly said so in clear and unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or designations attached to the word remuneration or earnings. Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the purpose of computation of their separation pay is concerned, this has been settled in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation of backwages and separation pay, account must be taken not only of the basic salary of petitioner but also of her transportation and emergency living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989. We shall concern ourselves now with the issue of whether or not earned sales commission should be included in the monthly salary of petitioner for the purpose of computation of their separation pay. Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been repeatedly declared by the courts that where the law speaks in clear and categorical language, there is no room for interpretation or construction; there is only room for application (Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity. How ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo): The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any indication that commission is part of salary. We can say that commission by itself may be considered a wage. This is not something novel for it cannot be gainsaid that certain types of employees like agents, field personnel and salesmen do not earn

any regular daily, weekly or monthly salaries, but rely mainly on commission earned. Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the termination pay due to one who is sought to be legally separated from the service is 'his latest salary rates. x x x. Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'. The above terms found in those Articles and the particular Rules were intentionally used to express the intent of the framers of the law that for purposes of separation pay they mean to be specifically referring to salary only. .... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is attached to simplify matters that may arise there from. The general guidelines in (sic) the formation of specific rules for particular purpose. Thus, that what should be controlling in matters concerning termination pay should be the specific provisions of both Book VI of the Code and the Rules. At any rate, settled is the rule that in matters of conflict between the general provision of law and that of a particular- or specific provision, the latter should prevail. On its part, the NLRC ruled (p. 110, Rollo): From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage is used in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task, piece or commission basis or other method of calculating the same. It does not, however, mean that commission, allowances or analogous income necessarily forms part of the employee's salary because to do so would lead to anomalies (sic), if not absurd, construction of the word "salary." For what will prevent the employee from insisting that emergency living allowance, 13th month pay, overtime, and premium pay, and other fringe benefits should be added to the computation of their separation pay. This

situation, to our mind, is not the real intent of the Code and its rules. We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real. Broadly, the word "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of which is the Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and commission is included in the definition of "wage", the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions. The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners. We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remuneration services rendered which contributed to the increase of income of Zuellig . Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commission are part of petitioners' wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic salary but depend on commissions and allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact that some salesman do not received any basic salary but depend on commissions and allowances or commissions alone, although an employer-employee relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite view that commissions, do not form part of wage or salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary and therefore, not entitled to

separation pay in the event of discharge from employment. Will this not be absurd? This narrow interpretation is not in accord with the liberal spirit of our labor laws and considering the purpose of separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown the the streets to face the harsh necessities of life. Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in computing the separation pay, We held that: The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not properly includible in such base figure since such commissions must be earned by actual market transactions attributable to petitioner. Applying this by analogy, since the commissions in the present case were earned by actual market transactions attributable to petitioners, these should be included in their separation pay. In the computation thereof, what should be taken into account is the average commissions earned during their last year of employment. The final consideration is, 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 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; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations Commission is MODIFIED by including allowances and commissions in the separation pay of petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper computation of said separation pay. SO ORDERED. Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 81077 June 6, 1990 LUIS DE OCAMPO, JR., JOSE RODRIGO, EUGENIO ESQUEJO, VICTORINO TABERNERO, RIZALO DALIVA, FRANCISCO ACOSTA and 87 others listed in Annex 'A' hereof, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and MAKATI DEVELOPMENT CORPORATION, respondents. Alfra Beta A. Serquina for petitioners. Maximo P. Amurao, Jr. for private respondent. CRUZ, J.: The petition seeks a reversal of the decision of the respondent NLRC dated June 8, 1984, the dispositive portion of which reads as follows: WHEREFORE, the Decision appealed from is hereby MODIFIED as hereinabove indicated. Consequently, the application for clearance to dismiss the union officers is granted; the employment status of the individual complainants who were project employees is also considered severed, not on account of illegality of the strike but due to the expiration of their employment contracts; and the respondent is ordered to reinstate, without back wages, the individual complainants who were regular employees except those who were officers of the union among them or paid separation pay at their option, equivalent to one month's pay or one-half month's pay for every year of service, whichever is greater. It appears that on September 30, 1980, the services of 65 employees of private respondent Makati Development Corporation were terminated on the ground of the expiration of their contracts; that the said employees filed a complaint for illegal dismissal against the MDC on October 1, 1980; * that on October 8, 1980, as a result of the aforementioned termination, the Philippine Transport and General Workers Association, of which the complainants were members, filed a notice of strike on the grounds of union-busting, subcontracting of projects which could have been assigned to the dismissed employees, and unfair labor practice; that on October 14, 1980, the

PTGWA declared a strike and established picket lines in the perimeter of the MDC premises; that on November 4, 1980, the MDC filed with the Bureau of Labor Relations a motion to declare the strike illegal and restrain the workers from continuing the strike; that on that same day and several days thereafter the MDC filed applications for clearance to terminate the employment of 90 of the striking workers, whom it had meanwhile preventively suspended; that of the said workers, 74 were project employees under contract with the MDC with fixed terms of employment; and that on August 31, 1982, Labor Arbiter Apolinar L. Sevilla rendered 1 a decision denying the applications for clearance filed by the MDC and directing it to reinstate the individual complainants with two months back wages each. This is the decision modified by the NLRC which is now faulted by the petitioners for grave abuse of discretion. The contention is that the public respondent acted arbitrarily and erroneously in ruling that: a) the motion for reconsideration was filed out of time; b) the strike was illegal; and c) the separation of the project employees was justified. Having considered the issues and the arguments of the parties in their respective pleadings, including the petitioners' ex parte motion for early resolution of this case, the Court makes the findings that follow. On the first issue, we note that the rule on motions for reconsideration of the decision of the NLRC is now found in Rule X of the Revised Rules of the NLRC, providing thus: Section 9. Motions for reconsideration Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within ten (I 0) calendar days from receipt of the order, resolution or decision, with proof of service that a copy of the same has been furnished, within the aforesaid reglementary period, the adverse party and provided further, that only one such motion shall be entertained. Subject to the provisions of Section 3, Rule IX of these Rules, motions for reconsideration of an order, resolution or decision of a Division shall be resolved by the Division of origin. However, this section was promulgated only on November 5, 1986, and became 3 effective only on November 29, 1986, after the required publication. It was therefore not yet in force when the required resolution in the present case was rendered in 1984.
2

Apparently agreeing that the reglementary period then was fifteen days, the Solicitor General argues that the petitioner's motion for reconsideration was nevertheless filed late on June 26, 1984, the decision of the NLRC having been rendered on June 7, 4 1984, or 19 days earlier. This is not exactly accurate. The fact is Annex "C" of the petition shows that a copy of the decision was received by the petitioner only on June 13, 1984, and it was from that date that the reglementary period commenced to run. This means that the motion for reconsideration was filed on time, only 13 days having elapsed before the deadline. But this notwithstanding, we must hold that under the law then in force, to wit, PD No. 823 as amended by PD No. 849, the strike was indeed illegal. In the first place, it was based not on the ground of unresolved economic issues, which was the only ground allowed at that time, when the policy was indeed to limit and discourage strikes. Secondly, the strike was declared only after 6 days from the notice of strike and before the lapse of the 30-day period prescribed in the said law for a cooling-off of the differences between the workers and management and a possible avoidance of the intended strike. That law clearly provided: Sec. 1. It is the policy of the state to encourage free trade unionism and free collective bargaining within the framework of compulsory and voluntary arbitration. Therefore all forms of strikes, picketing and lockout are hereby strictly prohibited in vital industries such as in public utilities, including transportation and communication, companies engaged in the manufacturer processing as well as in the distribution of fuel gas, gasoline and fuel or lubricating oil, in companies engaged in the production or processing of essential commodities or products for export, and in companies engaged in banking of any kind, as well as in hospitals and in schools and colleges. However, any legitimate labor union may strike and any employer may lockout in establishments not covered by General Order No. 5 only on grounds of unresolved economic issues in collective bargaining, in which case the union or the employer shall file a notice with the Bureau of Labor Relations at least 30 days before the intended strike or lockout. (Emphasis supplied) It is our ruling that the leaders of the illegal strike were correctly punished with dismissal, but their followers (other than the contract workers) were properly ordered reinstated, considering their lesser degree of responsibility. The penalty imposed upon the leaders was only proper because it was they who instigated the strike even if they knew, or should have known, that it was illegal. It was also fair to rule that the reinstated strikers were not entitled to backpay as they certainly should not be compensated for services not rendered during the illegal strike. In our view,

this is a reasonable compromise between the demands of the workers and the rights of the employer. Coming now to the last question, we stress the rule in Cartagenas v. Romago Electric 5 Co., that contract workers are not considered regular employees, their services being needed only when there are projects to be undertaken. 'The rationale of this rule is that if a project has already been completed, it would be unjust to require the employer to maintain them in the payroll while they are doing absolutely nothing except waiting until another project is begun, if at all. In effect, these stand-by workers would be enjoying the status of privileged retainers, collecting payment for work not done, to be disbursed by the employer from profits not earned. This is not fair by any standard and can only lead to a coddling of labor at the expense of management. We believe, however, that this rule is not applicable in the case at bar, and for - good reason. The record shows that although the contracts of the project workers had indeed expired, the project itself was still on-going and so continued to require the 6 workers' services for its completion. There is no showing that such services were unsatisfactory to justify their termination. This is not even alleged by the private respondent. One can therefore only wonder why, in view of these circumstances, the contract workers were not retained to finish the project they had begun and were still working on. This had been done in past projects. This arrangement had consistently been followed before, which accounts for the long years of service many of the workers had with the MDC. It is obvious that the real reason for the termination of their services-which, to repeat, were still needed-was the complaint the project workers had filed and their participation in the strike against the private respondent. These were the acts that rendered them persona non grata to the management. Their services were discontinued by the MDC not because of the expiration of their contracts, which had not prevented their retention or rehiring before as long as the project they were working on had not yet been completed. The real purpose of the MDC was to retaliate against the workers, to punish them for their defiance by replacing them with more tractable employees. Also noteworthy in this connection is Policy Instruction No. 20 of the Department of Labor, providing that "project employees are not entitled to separation pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the projects in which they had been 7 employed by a particular construction company." Affirmatively put, and interpreting it in the most liberal way to favor the working class, the rule would entitle project employees to separation pay if the projects they are working on have not yet been completed when their services are terminated. And this should be true even if their contracts have expired, on the theory that such contracts would have been renewed anyway because their services were still needed.

Applying this rule, we hold that the project workers in the case at bar, who were separated even before the completion of the project at the New Alabang Village and not really for the reason that their contracts had expired, are entitled to separation pay. We make this disposition instead of ordering their reinstatement as it may be assumed that the said project has been completed by this time. Considering the workers to have been separated without valid cause, we shall compute their separation pay at the rate of one month for every year of service of each dismissed 8 employee, up to the time of the completion of the project. We feel this is the most equitable way to treat their claim in light of their cavalier dismissal by the private respondent despite their long period of satisfactory service with it. It is the policy of the Constitution to afford protection to labor in recognition of its role in the improvement of our welfare and the strengthening of our democracy. An exploited working class is a discontented working class. It is a treadmill to progress and a threat to freedom. Knowing this, we must exert all effort to dignify the lot of the employee, elevating him to the same plane as his employer, that they may better work together as equal partners in the quest for a better life. This is a symbiotic relationship we must maintain if such a quest is to succeed. WHEREFORE, the appealed decision of the NLRC is AFFIRMED but with the modification that the contract workers are hereby declared to have been illegally separated before the expiration of the project they were working on and so are entitled to separation pay equivalent to one month salary for every year of service. No costs. SO ORDERED. Narvasa (Chairman), Gancayco and Medialdea, JJ., concur. Grio-Aquino, J., is on leave. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 76633 October 18, 1988 EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents.

Jimenea, Dala & Zaragoza Law Office for petitioner. The Solicitor General for public respondent. Dizon Law Office for respondent Kathleen D. Saco. CRUZ, J.: The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration (POEA) for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was not an overseas worker. Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial expenses. The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal on the ground of non-exhaustion of administrative remedies. Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the questions the petitioner is raising are 1 essentially questions of law. Moreover, the private respondent himself has not objected to the petitioner's direct resort to this Court, observing that the usual procedure would delay the disposition of the case to her prejudice. The Philippine Overseas Employment Administration was created under Executive Order No. 797, promulgated on May 1, 1982, to promote and monitor the overseas employment of Filipinos and to protect their rights. It replaced the National Seamen Board created earlier under Article 20 of the Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with "original and exclusive jurisdiction over all cases, including money claims, involving employee-employer relations arising out of or by virtue of any law or contract involving Filipino contract workers, including seamen." These cases, according to the 1985 Rules and

Regulations on Overseas Employment issued by the POEA, include "claims for death, 2 disability and other benefits" arising out of such employment. The petitioner does not contend that Saco was not its employee or that the claim of his widow is not compensable. What it does urge is that he was not an overseas worker but a 'domestic employee and consequently his widow's claim should have been filed with Social Security System, subject to appeal to the Employees Compensation Commission. We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee of the petitioner at the time he met with the fatal accident in Japan in 1985. Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as "employment of a worker outside the Philippines, including employment on board vessels plying international waters, covered by a 3 valid contract. A contract worker is described as "any person working or who has 4 worked overseas under a valid employment contract and shall include seamen" or "any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal or partner under a valid employment 5 contract and shall include seamen." These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while under a contract of employment with the petitioner and alongside the petitioner's vessel, the M/V Eastern Polaris, while 6 berthed in a foreign country. It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Saco's employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory power over 7 8 overseas employment under Executive Order NO. 797. The second is its payment of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 "for the purpose of providing social and welfare services to Filipino overseas workers." Significantly, the office administering this fund, in the receipt it prepared for the private respondent's signature, described the subject of the burial benefits as 9 "overseas contract worker Vitaliano Saco." While this receipt is certainly not controlling, it does indicate, in the light of the petitioner's own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to be an overseas employee. The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air Lines who, although working abroad in its international flights, are not considered overseas workers. If this be so, the

petitioner should not have found it necessary to submit its shipping articles to the POEA for processing, formalization and approval or to contribute to the Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under the definitions given be considered seamen nor are their appointments coursed through the POEA. The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas employment. A similar contract had earlier been required by the National Seamen Board and had been sustained in a number of cases by this 10 Court. The petitioner claims that it had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done so as required by the circular, which specifically declared that "all parties to the employment of any Filipino seamen on board any ocean-going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any other format of employment contract effective that date." In the second place, even if it had not done so, the provisions of the said circular are nevertheless deemed written into the contract with Saco as a postulate of the police 11 power of the State. But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delegation of legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation. The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows: ... The governing Board of the Administration (POEA), as hereunder provided shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration (POEA). Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself prescribed a standard shipping contract substantially the same as the format adopted by the POEA. The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may be enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This

prerogative cannot be abdicated or surrendered by the legislature to the delegate. 12 Thus, in Ynot v. Intermediate Apellate Court which annulled Executive Order No. 626, this Court held: We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a 'roving commission a wide and sweeping authority that is not canalized within banks that keep it from overflowing,' in short a clearly profligate and therefore invalid delegation of legislative powers. There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will 13 have to do is enforce it. Under the sufficient standard test, there must be adequate guidelines or stations in the law to map out the boundaries of the 14 delegate's authority and prevent the delegation from running riot. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally certain. In the case of the legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its non-delegation the exception.

The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the "power of subordinate legislation." With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in' the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices." Parenthetically, it is recalled that this Court has accepted as sufficient standards 15 "Public interest" in People v. Rosenthal "justice and equity" in Antamok Gold Fields 16 17 v. CIR "public convenience and welfare" in Calalang v. Williams and "simplicity, 18 economy and efficiency" in Cervantes v. Auditor General, to mention only a few cases. In the United States, the "sense and experience of men" was accepted in 19 Mutual Film Corp. v. Industrial Commission, and "national security" in Hirabayashi 20 v. United States. It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she

also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private respondent's claim against the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that Section C. Compensation and Benefits. 1. In case of death of the seamen during the term of his Contract, the employer shall pay his beneficiaries the amount of: a. P220,000.00 for master and chief engineers b. P180,000.00 for other officers, including radio operators and master electrician c. P 130,000.00 for ratings. 2. It is understood and agreed that the benefits mentioned above shall be separate and distinct from, and will be in addition to whatever benefits which the seaman is entitled to under Philippine laws. ... 3. ... c. If the remains of the seaman is buried in the Philippines, the owners shall pay the beneficiaries of the seaman an amount not exceeding P18,000.00 for burial expenses. The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National Seamen Board on July 12,1976, providing an follows: Income Benefits under this Rule Shall be Considered Additional Benefits. All compensation benefits under Title II, Book Four of the Labor Code of the Philippines (Employees Compensation and State Insurance Fund) shall be granted, in addition to whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be entitled to under the employment contract approved by the NSB. If applicable, all benefits under the Social Security Law and the Philippine Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with such laws.

The above provisions are manifestations of the concern of the State for the working class, consistently with the social justice policy and the specific provisions in the Constitution for the protection of the working class and the promotion of its interest. One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been denied due process because the same POEA that issued Memorandum Circular No. 2 has also sustained and applied it is an uninformed criticism of administrative law itself. Administrative agencies are vested with two basic powers, the quasi-legislative and the quasi-judicial. The first enables them to promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations. Examples abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board and the Civil Aeronautics Administration and the Department of Natural Resources and so on ad infinitum on their respective administrative regulations. Such an arrangement has been accepted as a fact of life of modern governments and cannot be considered violative of due process as long as the cardinal rights laid down by Justice Laurel in 21 the landmark case of Ang Tibay v. Court of Industrial Relations are observed. Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the private respondent, in line with the express mandate of the Labor Code and the principle that those with less in life should have more in law. When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the underprivileged worker. This is only fair if he is to be given the opportunity and the right to assert and defend his cause not as a subordinate but as a peer of management, with which he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner. WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered. Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-21849

December 11, 1967

LOURDES VDA. DE MAGALONA, petitioner, vs. THE WORKMEN'S COMPENSATION COMMISSION and THE NATIONAL SHIPYARD AND STEEL CORPORATION (NASSCO), respondents. Pablo B. Badong and Associates for petitioner. P. C. Villavieja and P. E. Villanueva for respondent WCC. Eduardo S. Rodriguez for respondent NASSCO. BENGZON, J.P., J.: Since April 1, 1954, Jorge Magalona worked for NASSCO-Iligan Steel Mills, as batteryman, then as electrician-helper and finally as pulpit operator with a weekly salary of P26.40, with hours of work at 7:00 A.M.-12: 00 Noon, 1:00 P.M.-4:00 P.M. As a batteryman, he filled jars of dry cells with hydrochloric acid inside a room that was always damp because of the sprinkling of water over the dry cells to prevent the acid from flowing. As electrician-helper, he helped clean electric motors, rewound coils and did other work in the electric shop. In his last designation as pulpit operator, he worked in the rolling mill department, which was hot, operated an electric switch and caught steel bars passing through at a finish line. On February 16, 1956, Magalona went on sick leave, to last up to March 10, 1956. He was not able to report for work after his leave expired. On May 1, 1956, he was admitted in Riverside Hospital, Bacolod City, where he died on May 17, of that year, of duodenal ulcer with partial obstruction at the pyloric end of the stomach, severe anemia with kidney complications. On July 25, 1956, his widow, Lourdes Magalona, filed a claim for compensation under the Workmen's Compensation Act. Respondent company did not controvert the claim. The hearing officer of the Regional Office, Department of Labor, awarded the widow and her child P2,745.60 as death benefits, P200.00 as burial expenses, P1,645.60 as medical expenses and P135.28 as attorney's fees. The award was based on the ground that the conditions of work inhalation of gas fumes, incessant heat, irregular eating habits might have caused duodenal ulcer, in line with the principle of liberal construction of labor laws in favor of the laborer. On review before the Workmen's Compensation Commission in Manila, claimant's counsel filed a "Motion to Dismiss the Appeal or Reply to Petition for Review", alleging, as it did before the hearing officer, that the case should be dismissed because NASSCO had not filed any written notice of controversion of the claim. Since medical considerations were involved, Workmen's Compensation Commissioner Cesareo Perez referred the case to the Evaluation Division of the Bureau of

Workmen's Compensation for a medical opinion. Dr. Elda M. Montemayor, Senior Compensation Rating Medical Officer therein, in her report dated February 20, 1963 (approved by the Chief of the Evaluation Division), stated that although the exact cause of duodenal ulcer is still unknown, the conditions of his work, in the absence of sufficient proof that the deceased missed or had irregular meals, had no causal relationship with the ailment causing his death. Without resolving the motion to dismiss, Commissioner Perez reversed the decision of the hearing officer, absolved NASSCO and ruled that duodenal ulcer is not compensable without any showing that there was any causal connection between the ulcer and the nature of the work, such as aggravation of the illness through an accident, over exertion and the like. After the Commission en banc denied her motion for reconsideration, claimant appealed to Us by way of certiorari, raising the following questions for determination: 1. Could the NASSCO have legally petitioned for review of the decision of the hearing officer considering that it had not controverted the claim? 2. Was the admission by Commissioner Perez of the medical opinion of a Senior Compensation Rating Officer of the Commission proper? 3. Was there need for claimant to show causal connection between the death of the employee and the nature of his work? As the hearing officer found, NASSCO failed to controvert the claim. It is NASSCO's position that granting there was no controversion, the acceptance by the hearing officer of NASSCO's evidence was tantamount to reinstatement of its right to controvert, citing Section 4 of Rule 14 of the Rules of the Workmen's Compensation Commission. However, to reinstate one's right to controvert, the section requires a petition under oath by the employer, specifying the reason for its failure to controvert.itc-alf In the case at bar, there was no such petition. Mere acceptance by the hearing officer of the evidence presented did not mean the reinstatement of the right to controvert. The law itself provides that only the Commissioner may reinstate the right to controvert. (See Sec. 45, par. 2, Workmen's Compensation Act; Agustin v. WCC, L-19957, Sept. 29, 1964).lawphil.net By failing to present a written controversion of the claim, the employer, NASSCO, renounced its right to challenge the claim. And this means that all non-jurisdictional defenses, such as non1 compensability of the illness, prescription, etc., are barred. Respondent NASSCO, in its answer before Us, alleges that the claim had prescribed, for it allegedly received notice of the claim for compensation only on July 25, 1962 (p. 64 of the Record).itc-alf The hearing officer, however, found that the records show the claim to have been received July 25, 1956 (Record, p. 33). Furthermore, it was the company physician who diagnosed the employee's illness (pp. 73 of T.s.n.,

quoted in petition, p. 22 of Record).The wife testified under oath that she sent a telegram to NASSCO right after the death of her husband and later filed her claim with its manager. These matters were not touched on by the reviewing commissioner or the Commission en banc and should stand. The widow's acts after the death of her husband may be considered as substantial compliance with the required notice of claim for compensation. In a case, We accepted as substantial compliance with Section 24 of the Act an oral demand for compensation hardly a month after lay-off, making of little consequence a subsequent written claim filed 2 much later. And besides, as stated, for lack of proper controversion, the defense of prescription is likewise barred. With regard to the admissibility of the medical opinion report of Dr. Montemayor, said report should not have been admitted because while technical rules of 3 procedure need not be followed by the Commission, no evidence should be taken into account where the adverse party was not given the opportunity to object to its 4 admissibility. This is sound especially where on such admitted report was principally based the decision of reversal. Based on the medical report, the Workmen's Compensation Commissioner ruled that the claimant must first establish a causal link between the nature of the employment and the cause of death of Magalona, before claimant can be compensated. This is a reversible error. The employee had obviously been sick. His inability to report sack to work when his sick leave expired did not sever the employer-employee relationship. NASSCO never claimed that it had terminated his employment. NASSCO claimed that he was "absent without leave" (pp. 36-38 of T.s.n., quoted in respondent's answer, pp. 68-69 of the Record).lawphil.net It is now unquestionable that once the illness supervened at the time of the employment there is a rebuttable presumption that such illness arose out of the employment or was at least aggravated by such employment. The claimant is relieved from the burden of proving causation once the 5 illness or the injury is shown to have arisen in the course of employment. Thus, the precise medical cause of the illness is not legally significant, as long as the illness supervened in the course of the employment. The presumption of causation or aggravation then applies. The function of a presumption is precisely to dispense with the need for proof. The burden to overthrow the presumption and to disconnect, by substantial evidence, the injury or sickness from employment, is laid by the statute 6 at the door of the employer. In the case at bar no substantial evidence exists to overcome said presumption. And, even if the medical report is considered, since the report itself admits that the real cause of duodenal ulcer is unknown, the presumption established by law would still apply as against a mere opinion on the non-causal connection between duodenal ulcer and the nature of Magalona's employment.lawphil.net WHEREFORE, the appealed resolution of the Workmen's Compensation Commission en banc and the Commissioner's decision are hereby reversed, and the award of the hearing officer granting claimant P2,745.60 as death benefits; P200.00 as burial

expenses; P1,645.60 as medical expenses; and P138.25 as attorney's fees, is affirmed. No costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. least believes that they are true at the time he takes such oath or subscribes such document. It can scarcely be believed that the defendant in the present case believed that the answer to said question No. 5 was true. He must have signed or answered said question not only believing that it was not true, but, as a matter of fact, signed the same knowing that the answer was false. With reference to the fifth assignment of error, we are of the opinion that the evidence adduced during the trial of the cause clearly shows that the defendant is guilty of the crime charged and therefore the sentence of the lower court should be and is hereby affirmed with costs. Arellano, C.J., Torres, Carson and Araullo, JJ., concur. Separate Opinions MORELAND, J., dissenting: I dissent. The case of United States vs. George (228 U. S., 14), is decisive of this, holding that an indictment for perjury can not be based on an affidavit not authorized or required by any law of the United States. There is no law of the Philippine Islands which authorizes or requires the affidavit which is the basis of the charge of perjury in this case. (U. S. vs. Panlilio, 28 Phil. Rep., 608.) Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 101279 August 6, 1992 PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner, vs. HON. RUBEN D. TORRES, as Secretary of the Department of Labor & Employment,

and JOSE N. SARMIENTO, as Administrator of the PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, respondents. De Guzman, Meneses & Associates for petitioner.

For compliance. (Emphasis ours; p. 30, Rollo.) Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30, Series of 1991, dated July 10, 1991, providing GUIDELINES on the Government processing and deployment of Filipino domestic helpers to Hong Kong and the accreditation of Hong Kong recruitment agencies intending to hire Filipino domestic helpers. Subject: Guidelines on the Temporary Government Processing and Deployment of Domestic Helpers to Hong Kong. Pursuant to Department Order No. 16, series of 1991 and in order to operationalize the temporary government processing and deployment of domestic helpers (DHs) to Hong Kong resulting from the temporary suspension of recruitment by private employment agencies for said skill and host market, the following guidelines and mechanisms shall govern the implementation of said policy. I. Creation of a joint POEA-OWWA Household Workers Placement Unit (HWPU) An ad hoc, one stop Household Workers Placement Unit [or HWPU] under the supervision of the POEA shall take charge of the various operations involved in the Hong Kong-DH industry segment: The HWPU shall have the following functions in coordination with appropriate units and other entities concerned: 1. Negotiations with and Accreditation of Hong Kong Recruitment Agencies 2. Manpower Pooling 3. Worker Training and Briefing 4. Processing and Deployment 5. Welfare Programs II. Documentary Requirements and Other Conditions for Accreditation of Hong Kong Recruitment Agencies or Principals

GRIO-AQUINO, J.: This petition for prohibition with temporary restraining order was filed by the Philippine Association of Service Exporters (PASEI, for short), to prohibit and enjoin the Secretary of the Department of Labor and Employment (DOLE) and the Administrator of the Philippine Overseas Employment Administration (or POEA) from enforcing and implementing DOLE Department Order No. 16, Series of 1991 and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, temporarily suspending the recruitment by private employment agencies of Filipino domestic helpers for Hong Kong and vesting in the DOLE, through the facilities of the POEA, the task of processing and deploying such workers. PASEI is the largest national organization of private employment and recruitment agencies duly licensed and authorized by the POEA, to engaged in the business of obtaining overseas employment for Filipino landbased workers, including domestic helpers. On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino housemaids employed in Hong Kong, DOLE Secretary Ruben D. Torres issued Department Order No. 16, Series of 1991, temporarily suspending the recruitment by private employment agencies of "Filipino domestic helpers going to Hong Kong" (p. 30, Rollo). The DOLE itself, through the POEA took over the business of deploying such Hong Kong-bound workers. In view of the need to establish mechanisms that will enhance the protection for Filipino domestic helpers going to Hong Kong, the recruitment of the same by private employment agencies is hereby temporarily suspended effective 1 July 1991. As such, the DOLE through the facilities of the Philippine Overseas Employment Administration shall take over the processing and deployment of household workers bound for Hong Kong, subject to guidelines to be issued for said purpose. In support of this policy, all DOLE Regional Directors and the Bureau of Local Employment's regional offices are likewise directed to coordinate with the POEA in maintaining a manpower pool of prospective domestic helpers to Hong Kong on a regional basis.

Recruitment agencies in Hong Kong intending to hire Filipino DHs for their employers may negotiate with the HWPU in Manila directly or through the Philippine Labor Attache's Office in Hong Kong. xxx xxx xxx X. Interim Arrangement All contracts stamped in Hong Kong as of June 30 shall continue to be processed by POEA until 31 July 1991 under the name of the Philippine agencies concerned. Thereafter, all contracts shall be processed with the HWPU. Recruitment agencies in Hong Kong shall submit to the Philippine Consulate General in Hong kong a list of their accepted applicants in their pool within the last week of July. The last day of acceptance shall be July 31 which shall then be the basis of HWPU in accepting contracts for processing. After the exhaustion of their respective pools the only source of applicants will be the POEA manpower pool. For strict compliance of all concerned. (pp. 31-35, Rollo.) On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37, Series of 1991, on the processing of employment contracts of domestic workers for Hong Kong. TO: All Philippine and Hong Kong Agencies engaged in the recruitment of Domestic helpers for Hong Kong Further to Memorandum Circular No. 30, series of 1991 pertaining to the government processing and deployment of domestic helpers (DHs) to Hong Kong, processing of employment contracts which have been attested by the Hong Kong Commissioner of Labor up to 30 June 1991 shall be processed by the POEA Employment Contracts Processing Branch up to 15 August 1991 only. Effective 16 August 1991, all Hong Kong recruitment agent/s hiring DHs from the Philippines shall recruit under the new scheme which requires prior accreditation which the POEA. Recruitment agencies in Hong Kong may apply for accreditation at the Office of the Labor Attache, Philippine Consulate General

where a POEA team is posted until 31 August 1991. Thereafter, those who failed to have themselves accredited in Hong Kong may proceed to the POEA-OWWA Household Workers Placement Unit in Manila for accreditation before their recruitment and processing of DHs shall be allowed. Recruitment agencies in Hong Kong who have some accepted applicants in their pool after the cut-off period shall submit this list of workers upon accreditation. Only those DHs in said list will be allowed processing outside of the HWPU manpower pool. For strict compliance of all concerned. (Emphasis supplied, p. 36, Rollo.) On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the aforementioned DOLE and POEA circulars and to prohibit their implementation for the following reasons: 1. that the respondents acted with grave abuse of discretion and/or in excess of their rule-making authority in issuing said circulars; 2. that the assailed DOLE and POEA circulars are contrary to the Constitution, are unreasonable, unfair and oppressive; and 3. that the requirements of publication and filing with the Office of the National Administrative Register were not complied with. There is no merit in the first and second grounds of the petition. Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate recruitment and placement activities. Art. 36. Regulatory Power. The Secretary of Labor shall have the power to restrict and regulate the recruitment and placement activities of all agencies within the coverage of this title [Regulation of Recruitment and Placement Activities] and is hereby authorized to issue orders and promulgate rules and regulations to carry out the objectives and implement the provisions of this title. (Emphasis ours.) On the other hand, the scope of the regulatory authority of the POEA, which was created by Executive Order No. 797 on May 1, 1982 to take over the functions of the Overseas Employment Development Board, the National Seamen Board, and the

overseas employment functions of the Bureau of Employment Services, is broad and far-ranging for: 1. Among the functions inherited by the POEA from the defunct Bureau of Employment Services was the power and duty: "2. To establish and maintain a registration and/or licensing system to regulate private sector participation in the recruitment and placement of workers, locally and overseas, . . ." (Art. 15, Labor Code, Emphasis supplied). (p. 13, Rollo.) 2. It assumed from the defunct Overseas Employment Development Board the power and duty: 3. To recruit and place workers for overseas employment of Filipino contract workers on a government to government arrangement and in such other sectors as policy may dictate . . . (Art. 17, Labor Code.) (p. 13, Rollo.) 3. From the National Seamen Board, the POEA took over: 2. To regulate and supervise the activities of agents or representatives of shipping companies in the hiring of seamen for overseas employment; and secure the best possible terms of employment for contract seamen workers and secure compliance therewith. (Art. 20, Labor Code.) The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional, unreasonable and oppressive. It has been necessitated by "the growing complexity of the modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are necessary to help in the regulation of society's ramified activities. "Specialized in the particular field assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice" (Ibid.). It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in the recruitment and deployment of Filipino landbased workers for overseas employment. A careful reading of the challenged administrative issuances discloses that the same fall within the "administrative and policing powers expressly or by necessary implication conferred" upon the respondents (People vs. Maceren,

79 SCRA 450). The power to "restrict and regulate conferred by Article 36 of the Labor Code involves a grant of police power (City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" means "to confine, limit or stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to protect, foster, promote, preserve, and control with due regard for the interests, first and foremost, of the public, then of the utility and of its patrons" (Philippine Communications Satellite Corporation vs. Alcuaz, 180 SCRA 218). The Solicitor General, in his Comment, aptly observed: . . . Said Administrative Order [i.e., DOLE Administrative Order No. 16] merely restricted the scope or area of petitioner's business operations by excluding therefrom recruitment and deployment of domestic helpers for Hong Kong till after the establishment of the "mechanisms" that will enhance the protection of Filipino domestic helpers going to Hong Kong. In fine, other than the recruitment and deployment of Filipino domestic helpers for Hongkong, petitioner may still deploy other class of Filipino workers either for Hongkong and other countries and all other classes of Filipino workers for other countries. Said administrative issuances, intended to curtail, if not to end, rampant violations of the rule against excessive collections of placement and documentation fees, travel fees and other charges committed by private employment agencies recruiting and deploying domestic helpers to Hongkong. [They are reasonable, valid and justified under the general welfare clause of the Constitution, since the recruitment and deployment business, as it is conducted today, is affected with public interest. xxx xxx xxx The alleged takeover [of the business of recruiting and placing Filipino domestic helpers in Hongkong] is merely a remedial measure, and expires after its purpose shall have been attained. This is evident from the tenor of Administrative Order No. 16 that recruitment of Filipino domestic helpers going to Hongkong by private employment agencies are hereby "temporarily suspended effective July 1, 1991." The alleged takeover is limited in scope, being confined to recruitment of domestic helpers going to Hongkong only. xxx xxx xxx

. . . the justification for the takeover of the processing and deploying of domestic helpers for Hongkong resulting from the restriction of the scope of petitioner's business is confined solely to the unscrupulous practice of private employment agencies victimizing applicants for employment as domestic helpers for Hongkong and not the whole recruitment business in the Philippines. (pp. 62-65, Rollo.) The questioned circulars are therefore a valid exercise of the police power as delegated to the executive branch of Government. Nevertheless, they are legally invalid, defective and unenforceable for lack of power publication and filing in the Office of the National Administrative Register as required in Article 2 of the Civil Code, Article 5 of the Labor Code and Sections 3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987 which provide: Art. 2. Laws shall take effect after fifteen (15) days following the completion of their publication in the Official Gazatte, unless it is otherwise provided. . . . (Civil Code.) Art. 5. Rules and Regulations. The Department of Labor and other government agencies charged with the administration and enforcement of this Code or any of its parts shall promulgate the necessary implementing rules and regulations. Such rules and regulations shall become effective fifteen (15) days after announcement of their adoption in newspapers of general circulation. (Emphasis supplied, Labor Code, as amended.) Sec. 3. Filing. (1) Every agency shall file with the University of the Philippines Law Center, three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months shall not thereafter be the basis of any sanction against any party or persons. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987.) Sec. 4. Effectivity. In addition to other rule-making requirements provided by law not inconsistent with this Book, each rule shall become effective fifteen (15) days from the date of filing as above provided unless a different date is fixed by law, or specified in the rule in cases of imminent danger to public health, safety and welfare, the existence of which must be expressed in a statement accompanying the rule. The agency shall take appropriate measures to make emergency rules known to persons who may be

affected by them. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987). Once, more we advert to our ruling in Taada vs. Tuvera, 146 SCRA 446 that: . . . Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. (p. 447.) Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties. (p. 448.) We agree that publication must be in full or it is no publication at all since its purpose is to inform the public of the content of the laws. (p. 448.) For lack of proper publication, the administrative circulars in question may not be enforced and implemented. WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department Order No. 16, Series of 1991, and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by the public respondents is hereby SUSPENDED pending compliance with the statutory requirements of publication and filing under the aforementioned laws of the land. SO ORDERED. Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-43389 April 28, 1980

GLENIA UY, for and in behalf of her minors,* REYNALDO, MARIA ELENA (MARILEN), and CONCHITA, all surnamed UY, petitioners, vs. WORKMEN'S COMPENSATION COMMISSION and LUCY PEREZ, respondents.

Orders Nos. 1, 6 (pars. 1 & 2) and 7, Section 56 of the Workmen's Compensation Act, as amended and for private respondent's failure to secure a permit to employ an alien pursuant to Department Order No. 2, and for violation of the Nationalization and Retail Trade Law. Private respondent Lucy Perez was further ordered to pay to the Workmen's Compensation Fund, the sum of P91.00, pursuant to Section 55 of the Act and likewise the sum of P450.00 as attorney's fees, pursuant to Section 31 of the same Act (Annexes "D"-"D-1", pp. 32-33, rec.). On January 13, 1975, private respondent's counsel filed a motion for extension of time to file his motion for reconsideration alleging inter alia that the cause of the death of the deceased was not work- connected (Annexes "E" - "E-1 ", pp. 34-35, rec.) On January 20, 1975, private respondent filed the motion for reconsideration from the December 27, 1974 Award on the grounds that the respondent did not fail to controvert the instant claim for compensation; that the Hearing Officer gravely erred in not giving the private respondent an opportunity to present evidence to rebut claimant's claim after reception of the latter's evidence ex parte and thereby violating the constitutional mandate of due process; and that the death of the deceased was not compensable (Annexes "F"-"F-4", pp. 3640, rec). On April 18, 1975, the Acting Chief of the Workmen's Compensation Unit, Regional Office No. 9, Department of Labor, Tacloban City, issued an order granting the motion for reconsideration in view of the absence of an opposition thereto and set the case for hearing on the merits on April 30, 1975, at 8:00 A.M. until terminated and with no postponements (Annex "G", p. 41, rec.). Hence, hearings on the merits were conducted before the above-said Acting Chief of the Workmen's Compensation Unit, Regional Office No. 9, Department of Labor, Tacloban City and/or Hearing Officer, and the parties duly represented by their counsels of record adduced evidence in support of their respective contentions. On October 28, 1975, after several hearings conducted by the aforesaid Hearing Officer, a decision was rendered which states among others, "that although the respondent has failed to controvert the claim within the period provided for under Section 45 of the Act, a hearing of the case, with notice to all the parties was conducted to determine the compensability of the claim" (Annex "H", p. 42, rec.). Moreover, the dispositive portion of said decision substantially revived the Award dated December 27,1974 (Annex "H-8", p. 50, rec.). On November 12, 1975, a motion for reconsideration was filed by private respondent, thru counsel on the following grounds, to wit: 1) that Honorable Office [Workmen's Compensation Unit Regional Office No. 9] gravely erred in considering deceased Ki Lam Uy as respondent's employee; 2) assuming that deceased was an

MAKASIAR, J.: This a petition for review on certiorari (pp. 1-26, rec.) of the decision of the Workmen's Compensation Commission dated February 23,1976 in R09-W-C-Case No. 14120 [Annexes "K"-"K-5", pp. 58-63, rec.] It appears that petitioners are all the children of the deceased Ki Lam Uy with his common-law wife, Pura Primer. Glenia Uy, daughter of the deceased, being of age, filed the present petition for and in behalf of her minor brother, Reynaldo, and minor sisters, Maria Elena (Marilen) and Conchita, all surnamed Uy. The instant petition had its genesis at about 7:30 in the evening of September 27, 1974 when deceased Ki Lam Uy, also known as Vicente Uy, was killed by robbers at the farm house (bodega) of private respondent Lucy Perez at Sitio Agay-ayan, Barrio Tugbong, Kananga, Leyte. On November 15, 1974, claimants-petitioners filed a Notice and Claim for Compensation in Death Cases before Regional Office No. 9, Department of Labor, Tacloban City, seeking to recover death compensation benefits for the death of their father, Ki Lam Uy, from private respondent, Lucy Perez. On December 10, 1974, a copy of the claim was sent by special delivery to private respondent, Lucy Perez, by the Chief of the Workmen's Compensation Unit, Regional Office No. 9, Department of Labor, Tacloban City, requiring the said private respondent to submit to said office the enclosed Workmen's Compensation Form No. 3, Employer's Report of Accident or Sickness (Annex "C", p. 31, rec.). For failure of private respondent to accomplish the required Employer's Report, the Acting Chief of the Workmen's Compensation Unit pursuant to Section 2, Rule, 11, Rules of the Workmen's Compensation Commission, after processing the claim and the supporting evidence submitted by claimants-petitioners, issued an Award dated December 27, 1974, granting death compensation benefits to claimants-petitioners, including Pura Primer, the common-law widow of the deceased, in the amount of P6,000.00, pursuant to Section 8 (b) of the Workmen's Compensation Act, as amended, plus the sum of P200.00 as burial expenses. Private respondent, Lucy Perez was also required to pay the additional sum of P3,000.00 under Section 4-A of the Act, due to private respondent's violation of Bureau of Labor Standards Safety

employee, respondent had already complied with her obligation in accordance with the Workmen's Compensation Act [Annexes "I"-"I-5", pp. 51-56, rec.] On November 28, 1975, an order denying said motion for reconsideration was issued and likewise ordering the elevation of the entire records of the case to the Workmen's Compensation Commission for review pursuant to the provisions of Section 4, Rule 19, of the Rules of the Workmen's Compensation Commission (Annex "J", p. 57, rec.). On February 23, 1976, the respondent Workmen's Compensation Commission rendered a decision reversing the decision of the Hearing Officer on the ground that the deceased, Ki Lam Uy was not an employee of private respondent, thereby absolving herein private respondent from any liability (Annexes "K"-"K-5", pp. 58-63, rec). Hence, the instant petition for review. I Private respondent in her answer to the instant petition claims that the petition, not being verified by the petitioners but by their counsel, is fatally defective. The claim has no merit. In the past, it has been the constant rulings of this Court that lack of verification is merely a formal defect. "In fact, many authorities consider the absence of verification a mere formal, not jurisdictional defect, the absence of which does not of itself justify a court in refusing to allow and act in the case" (71 C.J.S. 744-745). This Court declared: The requirement regarding verification of a pleading is simply intended to secure an assurance that what are alleged in the pleadings are true and correct and not the product of the imagination on a matter of speculation, and that the pleading is filed in good faith. The requirement regarding verification of a pleading is a formal, not a jurisdictional requisite. The requirement regarding verification of a pleading is simply a condition affecting the form of pleading (Rule 7 of the Rules of Court is entitled 'Formal Requirements of Pleadings and it is under this Rule [Sec. 6] that the requirement regarding verification is provided the noncompliance of which does not necessarily render the pleading fatally defective. The Court may order the correction of the pleading if the verification is lacking, or act on the pleading although it is not verified if the attending circumstances are such that the strict complaince with the rule may be dispensed with in order that the ends of justice or the law may thereby be served

(Oshita vs. Republic, L-21180, March 31, 1967, 19 SCRA 700; Miller, et al. vs. The Director of Lands, et al, L-16761, Oct. 31, 1964; Nicolas vs. Director of Lands, et al. L-19147-8, Dec. 28, 1963; The Philippine Bank of Commerce vs. Macaraeg, et al., L-14174, Oct. 31, 1960; Tavera vs. E. Hogar Filipino, Inc., et al. 98 Phil. 481; Malagum vs. Pablo, 46 Phil. 19). The above-quoted ruling was reiterated by this Court through Mr. Justice Barredo in Valino vs. Munoz (L-26151, OCT 22,1970), which held. Assuming that the rule of verification, Sec. 6 of Rule 7, has not been strictly complied with, it has been held anyway that absence of verification is a mere formal, not jurisdictional defect, particularly when the facts alleged are more or less indisputable or home clearly by the records. Furthermore, while it is true that the petition now before Us was not verified by the claimants-petitioners, it was, however, verified by their counsel. Herein private respondent contends that the verification by the counsel and not by the claimantspetitioners, is fatal. WE believe otherwise. A verification by the attorney is adequate compliance with Rule 7, Sec. 6, it being presumed that facts by him alleged are true to his knowledge in view of the sanctions provided in Sec. 5 of the Rules of Court (Guerra Enterprises Company, Inc. vs. Court of First Instance of Lanao del Sur, L-28310, April 17, 1970, 32 SCRA 314 citing Arambulo vs. Perez, 78 Phil. 387; Cajefe vs. Fernandez, L-15409, Oct. 19, 1960). Earlier, We held that "it is only when the person verifying is other than the attorney who signs the pleading that the affiant must state that the allegations thereof are true of his own knowledge, but when the complaint is signed by the attorney the latter's oath couched in the usual form 'subscribed and sworn to before me, etc.' is substantial compliance with the Rules of Court (Arambulo vs. Perez, 78 Phil. 387 [1947]; Emphasis supplied). II. Private respondent next contends that what is raised by the claimants-petitioners are findings of facts of the respondent Workmen's Compensation Commission which is definitely within the province of appeal and not for certiorari. This contention, in Our opinion, is untenable. It is true that the remedy of certiorari is generally resorted to only in cases where the remedy of appeal is unavailable. This, rule, however, is not so rigid and strict as not to admit of any exception. This Court in a long line of decisions laid down the ruling that certiorari is available despite the

existence of the remedy of appeal where public policy so dictate or the broader interests of justice so require (Fernando vs. Vasquez, L-26517, Jan. 30, 1970, 31 SCRA 294; Tirona vs. Nanawa L-22107, Sept. 30, 1967, 21 SCRA 395; Jose vs. Zulueta, May 31, 1961, 2 SCRA 574; Pachoco vs. Tumangday, May 25, 1960, 108 Phil. 238; Pineda & Ampil Mfg. Co. vs. Bartolome, Sept. 30, 1954, 95 Phil. 930; People vs. Zulueta, L4017, Aug. 30, 1951. 89 Phil. 756, 757; Maningat vs. Castillo, 75 Phil. 532; Arevalo vs. Nepomuceno, No. 45332, Oct. 27, 1936, 63 Phil. 627; Dais vs. CFI, No. 28770, Jan. 21, 1928, 51 Phil. 396; Yu Cong Eng vs. Trinidad, 47 Phil. 385; Dimayuga vs. Fajardo, No. 18913, April 15, 1922, 43 Phil. 304; Leung Ben vs. O' Brien No. 13602, April 6, 1918, 38 Phil. 182; Rocha vs. Crossfield, No. 3430, Aug. 7, 1906, 6 Phil. 355). In the light of the rulings laid down by this Court in the decisions afore-cited, it is clear that dismissal of the instant petition which seeks to enforce the provisions of the Workmen's Compensation Act, as amended, a benign legislation intended to implement the social justice guarantee mandated by the Constitution is a foul blow to the humanitarian design of the law. III Now, the issue of whether there was employer-employee relationship between private respondent Lucy Perez and the deceased Ki Lam Uy alias Vicente Uy. In dismissing the claim of claimants-petitioners, the respondent Workmen's Compensation Commission primarily based its decision on its findings that there was no substantial proof that deceased Ki Lam Uy was an employee of the respondent; that at the time of the incident, the rice mill that private respondent allegedly operates was not yet duly registered; and that private respondent's rice and corn buying and milling business is a nationalized industry, in which employing an alien like the deceased, unless duly authorized or allowed by appropriate authorities, is penalized by law. WE cannot agree with private respondent. The records are replete with proof that the rice mill was established and started operating in 1972 (p. 47, rec.) and in fact private respondent admitted that she had four [4] employees in her rice mill (Annex "O", p. 57, rec.). Private respondent's pretension of ignorance of the existence of employer-employee relationship is indeed inconceivable considering that during the period from 1972 up to the time of the bloody incident, she had been commuting from Ormoc City to Kanaga, Leyte, in connection with her rice null business. It is likewise clear from the records that private respondent committed violations of the laws and regulations prohibiting the employment of aliens in nationalized industries and operating a non- registered rice mill. To afford her immunity from the application of the Workmen's Compensation Law by reason of her failure to comply

with the laws would put a premium on her illegal acts. It is axiomatic that two wrongs do not make a right. One unlawful act does not justify another. The fact that the deceased, Ki Lam Uy, was between the age of 65 and 68 years, does not necessarily show that private respondent could not have employed such an old man. It has been shown by claimants-petitioners that as early as 1968. when deceased Ki Lam Uy was only 61 years old, or possibly even before that date, the late Chua Lim, the original Chinese owner-manager of the entire business and late husband of private respondent, Lucy Perez, had already engaged the services of Ki Lam Uy as his "overseer," machine operator" and "cashier," or in short as Chua Lim's "utility man" with a weekly salary of P70.00 until the death of Ki Lam Uy. This stands unrebutted. It is logical to conclude that private respondent, who is staying at Ormoc City, which is approximately twenty-three (23) kilometers from Kananga, Leyte [Ministry of Public Highways, Map of Northern Leyte showing road system, Scale: 1,200,000 (1967)], continued to comply the deceased as an "overseer," "cashier" or "machine operator," as the records reveal that the deceased had been working in private respondent's rice mill with the assistance of deceased's son, Reynaldo, who stayed with him at the farm house. Moreover, the friendship between the late Chua Lim and Ki Lam Uy fortifies the fact that the former employed the latter despite the latter's age and possible violations of the law. The fact that Ki Lam Uy stayed at the farm house where he was killed by the robbers and the act of the private respondent in defraying the total amount of P4,050.00 consisting of P 3,000.00 in cash, P 750.00 for the tomb and P300.00 for the priest, confirms the recognition by private respondent of the deceased's faithful and loyal service to her and her late husband Chua Lim, which Ki Lam Uy rendered at the sacrifice of his own dear life that fateful night of September 27, 1974. It is claimed by private respondent that claimants-petitioners failed to support its claim of employment with documentary evidence but only through oral testimonies of witnesses. WE cannot agree with private respondent for "an employee is any person in the service of another under a contract for hire, express or implied, oral or written (Sunripe Coconut Products Co., Inc. vs. Court of Industrial Relations & Sunrise Coconut Workers' Union [CLO], L-2009, April 30, 1949, XIV L.J. 472; citing Medermott's Case, 283 Mass. 74; Werner vs. Industrial Comm., 212 Wis. 76; Emphasis supplied). Moreover, it is true that the existence of employer-employee relationship is often difficult of determination because it was purposely made so by employers bent on evading liability under the Workmen's Compensation and Nationalization Laws.

Hence, if the object of the law is to be accomplished with a liberal construction, the creation of the relationship should not be adjudged strictly in accordance with technical legal rules, but rather according to the actualities and realities of industrial or business practice (Fernandez & Quiazon, Labor Standards & Social Legislation, 414 [1964]; Pucan & Besinga, Comments & Annotations on the Workmen's Compensation Act, as amended, 32 [1971], citing the case of Asia Steel Corporation vs. Workmen's Compensation Commission, L-7636, June 2 7, 1955). In the case at bar, records disclosed that deceased Ki Lam Uy was employed as "machine operator," "overseer" or "cashier" of private respondent (Annex "N", p. 66, rec., Annex "B", p. 30, rec., Annex "M", p. 65, rec.). The respondent Commission failed to give due weight to the police report of Patrolman Amador Profetana, which Identified the deceased as "the overseer of Lucy Perez," the private respondent who resides in Ormoc City. Patrolman Profetana, who investigated the killing made an initial spot report stating among other things "(t)hat at about 1900H [7:00 P.M.] 27 September 1974 an incident took place in the house of a certain Lucy Perez at Sitio Agay-ayan Bo. Tugbong, Kananga, Leyte per verbal report of the rice mill caretaker thereat received at the Police Headquarters on the same evening of 27 Sept. 1974 at around 203OH [8:30 P.M.]. A combined PC-Police Team was sent to conduct an on-the-spot investigation and it as found out that a certain Vicente Uy (alias Ki Lam Uy), 67 years, married, Chinese citizen under ACR#________ and an overseer of Lucy Perez with residence at Ormoc City was killed inside his dwelling after having been hacked several times on different parts of his body that resulted in his immediate death [Annexes "L" & "M"-Police Report, pp. 64- 65, rec; Emphasis supplied]. A portion of the decision of the Hearing Officer, who found the existence of employer-employee relationship between the deceased and private respondent, is hereunder quoted: The said witness (Patrolman Amador Profetana) further testified that the deceased, Ki Lam Uy, was in charge of the management of the farm of Lucy Perez, as well as the rice mill, the buying and selling palay and other activities in connection with the business of the respondent, Lucy Perez; that the respondent, Lucy Perez, was engaged in buying palay and milling said palay in her rice mill at Bo.

Tugbong, Kananga, Leyte and selling the milled palay at Ormoc City; that because of the activities of the deceased, he considered the deceased as an overseer of the respondent, Lucy Perez, that he found from his investigation that the cause for which the chinaman Ki Lam Uy alias Vicente Uy was murdered it as because of the demand of the robbers for money from him as the deceased was the one handling the money of the respondent in buying palay, and as such, he was entrusted with the same; that he further found out that at the time of the robbery there was no sufficient cash in the possession of the deceased and the cash he had was hardly sufficient to buy five (5) sacks of palay, but in spite of that, the deceased Ki Lam Uy alias Vicente Uy refused to surrender the same to the robbers as the same was in his possession, so he was killed by the assailants (robbers). On cross-examination by counsel for the respondent, the witness maintained the fact that the deceased was the overseer of the respondents and not Thomas Un, who was merely caretaker of the rice mill, that in his investigation a barrio councilor of Bo. Tugbong, Kananga, Leyte testified before him that the bodega where the deceased was murdered belonged to Lucy Perez (pp. 44- 45, rec.; Emphasis supplied). Upon the other hand, the testimonies of Nonito On Sanchez and Thomas Un are impaired as they are by bias. Nonito On Sanchez, stepson of private respondent, testified that he does not know if there are employees in the rice mill business of private respondent as he was positive that a license for its operation was not yet secured and yet he claims to be managing the affairs of the farm house where he stayed as early as 1972 or before the gory incident happened and which is only about fifteen (15) meters away from the rice mill. He also testified that deceased Ki Lam Uy was not an employee of his stepmother [pp. 46-47, rec.]. The second witness, Thomas Un, tenant of Nonito On Sanchez, likewise testified that the deceased Ki Lam Uy was not an employee of private respondent as there were no employees in the farm of private respondent. He admitted that private respondent, Lucy Perez, requested him to testify in the case and that it was he who reported the incident to the Chief of Police of Kananga, Leyte. The investigation conducted by the police establishing the fact of existence of employer-employee relationship between the deceased and the private respondent should have been given probative weight by respondent Commission than the biased testimonies of Nonito On Sanchez, stepson of private respondent, and Thomas Untenant of Nonito On Sanchez. There is no quarrel as to the admissibility of said police report as Section 1 (d), Rule 16 of the Workmen's Compensation Commission Rules specifically affirms the

admissibility of reports of government agencies covering material facts. Additionally, Section 5318.01, Labor Manual impliedly supports the admissibility of police reports. It reads: The cooperation of the following government agencies or officials may be sought in developing evidence to establish claims: a. The Bureau of Mines & Bureau of Health ... b. The Bureau of Customs ... c. The Weather Bureau ... d. Provincial, City or Municipal Officials When appropriate, the aid of these officials may be requested in securing copies of police reports, locating claimant's or employers' whereabouts, or in making payments of compensation to claimants (Fernandez & Quiazon, Labor Standards & Welfare Legislation 689 [1964]). xxx xxx xxx The findings of the Workmen's Compensation Commission that an employment relation existed was upheld as supported by substantial evidence. In a police investigation conducted on the very day of the accident, two workers of the petitioners declared in the course of the investigation that the deceased was their coworker. Considering that these statements were made at a time when connivance was most remote, because the question of compensation had not yet arisen, these must be accepted as truthful, although subsequently these workers tried to repudiate their own declarations (Fernandez & Quiason, supra, Appendix, citing the case of Jueco vs. Flores, L-19325, Feb. 28, 1964, 10 SCRA 304, 307; Emphasis supplied). The initial spot report (Annexes "L" & "M") made by the police officer in the case at bar as to surrounding circumstances of the killing of Ki Lam Uy merits belief as it was likewise made at a time when connivance between the persons investigated was most remote and the question of compensability under the Workmen's Compensation Act was not yet in their minds. It may not be amiss to state further that nothing appears in the record that would sufficiently overcome the presumption that official duty had been performed. Henceforth, there being no showing that the police officer in the present case maliciously or recklessly conducted the investigation and prepared the police report,

the police report must be given more probative weight than the bias testimonies of private respondent's witnesses. The ruling of respondent Commission was in effect not in furtherance of the presumption of moral sense of responsibility of police officers and the presumption of regularity of acts of military officers contrary to Our ruling in the case of People vs. Dela Cruz (L-1745, May 23, 1950; 5 Martin, Rules of Court 480 [1974]). While as a rule, matters of credibility and weight to be assigned to a particular item of evidence are primarily for the Commission, the same is true only where the findings of the Commission are supported by substantial, credible and competent evidence. IV WE deemed it likewise significant to resolve the claim of private respondent that the death of the deceased was not work-connected (Annexes "E" & "E-1", pp. 34-35, rec.) and that murder is not compensable not to mention the fact that the deceased was murdered outside working hours [Annex "F-3", p. 39, rec.]. It is true that the late Ki Lam Uy was murdered outside working hours, but this is not fatal to the claim of petitioners. It must be pointed out that the nature of Ki Lam Uy's work as an overseer requires his presence in the farm house or bodega of private respondent even during nighttime. Henceforth, under the so-called "Bunkhouse Rule", where the employee is required to stay in the premises or in quarters furnished by the employer, injuries sustained therein are in the course of employment regardless of the time the same occurred. Thus, in Martha Lumber Mills, Inc. vs. Lagradante (L-7599, June 27, 1956, 52 O.G. 4230), this Court said: WE cannot accept petitioner's argument that the death of Felicito Lagradante did not arise out of and in the course of his employment, having been murdered outside of office hours. It appears that the deceased was required to live and sleep in the quarters provided by the petitioner, and obviously by reason of the nature of his duties as a concession guard, with the result that, although he had to observe certain working hours, he nevertheless was compelled to stay in his quarters, thereby in effect making himself available, regardless of time, for the protection of the rights and interest of the petitioner in its concession. The aforecited decision is amply supported by American authorities. Thus:

Closely allied to the lodging cases is the 'bunkhouse' doctrine. Where the employer provides the sleeping quarters, an reasonable risks therein, whether by fire, slipping on the floors, or otherwise are compensable as arising out of and in the course of the employment. In short, 'bunkhouse' injuries are compensable as incidents of the employment (Horovitz, 3 NACCA L. J. 63-64). Special rules apply where the employee is compelled or expected to live on the employer's premises or quarters furnished by the gang, etc. In such cases, the so-called 'bunkhouse rule protects the employee against any injury sustained while he is making reasonable use of such premises" (Riesenfeld & Maxwell, 250; cited in Fernandez & Quiazon, Labor Standards & Welfare Legislation 570571 [1964]). V It is finally contended by private respondent that the respondent Commission's decision was purely based upon findings of facts and therefore cannot be the subject of the present petition. The claim merits scant consideration for this Court is authorized to inquire into the facts when the conclusions are not supported by substantial or credible evidence (Yutuc vs. Republic of the Philippines, L-43270, Dec. 29, 1978, 87 SCRA 436; Mulingtapang vs. WCC & Marcelo Steel Corporation, L-42483, Dec. 21, 1977, 80 SCRA 610, 614; Abong vs. WCC, Nos. L-32347-53, Dec. 26, 1973, 54 SCRA 379; International Factory vs. Vda. de Doria and WCC, No. L-13426, Sept. 30, 1960, 109 Phil. 553; PAL vs. PAL Employees ASSOCIATION, L-8190, Oct. 31,1958). VI Moreover, there is no question that the claim was not seasonably controverted as correctly found by the Hearing Officer/Acting Chief of the Workmen's Compensation Unit. The records disclose that private respondent failed to file an answer in controversion to petitioner's claim for compensation. This is patently a violation of the provisions of Section 45, paragraph 2 of the Workmen's Compensation Act, as amended, which reads: "In case the employer decided to controvert the right to compensation, he shall either on or before the fourteenth day of disability or within ten days after he has knowledge of the alleged accident, file a notice with the Commissioner, on a form prescribed by him, that compensation is not being paid, giving the name of the claimant, name of the employer, date of the accident, and the reason why compensation is not being paid. Failure on the part of the employer or the insurance carrier to comply with the requirement shall constitute a renunciation of his right to controvert the claim unless he submits reasonable grounds for the failure to make

the necessary reports, on the basis of which grounds the Commissioner may reinstate his right to controvert the claim." Private respondent, in taking exception to petitioners' contention that she failed to seasonably controvert the claim, declared that the copy of the claim was received only sometime during the first week of January 1975 or a week after the December 27, 1974 award. Nonetheless, it is inconceivable that the death of the deceased employee on September 27, 1974, which occurred at the farm house (bodega) of private respondent, was not known to the latter who was engaged in buying and milling palay in her rice mill at Barrio Tugbong, Kananga, Leyte and selling the milled rice at Ormoc City. Such failure to timely controvert the claim results in a renunciation of respondent employer's right to challenge the claim and a waiver of all nonjurisdictional defenses (Natividad vs. WCC, et al., L-42021, Nov. 21, 1979; Villones vs. ECC, et al., L-46200, July 30, 1979; Mesina vs, Republic, L- 43517, May 31, 1979, 90 SCRA 489; Dulay vs, WCC, et al., L- 41998, April 30, 1979, 89 SCRA 659; Marasigan vs. WCC, et al., L-4327 1, March 30, 1979, 89 SCRA 259; Vega vs, WCC, et al., L-43134, March 26,1979,89 SCRA 141). VI As undisputedly borne out by the records, however, private respondent has advanced payment for the burial expenses of the deceased Ki Lam Uy. Consequently, in the interest of justice and in fairness to the private respondent, she is hereby absolved from payment of the burial expenses. The amount of P3,000.00 paid in cash by private respondent to the heirs of the deceased Ki Lam Uy, should be deducted from the amount of P6,000.00 death benefits. WHEREFORE, THE DECISION OF THE RESPONDENT WORKMEN'S COMPENSATION COMMISSION IS HEREBY REVERSED AND SET ASIDE, AND RESPONDENTS EMPLOYER IS HEREBY ORDERED 1. TO PAY PETITIONERS-CLAIMANTS THE SUM OF THREE THOUSAND (P 3,000.00) PESOS AS DEATH BENEFITS; 2. TO PAY PETITIONERS-CLAIMANTS ATTORNEY'S FEES EQUIVALENT TO 101%, OF THE TOTAL AWARD; 3. TO PAY THE SUCCESSOR OF THE DEFUNCT COMMISSION, ADMINISTRATIVE FEES; AND

4. TO PAY THE COSTS. SO ORDERED. Teehankee (Chairman), Fernandez Guerrero, De Castro and Melencio-Herrera JJ., concur. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-75038 August 23, 1993 ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET TAILORING and/or RODOLFO ZAPANTA, respondents. Balguma, Macasaet & Associates for petitioners. Teresita Gandionco Oledan for private respondents. NOCON, J.: A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor Code and other presidential issuances or labor legislations is the status and nature of one's employment. Whether an employer-employee relationship exist and whether such employment is managerial in character or that of a rank and file employee are primordial considerations before extending labor benefits. Thus, petitioners in this case seek a definitive ruling on the status and nature of their employment with Broad Street Tailoring and pray for the nullification of the resolution dated May 12, 1986 of the National Labor Relations Commissions in NLRC Case No. RB-IV- 21558-78-T affirming the decision of Labor Arbiter Ernilo V. Pealosa dated May 28, 1979, which held eleven of them as independent contractors and the remaining one as employee but of managerial rank. The facts of the case shows that petitioner Elias Villuga was employed as cutter in the tailoring shop owned by private respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw Boulevard, Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a monthly transportation

allowance of P40.00. In addition to his work as cutter, Villuga was assigned the chore of distributing work to the shop's tailors or sewers when both the shop's manager and assistant manager would be absent. He saw to it that their work conformed with the pattern he had prepared and if not, he had them redone, repaired or resewn. The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for every item ironed, repaired or sewn, regardless of the time consumed in accomplishing the task. Petitioners did not fill up any time record since they did not observe regular or fixed hours of work. They were allowed to perform their work at home especially when the volume of work, which depended on the number of job orders, could no longer be coped up with. From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to illness. For not properly notifying his employer, he was considered to have abandoned his work. In a complaint dated March 27, 1978, filed with the Regional Office of the Department of Labor, Villuga claimed that he was refused admittance when he reported for work after his absence, allegedly due to his active participation in the union organized by private respondent's tailors. He further claimed that he was not paid overtime pay, holiday pay, premium pay for work done on rest days and holidays, service incentive leave pay and 13th month pay. Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they were dismissed from their employment because they joined the Philippine Social Security Labor Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and Domingo Saguit claimed that they stopped working because private respondents gave them few pieces of work to do after learning of their membership with PSSLU. All the petitioners laid claims under the different labor standard laws which private respondent allegedly violated. On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision ordering the dismissal of the complaint for unfair labor practices, illegal dismissal and other money claims except petitioner Villuga's claim for 13th month pay for the years 1976, 1977 and 1980. The dispositive portion of the decision states as follows: WHEREFORE, premises considered, the respondent Broad Street Tailoring and/or Rodolfo Zapanta are hereby ordered to pay complainant Elias Villuga the sum of ONE THOUSAND TWO HUNDRED FORTY-EIGHT PESOS AND SIXTY-SIX CENTAVOS (P1,248.66) representing his 13th month pay for the years 1976, 1977 and 1978. His other claims in this case are hereby denied for lack of merit.

The complaint insofar as the other eleven (11) complainants are concerned should be, as it is hereby dismissed for want of 1 jurisdiction. On appeal, the National Labor Relations Commission affirmed the questioned decision in a resolution dated May 12, 1986, the dispositive portion of which states as follows: WHEREFORE, premises considered, the decision appealed from is, 2 as it is hereby AFFIRMED, and the appeal dismissed. Presiding Commissioner Guillermo C. Medina merely concurred in the result while Commissioner Gabriel M. Gatchalian rendered a dissenting opinion which states as follows: I am for upholding employer-employee relationship as argued by the complainants before the Labor Arbiter and on appeal. The further fact that the proposed decision recognizes complainant's status as piece-rate worker all the more crystallizes employer3 employee relationship the benefits prayed for must be granted. Hence, petitioners filed this instant certiorari case on the following grounds: 1. That the respondent National Labor Relations Commission abused its discretion when it ruled that petitioner/complainant, Elias Villuga falls within the category of a managerial employee; 2. . . . when it ruled that the herein petitioners were not dismissed by reason of their union activities; 3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela, Norlito Ladia, Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and Domingo Saguit were not employees of private respondents but were contractors. 4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime pay and services for Sundays and Legal Holidays; and 5. . . . when it failed to grant petitioners their respective claims 4 under the provisions of P.D. Nos. 925, 1123 and 851. Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a member of a managerial staff, the following elements must concur or co-exist, to wit: (1) that his primary duty consists of the performance of work directly related to

management policies; (2) that he customarily and regularly exercises discretion and independent judgment in the performance of his functions; (3) that he regularly and directly assists in the management of the establishment; and (4) that he does not devote his twenty per cent of his time to work other than those described above. Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work or duty is to cut or prepare patterns for items to be sewn, not to lay down or implement any of the management policies, as there is a manager and an assistant manager who perform said functions. It is true that in the absence of the manager the assistant manager, he distributes and assigns work to employees but such duty, though involving discretion, is occasional and not regular or customary. He had also the authority to order the repair or resewing of defective item but such authority is part and parcel of his function as cutter to see to it that the items cut are sewn correctly lest the defective nature of the workmanship be attributed to his "poor cutting." Elias Villuga does not participate in policy-making. Rather, the functions of his position involve execution of approved and established policies. In 5 Franklin Baker Company of the Philippines v. Trajano, it was held that employees who do not participate in policy-making but are given ready policies to execute and standard practices to observe are not managerial employees. The test of "supervisory or managerial status" depends on whether a person possesses authority that is not merely routinary or clerical in nature but one that requires use of independent judgment. In other words, the functions of the position are not managerial in nature if they only execute approved and established policies leaving 6 little or no discretion at all whether to implement said policies or not. Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay and premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95 (service incentive leave pay) of the Labor Code, on the ground that he is a managerial employee is unwarranted. He is definitely a rank and file employee hired to perform the work of the cutter and not hired to perform supervisory or managerial functions. The fact that he is uniformly paid by the month does not exclude him from the benefits of holiday pay as held in the case of Insular 7 Bank of America Employees Union v. Inciong. He should therefore be paid in addition to the 13th month pay, his overtime pay, holiday pay, premium pay for holiday and rest day, and service incentive leave pay. As to the dismissal of the charge for unfair labor practices of private respondent consisting of termination of employment of petitioners and acts of discrimination against members of the labor union, the respondent Commission correctly held the absence of evidence that Mr. Zapanta was aware of petitioners' alleged union membership on February 22, 1978 as the notice of union existence in the establishment with proposal for recognition and collective bargaining negotiation was received by management only an March 3, 1978. Indeed, self-serving allegations without concrete proof that the private respondent knew of their membership in the union and accordingly reacted against their membership do not suffice.

or is private respondent's claim that petitioner Villuga abandoned his work acceptable. For bandonment to constitute a valid cause for dismissal, there must be a deliberate and njustified refusal of the employee to resume his employment. Mere absence is not sufficient, must be accompanied by overt acts unerringly pointing to the fact that the employee simply 8 oes not want to work anymore. At any rate, dismissal of an employee due to his prolonged bsence without leave by reason of illness duly established by the presentation of a medical 9 ertificate is not justified. In the case at bar, however, considering that petitioner Villuga bsented himself for four (4) days without leave and without submitting a medical certificate support his claim of illness, the imposition of a sanction is justified, but surely, not dismissal, the light of the fact that this is petitioner's first offense. In lieu of reinstatement, petitioner lluga should be paid separation pay where reinstatement can no longer be effected in view 10 the long passage of time or because of the realities of the situation. But petitioner should ot be granted backwages in addition to reinstatement as the same is not just and equitable 11 nder the circumstances considering that he was not entirely free from blame. As to the other eleven petitioners, there is no clear showing that they were dismissed because the circumstances surrounding their dismissal were not even alleged. However, we disagree with the finding of respondent Commission that the eleven petitioners are independent contractors. For an employer-employee relationship to exist, the following elements are generally considered: "(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal and (4) the power to control 12 the employee's conduct." Noting that the herein petitioners were oftentimes allowed to perform their work at home and were paid wages on a piece-rate basis, the respondent Commission apparently found the second and fourth elements lacking and ruled that "there is no employer-employee relationship, for it is clear that respondents are interested only in the result and not in the means and manner and how the result is obtained." Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate basis is no argument that herein petitioners were not employees. The term "wage" has been broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or commission basis. . . ." The facts of this case indicate that payment by the piece is just a method of compensation and does not define the essence of the 13 relation. The petitioners were allowed to perform their work at home does not likewise imply absence of control and supervision. The control test calls merely for the existence of a right to control the manner of doing the work, not the actual 14 exercise of the right.

In determining whether the relationship is that of employer and employee or one of an independent contractor, "each case must be determined on its own facts and all 15 the features of the relationship are to be considered." Considering that petitioners who are either sewers, repairmen or ironer, have been in the employ of private respondent as early as 1972 or at the latest in 1976, faithfully rendering services which are desirable or necessary for the business of private respondent, and observing management's approved standards set for their respective lines of work as well as the customers' specifications, petitioners should be considered employees, not independent contractors. Independent contractors are those who exercise independent employment, contracting to do a piece of work according to their own methods and without being subjected to control of their employer except as to the result of their work. By the nature of the different phases of work in a tailoring shop where the customers' specifications must be followed to the letter, it is inconceivable that the workers therein would not be subjected to control. In Rosario Brothers, Inc. v. Ople, this Court ruled that tailors and similar workers hired in the tailoring department, although paid weekly wages on piece work basis, are employees not independent contractors. Accordingly, as regular employees, paid on a piece-rate basis, petitioners are not entitled to overtime pay, holiday pay, premium pay for holiday/rest day and service incentive leave pay. Their claim for separation pay should also be defined for lack of evidence that they were in fact dismissed by private respondent. They should be paid, however, their 13th month pay under P.D. 851, since they are employees not independent contractors. WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor Relations Commission is hereby MODIFIED by awarding (a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay and separation pay, in addition to his 13th month pay; and (b) in favor of the rest of the petitioners, their respective 13th month pay. The case is hereby REMANDED to the National Labor Relations Commission for the computation of the claims herein-above mentioned. SO ORDERED. Narvasa C.J., Padilla, Regalado and Puno, JJ., concur.
16

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

The MOLE Director in the National Capital Region certified for compulsory arbitration only the claims for illegal dismissal and ULP Considering that NOWM PSSLU-TUCP wanted to include as well the other issues it had raised in the amended complaint, it filed a motion for reconsideration. The motion was denied because money claims, according to the MOLE Director, should be brought against Escao and PIER 8 A&S in a separate complaint. On the basis of the position papers submitted by the parties and the annexes attached thereto, the case was considered submitted for resolution. On 28 February 3 1980, the Labor Arbiter rendered a Decision with the following dispositive portion: WHEREFORE, consonant with the foregoing premises, the respondents Hijos de F. Escao and Pier 8 Arrastre and Stevedoring Services, Inc. are hereby found guilty of committing acts of unfair labor practice and are ordered to jointly and severally reinstate all of the petitioners named in the amended complaint, with payment of full backwages counted from the time they were illegally dismissed which was on August 10, 1978 up to March 27, 1979, inclusive, when the petitioners admitted having received return to work notice from the respondent but refused to comply in view of the pendency of the present case, based on their individual rate at the time of their dismissal or on the minimum wage then prevailing whichever is more beneficial to them. For purposes of this decision, the Socio-Economic Analyst of this branch is hereby directed to compute the backwages of the individual petitioners as mandated herein, and to submit his report within ten 10 days from receipt hereof which shall form part of this award. SO ORDERED. Petitioners appealed to the NLRC which, however, affirmed the Decision of the Labor Arbiter. The instant Petition for certiorari imputes grave abuse of discretion to the NLRC in upholding the finding of the Labor Arbiter that the stevedores are employees not only of PIER 8 A&S but also of Escao. Petitioners also assail that portion of the Decision which directed them to reinstate the dismissed stevedores with the obligation to pay backwages from 10 August 1978 to 27 March 1979. In his Decision, the Labor Arbiter took the view that PIER 8 A&S was a labor only contractor and held that Escao was the principal employer of the stevedores. For

G.R. No. L-59229 August 22, 1991 HIJOS DE F. ESCAO INC., and PIER 8 ARRASTRE AND STEVEDORING SERVICES, INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, NATIONAL ORGANIZATION OF WORKINGMEN (NOWM) PSSLU-TUCP and ROLANDO VILLALOBOS, respondents. Beltran, Beltran & Beltran for petitioners. Bautista, Santiago & Associates for private respondents.

FELICIANO, J.:p Petitioners seek to set aside the Decision of the National Labor Relations Commission ("NLRC") dated 11 November 1981, which affirmed the Decision of the Labor Arbiter dated 28 February 1980. Private respondent National Organization of Workingmen ("NOWM") PSSLU-TUCP is a labor organization that counts among its members a majority of the laborers of petitioner Pier 8 Arrastre & Stevedoring Services, Inc. ("PIER 8 A&S") consisting, among others, of stevedores, dockworkers, sweepers and forklift operators (hereinafter collectively referred to as "the stevedores"). On 31 July 1978, NOWM PSSLU-TUCP and about 300 stevedores filed with the then Ministry of Labor and 1 Employment ("MOLE") a complaint for unfair labor practice ULP and illegal dismissal against PIER 8 A&S. On 8 September 1978, NOWM PSSLU-TUCP amended its complaint to include the monetary claims of the stevedores for overtime compensation, legal holiday pay, emergency cost of living allowance, 13th month pay, night shift differential pay, and the difference between the salaries they received and that prescribed under the minimum wage law. The complaint was also amended to implead petitioner Hijos de 2 F. Escao, Inc. (Escao) as respondent before the MOLE.

that reason, the Labor Arbiter adjudged the petitioners solidarily liable for payment of backwages to the stevedores as well as for reinstatement. While petitioner PIER 8 A&S does not dispute that the stevedores were its employees, petitioner Escao denies the existence of an employer-employee relationship between it and the stevedores. Escao therefore contends that liability, if any, should attach only to PIER 8 A&S. PIER 8 A&S is a corporation providing Arrastre and stevedoring services to vessels docked at Pier 8 of the Manila North Harbor. Prior to the incorporation of PIER 8 A&S two (2) stevedoring companies had been servicing vessels docking at Pier 8. One of these was the Manila Integrated Services, Inc. MISI which was servicing Escao vessels, then berthing at Pier 8. The other was the San Nicolas Stevedoring and Arrastre Services, Inc. (SNSASI) which was servicing Compania Maritima vessels. Aside, of course, from MISI and SNSASI there were individual contractors known as the "cabos" who were operating in Pier 8. On 11 July 1974, the Philippine Port Authority ("PPA") was created pursuant to the policy of the State to implement an integrated program of port development for the 4 entire country. Towards this end, the PPA issued Administrative Order No. 1377 specifically adopting the policy of "one pier, one Arrastre and/or stevedoring company." MISI and SNSASI merged to form the Pier 8 Arrastre and Stevedoring Services, Inc. Sometime in June 1978, Escao had transferred berth to Pier 16 with the approval of the PPA. PIER 8 A&S then started to encounter problems; it found its business severely reduced with only Compania Maritima vessels to service. Even if it had wanted to continue servicing the vessels of Escao at Pier 16, that was simply not possible as there was another company exclusively authorized to handle and render Arrastre and stevedoring services at Pier 16. Because of its resulting manpower surplus, PIER 8 A&S altered the work schedule of its stevedores by rotating them. The rotation scheme was resisted by the stevedores, especially those formerly assigned to service Escao vessels. It appears that the employees formerly belonging to MISI continued to service Escao vessels in like manner that those employees formerly belonging to SNSASI continued to service Compania Maritima vessels, although MISI and SNSASI had already merged to form PIER 8 A&S The affected stevedores boycotted Pier 8 leading to their severance from employment by PIER 8 A&S on 10 August 1978. Their refusal to work continued even after they were served with a return-to-work order. The stevedores claim that since they had long been servicing Escao vessels, i.e. from the time Escao was exclusively serviced by MISI until the time MISI was merged with SNSASI to form PIER 8 A&S they should also be considered as

employees of Escao. Escao disclaimed any employment relationship with the stevedores. In its Position Paper, Escao alleged that the stevedores are included in the payroll of PIER 8 A&S and that the SSS and Medicare contributions of the stevedores are paid by PIER 8 A&S as well. It is firmly settled that the existence or non-existence of the employer-employee relationship is commonly to be determined by examination of certain factors or aspects of that relationship. These include: (a) the manner of selection and engagement of the putative employee; (b) the mode of payment of wages; (c) the presence or absence of the power of dismissal; and (d) the presence or absence of a 5 power to control the putative employee's conduct. The Court notes that in finding against PIER 8 A&S and Escao the Labor Arbiter relied solely on the position paper of the parties. The record of the case is bare of evidence tending to support such allegations; what is found in the record instead are the self-serving statements from both parties. It is not clear to the Court from examination of the record which entity paid the salaries of the stevedores. While the stevedores attached to their amended complaint a list of their daily wages set forth opposite their individual names under the heading "Hijos de F. Escao Inc. and/or 6 Pier 8 Arrastre and Stevedoring Services, Inc. apparently to show that they are paid for their services by either or both of petitioners, they did not submit direct evidence, e.g., copies of payrolls and remittances to the SSS and Medicare, establishing this fact. Further, the stevedores failed to substantiate their allegation that the supervisors of Escao had control over them while discharging their (stevedores') duties. On the contrary, their Position Paper submitted to the Labor Arbiter disclosed that the supervisors of Escao "merely supervised" them. The record includes letters written by the National President of NOWM PSSLU-TUC to which the stevedores belong-relating to collective bargaining and other operating matters, were all addressed to the management of PIER 8 A&S indicating that they recognized PIER 8 A&S as their employer. Specifically, in the letter dated 21 May 1977, the stevedores proposed that PIER 8 A&S recognize their union as the sole and exclusive representative of the stevedores for the purpose of collective bargaining. They also sought to submit for collective bargaining with PIER 8 A&S such other labor 7 standard issues as wage increases, 13th month pay and vacation and sick leave pay. The stevedores, however, now contend that PIER 8 A&S is not an independent contract but a labor only contractor. In their Amended Complaint and Position Paper, the stevedores alleged that: (1) They perform their duties or work assignments under the close supervision of supervisors of respondent Hijos de F. Escao Inc.;

(2) The machineries, equipment, tools and other facilities complainants used, while in the performance of their jobs, are owned by respondent Hijos de F. Escao, Inc.; (3) The jobs they were performing from the time they were first employed, until their dismissals, are principal phases of respondent's operations; and (4) The so-called Pier 8 Arrastre & Stevedoring Services, Inc. is a mere middleman; its vital role is purely one of supplying workers to respondent Hijos de F. Escao, Inc. in short, a mere recruiting agent. Plainly, said contractor can be categorized as an agent of respondent Hijos de F. Escao, Inc. as it performs activities directly related to the principal business of said Hijos de F. Escao, Inc. Although the record does not show that the stevedores had submitted any evidence to fortify their claim that PIER 8 A&S is a labor only contractor, the Labor Arbiter simply conceded that claim to be factual. The Labor Arbiter added that the business of PIER 8 A&S is "desirable and indispensable in the business of Hijos de F. Escao and without [the stevedores], its vessels could not be operated." The Court is unable to agree with the conclusion reached by the Labor Arbiter, particularly that portion where the Labor Arbiter supposed stevedoring to be an indispensable part of the business of Escao. Escao is a corporation engaged in inter-island shipping business, being the operator of the Escao Shipping Lines. It was not alleged, nor has it been shown, that Escao or any other shipping company is also engaged in Arrastre and stevedoring services. Stevedoring is not ordinarily included in the business of transporting goods, it (stevedoring) being a special kind of service which involves the loading unloading of cargo on or from a vessel on port. It consists of the handling of cargo from the hold of the ship to the dock, in case of pier-side unloading, or to a barge, in case of unloading at sea. The loading on a ship 8 of outgoing cargo is also part of stevedoring work. Arrastre, upon the other hand, involves the handling of cargo deposited on the wharf or between the establishment 9 of the consignee or shipper and the ships tackle. Considering that a shipping company is not normally or customarily engaged in stevedoring and arrastre activities either for itself or other vessels, it contracts with other companies offering those services. The employees, however, of the stevedoring and/or arrastre company should not be deemed the employees of the shipping company, in the absence of any showing, that the arrastre and/or stevedoring company in fact acted as an agent only of the shipping company. No such showing was made in this case. We turn next to the stevedores' contention that PIER 8 A&S is guilty of ULP. In this respect, the Labor Arbiter had found that:

Now comes the issue of unfair labor practice. This Labor Arbiter believes that respondents are guilty as charged. The unfair labor practice acts of the respondents started when they came to know that the petitioners have organized themselves and affiliated with the NOWM Subsequent acts of the respondents like requiring the petitioners to disaffiliate with the NOWM and affiliate with the General Maritime Stevedores Union and later on to Independent Workers Union, requiring them to sign applications for membership therein, they were threatened and coerced, are all acts of unfair labor practices. Thereafter, the petitioners' working schedules were rotated when the respondent Hijos de F. Escao transferred to Pier 16 through the alleged approval of the Philippine Port Authority and later on the said petitioners were left without work, were all in furtherance of such unfair labor practice 10 acts. ... Both the Constitution and the Labor Code guarantee to the stevedores a right to selforganization. It was unlawful for PIER 8 A&S to deprive them of that right by its undue interference. The Constitution (Article III, Section 7) expressly recognizes the right of employees, whether of the public or the private sector, to form unions. Article 248 of the Labor Code provides: Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the following unfair labor practice: (a) To interfere with, restrain or coerce employees in the exercise of their right to self- organization; (b) To require as a condition of employment that a person or an employee shall not join a labor organization or shall withdraw from one to which he belongs; (c) To contract out services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization; (d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any labor organization, including the giving of financial or other support to it or its organizations or supporters;

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. xxx xxx xxx (Emphasis supplied.) Not only was PIER 8 A&S guilty of ULP; it was also liable for illegal dismissal. PIER 8 A&S did not obtain prior clearance from the MOLE before it dismissed the stevedores, as required by the law then in force which read: Section 1. Requirement for shutdown or dismissal. No employer may shut down his establishment or dismiss any of his employees with at least one year of service during the last two years, whether the service is broken or continuous, without prior clearance issued therefor in accordance with this Rule. Any provision in a collective bargaining agreement dispensing with the clearance requirement shall be null and void. Section 2. Shutdown or dismissal without clearance. Any shutdown or dismissal without prior clearance shall be conclusively presumed to be a termination of employment without a just cause. The Regional Director shall, in such case, order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismissal until the time of 11 reinstatement. B.P. Blg. 130 amended the Labor Code on 4 September 1981 by abolishing the requirement of prior clearance from the MOLE but since the dismissal of the stevedores was effected prior to the promulgation of B.P. Blg. 130, PIER 8 A&S was then bound to comply with the old law. The Court, interpreting Sections 1 and 2 above quoted, has consistently held that a dismissal without said clearance shall be 12 conclusively presumed a termination without just cause. The record is bare of any evidence that could compel the Court to overturn the factual findings of the Labor Arbiter on this point. WHEREFORE, considering the absence of an employer-employee relationship between Hijos de F. Escao, Inc. and private respondents, the Decision of the Labor Arbiter dated 28 February 1980 in NLRC Case No. RB-IV-2326-79 and the Decision of the NLRC dated 11 November 1981 are hereby MODIFIED so that only Pier 8 Arrastre & Stevedoring Services, Inc. shall be liable for reinstatement and payment of backwages. As so modified, both Decisions are hereby AFFIRMED. No costs.

SO ORDERED. Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-41182-3 April 16, 1988 DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, vs. THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.: The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute: xxx xxx xxx On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc. On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since

the branch office was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice. The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim. On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which was elevated the instant appeal on the following assignment of errors: I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT. II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.

III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFFAPPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER. IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS. V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES. VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS. On the foregoing facts and in the light of the errors asigned the issues to be resolved are: 1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita; 2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and 3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant. In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business venture appellant made declarations showing: 1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediately columnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist World Service, Inc. and appellee

Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965). 2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964). 3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate office located at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.). 4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.) 5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief) Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and as 1 such was designated manager. xxx xxx xxx The trial court held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its 3 prerogative to terminate the lease and padlock the premises. It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and 4 as such, she was bound by the acts of her employer. The respondent Court of 5 Appeal rendered an affirmance. The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state: I THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW. II THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED
2

TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8) III THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS. IV THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE 6 TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch 7 office of the appellee Tourist World Service, Inc. Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the between parties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao 8 from taking the law into their own hands, in reference to the padlocking now questioned. The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then 9 in force.

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we have relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in 10 reaching such end." Subsequently, however, we have considered, in addition to the standard of right-of control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the 11 existence of an employer-employee relationship. The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidum as and for rental payments, an arrangement that would be like claims of a master-servant relationship. True the respondent Court would later 12 minimize her participation in the lease as one of mere guaranty, that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation, but certainly not employment. In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. 13 Lina Sevilla. Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities. It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes. The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said, employment is determined by the right-ofcontrol test and certain economic parameters. But titles are weak indicators. In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of 14 your branch office in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture, including a partnership,

presupposes generally a of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property 15 contributed and where each party exercises equal rights in the conduct of the 16 business. furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17 in lieu of a distinct partnership name. It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that 18 the agent renders services "in representation or on behalf of another. In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership.. But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual 19 interest, of the agent and the principal. It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages. As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the 20 Tourist World Service, Inc. disconnected the telephone lines at the branch office. Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor. The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that

contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper. The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without notice to her. It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it was 22 necessary to Protect the interests of the Tourist World Service. " It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein. This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play. We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of 23 contract where the defendant acted ... in bad faith. We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy 24 shall compensate the latter for the damage. ART. 2219. Moral damages and analogous cases: xxx xxx xxx (10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35. The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity. Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor. The Court considers the sums of P25,000.00 as and for moral damages,24 25 26 P10,000.00 as exemplary damages, and P5,000.00 as nominal and/or temperate 27 damages, to be just, fair, and reasonable under the circumstances. WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages. Costs against said private respondents. SO ORDERED. Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC
25

G.R. No. L-16600

December 27, 1961

may be recovered in the following

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

tuberculosis, indicated that he had been suffering from such disease even during the time he was employed by the respondent and considering the strenuous work he performed, his employment as janitor aggravated his pre-existing illness; that although here is a discrepancy between the cause of death "beriberi adult," as appearing in the death Certificate and the testimony of Dr. Villareal, the latter deserves more credence, because the information (cause of death) was given by the sanitary inspector who did not, in any way, examine the deceased before or after his death. The Commission, therefore, ordered the respondent Chinese Commercial School, Inc., in said case 1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely, Carlito, Gloria, Rosita and Ernesto, all surnamed Fabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as Death benefits; and 2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act 3428, as amended. The above decision is now before Us for Review on a Writ of Certiorari, after the motion for reconsideration had been denied, petitioner alleging that the Commission erred: 1. In disregarding completely the evidentiary value of the death certificate of the attending physician which was presented as evidence by both claimants and respondent (Exhibits C & 4) to prove the cause of death; 2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was contracted during and as a result of the nature of his employment; 3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar; and 4. In not holding that the herein petitioner is exempt from the scope of the Workmen's Compensation Law.lawphil.net Petitioner contends that the preponderance of evidence on the matters involved in this case, militates in its favor. Considering the doctrine that the Commission, like the Court of Industrial Relations, is bound not by the rule of preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence (Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guild vs. Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No. 772, W.C. Act), petitioner's pretension is without merit. Substantial evidence supports the decision of the Commission. While seemingly there exists an inconsistency in the cause of death, as appearing in the death

certificate by Dr. Labitoria and in Dr. Villareal's diagnosis, it is a fact found by the Commission, that the Sanitary Inspector did not examine the deceased before and after his death. "Undoubtedly," says the Commission, "the information that he died of beriberi adult, as appearing in the death certificate was given because it appears that the deceased had also edema of the extremities (swollen legs)." The evidence of record sustains the following findings of the Commission, is Fabrigar's cause of death to wit The short period of time intervening between his last day of work (March 13, 1956) when he spat blood and his death June 28, 1956 due to pulmonary tuberculosis indicates that he had been suffering from the disease even during the time that he was employed by the respondent. Considering the strenuous work that he performed while in the service of the respondents and the unusually long hours of work he rendered (6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal and legal working hours, we find that his employment aggravated his pre-existing illness and brought about his death. Moreover, our conclusion finds support in the fact that immediately preceding his last day of work with the respondent, he had an unusually hard day lifting desks and other furnitures and assisting in the preparations for the graduation exercises of the school. Considering also his complaints during that day (March 11), among which was "shortness of breath", we may also say that his work affected an already existing heart ailment. We find no plausible reason for altering or disturbing the above factual findings of the Commission, in the present appeal by certiorari. It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo Chinese Chamber of Commerce which was the one that furnished the janitor service in the premises of its buildings, including the part thereof occupied by the petitioner; that the Chamber of Commerce paid the salaries of janitors, including the deceased; that the petitioner could not afford to pay rentals of its premises and janitor due to limited finances depended largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and Chinese nationals who helped the school. In other words, it is pretended that the deceased was not an employee of the school but of the Chinese Chamber of Commerce which should be the one responsible for the compensation of the deceased. On one hand, according to the Commission, there is substantial proof to the effect that Fabrigar was employed by and rendered service for the petitioner and was an employee within the purview of the Workmen's Compensation Law. On the other hand, the most important test of employer-employee relation is the power to control the employee's conduct. The records disclose that the person in charge (encargado) of the respondent school supervised the deceased in his work and had control over the manner he performed the same.

It is finally contended that petitioner is an institution devoted solely for learning and is not an industry within the meaning of the Workmen's Compensation Law. Consequently, it is argued, it is exempt from the scope of the same law. Considering that this factual question has not been properly put in issue before the Commission, it may not now be entertained in this appeal for the first time (Atlantic Gulf, etc. vs. CIR, et al., L-16992, Dec. 23, 1961, citing International Oil Factory Union v. Hon. Martinez, et al., L-15560, Dec. 31, 1960). The decision of the Commission does not show that the matter was taken up. We are at a loss to state whether the issue was raised in the motion for reconsideration filed with the Commission, because the said motion is not found in the record before us. And the resolution to the motion for reconsideration does not touch this question. IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed from is affirmed, with costs against the herein petitioner. Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon and De Leon, JJ., concur. Padilla, J., took no part. SECOND DIVISION [G.R. No. 116960. April 2, 1996] BERNARDO JIMENEZ and JOSE JIMENEZ, as Operators of JJs TRUCKING, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PEDRO JUANATAS and FREDELITO JUANATAS, respondents. SYLLABUS 1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE NLRC, GENERALLY RESPECTED; EXCEPT WHEN AT ODDS WITH THE LABOR ARBITER. - The review of labor cases elevated to us on certiorari is confined to questions of jurisdiction or grave abuse of discretion. As a rule, this Court does not review supposed errors in the decision of the NLRC which raise factual issues, because factual findings of agencies exercising quasi-judicial functions are accorded not only respect but even finality, aside from the consideration that the Court is essentially not a trier of facts. However, in the case at bar, a review of the records thereof with an assessment of the facts is necessary since the factual findings of the NLRC and the labor arbiter are at odds with each other. 2. ID.; ID.; BURDEN OF PROOF; THE DEBTOR WHO PLEADS AFFIRMATIVE ALLEGATION OF PAYMENT OF OBLIGATION MUST PROVE THE SAME; WHEN THE BURDEN SHIFTS TO THE CREDITOR. - As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the

general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going forward with the evidence - as distinct from the general burden of proof- shifts to the creditor, who is then under a duty of producing some evidence to show non-payment. In the instant case, the right of respondent to be paid a commission is not disputed by petitioners. Although private respondents admit receipt of partial payment, petitioners still have to present proof of full payment. Where the defendant sued for a debt admits that the debt was originally owed, and pleads payment in whole or in part, it is incumbent upon him to prove such payment. That a plaintiff admits that some payments have been made does not change the burden of proof. The defendant still has the burden of establishing payments beyond those admitted by plaintiff. The positive testimony of a creditor may be sufficient of itself to show non-payment, even when met by indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be sufficient to show payment, but, where his testimony is contradicted by the other party or by a disinterested witness, the issue may be determined against the debtor since he has the burden of proof. The testimony of the debtor creating merely an inference of payment will not be regarded as conclusive on that issue. Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense and in effect admitted the allegations of private respondents. 3. ID.; ID.; RULES OF ADMISSIBILITY; DOCUMENTS NOT PROPERLY ACCOMPLISHED HAS NO PROBATIVE VALUE. - The testimony of petitioners which merely denied the claim of private respondents, unsupported by documentary evidence, is not sufficient to establish payment. Although petitioners submitted a notebook showing the alleged vales of private respondents for the year 1990, the same is inadmissible and cannot be given probative value considering that it is not properly accomplished, is undated and unsigned, and is thus uncertain as to its origin and authenticity. 4. LABOR LAW AND SOCIAL LEGISLATION; EMPLOYER-EMPLOYEE RELATIONSHIP; ELEMENTS; NOT PRESENT IN CASE AT BAR. - In determining the existence of an employer-employee relationship, the elements that are generally considered are the following: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct, with the control test assuming primacy in the overall consideration. In the case at bar, the aforementioned elements are not present. APPEARANCES OF COUNSEL Fernandez law Office for petitioners.

Alejandro M. Villamil for private respondents. DECISION REGALADO, J.: This petition for certiorari seeks the annulment of the decision of respondent National Labor Relations Commission (NLRC), dated May 27, 1994, as well as its resolution, dated August 8, 1994, denying petitioners motion for reconsideration, 1 which assailed decision affirmed with modifications the adverse decision of the labor arbiter against herein petitioners. On June 29, 1990, herein private respondents Pedro and Fredelito Juanatas, father and son, filed a claim for unpaid wages/commissions, separation pay and damages against JJ s Trucking and/or Dr. Bernardo Jimenez. Said respondents, as complainants therein, alleged that in December, 1987, they were hired by herein petitioner Bernardo Jimenez as driver! mechanic and helper, respectively, in his trucking firm, JJ Trucking. They were assigned to a ten-wheeler truck to haul soft drinks of Coca-Cola Bottling Company and paid on commission basis, initially fixed at 17% but later increased to 20% in 1988. Private respondents further alleged that for the years 1988 and 1989 they received only a partial commission of P84,000.00 from petitioners total gross income of almost P1,000,000.00 for the said two years. Consequently, with their commission for that period being computed at 20% of said income, there was an unpaid balance to them of P106,211.86; that until March, 1990 when their services were illegally terminated, they were further entitled to P15,050.309 which, excluding the partial payment of P7,000.00, added up to a grand total of P114,261.86 due and payable to them; and that petitioners refusal to pay their aforestated commission was a ploy to unjustly terminate them. Disputing the complaint, petitioners contend that respondent Fredelito Juanatas was not an employee of the firm but was merely a helper of his father Pedro; that all commissions for 1988 and 1989, as well as those up to March, 1990, were duly paid; and that the truck driven by respondent Pedro Juanatas was sold to one Winston Flores in 1991 and, therefore, private respondents were not illegally dismissed.2

After hearings duly conducted, and with the submission of the parties position/supporting papers, Labor Arbiter Roque B. de Guzman rendered a decision dated March 9, 1993, with this decretal portion: WHEREFORE, decision is hereby issued ordering respondents JJs Trucking and/or Dr. Bernardo Jimenez to pay jointly and severally complainant Pedro Juanatas a separation pay of FIFTEEN THOUSAND FIFTY (P15,050.00) PESOS, plus attorneys fee equivalent to ten percent (10%) of the award. The complaint of Fredelito Juanatas is hereby dismissed for lack of merit. 3 On appeal filed by private respondents, the NLRC modified the decision of the labor arbiter and disposed as follows: PREMISES CONSIDERED, the Decision of March 9, 1993 is hereby MODIFIED, to wit: 1. Complainant Fredelito Juanatas is hereby declared respondents employee and shares in (the) commission and separation pay awarded to complainant Pedro Juanatas, his father. 2. Respondent JJs Trucking and Dr. Bernardo Jimenez are jointly and severally liable to pay complainants their unpaid commissions in the total amount of Eighty Four Thousand Three Hundred Eighty Seven Pesos and 05/100 (P84,387.05). 3. The award of attorneys fees is reduced accordingly to eight thousand four hundred thirty eight pesos and 70/100 (P8,438.70). 4. The other findings stand affirmed.4

Petitioners motion for reconsideration having been denied thereafter in public respondents resolution dated August 8, 1994,5 petitioners have come to us in this

recourse, raising for resolution the issues as to whether or not respondent NLRC committed grave abuse of discretion in ruling (a) that private respondents were not paid their commissions in full, and (b) that respondent Fredelito Juanatas was an employee of JJs Trucking. The review of labor cases elevated to us on certiorari is confined to questions ofjurisdiction or grave abuse of discretion.6 As a rule, this Court does not review supposed errors in the decision of the NLRC which raise factual issues, because factual findings of agencies exercising quasi-judicial functions are accorded not only respect but even finality,7 aside from the consideration that the Court is essentially not a trier of facts. However, in the case at bar, a review of the records thereof with an assessment of the facts is necessary since the factual findings of the NLRC and the labor arbiter are at odds with each other.8 On the first issue, we find no reason to disturb the findings of respondent NLRC that the entire amount of commissions was not paid, this by reason of the evident failure of herein petitioners to present evidence thatfull payment thereof has been made. It is a basic rule in evidence that each party must prove his affirmative allegations. Since the burden of evidence lies with the party who asserts an affirmative allegation, the plaintiff or complainant has to prove his affirmative allegation, in the complaint and the defendant or respondent has to prove the affirmative allegations in his affirmative defenses and counterclaim. Considering that petitioners herein assert that the disputed commissions have been paid, they have the bounden duty to prove that fact. As a general rule, one who pleads payment has the burden of proving it.9 Even where the plaintiff must allege non-payment, the general rule is that the burden

rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.10 The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.11 When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor.12 Where the debtor introduces some evidence of payment, the burden of going forward with the evidence - as distinct from the general burden of proof - shifts to the creditor, who is then under a duty of producing some evidence to show non-payment.13 In the instant case, the right of respondent Pedro Juanatas to be paid a commission equivalent to 17%, later increased to 20%, of the gross income is not disputed by petitioners. Although private respondents admit receipt of partial payment, petitioners still have to present proof of full payment. Where the defendant sued for a debt admits that the debt was originally owed, and pleads payment in whole or in part, it is incumbent upon him to prove such payment. That a plaintiff admits that some payments have been made does not change the burden of proof. The defendant still has the burden of establishing payments beyond those admitted by plaintiff.14

The testimony of petitioners which merely denied the claim of private respondents, unsupported by documentary evidence, is not sufficient to establish payment. Although petitioners submitted a notebook showing the alleged vales of private respondents for the year 1990,15 the same is inadmissible and cannot be given probative value considering that it is not properly accomplished, is undated and unsigned, and is thus uncertain as to its origin and authenticity.16 The positive testimony of a creditor may be sufficient of itself to show non-payment, even when met by indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be sufficient to show payment, but, where his testimony is contradicted by the other party or by a disinterested witness, the issue may be determined against the debtor since he has the burden of proof. The testimony of the debtor creating merely an inference of payment will not be regarded as conclusive on that issue.17 Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense and in effect admitted the allegations of private respondents. With respect to the second issue, however, we agree with petitioners that the NLRC erred in holding that the son, Fredelito, was an employee of petitioners. We have consistently ruled that in determining the existence of an employeremployee relationship, the elements that are generally considered are the following: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct,18 with the control test assuming primacy in the overall consideration.

In the case at bar, the aforementioned elements are not present. The agreement was between petitioner JJs Trucking and respondent Pedro Juanatas. The hiring of a helper was discretionary on the part of Pedro. Under their contract, should he employ a helper, he would be responsible for the latters compensation. With or without a helper, respondent Pedro Juanatas was entitled to the same percentage of commission. Respondent Fredelito Juanatas was hired by his father, Pedro, and the compensation he received was paid by his father out of the latters commission. Further, Fredelito was not subject to the control and supervision of and dismissal by petitioners but of and by his father. Even the Solicitor General, in his comment, agreed with the finding of the labor arbiter that Fredelito was not an employee of petitioners, to wit: Public respondent committed grave abuse of discretion in holding that said private respondent is an employee of JJs Trucking on the ground that, citing Article 281 of the Labor Code, Fredelitos functions as helper was (sic) necessary and desirable to respondents trucking business. In the first place, Article 281 of the Labor Code does not refer to the basic factors that must underlie every existing employer-employee relationship, the absence of any of which will negate such existence. It refers instead to the qualifications of (A)n employee who is allowed to work after a probationary period and who, as a consequence, shall be considered a regular employee. Secondly, the test in determining the existence of an employee-employer relationship is not the necessity and/or desirability of ones functions in relation to an employers business, but (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct. The latter is the most important element (Singer Sewing Machine Company vs. Drilon, 193 SCRA 270, 275; Deferia vs. NLRC, 194 SCRA 531, 525; Ecal vs. NLRC, 224, 228; Hijos De F. Escano, Inc. vs. NLRC, 224 SCRA 781, 785). The aforequoted pertinent findings of the Labor Arbiter indicate (that) the foregoing requirements do not exist between petitioner and private respondent Fredelito Juanatas. Thus, the labor arbiter stated that respondent Fredelito Juanatas was never hired by petitioners. Instead the formers services were availed of by respondent Pedro Juanatas his father, who, at the same time, supervised and controlled his work and paid his commissions. Respondent NLRCs ruling did not traverse these findings of the labor arbiter. 19 WHEREFORE, the judgment of respondent National Labor Relations Commission is hereby AFFIRMED, with the MODIFICATION that paragraph 1 thereof, declaring

Fredelito Juanatas an employee of petitioners and entitled to share in the award for commission and separation pay, is hereby DELETED. SO ORDERED. Romero, Puno and Mendoza, JJ., concur. Torres, Jr. J., on leave. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

were contracted by MAM for the operation of the Rancho Estates' water pump. He was engaged, however, not as an employee, but as a service contractor, at an agreed fee of P1,590.00 a month. Similar arrangements were likewise entered into by MAM with one Rodolfo Mercado and with a security guard of Rancho Estates III Homeowners' Association. Under the agreement, Balbastro was merely made to open and close on a daily basis the water supply system of the different phases of the subdivision in accordance with its water rationing scheme. He worked for only a maximum period of three hours a day, and he made use of his free time by offering plumbing services to the residents of the subdivision. He was not at all subject to the control or supervision of MAM for, in fact, his work could so also be done either by Mercado or by the security guard. On 23 May 1990, prior to the filing of the 1 complaint, MAM executed a Deed of Transfer, effective 01 July 1990, in favor of the Rancho Estates Phase III Homeowners Association, Inc., conveying to the latter all its rights and interests over the water system in the subdivision. In a decision, dated 23 December 1991, the Labor Arbiter dismissed the complaint for lack of merit.

G.R. No. 114787 June 2, 1995 MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO respondents.

On appeal to it, respondent National Labor Relations Commission ("NLRC") rendered judgment (a) setting aside the questioned decision of the Labor Arbiter and (b) referring the case, pursuant to Article 218(c) of the Labor Code, to Arbiter Cristeta D. Tamayo for further hearing and submission of a report within 20 days from receipt of 2 the Order. On 21 March 1994, respondent Commissioner, after considering the report of Labor Arbiter Tamayo, ordered: WHEREFORE, the respondents are hereby directed to pay jointly and severally complainant the sum of P86,641.05 as above3 computed. The instant petition asseverates that respondent NLRC gravely abused its discretion, amounting to lack or excess of jurisdiction, (1) in finding that an employer-employee relationship existed between petitioners and private respondent and (2) in holding petitioners jointly and severally liable for the money claims awarded to private respondent. Once again, the matter of ascertaining the existence of an employer-employee relationship is raised. Repeatedly, we have said that this factual issue is determined by: (a) the selection and engagement of the employee; (b) the payment of wages;

VITUG, J.: A prime focus in the instant petition is the question of when to hold a director or officer of a corporation solidarily obligated with the latter for a corporate liability. The case originated from a complaint filed with the Labor Arbiter by private respondent Celso B. Balbastro against herein petitioners, MAM Realty Development Corporation ("MAM") and its Vice President Manuel P. Centeno, for wage differentials, "ECOLA," overtime pay, incentive leave pay, 13th month pay (for the years 1988 and 1989), holiday pay and rest day pay. Balbastro alleged that he was employed by MAM as a pump operator in 1982 and had since performed such work at its Rancho Estate, Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00 for seven days of work a week that started from 6:00 a.m. to up until 6:00 p.m. daily. MAM countered that Balbastro had previously been employed by Francisco Cacho and Co., Inc., the developer of Rancho Estates. Sometime in May 1982, his services

(c) the power of dismissal; and

(d) the employer's power to control the employee with respect to the result of the work to be done and to the means and methods by which the work is to be accomplished. We see no grave abuse of discretion on the part of NLRC in finding a full satisfaction, in the case at bench, of the criteria to establish that employeremployee relationship. The power of control, the most important feature of that relationship and, here, a point of controversy, refers merely to the existence of the power and not to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the former has a right to wield the 4 power. It is hard to accede to the contention of petitioners that private respondent should be considered totally free from such control merely because the work could equally and easily be done either by Mercado or by the subdivision's security guard. Not without any significance is that private respondent's employment with MAM has been registered by petitioners 5 with the Social Security System. It would seem that the money claims awarded to private respondent were computed 6 from 06 March 1988 to 06 March 1991, the latter being the date of the filing of the complaint. The NLRC might have missed the transfer by MAM of the water system to the Homeowners Association on 01 July 1990, a matter that would appear not to be in dispute. Accordingly, the period for the computation of the money claims should only be for the period from 06 March 1988 to 01 July 1990 (when petitioner corporation could be deemed to have ceased from the activity for which private respondent was employed), and petitioner corporation should, instead, be made liable for the employee's separation pay equivalent to one-half (1/2) month pay for every year of 7 service. While the transfer was allegedly due to MAM's financial constraints, unfortunately for petitioner corporation, however, it failed to sufficiently establish that its business losses or financial reverses were serious enough that possibly can 8 warrant an exemption under the law. We agree with petitioners, however, that the NLRC erred in holding Centeno jointly and severally liable with MAM. A corporation, being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in the following 9 cases: 1. When directors and trustees or, in appropriate cases, the officers of a corporation

(a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or 10 members, and other persons. 2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection 11 thereto. 3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the 12 Corporation. 4 When a director, trustee or officer is made, by specific provision 13 of law, personally liable for his corporate action. In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with the corporation for the termination of 14 employment of employees done with malice or in bad faith. In the case at Bench, there is nothing substantial on record that can justify, prescinding from the foregoing, petitioner Centeno's solidary liability with the corporation. An extra note. Private respondent avers that the questioned decision, having already become final and executory, could no longer be reviewed by this Court. The petition before us has been filed under Rule 65 of the Rules of Court, there being no appeal, or any other plain, speedy and adequate remedy in the ordinary course of law from decisions of the National Labor Relations Commission; it is a relief that is open so long as it is availed of within a reasonable time. WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is REMANDED to the NLRC for a re-computation of private respondent's monetary awards, which, conformably with this opinion, shall be paid solely by petitioner MAM Realty Development Corporation. No special pronouncement on costs. SO ORDERED.

Feliciano, Romero, Melo and Francisco, JJ., concur. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 84484 November 15, 1989 INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents. Tirol & Tirol for petitioner. Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe. ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner. TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ... Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust. ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ... Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while 2 concurrently fulfilling his commitments under the first contract with the Company. In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was

NARVASA, J.: On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the 1 Company) and Melecio T. Basiao entered into a contract by which: 1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company; 2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and 3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract. The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:

later to claim, prompted the latter to terminate also his engagement under the first 3 contract and to stop payment of his commissions starting April 1, 1980. Basiao thereafter filed with the then Ministry of Labor a complaint against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions 5 under the terms and conditions of his contract. The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... 6 (him) in favor of the respondent company ..." plus 10% attorney's fees. This decision was, on appeal by the Company, affirmed by the National Labor 7 Relations Commission. Hence, the present petition for certiorari and prohibition. The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the 8 Labor Arbiter under the provisions of Section 217 of the Labor Code, or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action. The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective. Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an
4

employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in 9 legal contemplation, an employee of the Company. It is true that the "control test" expressed in the following pronouncement of the 10 Court in the 1956 case of Viana vs. Alejo Al-Lagadan ... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct although the latter is the most important element (35 Am. Jur. 445). ... has been followed and applied in later cases, some fairly recent. Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and 12 insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and
11

what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company. There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they 13 worked. In Mafinco Trading Corporation vs. Ople, the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor. In Investment Planning Corporation of the Philippines us. Social Security System a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses. More recently, in Sara vs. NLRC, it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee. The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods or the
15 14

methods themselves of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance." The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company. The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits. WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. SO ORDERED. Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18873 September 30, 1963

MANILA HOTEL COMPANY, petitioner, vs. COURT OF INDUSTRIAL RELATIONS, ET AL., respondents. Government Corporate Counsel Simeon M. Gopengco and Trial Attorney Jose S. Gomez for petitioner. Gregorio E. Fajardo and Jesus Jaramillo for respondent Union. Mariano B. Tuason for respondent Court.

BAUTISTA ANGELO, J.: The Pines Hotel Employees Association filed on February 24, 1960 before the Court of Industrial Relations a petition praying, among other things, that its employees who were working at the Pines Hotel be paid additional compensation for overtime service rendered due to the exigencies of the business, as well as additional compensation for Sunday, legal holiday and nighttime work. The Manila Hotel filed its answer denying the material averments of the petition and alleging, among others, that if overtime service was rendered the same was not authorized but was rendered voluntarily, for the employees were interested in the "tips" offered by the patrons of the hotel. Presiding Judge Jose S. Bautista, to whom the petition was assigned, after trial, rendered judgment stating that the employees were entitled to the additional compensation demanded, including that for overtime work, because an employee who renders overtime service is entitled to compensation even if he rendered it without prior authority. A motion for reconsideration was filed on the ground that the order was contrary to law and the evidence, but the same was denied by the industrial court en banc.1awphl.nt In compliance with the order of the court, the Examining Division of the Court of Industrial Relations submitted a report in which it stated that the amount due the employees as additional compensation for overtime and night services rendered from January to December 31, 1958 was P32,950.69. The management filed its objection to the report on the ground that it included 22 names of employees who were not employees of the Pines Hotel at the time the petition was filed so that insofar as said employees are concerned the petition merely involves a money claim which comes under the jurisdiction of the regular courts. The trial judge, however, overruled this objection holding that, while the 22 employees were actually not in the service at the time of the filing of the petition, they were however subsequently employed even during the pendency of the incident, and so their claim comes within the jurisdiction of the Court of Industrial Relations. Hence, the present petition for review. There is no merit in this appeal it appearing that while it is true that the 22 employees whose claim is objected to were not actually in the service at the time the instant petition was filed, they were however, subsequently reemployed even while the present incident was pending consideration by the trial court. Moreover, it appears that the questioned employees were never separated from the service. Their status is that of regular seasonal employees who are called to work from time to time, mostly during summer season. The nature of their relationship with the hotel is such that during off season they are temporarily laid off but during summer season they are re-employed, or when their services may be needed. They are not

strictly speaking separated from the service but are merely considered as on leave of absence without pay until they are re-employed. Their employment relationship is never severed but only suspended. As such, these employees can be considered as in the regular employment of the hotel. WHEREFORE, the order appealed from is affirmed. No costs. Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur. Reyes, J.B.L., J., took no part. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21465 March 31, 1966

INDUSTRIAL-COMMERCIAL-AGRICULTURAL WORKERS' ORGANIZATION (ICAWO), petitioner-appellant, vs. COURT OF INDUSTRIAL RELATIONS, CENTRAL AZUCARERA DE PILAR and/or ANTONIO BELZARENA as Manager, CENTRAL AZUCARERA DE PILAR ALLIED WORKERS ASSOCIATION (CAPAWA), respondents-appellees. A. Velez for the petitioner. Tirol and Tirol for the respondent. REYES, J.B.L., J.: Appeal from a decision of the Court of Industrial Relations (Case No. 44-ULP-Iloilo) dismissing charges for unfair labor practice. On 9 February 1956, the petitioner, Industrial-Commercial-Agricultural Workers' Organization (hereinafter referred to as the "ICAWO"), declared a strike against the respondent Central Azucarera de Pilar. The strike was amicably settled the following day, and among the provisions of the "Amicable Settlement" (Exhibit "C") reads: That the company shall not discriminate against any worker and the same treatment shall be accorded to workers (ICAWO affiliates) who declared a strike or not. A petition for Certification Election will be filed by the ICAWO in view of the other labor union, CAPAWA, with whom the company has an

existing collective bargaining contract, a union which is considered by the ICAWO as a company union. The CAPAWA therein referred to is the herein respondent Central Azucarera de Pilar Allied Workers Association and the collective bargaining contract, likewise therein referred to, entered into in 1955, provided: The EMPLOYER agrees that in hiring unskilled employees and laborers, the members of the WORKERS ASSOCIATION should be given preference and the management should notify accordingly the WORKERS ASSOCIATION of any vacancy existing in all Departments. New employees and laborers hired who are members of the WORKERS ASSOCIATION will be on TEMPORARY STATUS and the EMPLOYER agrees that before they will be considered regular employees and laborers they have to become members of the CENTRAL AZUCARERA DE PILAR ALLIED WORKERS' ASSOCIATION within thirty (30) days from the date of employment and if they refuse to affiliate with the said labor organization within this time they will be immediately dismissed by the EMPLOYER; Among the strikers were 101 seasonal workers, some of whom have worked as such for the company since pre-war years. On the opening of the milling season for the year 1956-1957, the respondent company refused to re-admit these 101 seasonal workers of the ICAWO on the ground that it was precluded by the closed-shop clause in its collective bargaining agreement with the CAPAWA. Thus, on 8 May 1958, the ICAWO filed an unfair labor practice charge against the company. The Court of Industrial Relations, in its decision dated 27 November 1961, ordered the reinstatement, with back wages, of these laborers; but on a motion for reconsideration, the said court, en banc, reversed the said decision in its resolution dated 13 August 1962. Not satisfied with the reversal, the ICAWO filed the present petition for certiorari to review the industrial court's resolution. The arguments gravitate around the status of the seasonal workers, the petitioner contending that they are regular and old employees and, as such, they should have been re-hired at the start, in the month of October, of each milling season, which usually lasts 5 months. The respondents, on the other hand, urge that these laborers are new, their employment terminating at the end of each milling season and, therefore, could not be re-admitted without the company violating the closed-shop agreement with the CAPAWA.1wph1.t In an almost identical case, involving practically the same parties, G.R. No. L-17422, 28 February 1962, the Court interpreted the closed shop agreement, jam quot, as

referring "to future or new employees or laborers". This interpretation, however, does not resolve the present issue because it does not classify the seasonal workers one way or the other. A direct precedent, however, exists in the case of Manila Hotel Company vs. Court of Industrial Relations, et al., L-18873, 30 September 1963, wherein this Court, alluding to certain employees in the Pines Hotel in Baguio, stated: x x x x Their status is that of regular seasonal employees who are called to work from time to time, mostly during summer season. The nature of their relationship with the hotel is such that during off season they are temporarily laid off but during summer season they are reemployed, or when their services may be needed. They are not strictly speaking separated from the service but are merely considered as on leave of absence without pay until they are re-employed. Their employment relationship is never severed but only suspended. As such, these, employees can be considered as in the regular employment of the hotel. The respondent company, however, relies upon the case of Hind Sugar Company vs. Court of Industrial Relations, et al., L-13364, 26 July 1960. This citation cannot be considered authoritative in the present case because the Hind case did not actually rule on the temporary character of the employment of seasonal workers; instead, it affirmed their reinstatement, which the labor court had ordered under Section 10 of the Industrial Peace Act as a solution to a strike, without regard to the permanent or seasonal nature of the employment of the strikers. Definitely, the Hind case did not deal with seasonal employees that had been recalled to work year after year during the milling season, thereby creating a reasonable expectation of continued employment; and for this reason, the Manila Hotel case (supra) sets a rule more in accord with justice and equity under the conditions shown by the record now before us. Our conclusion is that petitioners, even if seasonal workers, were not "new workers" within the scope of the closed shop contract between the sugar central and the CAPAWA union; hence their discharge was illegal. In filing the unfair labor practice complaint on 8 May 1958, the petitioner union, under the circumstances, did not incur laches, because there was no work for these seasonal workers during the off-season, from March to October. Moreover, the seat of the prosecutor's office was in Cebu, not in Panay, and a certification election had intervened to absorb the attention of the complainants. For the foregoing reasons, the resolution under review is hereby set aside, and the court of origin is directed to order the reinstatement of the 101 seasonal workers to their former positions in the respondent sugar milling company.

With regard to the petitioners' claim for backpay, this matter should be threshed out in the court below where the parties must be given opportunity to submit evidence to prove or disprove the employer's good faith as well as the amounts that petitioners have earned or should have earned during their wrongful lay off, such amounts being deductible from the backpay due to petitioners (National Labor Union vs. Zip Venetian Blind Co., L-15827, 31 May 1961; Aboitiz & Co. vs. C.I.R., L8418, 29 Nov. 1962). Let the records be returned to the Court of Industrial Relations for further proceedings, in consonance with this opinion. So ordered. Bengzon, C.J., Concepcion, Barrera, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur. Dizon, J., is on leave. RESOLUTION August 23, 1966 REYES, J.B.L., J.: Respondents Central Azucarera de Pilar and its manager have asked this Court to reconsider and reverse its decision of March 31, 1966. They insist that the seasonal character of the milling activities of the respondent Central each year necessarily implies that the employment of petitioners ceases after each milling season. We do not find this position tenable. The cessation of the Central's milling activities at the end of the season is certainly not permanent or definitive; it is a foreseeable suspension of work, and both Central and laborers have reason to expect that such activities will be resumed, as they are in fact resumed, when sugar cane ripe for milling is again available. There is, therefore, merely a temporary cessation of the manufacturing process due to passing shortage of raw material that by itself alone is not sufficient, in the absence of other justified reasons, to sever the employment or labor relationship between the parties, since the shortage is not permanent. The proof of this assertion is the undenied fact that many of the petitioner members of the ICAWO Union have been laboring for the Central, and reengaged for many seasons without interruption. Nor does the Central interrupt completely its operations in the interval between milling seasons; the office and sales force are maintained, precisely because operations are to be later resumed. That during the temporary layoff the laborers are considered free to seek other employment is natural, since the laborers are not being paid yet must find means of support. A period during which the Central is forced to suspend or cease operation for a time (whether by reason of lack of cane or by some accident to its machinery)

should not mean starvation for the employees and their families. Of course, the stopping of the milling at the end of each season, and before the next sugar crop is ready, being regular and foreseen by both parties to the labor relation, no compensation is expected nor demanded during the seasonal layoff. Neither does the fact that the laborers assent to their medical examination at the beginning of each milling season indicate that a new labor contract is being entered into, in the absence of stipulation to such effect. Said examination is in the interest not only of the Central but also of the labor force itself and is a mere precautionary measure. The seasonal stoppage of work does not, therefore, negate the reasonable expectation of the laborers to be subsequently allowed to resume work unless there be other justifiable reasons for acting otherwise. We note again that in the Hind case (Hind Sugar Go. vs. C.I.R., L-13364, July 26, 1960) the pronouncement of the Industrial Court that reemployment of the seasonal laborers was discretionary in the employer was not in issue before this Court. All that was declared therein was that the Company should not be compelled to pay for work not done as it would be inconsistent with the C.I.R.'s own pronouncement, the legal correctness of which was not being contested. In Manila Hotel Co. vs. C.I.R., L-18873, September 30, 1963, on the contrary, it was squarely ruled that the employment of the seasonal laborers is not severed, but only suspended, during the seasonal layoff. In remanding the case to the Court of Industrial Relations for determination whether the Central acted in good faith and the employees should be declared entitled to backpay, and the amount due the latter, this Court took into account that these are matters dependent upon circumstances that the C.I.R. had not previously inquired into, and particularly the requirement of the Industrial Peace Act (Republic Act 875) in its section 5(c), that where a person is found engaging in any unfair labor practice, the Industrial Court, besides issuing a cease and desist order, must. take such affirmative action as will effectuate the policies of this Act, a rule that implies exercise of judgment and discretion by the Industrial Court, based on facts and considerations not now brought to our attention. Wherefore, the motion for reconsideration is denied. Concepcion, Barrera, Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur. Regala, J., is on leave.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-30592 February 25, 1982 PHILIPPINE FISHING BOAT OFFICERS AND ENGINEERS UNION, SAMAHAN NG MANGDARAGAT SA FILIPINAS, FRANCISCO VISAYAS AND AMBROCIO BERGADO, petitioners, vs. COURT OF INDUSTRIAL RELATIONS, SAN DIEGO FISHERY ENTERPRISES, INC., BARTOLOME A. SAN DIEGO AND ANATOLIO LLIDO, respondents.

Diego dismissed petitioners Visayas and Bergado because of their union activities and their refusal to resign from the Philippine Fishing Boat Officers and Engineers Union and join the union being organized by respondents San Diego and Llido. Consequently, on or about June 24, 1958, petitioners unions declared a strike. In their answer, respondents denied all the substantial allegations of the complaint and maintained that complainants do not constitute representative groups for collective bargaining purposes and therefore the strike declared by the employees was not legal. Respondents likewise denied that petitioners Visayas and Bergado were employees of the corporation. What transpired during the hearing of the case can well be seen from the appealed decision. Petitioners introduced evidence that Visayas and Bergado had continuously been employed by respondent San Diego Fishery Enterprises, Inc. since April 1952 and September 1956, respectively. In the course of their employment, they joined the Philippine Fishing Boat Officers and Engineers Union and were duly elected, respectively, as its vice-president and treasurer. On May 6. 1958 and June 12, 1958, petitioners-unions sent letters of demand to respondent corporation which remained unanswered inspite of the lapse of the reglementary period provided in Section 14, Republic Act 8 5. Sometime thereafter, respondent San Diego, with the cooperation and assistance of Llido started gathering information on the employees' affiliations with the two complaining unions. This was heightened when on May 8 and 9, 1958 respondent San Diego allegedly called into his office petitioners Visayas and Bergado and interrogated, coerced and required them to resign from their union and to cooperate with the company by joining the union being organized by respondents San Diego and Llido. When they refused to heed the demands of the management, Visayas and Bergado were dismissed. As an offshoot of their dismissal, the two unions staged a strike and threw, picketlines in the premises of the respondent corporation. Respondent corporation in turn tried to establish its defense that there is no employer-employee relationship between petitioners Visayas and Bergado and the company in view of the peculiar feature of the fishing industry i.e., the regular dry docking of fishing vessels to make them seaworthy; the repairs that must be made from time to time or the delay in the trips because of scarcity of ice. Respondents alleged that the contract of employment invariably lasts only for the duration of each fishing trip and terminates on the return of the vessel to its home port; and that the moment the crew members disembark, they are no longer considered employees of the company. Since the record indicated that individual petitioners were not on board any of the company's fishing vessels at the time of their dismissal, respondent court ruled in its decision of October 3, 1968 that there existed no employer-employee relationship between the parties and therefore respondents could not be held liable for unfair labor practices.

TEEHANKEE, J.: In this petition for review by certiorari, petitioners seek the reversal of the decision of the now defunct Court of Industrial Relations dismissing their complaint of unfair labor practices against respondents San Diego Fishery Enterprises, Inc., Bartolome A. San Diego and Anatolio Llido. Petitioners Francisco Visayas and Ambrocio Bergado, who were dismissed by respondent corporation likewise pray that they be granted backwages from the date of their dismissal on May 9, 1958. Respondent San Diego Fishery Enterprises, Inc. is a domestic corporation engaged in deep-sea fishing and respondents Bartolome A. San Diego and Anatolio Llido are the manager and an employee thereof while petitioners Philippine Fishing Boat Officers and Engineers Union and Samahan ng Mangdaragat sa Filipinas are duly registered labor unions. Petitioners Francisco Visayas and Ambrocio Bergado were the President and Treasurer, respectively, of the first named union. The Philippine Fishing Boat Officers and Engineers Union is composed of officers and engineers, while Samahan ng Mangdaragat sa Filipinas is composed of crew members, in the employ of respondent corporation. On charges instituted by herein petitioners, the prosecution staff of respondent court, after conducting a preliminary investigation filed a complaint for unfair labor practices against herein respondents. The complaint shows that petitioners unions sent letters of demands and proposals to respondent corporation on May 6, 1958 and June 12, 1958 but respondent corporation failed to answer the said letters within the reglementary period as provided for in Section 14 of Republic Act No. 875 and also refused to talk with representatives of petitioners- unions. It also appears that on May 9, 1958, respondent corporation, through its manager Bartolome A. San

Petitioners timely filed a motion for reconsideration of the decision but respondent court, in an en banc resolution found the motion to be without merit, besides the fact that the arguments of petitioners' counsel were 'not duly verified." Hence, this appeal by certiorari, which the Court finds to be meritorious. It is settled that tenure of employment is not considered as the test of employment. 1 All that is required is hiring. For it not the continuity of employment that renders the employer responsible, but whether the work of the laborer is part of the regular 2 business or occupation of the employer. In the case at bar, the employer-employee relationship is merely suspended during the time the vessels are dry docked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip. All these activities form part of the regular operation of the company's fishing 3 business. Thus, in the analogous case of Manila Hotel Co. vs. CIR, the Court held that: Where the nature of the employees' relationship with the hotel is such that during off season they are temporarily laid off and during summer season they are reemployed, or their services may be needed, their status is that of regular seasonal employees. They are not strictly speaking separated from the service but are merely on leave of absence without pay until they are reemployed. Their employment relationship is never severed but merely suspended As such these employees can be considered as in the regular employment of the hotel . The temporary suspension of the business due to some foreseeable events, say, the scarcity of ice for the fishing trips or when the fishing vessels cannot go out to sea due to repairs or strong typhoons does not sever the employer-employee relationship between the parties. Under similar circumstances, the Court likewise 4 held in Industrial Commercial-Agricultural Worker's Organization vs. CIR, that: ... The cessation of the Central's milling activities at the end of the season is certainly not permanent or definitive; it is a foreseeable suspension of work, and both Central and laborers reason to expect that such activities will be resumed, as they are in fact resumed, when sugar cane ripe for milling is available. There is, therefore, merely a temporary cessation of the manufacturing process due to passing shortage of raw materials that by itself alone, is not sufficient, in the absence of other justified reasons, to sever the employment or labor relationship between the parties, since the shortage is not permanent. The proof of this assertion is the undenied fact that many of the petitioner members of the ICAWO Union have been laboring for the Central, and reengaged for many seasons without interruption. Nor does the Central interrupt completely its operations in the interval between milling seasons;

the office and sales force are maintained, precisely because operations are to be later resumed. That during the temporary layoff the laborers are considered free to seek other employment is natural, since the laborers are not being paid, yet must find means of support. A period during which the Central is forced to suspend or cease operation for a time (whether by reason of lack of cane or by some accident to its machinery) should not mean starvation for employees and their families. Of course, the stopping of the milling at the end of the season, and before the next sugar crop is ready, being regular and foreseen by both parties to the labor relation, no compensation is expected nor demanded during the seasonal layoff. The Court holds, therefore, that the employer- employee relationship existed between the parties notwithstanding evidence to the fact that petitioners Visayas and Bergado, even during the time that they worked with respondent company alternated their employment on different vessels when they were not assigned on the company's vessels. For, as was stressed in the above-quoted case of IndustrialCommercial-Agricultural Workers Organization vs. CIR, "that during the temporary layoff the laborers are considered free to seek other employment is natural, since the laborers are not being paid, yet must find means of support" and such temporary cessation of operations "should not mean starvation for employees and their families." The fact that on the date of the individuals petitioners dismissal on May 9, 1958, they were not on board any of the company's fishing vessels does not exonerate respondents from the charge of unjust dismissal. It was shown that at the time of the dismissal of said petitioners Visayas and Bergado, respondent San Diego was not the general manager of the corporation. The power to hire and dismiss employees was then exercised by Enrique Diaz, who approved or disapproved contracts of employment as acting general manager of respondent corporation. Respondent court ruled that even assuming that respondents San Diego and Llido coerced the officers and engineers regarding their union affiliations under threat of dismissal, no evidence existed to warrant a conclusion that San Diego was acting for and in behalf of respondent firm as an employer. Respondent court thus ruled that since respondent San Diego was not, at the time of petitioners' dismissal, the general manager and president of respondent corporation but merely a stockholder, he had no power to hire and dismiss employees and any act imputed to him, even if assumed to be true, could not bind the corporation. Whatever be the case, the Court has found the dismissal of petitioners to be unjustified, and it is not San Diego nor Diaz who are herein held personally liable but respondent corporation itself as the employer. Moreover, respondent corporation is undeniably a family corporation and Bartolome A. San Diego is one of the incorporators and directors. In Emilio Cano Enterprises, Inc.

vs. CIR, the Court ruled that where the incorporators and directors belong to a single family, the corporation and its members can be considered as one in order to avoid its being used as an instrument to commit injustice, and held that A judgment of unfair labor practice rendered against two individuals in their capacity as officials of the corporation may be made against the property of said corporation, notwithstanding the fact that the corporation was not a partv to the unfair labor practice charged, it appearing that the corporation is a closed family corporation where the incorporators and directors belong to a single family. This is an instance where the corporation and its members can be considered, and to hold such entity liable for the acts of its members is not to ignore the legal fiction but merely to give meaning to the principle that such fiction cannot be invoked if it is used as a shield to further an end subversive of justice. The fact that the hiring and dismissal of employees was exercised by Enrique Diaz, the acting general manager of respondent corporation, does not alter the employeremployee relationship between the parties and mean that he personally was the employer. It is obvious that respondent corporation is the statutory employer of 6 petitioners. The intervention of Enrique Diaz, in this case, was merely that of an agent or intermediary between the owner of the fishing boat and the members of its crew. In short, Diaz was merely the person charged by respondent corporation to recruit its officers and crew members to work on its vessels in pursuance of its 7 regular fishing business. The Court finds as totally unjustifiable respondent court's dismissal of petitioners' motion for reconsideration on the flimsy ground that the arguments filed by their new counsel were not duly verified." Such defect was merely formal and did not affect the validity and efficacy of the pleading and the arguments submitted. The 8 most respondent court could have done was to require such formal verification. The Rules of Court (Rule 1, Sec. 2) prescribe a general directive that procedural rules be liberallv construed or interpreted in order to promote their objective and to assist 9 the parties in obtaining just, speedy and inexpensive determination of their cases. As stated by the now Chief Justice in Firestone Filipinas Employees Association, et al. 10 vs. Firestone Tire and Rubber Co. of the Philippines, et al. it is "the well-settled doctrine that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep, the Idea being that its power be exercised according to justice and equity and substantial merits of the controversy. We find that "respondents committed unfair labor practices in their refusal to answer the proposals of the petitioners-unions and to bargain with them, coupled with the unlawful dismissal of petitioners Francisco Visayas and Ambrocio Bergado. Accordingly, the decision under review is set aside and respondent San Diego Fishery Enterprises, Inc. is ordered to cease and desist from further commission of such acts,

and to pay petitioners Francisco Visayas and Ambrocio Bergado backwages for a period of five (5) years without qualification and deduction, computed on the basis of their average yearly earnings at the time of their unlawful dismissal on May 9, 11 1958. This decision is immediately executory. With costs against respondent company. SO ORDERED. Guerrero, Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur. National Housing Corp. v. Juco, 134 SCRA 172 (1985) F: Juco was an employee of the NHA. He filed a complaint for illegal dismissal w/ MOLE but his case was dismissed by the labor arbiter on the ground that the NHA is a govt-owned corp. and jurisdiction over its employees is vested in the CSC. On appeal, the NLRC reversed the decision and remanded the case to the labor arbiter for further proceedings. NHA in turn appealed to the SC ISSUE: Are employees of the National Housing Corporation, a GOCC without original charter, covered by the Labor Code or by laws and regulations governing the civil service? HELD: Sec. 11, Art XII-B of the Constitution specifically provides: "The Civil Service embraces every branch, agency, subdivision and instrumentality of the Government, including every government owned and controlled corporation. The inclusion of GOCC within the embrace of the civil service shows a deliberate effort at the framers to plug an earlier loophole which allowed GOCC to avoid the full consequences of the civil service system. All offices and firms of the government are covered. This consti provision has been implemented by statute PD 807 is unequivocal that personnel of GOCC belong to the civil service and subject to civil service requirements. "Every" means each one of a group, without exception. This case refers to a GOCC. It does not cover cases involving private firms taken over by the government in foreclosure or similar proceedings. xxx For purposes of coverage in the Civil Service, employees of govt- owned or controlled corps. whether created by special law or formed as subsidiaries are covered by the Civil Service Law, not the Labor Code, and the fact that pvt. corps. owned or controlled by the govt may be created by special charter does not mean that such corps. not created by special law are not covered by the Civil Service. xxx The infirmity of the resp's position lies in its permitting the circumvention or emasculation of Sec. 1, Art. XII-B [now Art IX, B, Sec. 2 (1)] of the Consti. It would be

possible for a regular ministry of govt to create a host of subsidiary corps. under the Corp. Code funded by a willing legislature. A govt-owned corp. could create several subsidiary corps. These subsidiary corps. would enjoy the best of two worlds. Their officials and employees would be privileged individuals, free from the strict accountability required by the Civil Service Dec. and the regulations of the COA. Their incomes would not be subject to the competitive restraint in the open market nor to the terms and conditions of civil service employment. Conceivably, all govt-owned or controlled corps. could be created, no longer by special charters, but through incorp. under the general law. The Constitutional amendment including such corps. in the embrace of the civil service would cease to have application. Certainly, such a situation cannot be allowed For more case digests and law school notes visit lizajamarga.com.

Consolidated special civil actions for certiorari seeking to review the decision * of the Third Division, National Labor Relations Commission in Case No. 11-4944-83 dated 28 November 1984 and its resolution dated 16 January 1985 denying motions for reconsideration of said decision. Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic corporation which provides security guards as well as messengerial, janitorial and other similar manpower services to the Philippine National Bank (PNB) and its agencies. She was first employed with NASECO as a lady guard on 18 July 1975. Through the years, she was promoted to Clerk Typist, then Personnel Clerk 1 until she became Chief of Property and Records, on 10 March 1980. Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren, Manager of Finance and Special Project and Evaluation Department of NASECO, stemming from her non-compliance with Lloren's memorandum, dated 11 October 1983, regarding certain entry procedures in the company's Statement of Billings Adjustment. Said charges alleged that Credo "did not comply with Lloren's instructions to place some corrections/additional remarks in the Statement of Billings Adjustment; and when [Credo] was called by Lloren to his office to explain further the said instructions, [Credo] showed resentment and behaved in a scandalous manner by shouting and uttering remarks of disrespect in the presence 2 of her co-employees." On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager of NASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in connection with the administrative charges filed against her. After said meeting, on the same date, Credo was placed on "Forced Leave" status for 3 1 5 days, effective 8 November 1983. Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint, docketed as Case No. 114944-83, with the Arbitration Branch, National Capital Region, Ministry of Labor and Employment, Manila, against NASECO for 4 placing her on forced leave, without due process. Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on Personnel Affairs deliberated and evaluated a number of past acts of 5 misconduct or infractions attributed to her. As a result of this deliberation, said committee resolved: 1. That, respondent [Credo] committed the following offenses in the Code of Discipline, viz: OFFENSE vs. Company Interest & Policies

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-69870 November 29, 1988 NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners, vs. THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRY OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents. G.R. No. 70295 November 29,1988 EUGENIA C. CREDO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION AND ARTURO L. PEREZ, respondents. The Chief Legal Counsel for respondents NASECO and Arturo L. Perez. Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:

No. 3 Any discourteous act to customer, officer and employee of client company or officer of the Corporation. OFFENSE vs. Public Moral No. 7 Exhibit marked discourtesy in the course of official duties or use of profane or insulting language to any superior officer. OFFENSE vs. Authority No. 3 Failure to comply with any lawful order or any instructions of a superior officer. 2. That, Management has already given due consideration to respondent's [Credo] scandalous actuations for several times in the past. Records also show that she was reprimanded for some offense and did not question it. Management at this juncture, has already met its maximum tolerance point so it has decided to put 6 an end to respondent's [Credo] being an undesirable employee. The committee recommended Credo's termination, with forfeiture of benefits.
7

months' backwages and without loss of seniority rights and other privileges appertaining thereto, and 2) dismissing Credo's claim for attorney's fees, moral and exemplary damages. As a consequence, both parties filed their respective motions 12 13 for reconsideration, which the NLRC denied in a resolution of 16 January 1985. Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave abuse of discretion the dispositive portion of the 28 November 1984 14 decision which ordered Credo's reinstatement with backwages. Petitioners contend that in arriving at said questioned order, the NLRC acted with grave abuse of discretion in finding that: 1) petitioners violated the requirements mandated by law on termination, 2) petitioners failed in the burden of proving that the termination of Credo was for a valid or authorized cause, 3) the alleged infractions committed by Credo were not proven or, even if proved, could be considered to have been condoned by petitioners, and 4) the termination of Credo was not for a valid or 15 authorized cause. On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion the dispositive portion of the 28 November 1984 decision which dismissed her claim for attorney's fees, moral and exemplary damages and limited her right to 16 backwages to only six (6) months. As guidelines for employers in the exercise of their power to dismiss employees for just causes, the law provides that: Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal. xxx xxx xxx Section 5. Answer and Hearing. The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. 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. Section 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a decision to dismiss him stating 17 clearly the reasons therefor. These guidelines mandate that the employer furnish an employee sought to be dismissed two (2) written notices of dismissal before a termination of employment can be legally effected. These are the notice which apprises the employee of the

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was being charged with certain offenses. Notably, these offenses were those which NASECO's Committee on Personnel Affairs already resolved, on 22 November 1983 to have been committed by Credo. In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was made to explain her side in connection with the charges filed against her; 8 however, due to her failure to do so, she was handed a Notice of Termination, 9 dated 24 November 1983, and made effective 1 December 1983. Hence, on 6 December 1983, Credo filed a supplemental complaint for illegal dismissal in Case No. 11-4944-83, alleging absence of just or authorized cause for her dismissal and 10 lack of opportunity to be heard. After both parties had submitted their respective position papers, affidavits and other documentary evidence in support of their claims and defenses, on 9 May 1984, the labor arbiter rendered a decision: 1) dismissing Credo's complaint, and 2) directing NASECO to pay Credo separation pay equivalent to one half month's pay for 11 every year of service. Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28 November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former position, or substantially equivalent position, with six (6)

particular acts or omissions for which his dismissal is sought and the subsequent notice which informs the employee of the employer's decision to dismiss him. Likewise, a reading of the guidelines in consonance with the express provisions of 18 law on protection to labor (which encompasses the right to security of tenure) and the broader dictates of procedural due process necessarily mandate that notice of the employer's decision to dismiss an employee, with reasons therefor, can only be issued after the employer has afforded the employee concerned ample opportunity to be heard and to defend himself. In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal. Although she was apprised and "given the chance to explain her side" of the charges filed against her, this chance was given so perfunctorily, thus rendering illusory Credo's right to security of tenure. That Credo was not given ample opportunity to be heard and to defend herself is evident from the fact that the compliance with the injunction to apprise her of the charges filed against her and to afford her a chance to prepare for her defense was dispensed in only a day. This is not effective compliance with the legal requirements aforementioned. The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her) was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO was already bent on terminating her services when she was informed on 1 December 1983 of the charges against her, and that any hearing which NASECO thought of affording her after 24 November 1983 would merely be pro forma or an exercise in futility. Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures in the company's Statement of Billings Adjustment did not warrant the severe penalty of dismissal of the NLRC correctly held that: ... on the charge of gross discourtesy, the CPA found in its Report, dated 22 November 1983 that, "In the process of her testimony/explanations she again exhibited a conduct unbecoming in front of NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic and discourteous manner, notwithstanding, the fact that she was inside the office of the Acctg. General Manager." Let it be noted, however, that the Report did not even describe how the so called "conduct unbecoming" or "discourteous manner" was done by complainant. Anent the "sarcastic" argument of complainant, 19 the purported transcript of the meeting held on 7 November 1983 does not indicate any sarcasm on the part of complainant. At the most, complainant may have sounded insistent or emphatic about her work being more complete than the work of Ms. de

Castro, yet, the complaining officer signed the work of Ms. de Castro and did not sign hers. As to the charge of insubordination, it may be conceded, albeit unclear, that complainant failed to place same corrections/additional remarks in the Statement of Billings Adjustments as instructed. However, under the circumstances obtaining, where complainant strongly felt that she was being discriminated against by her superior in relation to other employees, we are of the considered view and so hold, that a reprimand would have sufficed for the infraction, but certainly not 20 termination from services. As this Court has ruled: ... where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. It is not only because of the law's concern for the working man. There is, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those 21 dependent on the wage-earner. Of course, in justifying Credo's termination of employment, NASECO claims as additional lawful causes for dismissal Credo's previous and repeated acts of insubordination, discourtesy and sarcasm towards her superior officers, alleged to 22 have been committed from 1980 to July 1983. If such acts of misconduct were indeed committed by Credo, they are deemed to have been condoned by NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a scandalous manner and raised her voice" in a discussion with 23 NASECO's Acting head of the Personnel Administration no disciplinary measure was taken or meted against her. Nor was she even reprimanded when she allegedly talked 'in a shouting or yelling manner" with the Acting Manager of NASECO's 24 Building Maintenance and Services Department in 1980 or when she allegedly "shouted" at NASECO's Corporate Auditor "in front of his subordinates displaying arrogance and unruly behavior" in 1980, or when she allegedly shouted at NASECO's 25 Internal Control Consultant in 1981. But then, in sharp contrast to NASECO's penchant for ignoring the aforesaid acts of misconduct, when Credo committed 26 frequent tardiness in August and September 1983, she was reprimanded. Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven, NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given a salary adjustment for having performed in the job 27 28 "at least [satisfactorily]" and she was then rated "Very Satisfactory" as regards

job performance, particularly in terms of quality of work, quantity of work, dependability, cooperation, resourcefulness and attendance. Considering that the acts or omissions for which Credo's employment was sought to be legally terminated were insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent the reason which gave rise to [the employee's] separation from employment, there is no intention on the part of the employer to 29 dismiss the employee concerned." And, as a result of having been wrongfully dismissed, Credo is entitled to three (3) years of backwages without deduction and 30 qualification. However, while Credo's dismissal was effected without procedural fairness, an award of exemplary damages in her favor can only be justified if her dismissal was effected 31 in a wanton, fraudulent, oppressive or malevolent manner. A judicious examination of the record manifests no such conduct on the part of management. However, in view of the attendant circumstances in the case, i.e., lack of due process in effecting her dismissal, it is reasonable to award her moral damages. And, for having been compelled to litigate because of the unlawful actuations of NASECO, a reasonable award for attorney's fees in her favor is in order. In NASECO's comment in G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction to order Credo's reinstatement. NASECO claims that, as a government corporation (by virtue of its being a subsidiary of the National Investment and Development Corporation (NIDC), a subsidiary wholly owned by the Philippine National Bank (PNB), which in turn is a government owned corporation), the terms and conditions of employment of its employees are governed by the Civil Service Law, rules and regulations. In support of this argument, NASECO cites National 33 Housing Corporation vs. JUCO, where this Court held that "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 rifles and regulations." It would appear that, in the interest of justice, the holding in said case should not be given retroactive effect, that is, to cases that arose before its promulgation on 17 January 1985. To do otherwise would be oppressive to Credo and other employees similarly situated, because under the same 1973 Constitution ,but prior to the ruling in National Housing Corporation vs. Juco, this Court had recognized the applicability of the Labor Code to, and the authority of the NLRC to exercise jurisdiction over, disputes involving terms and conditions of employment in government owned or controlled corporations, among them, the National Service Corporation 34 (NASECO).<re||an1w> Furthermore, in the matter of coverage by the civil service of government-owned or controlled corporations, the 1987 Constitution starkly varies from the 1973
32

Constitution, upon which National Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was provided that: The civil service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government35 owned or controlled corporation. ... On the other hand, the 1987 Constitution provides that: The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original 36 charter. (Emphasis supplied) Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in the National Housing . Corporation case in the following manner The infirmity of the respondents' position lies in its permitting a circumvention or emasculation of Section 1, Article XII-B of the constitution. It would be possible for a regular ministry of government to create a host of subsidiary corporations under the Corporation Code funded by a willing legislature. A governmentowned corporation could create several subsidiary corporations. These subsidiary corporations would enjoy the best of two worlds. Their officials and employees would be privileged individuals, free from the strict accountability required by the Civil Service Decree and the regulations of the Commission on Audit. Their incomes would not be subject to the competitive restrains of the open market nor to the terms and conditions of civil service employment. Conceivably, all government-owned or controlled corporations could be created, no longer by special charters, but through incorporations under the general law. The Constitutional amendment including such corporations in the embrace of the civil service would cease to have application. Certainly, such a situation 37 cannot be allowed to exist. appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Service embraces government-owned or controlled corporations with original charter; and, therefore, by clear implication, the Civil Service does not include government-owned or controlled corporations which are organized as subsidiaries of government-owned or controlled corporations under the general corporation law.

The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent and meaning in the use of the phrase "with original charter." Thus THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is recognized. MR. ROMULO. I beg the indulgence of the Committee. I was reading the wrong provision. I refer to Section 1, subparagraph I which reads: The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled corporations. My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the Commissioner please state his previous question? MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1, under the Civil Service Commission, says: "including government-owned or controlled corporations.' Does that include a corporation, like the Philippine Airlines which is government-owned or controlled? MR. FOZ. I would like to throw a question to the Commissioner. Is the Philippine Airlines controlled by the government in the sense that the majority of stocks are owned by the government? MR. ROMULO. It is owned by the GSIS. So, this is what we might call a tertiary corporation. The GSIS is owned by the government. Would this be covered because the provision says "including government-owned or controlled corporations." MR. FOZ. The Philippine Airlines was established as a private corporation. Later on, the government, through the GSIS, acquired the controlling stocks. Is that not the correct situation?

MR. ROMULO. That is true as Commissioner Ople is about to explain. There was apparently a Supreme Court decision that destroyed that distinction between a government-owned corporation created under the Corporation Law and a government-owned corporation created by its own charter. MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA vs. Juco to the effect that all government corporations irrespective of the manner of creation, whether by special charter or by the private Corporation Law, are deemed to be covered by the civil service because of the wide-embracing definition made in this section of the existing 1973 Constitution. But we recall the response to the question of Commissioner Ople that our intendment in this provision is just to give a general description of the civil service. We are not here to make any declaration as to whether employees of government-owned or controlled corporations are barred from the operation of laws, such as the Labor Code of the Philippines. MR. ROMULO. Yes. MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name has been mentioned by both sides. MR. ROMULO. I yield part of my time. THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is recognized. MR. OPLE. In connection with the coverage of the Civil Service Law in Section 1 (1), may I volunteer some information that may be helpful both to the interpellator and to the Committee. Following the proclamation of martial law on September 21, 1972, this issue of the coverage of the Labor Code of the Philippines and of the Civil Service Law almost immediately arose. I am, in

particular, referring to the period following the coming into force and effect of the Constitution of 1973, where the Article on the Civil Service was supposed to take immediate force and effect. In the case of LUZTEVECO, there was a strike at the time. This was a governmentcontrolled and government-owned corporation. I think it was owned by the PNOC with just the minuscule private shares left. So, the Secretary of Justice at that time, Secretary Abad Santos, and myself sat down, and the result of that meeting was an opinion of the Secretary of Justice which 9 became binding immediately on the government that government corporations with original charters, such as the GSIS, were covered by the Civil Service Law and corporations spun off from the GSIS, which we called second generation corporations functioning as private subsidiaries, were covered by the Labor Code. Samples of such second generation corporations were the Philippine Airlines, the Manila Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these companies I have mentioned as examples, except for the Manila Hotel, had collective bargaining agreements. In the Philippine Airlines, there were, in fact, three collective bargaining agreements; one, for the ground people or the PALIA one, for the flight attendants or the PASAC and one for the pilots of the ALPAC How then could a corporation like that be covered by the Civil Service law? But, as the Chairman of the Committee pointed out, the Supreme Court decision in the case of NHA vs. Juco unrobed the whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt are now considered under that decision covered by the Civil Service Law. I also recall that in the emergency meeting of the Cabinet convened for this purpose at the initiative of the Chairman of the Reorganization Commission, Armand Fabella, they agreed to allow the CBA's to lapse before applying the full force and effect of the Supreme Court decision. So, we were in the awkward situation when the new government took over. I can agree with Commissioner Romulo when he said that this is a problem which I am not exactly sure we should address in the deliberations on the Civil Service Law or whether we should be content with what the Chairman said that Section 1 (1) of the Article on the Civil Service is just a general description of the coverage of the Civil Service and no more.

Thank you, Mr. Presiding Officer. MR. ROMULO. Mr. Presiding Officer, for the moment, I would be satisfied if the Committee puts on records that it is not their intent by this provision and the phrase "including governmentowned or controlled corporations" to cover such companies as the Philippine Airlines. MR. FOZ. Personally, that is my view. As a matter of fact, when this draft was made, my proposal was really to eliminate, to drop from the provision, the phrase "including governmentowned or controlled corporations." MR. ROMULO. Would the Committee indicate that is the intent of this provision? MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can make such a statement in the face of an absolute exclusion of government-owned or controlled corporations. However, this does not preclude the Civil Service Law to prescribe different rules and procedures, including emoluments for employees of proprietary corporations, taking into consideration the nature of their operations. So, it is a general coverage but it does not preclude a distinction of the rules between the two types of enterprises. MR. FOZ. In other words, it is something that should be left to the legislature to decide. As I said before, this is just a general description and we are not making any declaration whatsoever. MR. MONSOD. Perhaps if Commissioner Romulo would like a definitive understanding of the coverage and the Gentleman wants to exclude government-owned or controlled corporations like Philippine Airlines, then the recourse is to offer an amendment as to the coverage, if the Commissioner does not accept the explanation

that there could be a distinction of the rules, including salaries and emoluments. MR. ROMULO. So as not to delay the proceedings, I will reserve my right to submit such an amendment. xxx xxx xxx THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is recognized. MR. ROMULO. On page 2, line 5, I suggest the following amendment after "corporations": Add a comma (,) and the phrase EXCEPT THOSE EXERCISING PROPRIETARY FUNCTIONS. THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say? SUSPENSION OF SESSION MR. MONSOD. May we have a suspension of the session? THE PRESIDING OFFICER (Mr. Trenas). The session is suspended. It was 7:16 p.m. RESUMPTION OF SESSION At 7:21 p.m., the session was resumed. THE PRESIDING OFFICER (Mr. Trenas). The session is resumed. Commissioner Romulo is recognized. MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment to now read as follows: "including government-owned or controlled corporations WITH ORIGINAL CHARTERS." The purpose of this amendment is to indicate that government corporations such as the GSIS and SSS, which have

original charters, fall within the ambit of the civil service. However, corporations which are subsidiaries of these chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt are excluded from the coverage of the civil service. THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say? MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original charters," what exactly do we mean? MR. ROMULO. We mean that they were created by law, by an act of Congress, or by special law. MR. FOZ. And not under the general corporation law. MR. ROMULO. That is correct. Mr. Presiding Officer. MR. FOZ. With that understanding and clarification, the Committee accepts the amendment. MR. NATIVIDAD. Mr. Presiding officer, so those created by the general corporation law are out. MR. ROMULO. That is correct:
38

On the premise that it is the 1987 Constitution that governs the instant case because it is the Constitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the NASECO is a government-owned or controlled corporation without original charter. Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also published in 78 Phil. 221) on the effectivity of the principle of social justice embodied in the 1935 Constitution, said: Certainly, this principle of social justice in our Constitution as generously conceived and so tersely phrased, was not included in the fundamental law as a mere popular gesture. It was meant to

(be) a vital, articulate, compelling principle of public policy. It should be observed in the interpretation not only of future legislation, but also of all laws already existing on November 15, 1935. It was intended to change the spirit of our laws, present and future. Thus, all the laws which on the great historic event when the Commonwealth of the Philippines was born, were susceptible of two interpretations strict or liberal, against or in favor of social justice, now have to be construed broadly in order to promote and achieve social justice. This may seem novel to our friends, the advocates of legalism but it is the only way to give life and significance to the above-quoted principle of the Constitution. If it was not designed to apply to these existing laws, then it would be necessary to wait for generations until all our codes and all our statutes shall have been completely charred by removing every provision inimical to social justice, before the policy of social justice can become really effective. That would be an absurd conclusion. It is more reasonable to hold that this constitutional principle applies to all legislation in force on November 15, 1935, and all laws thereafter passed. WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, are ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her termination, or if such reinstatement is not possible, to place her in a substantially equivalent position, with three (3) years backwages, from 1 December 1983, without qualification or deduction, and without loss of seniority rights and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for moral damages and P5,000.00 for attorney's fees. If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo, in addition to her backwages and damages as above described, separation pay equivalent to one-half month's salary for every year of service, to be computed on her monthly salary at the time of her termination on 1 December 1983. SO ORDERED. Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur. Narvasa, J., is on leave. Gutierrez, Jr., J., in the result.

Separate Opinions CRUZ, J., concurring: While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again my disappointment over still another avoidable ambiguity in the 1987 Constitution. It is clear now from the debates of the Constitutional Commission that the government-owned or controlled corporations included in the Civil Service are those with legislative charters. Excluded are its subsidiaries organized under the Corporation Code. If that was the intention, the logical thing, I should imagine, would have been to simply say so. This would have avoided the suggestion that there are corporations with duplicate charters as distinguished from those with original charters. All charters are original regardless of source unless they are amended. That is the acceptable distinction. Under the provision, however, the charter is still and always original even if amended as long it was granted by the legislature. It would have been clearer, I think, to say "including government owned or controlled corporations with legislative charters." Why this thought did not occur to the Constitutional Commission places one again in needless puzzlement. Separate Opinions CRUZ, J., concurring: While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again my disappointment over still another avoidable ambiguity in the 1987 Constitution. It is clear now from the debates of the Constitutional Commission that the government-owned or controlled corporations included in the Civil Service are those with legislative charters. Excluded are its subsidiaries organized under the Corporation Code. If that was the intention, the logical thing, I should imagine, would have been to simply say so. This would have avoided the suggestion that there are corporations with duplicate charters as distinguished from those with original charters.

All charters are original regardless of source unless they are amended. That is the acceptable distinction. Under the provision, however, the charter is still and always original even if amended as long it was granted by the legislature. It would have been clearer, I think, to say "including government owned or controlled corporations with legislative charters." Why this thought did not occur to the Constitutional Commission places one again in needless puzzlement. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

Manuel S. Pineda was employed with the Philippine National Oil Co.-Energy Development Corp. (PNOC-EDC), as subsidiary of the Philippine National Oil Co., from September 17, 1981, when he was hired as clerk, to January 26, 1989, when his employment was terminated. The events leading to his dismissal from his job are not disputed. In November, 1987, while holding the position of Geothermal Construction Secretary, Engineering and Construction Department, at Tongonan Geothermal Project, Ormoc City, Pineda decided to run for councilor of the Municipality of Kananga, Leyte, in the local elections scheduled in January, 1988, and filed the corresponding certificate of candidacy for the position. Objection to Pineda's being a candidate while retaining his job in the PNOC-EDC was shortly thereafter registered by Mayor Arturo Cornejos of Kananga, Leyte. The mayor communicated with the PNOC-EDC thru Engr. Ernesto Patanao, Resident Manager, Tongonan Geothermal Project to express the view that Pineda could not actively participate in politics 1 unless he officially resigned from PNOC-EDC. Nothing seems to have resulted from this protest. The local elections in Leyte, scheduled for January, 1988, were reset to and held on February 1, 1988. Pineda was among the official candidates voted for, and eventually proclaimed elected to, the office of councilor. Some vacillation appears to have been evinced by Pineda at about this time. On February 8, 1988, he wrote to the COMELEC Chairman, expressing his desire to withdraw from the political contest on account of 2 what he considered to be election irregularities; and on March 19, 1988, he wrote to the Secretary of Justice seeking legal opinion on the question, among others, of whether or not he was "considered automatically resigned upon . . . filing of . . . (his) certificate of candidacy," and whether or not, in case he was elected, he could "remain appointed to any corporate offspring of a government-owned or controlled 3 corporation." Nevertheless, Pineda took his oath of office in June, 1988 as 4 councilor-elect of the Municipality of Kananga, Leyte. And despite so qualifying as councilor, and assuming his duties as such, he continued working for PNOC-EDC as the latter's Geothermal Construction Secretary, Engineering and Construction Department, at Tongonan Geothermal Project, Ormoc City. On June 7, 1988, Marcelino M. Tongco, Department Manager of the Engineering and Construction Department, PNOC-EDC, addressed an inquiry to the latter's Legal Department regarding the status of Manuel S. Pineda as employee in view of his 5 candidacy for the office of municipal councilor. In response, the Legal Department rendered an opinion to the effect that Manuel S. Pineda should be considered ipso facto resigned upon the filing of his Certificate of Candidacy in November, 1987, in 6 accordance with Section 66 of the Omnibus Election Code. Pineda appealed the PNOC-EDC Legal Department's ruling to N.C. Vasquez, the Vice7 President of PNOC-EDC, on July 14, 1988. In his letter of appeal, he invoked a "court ruling in the case of Caagusan and Donato vs. PNOC-Exploration Corp. . . . (to the

G.R. No. 100947 May 31, 1993 PNOC ENERGY DEVELOPMENT CORPORATION and MARCELINO TONGCO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and MANUEL S. PINEDA, respondents. Alikpala, Gomez & Associates Law Office for petitioners. Filomeno A. Zieta for private respondent.

NARVASA, C.J.: The applicability to private respondent Manuel S. Pineda of Section 66 of the Election Code is what is chiefly involved in the case at bar. Said section reads as follows: Sec. 66. Candidates holding appointive office or position. Any person holding a public appointive office or position, including active members of the Armed Forces of the Philippines, and officers and employees in government-owned or controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of candidacy.

effect that) while the government-owned or controlled corporations are covered by the Civil Service Law (as is taken to mean in Sec. 66 of the Omnibus Election Code of 1985) (sic), the subsidiaries or corporate offsprings are not." In the same letter he declared his wish to continue resign from his position as councilor/member of the Sangguniang Bayan. He also wrote a letter dated October 1, 1988 to the Department of Local Government inquiring about the status of his employment with PNOC-EDC in relation to his election as member of the Sangguniang Bayan. He was advised by DLG Undersecretary Jacinto T. Rubillo, Jr., by letter dated March 31, 1989, that there was no legal impediment to his continuing in his employment with PNOC-EDC while holding at the same time the elective position of municipal councilor. Cited as basis by Undersecretary Rubillo was Section 2(1) Article IX-B of the 1987 Constitution and this Court's ruling in NASECO vs. NLRC, 168 SCRA 122. Undersecretary Rubillo went on to say that Pineda could receive his per diems as municipal councilor as well as the corresponding representation and transportation allowance [RATA] "provided the PNOC-EDC charter does not provide otherwise and public shall not be 8 prejudiced." The PNOC-EDC did not, however, share the Undersecretary's views. On January 26, 1989, the PNOC-EDC, through Marcelino Tongco (Manager, Engineering and Construction Department), notified Manuel S. Pineda in writing (1) that after having given him "ample time" to make some major adjustments before . . . separation from the company," his employment was being terminated pursuant to Section 66 of the Omnibus Election Code, effective upon receipt of notice, and (2) that he was entitled to "proper compensation" for the services rendered by him from the time he filed his 9 certificate of candidacy until his actual separation from the service. On October 16, 1989, Pineda lodged a complaint for illegal dismissal in the Regional Arbitration Branch No. VIII, NLRC, Tacloban City. Impleaded as respondents were the PNOC-EDC and the Manager of its Engineering and Construction Department, 10 Marcelino M. Tongco. After due proceedings, Labor Arbiter Araceli H. Maraya, to whom the case was 11 assigned, rendered a decision on December 28, 1990, declaring Manuel S. Pineda's dismissal from the service illegal, and ordering his reinstatement to his former position without loss of seniority rights and payment of full back wages corresponding to the period from his illegal dismissal up to the time of actual reinstatement. The Arbiter pointed out that the ruling relied upon by PNOC-EDC to 12 justify Pineda's dismissal from the service, i.e., NHA v. Juco, had already been abandoned; and that "as early as November 29, 1988," the governing principle laid 13 down by case law in light of Section 2 (1), Article IX-B of the 1987 Constitution has been that government-owned or controlled corporations incorporated under the Corporation Code, the general law as distinguished from those created by special charter are not deemed to be within the coverage of the Civil Service Law,

and consequently their employees, like those of the PNOC-EDC, are subject to the 14 provisions of the Labor Code rather than the Civil Service Law. The PNOC-EDC filed an appeal with the National Labor Relations Commission. The 15 latter dismissed the appeal for lack of merit in a decision dated April 24, 1991. 16 PNOC-EDC sought reconsideration; its motion was denied by the Commission in a 17 Resolution dated June 21, 1991. It is this decision of April 24, 1991 and the Resolution of June 21, 1991 that the PNOC-EDC seeks to be annulled and set aside in the special civil action for certiorari at bar. It contends that the respondent Commission gravely abused its discretion: 1) when it ruled that Manuel S. Pineda was not covered by the Civil Service Rules when he filed his candidacy for the 1988 local government elections in November 1987; 2) when it ruled that Pineda was not covered by the Omnibus Election Code at the time he filed his certificate of candidacy for the 1988 local elections; 3) when it ruled that Pineda was illegally dismissed despite the fact that he was considered automatically resigned pursuant to Section 66 of the Omnibus Election Code; and 4) when it ruled that Pineda could occupy a local government position and be simultaneously employed in a government-owned or controlled corporation, a situation patently violative of the constitutional prohibition on additional compensation. Acting on the petition, this Court issued a temporary restraining order enjoining the respondent NLRC from implementing or enforcing its decision and resolution dated April 24, 1991 and June 21, 1991, respectively. In the comment required of him by the Court, the Solicitor General expressed agreement with the respondent Commission's holding that Manuel Pineda had indeed been illegally separated from his employment in the PNOC-EDC; in other words, that his running for public office and his election thereto had no effect on his employment with the PNOC-EDC, a corporation not embraced within the Civil Service. Petitioner PNOC-EDC argues that at the time that Pineda filed his certificate of candidacy for municipal councilor in November, 1987, the case law "applicable as far as coverage of government-owned or controlled corporations are concerned . . . ( 18 was to the following effect):

As correctly pointed out by the Solicitor General, the issue of jurisdiction had been resolved in a string of cases starting with the National Housing Authority vs. Juco (134 SCRA 172) followed by Metropolitan Waterworks and Sewerage System vs. Hernandez (143 SCRA 602) and the comparatively recent case of Quimpo vs. Sandiganbayan (G.R. No. 72553, Dec. 2, 1986) in which this Court squarely ruled that PNOC subsidiaries, whether or not originally created as government-owned or controlled corporations are governed by the Civil Service Law. This doctrine, petitioner further argues, was not "automatically reversed" by the 1987 Constitution because not "amended or repealed by the Supreme Court or the 19 Congress;" and this Court's decision in November, 1988, in National Service 20 Corporation vs. NLRC, supra abandoning the Juco ruling "cannot be given retroactive effect . . . (in view of ) the time-honored principle . . . that laws (judicial decisions included) shall have no retroactive effect, unless the contrary is provided (Articles 4 and 8 of the New Civil Code of the Philippines)." Section 2 (1), Article IX of the 1987 Constitution provides as follows: The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. Implicit in the provision is that government-owned or controlled corporations without original charters i.e., organized under the general law, the Corporation Code are not comprehended within the Civil Service Law. So has this Court 21 construed the provision. In National Service Corporation (NASECO), et al. v. NLRC, et al., etc., decided on November 29, 1988, it was ruled that the 1987 Constitution "starkly varies" from the 1973 charter upon which the Juco doctrine rested in that unlike the latter, the present constitution qualifies the term, "government-owned or controlled corporations," by the phrase, "with original charter;" hence, the clear implication is that the Civil Service no longer includes government-owned or controlled corporations without original charters, i.e., those organized under the general 23 corporation law. NASECO further ruled that the Juco ruling should not apply retroactively, considering that prior to its promulgation on January 17, 1985, this Court had expressly recognized the applicability of the Labor Code to government24 owned or controlled corporations. Lumanta, et al. v. NLRC, et al., decided on February 8, 1989, made the same pronouncement: that Juco had been superseded by the 1987 Constitution for implicit
25 22

in the language of Section 2 (1), Article IX thereof, is the proposition that government-owned or controlled corporations without original charter do not fall under the Civil Service Law but under the Labor Code. And in PNOC-EDC v. Leogardo, etc., et al., promulgated on July 5, 1989, this Court ruled that conformably with the apparent intendment of the NASECO case, supra, since the PNOC-EDC, a government-owned or controlled company had been incorporated under the general Corporation Law, its employees are subject to the provisions of the Labor Code. It is thus clear that the Juco doctrine prevailing at the time of the effectivity of the fundamental charter in 1987 i.e., that government-owned or controlled corporations were part of the Civil Service and its employees subject to Civil Service 27 laws and regulations, regardless of the manner of the mode of their organization or incorporation is no longer good law, being at "stark variance," to paraphrase NASECO, with the 1987 Constitution. In other words, and contrary to the petitioner's view, as of the effectivity of the 1987 Constitution, government-owned or controlled corporations without original charters, or, as Mr. Justice Cruz insists in his concurring 28 opinion in NASECO v. NLRC, a legislative charter (i.e., those organized under the Corporation Code), ceased to pertain to the Civil Service and its employees could no longer be considered as subject to Civil Service Laws, rules or regulations. The basic question is whether an employee in a government-owned or controlled corporations without an original charter (and therefore not covered by Civil Service Law) nevertheless falls within the scope of Section 66 of the Omnibus Election Code, viz.: Sec. 66. Candidates holding appointive office or position. Any person holding a public appointive office or position, including active members of the Armed Forces of the Philippines, and officers and employees in government-owned or controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of candidacy. When the Congress of the Philippines reviewed the Omnibus Election Code of 1985, in connection with its deliberations on and subsequent enactment of related and repealing legislation i.e., Republic Acts Numbered 7166: "An Act Providing for Synchronized National and Local Elections and for Electoral Reforms, Authorizing Appropriations Therefor, and for Other Purposes" (effective November 26, 1991), 6646: "An Act Introducing Additional Reforms in the Electoral System and for Other Purposes" (effective January 5, 1988) and 6636: "An Act Resetting the Local Elections, etc., (effective November 6, 1987), it was no doubt aware that in light of Section 2 (1), Article IX of the 1987 Constitution: (a) government-owned or controlled corporations were of two (2) categories those with original charters,
26

and those organized under the general law and (b) employees of these corporations were of two (2) kinds those covered by the Civil Service Law, rules and regulations because employed in corporations having original charters, and those not subject to Civil Service Law but to the Labor Code because employed in said corporations organized under the general law, or the Corporation Code. Yet Congress made no effort to distinguish between these two classes of governmentowned or controlled corporations or their employees in the Omnibus Election Code or subsequent related statutes, particularly as regards the rule that any employee " in government-owned or controlled corporations, shall be considered ipso facto 29 resigned from his office upon the filing of his certificate of candidacy." Be this as it may, it seems obvious to the Court that a government-owned or controlled corporation does not lose its character as such because not possessed of an original charter but organized under the general law. If a corporation's capital stock is owned by the Government, or it is operated and managed by officers charged with the mission of fulfilling the public objectives for which it has been organized, it is a government-owned or controlled corporation even if organized under the Corporation Code and not under a special statute; and employees thereof, even if not covered by the Civil Service but by the Labor Code, are nonetheless "employees in government-owned or controlled corporations," and come within the letter of Section 66 of the Omnibus Election Code, declaring them "ipso facto resigned from . . . office upon the filing of . . . (their) certificate of candidacy." What all this imports is that Section 66 of the Omnibus Election Code applies to officers and employees in government-owned or controlled corporations, even those organized under the general laws on incorporation and therefore not having an original or legislative charter, and even if they do not fall under the Civil Service Law but under the Labor Code. In other words, Section 66 constitutes just cause for termination of employment in addition to those set forth in the Labor Code, as amended. The conclusions here reached make unnecessary discussion and resolution of the other issues raised in this case. WHEREFORE, the petition is GRANTED; the decision of public respondent National Labor Relations Commission dated April 24, 1991 and its Resolution dated June 21, 1991 are NULLIFIED AND SET ASIDE; and the complaint of Manuel S. Pineda is DISMISSED. No costs. SO ORDERED. Padilla, Regalado and Nocon, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-58494 July 5, 1989 PHILIPPINE NATIONAL OIL COMPANY-ENERGY DEVELOPMENT CORPORATION, petitioner, vs. HON. VICENTE T. LEOGARDO, DEPUTY MINISTER OF LABOR AND VICENTE D. ELLELINA, respondents.

MELENCIO-HERRERA, J.: Through this Petition for Certiorari, Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) seeks to declare null and void, for lack of jurisdiction, the Order of public respondent, the Deputy Minister of Labor, sustaining his jurisdiction over the instant controversy. Petitioner PNOC-EDC is a subsidiary of the Philippine National Oil Company (PNOC). On 20 January 1978, it filed with the Ministry of Labor and Employment, Regional Office No. VII, Cebu City (MOLE), a clearance application to dismiss/ terminate the services of private respondent, Vicente D. Ellelina, a contractual employee. The application for clearance was premised on Ellelina's alleged commission of a crime (Alarm or Public Scandal) during a Christmas party on 19 December 1977 at petitioner's camp in Uling, Cebu, when, because of the refusal of the raffle committee to give him the prize corresponding to his lost winning ticket, he tried to grab the armalite rifle of the PC Officer outside the building despite the warning shots fired by the latter. Clearance to dismiss was initially granted by MOLE but was subsequently revoked and petitioner was ordered to reinstate Ellelina to his former position, without loss of seniority rights, and with backwages from I February 1978 up to his actual reinstatement. Petitioner appealed to the Minister of Labor who, acting through public respondent, affirmed, on 14 August 1981, the appealed Order. Hence, this Petition predicated substantially on the following grounds:

1. Under Article 277 of the Labor Code, the Ministry of Labor and Employment has no jurisdiction over petitioner because it is a government-owned or controlled corporation; 2. Ellelina's dismissal is valid and just because it is based upon the commission of a crime. On the other hand, public respondent contends: (a) While the petitioner is a subsidiary of the PNOC, it is still covered by the Labor Code and, therefore, within the jurisdiction of the Ministry of Labor inasmuch as petitioner was organized as a private corporation under the Corporation Law and registered with the Securities and Exchange Commission; (b) Petitioner is estopped from assailing the Labor Department's jurisdiction, having subjected itself to the latter when it filed the application for clearance to terminate Ellelina's services; and (c) Dismissal is too harsh a penalty. The issues that confront us, therefore, are (1) whether or not public respondent committed grave abuse of discretion in holding that petitioner is governed by the Labor Code; and (2) whether or not Ellelina's dismissal was justified. 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. Thus, 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 ... . In turn, the 1973 Constitution provided: The Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including government-owned or controlled corporations. In National Housing Corporation vs. Juco (L-64313, January 17, 1985, 134 SCRA 172), we laid down the doctrine 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.

However, the above doctrine has been supplanted by the present Constitution, which provides: The Civil Service embraces all branches, subdivisions, instrumentalities and agencies of the Government, including government-owned or controlled corporations with original charters. (Article IX-B, Section 2 [1]) Thus, under the present state of the law, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation such that government corporations created by special charter are subject to its provisions while those incorporated under the general Corporation Law are not within its coverage. In NASECO vs. NLRC (G.R. No. 69870, November 29,1988), we had occasion to apply the present Constitution in deciding whether or not the employees of NASECO (a subsidiary of the NIDC, which is in turn a subsidiary wholly-owned by the PNB, a government-owned corporation) 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 held that the NLRC has jurisdiction over the employees of NASECO "on the premise that it is the 1987 Constitution that governs because it is the Constitution in place at the time of decision;" and that being a corporation without an original charter, the employees of NASECO are subject to the provisions of the Labor Code. We see no reason to depart from the ruling in the aforesaid case. We hold, therefore, that the PNOC-EDC having been incorporated under the general Corporation Law, is a government-owned or controlled corporation whose employees are subject to the provisions of the Labor Code. This is apparently the intendment in the NASECO case notwithstanding the fact that the NASECO therein was a subsidiary of the PNB, a government-owned corporation. In so far as Ellelina is concerned, we hold that the reinstatement ordered by public respondent, without loss of seniority rights, is proper. However, consistent with the rulings of the Court, backwages should be limited to three years from 1 February 1978. The dismissal ordered by petitioner was a bit too harsh considering the nature of the act which he had committed and that it was his first offense. WHEREFORE, the Petition is DISMISSED, and the judgment of respondent public official is hereby AFFIRMED. No costs. SO ORDERED. Paras, Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 87676 December 20, 1989 REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL PARKS DEVELOPMENT COMMITTEE, petitioner, vs. THE HON. COURT OF APPEALS and THE NATIONAL PARKS DEVELOPMENT SUPERVISORY ASSOCIATION & THEIR MEMBERS, respondents. Bienvenido D. Comia for respondents.

On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr., informed SEC that his Office had no objection to the suspension, cancellation, or revocation of the Certificate of Registration of NPDC. By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC was attached to the Ministry (later Department) of Tourism and provided with a separate budget subject to audit by the Commission on Audit. On September 10, 1987, the Civil Service Commission notified NPDC that pursuant to Executive Order No. 120, all appointments and other personnel actions shall be submitted through the Commission. Meanwhile, the Rizal Park Supervisory Employees Association, consisting of employees holding supervisory positions in the different areas of the parks, was organized and it affiliated with the Trade Union of the Philippines and Allied Services (TUPAS) under Certificate No. 1206. On June 15, 1987, two collective bargaining agreements were entered into between NPDC and NPDCEA (TUPAS local Chapter No. 967) and NPDC and NPDCSA (TUPAS Chapter No. 1206), for a period of two years or until June 30, 1989. On March 20, 1988, these unions staged a stake at the Rizal Park, Fort Santiago, Paco Park, and Pook ni Mariang Makiling at Los Banos, Laguna, alleging unfair labor practices by NPDC. On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch III, a complaint against the union to declare the strike illegal and to restrain it on the ground that the strikers, being government employees, have no right to strike although they may form a union. On March 24, 1988, the lower court dismissed the complaint and lifted the restraining order for lack of jurisdiction. It held that the case "properly falls under the jurisdiction of the Department of Labor," because "there exists an employeremployee relationship" between NPDC and the strikers, and "that the acts complained of in the complaint, and which plaintiff seeks to enjoin in this action, fall under paragraph 5 of Article 217 of the Labor Code, ..., in relation to Art. 265 of the same Code, hence, jurisdiction over said acts does not belong to this Court but to the Labor Arbiters of the Department of Labor." (p. 142, Rollo.). Petitioner went to the Court of Appeals on certiorari (CA-G.R. SP No. 14204). On March 31, 1989, the Court of appeals affirmed the order of the trial court, hence, this petition for review. The petitioner alleges that the Court of Appeals erred:

GRIO-AQUINO, J.: The Regional Trial Court of Manila, Branch III, dismissed for lack of jurisdiction, the petitioner's complaint in Civil Case No. 88- 44048 praying for a declaration of illegality of the strike of the private respondents and to restrain the same. The Court of Appeals denied the petitioner's petition for certiorari, hence, this petition for review. The key issue in this case is whether the petitioner, National Parks Development Committee (NPDC), is a government agency, or a private corporation, for on this issue depends the right of its employees to strike. This issue came about because although the NPDC was originally created in 1963 under Executive Order No. 30, as the Executive Committee for the development of the Quezon Memorial, Luneta and other national parks, and later renamed as the National Parks Development Committee under Executive Order No. 68, on September 21, 1967, it was registered in the Securities and Exchange Commission (SEC) as a non-stock and non-profit corporation, known as "The National Parks Development Committee, Inc." However, in August, 1987, the NPDC was ordered by the SEC to show cause why its Certificate of Registration should not be suspended for: (a) failure to submit the General Information Sheet from 1981 to 1987; (b) failure to submit its Financial Statements from 1981 to 1986; (c) failure to register its Corporate Books; and (d) failure to operate for a continuous period of at least five (5) years since September 27, 1967.

1) in not holding that the NPDC employees are covered by the Civil Service Law; and 2) in ruling that petitioner's labor dispute with its employees is cognizable by the Department of Labor. We have considered the petition filed by the Solicitor General on behalf of NPDC and the comments thereto and are persuaded that it is meritorious. In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos. 84637-39, August 2, 1989, we ruled that the NPDC is an agency of the government, not a governmentowned or controlled corporation, hence, the Sandiganbayan had jurisdiction over its acting director who committed estafa. We held thus: The National Parks Development Committee was created originally as an Executive Committee on January 14,1963, for the development of the Quezon Memorial, Luneta and other national parks (Executive Order No. 30). It was later designated as the National Parks Development Committee (NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia were designated Chairman and Vice- Chairman respectively (E.O. No. 3). Despite an attempt to transfer it to the Bureau of Forest Development, Department of Natural Resources, on December 1, 1975 (Letter of Implementation No. 39, issued pursuant to PD No. 830, dated November 27, 1975), the NPDC has remained under the Office of the President (E.O. No. 709, dated July 27, 1981). Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular government agency under the Office of the President and allotments for its maintenance and operating expenses were issued direct to NPDC (Exh. 10-A Perlas, Item No. 2, 3). (Italics ours.) Since NPDC is a government agency, its employees are covered by civil service rules and regulations (Sec. 2, Article IX, 1987 Constitution). Its employees are civil service employees (Sec. 14, Executive Order No. 180). While NPDC employees are allowed under the 1987 Constitution to organize and join unions of their choice, there is as yet no law permitting them to strike. In case of a labor dispute between the employees and the government, Section 15 of Executive Order No. 180 dated June 1, 1987 provides that the Public Sector LaborManagement Council, not the Department of Labor and Employment, shall hear the dispute. Clearly, the Court of Appeals and the lower court erred in holding that the

labor dispute between the NPDC and the members of the NPDSA is cognizable by the Department of Labor and Employment. WHEREFORE, the petition for review is granted. The decision of the Court of Appeals in CA-G.R. SP No. 14204 is hereby set aside. The private respondents' complaint should be filed in the Public Sector Labor-Management Council as provided in Section 15 of Executive Order No. 180. Costs against the private respondents. SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.