To whom does the Labor Code Apply

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 98107 August 18, 1997
BENJAMIN C. JUCO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING
CORPORATION, respondents.

HERMOSISIMA, JR., J .:
This is a petition for certiorari to set aside the Decision of the National Labor Relations Commission
(NLRC) dated March 14, 1991, which reversed the Decision dated May 21, 1990 of Labor Arbiter
Manuel R Caday, on the ground of lack of jurisdiction.
Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing
Corporation (NHC) from November 16, 1970 to May 14, 1975. On May 14, 1975, he was separated
from the service for having been implicated in a crime of theft and/or malversation of public funds.
On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the
Department of Labor.
On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the
ground that the NLRC had no jurisdiction over the case.
1

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

Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on
January 17, 1985, we rendered a decision, the dispositive portion thereof reads as follows:
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the
respondent National Labor Relations Commission is SET ASIDE. The decision of the
Labor Arbiter dismissing the case before it for lack of jurisdiction is REINSTATED.
3

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

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

On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of
jurisdiction. It ratiocinated that:
The Board finds the comment and/or motion to dismiss meritorious. It was not disputed
that NHC is a government corporation without an original charter but organized/created
under the Corporation Code.
Article IX, Section 2 (1) of the 1987 Constitution provides:
The civil service embraces all branches, subdivisions, instrumentalities
and agencies of the Government, including government owned and
controlled corporations with original charters. (emphasis supplied)
From the aforequoted constitutional provision, it is clear that respondent NHC is not
within the scope of the civil service and is therefore beyond the jurisdiction of this Board.
Moreover, it is pertinent to state that the 1987 Constitution was ratified and became
effective on February 2, 1987.
WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed.
6

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

On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was
illegally dismissed from his employment by respondent as there was evidence in the record that the
criminal case against him was purely fabricated, prompting the trial court to dismiss the charges
against him. Hence, he concluded that the dismissal was illegal as it was devoid of basis, legal or
factual.
He further ruled that the complaint is not barred by prescription considering that the period from which
to reckon the reglementary period of four years should be from the date of the receipt of the decision
of the Civil Service Commission promulgated on April 11, 1989. He also ratiocinated that:
It appears . . . complainant filed the complaint for illegal dismissal with the Civil Service
Commission on January 6, 1989 and the same was dismissed on April 11, 1989 after
which on April 28, 1989, this case was filed by the complainant. Prior to that, this case
was ruled upon by the Supreme Court on January 17, 1985 which enjoined the
complainant to go to the Civil Service Commission which in fact, complainant did. Under
the circumstances, there is merit on the contention that the running of the reglementary
period of four (4) years was suspended with the filing of the complaint with the said
Commission. Verily, it was not the fault of the respondent for failing to file the complaint
as alleged by the respondent but due to, in the words of the complainant, a "legal knot"
that has to be untangled.
8

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

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

The primordial issue that confronts us is whether or not public respondent committed grave abuse of
discretion in holding that petitioner is not governed by the Labor Code.
Under the laws then in force, employees of government-owned and/or controlled corporations were
governed by the Civil Service Law and not by the Labor Code. Hence,
Article 277 of the Labor Code (PD 442) then provided:
The terms and conditions of employment of all government employees, including
employees of government-owned and controlled corporations shall be governed by the
Civil Service Law, rules and regulations . . . .
The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:
The Civil Service embraces every branch, agency, subdivision and instrumentality of the
government, including government-owned or controlled corporations.
Although we had earlier ruled in National Housing Corporation v.
Juco,
11
that employees of government-owned and/or controlled corporations, whether created by special law or formed
as subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the Labor Code, this
ruling has been supplanted by the 1987 Constitution. Thus, the said Constitution now provides:
The civil service embraces all branches, subdivisions, instrumentalities, and agencies of
the Government, including government owned or controlled corporations with original
charter. (Article IX-B, Section 2[1])
In National Service Corporation (NASECO) v. National Labor Relations Commission,
12
we had the
occasion to apply the present Constitution in deciding whether or not the employees of NASECO are covered by the Civil
Service Law or the Labor Code notwithstanding that the case arose at the time when the 1973 Constitution was still in
effect. We ruled that the NLRC has jurisdiction over the employees of NASECO on the ground that it is the 1987
Constitution that governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled that the
new phrase "with original charter" means that government-owned and controlled corporations refer to corporations
chartered by special law as distinguished from corporations organized under the Corporation Code. Thus, NASECO which
had been organized under the general incorporation statute and a subsidiary of the National Investment Development
Corporation, which in turn was a subsidiary of the Philippine National Bank, is exluded from the purview of the Civil
Service Commission.
We see no cogent reason to depart from the ruling in the aforesaid case.
In the case at bench, the National Housing Corporation is a government owned corporation organized
in 1959 in accordance with Executive Order No. 399, otherwise known as the Uniform Charter of
Government Corporation, dated January 1, 1959. Its shares of stock are and have been one hundred
percent (100%) owned by the Government from its incorporation under Act 1459, the former
corporation law. The government entities that own its shares of stock are the Government Service
Insurance System, the Social Security System, the Development Bank of the Philippines, the National
Investment and Development Corporation and the People's Homesite and Housing
Corporation.
13
Considering the fact that the NHA had been incorporated under Act 1459, the former corporation law, it
is but correct to say that it is a government-owned or controlled corporation whose employees are subject to the
provisions of the Labor Code. This observation is reiterated in the recent case of Trade Union of the Philippines and Allied
Services (TUPAS) v. National Housing
Corporation,
14
where we held that the NHA is now within the jurisdiction of the Department of Labor and Employment, it
being a government-owned and/or controlled corporation without an original charter. Furthermore, we also held that the
workers or employees of the NHC (now NHA) undoubtedly have the right to form unions or employee's organization and
that there is no impediment to the holding of a certification election among them as they are covered by the Labor Code.
Thus, the NLRC erred in dismissing petitioner's complaint for lack of jurisdiction because the rule now
is that the Civil Service now covers only government-owned or controlled corporations with original
charters.
15
Having been incorporated under the Corporation Law, its relations with its personnel are governed by the
Labor Code and come under the jurisdiction of the National Labor Relations Commission.
One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal
case. It is but apt that we put an end to his dilemna in the interest of justice.
WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is
hereby REVERSED and the Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 108813 December 15, 1994
JUSMAG PHILIPPINES, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (Second Division) and FLORENCIO
SACRAMENTO, Union President, JPFCEA, respondents.
Juan, Luces, Luna and Associates for petitioner.
Galutera & Aguilar Law Offices for private respondent.

PUNO, J .:
The immunity from suit of the Joint United States Military Assistance Group to the Republic of the
Philippines (JUSMAG-Philippines) is the pivotal issue in the case at bench.
JUSMAG assails the January 29, 1993 Resolution of the NATIONAL LABOR RELATIONS
COMMISSION (public respondent), in NLRC NCR CASE NO. 00-03-02092-92, reversing the July 30,
1991 Order of the Labor Arbiter, and ordering the latter to assume jurisdiction over the complaint for
illegal dismissal filed by FLORENCIO SACRAMENTO (private respondent) against petitioner.
First, the undisputed facts.
Private respondent was one of the seventy-four (74) security assistance support personnel (SASP)
working at JUSMAG-Philippines.
1
He had been with JUSMAG from December 18, 1969, until his dismissal on April
27, 1992. When dismissed, he held the position of Illustrator 2 and was the incumbent President of JUSMAG
PHILIPPINES-FILIPINO CIVILIAN EMPLOYEES ASSOCIATION (JPFCEA), a labor organization duly registered with the
Department of Labor and Employment. His services were terminated allegedly due to the abolition of his position.
2
He
was also advised that he was under administrative leave until April 27, 1992, although the same was not charged against
his leave.
On March 31, 1992, private respondent filed a complaint with the Department of Labor and
Employment on the ground that he was illegally suspended and dismissed from service by
JUSMAG.
3
He asked for his reinstatement.
JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of the United
States. It further alleged lack of employer-employee relationship and that it has no juridical personality
to sue and be sued.
4

In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject complaint " for
want of jurisdiction."
5
Private respondent appealed
6
to the National Labor Relations Commission (public respondent),
assailing the ruling that petitioner is immune from suit for alleged violation of our labor laws. JUSMAG filed its
Opposition,
7
reiterating its immunity from suit for its non-contractual, governmental and/or public acts.
In a Resolution, dated January 29, 1993, the NLRC
8
reversed the ruling of the Labor Arbiter as it held that
petitioner had lost its right not to be sued. The resolution was predicated on two grounds: (1) the principle of estoppel
that JUSMAG failed to refute the existence of employer-employee relationship under the "control test"; and (2) JUSMAG
has waived its right to immunity from suit when it hired the services of private respondent on December 18, 1969.
The NLRC relied on the case of Harry Lyons vs. United States of America,
9
where the "United States
Government (was considered to have) waived its immunity from suit by entering into (a) contract of stevedoring services,
and thus, it submitted itself to the jurisdiction of the local courts."
Accordingly, the case was remanded to the labor arbiter for reception of evidence as to the issue on
illegal dismissal.
Hence, this petition, JUSMAG contends:
I
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION
A. IN REVERSING THE DECISION OF THE LABOR ARBITER AND IN
NOT AFFIRMING THE DISMISSAL OF THE COMPLAINT IT BEING A
SUIT AGAINST THE UNITED STATES OF AMERICA WHICH HAD NOT
GIVEN ITS CONSENT TO BE SUED; AND
B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY FROM SUIT;
II
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION
A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN JUSMAG AND PRIVATE RESPONDENT; AND
B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYING
THAT PRIVATE RESPONDENT IS ITS EMPLOYEE FOR FAILURE TO
PRESENT PROOF TO THE CONTRARY.
We find the petition impressed with merit.
It is meet to discuss the historical background of the JUSMAG to determine its immunity from suit.
JUSMAG was created pursuant to the Military Assistance Agreement
10
dated March 21, 1947, between the
Government of the Republic of the Philippines and the Government of the United States of America. As agreed upon,
JUSMAG shall consist of Air, Naval and Army group, and its primary task was to advise and assist the Philippines, on air
force, army and naval matters.
11

Article 14 of the 1947 Agreement provides, inter alia, that "the cost of all services required by the
Group, including compensation of locally employed interpreters, clerks, laborers, and other personnel,
except personal servants, shall be borne by the Republic of the Philippines."
This set-up was to change in 1991. In Note No 22, addressed to the Department of Foreign Affairs
(DFA) of the Philippines, dated January 23, 1991, the United States Government, thru its Embassy,
manifested its preparedness "to provide funds to cover the salaries of security assistance support
personnel" and security guards, the rent of JUSMAG occupied buildings and housing, and the cost of
utilities.
12
This offer was accepted by our Government, thru the DFA, in Note No. 911725, dated April 18, 1991.
13

Consequently, a Memorandum of Agreement
14
was forged between the Armed Forces of the Philippines and
JUSMAG-Philippines, thru General Lisandro C. Abadia and U.S. Brigadier General Robert G. Sausser. The Agreement
delineated the terms of the assistance-in-kind of JUSMAG for 1991, the relevant parts of which read:
a. The term salaries as used in this agreement include those for the security guards
currently contracted between JUSMAG and A' Prime Security Services Inc., and
the Security Assistance Support Personnel (SASP). . . . .
b. The term Security Assistance Support Personnel (SASP) does not include active duty
uniformed members of the Armed Forces of the Philippines performing duty at
JUSMAG.
c. It is understood that SASP are employees of the Armed Forces of the
Philippines (AFP). Therefore,the AFP agrees to appoint, for service with JUSMAG, no
more than 74 personnel to designated positions with JUSMAG.
d. SASP are under the total operational control of the Chief, JUSMAG-Philippines. The
term "Operational Control" includes, but is not limited to, all personnel administrative
actions, such as: hiring recommendations; firing recommendations; position
classification; discipline; nomination and approval of incentive awards; and payroll
computation. Personnel administration will be guided by Annex E of JUSMAG-
Philippines Memo 10-2. For the period of time that there is an exceptional funding
agreement between the government of the Philippines and the United States
Government (USG), JUSMAG will pay the total payroll costs for the SASP employees.
Payroll costs include only regular salary; approved overtime, costs of living allowance;
medical insurance; regular contributions to the Philippine Social Security System, PAG-
IBIG Fund and Personnel Economic Relief Allowance (PERA); and the thirteenth-month
bonus. Payroll costs do not include gifts or other bonus payments in addition to those
previously defined above. Entitlements not considered payroll costs under this
agreement will be funded and paid by the AFP.
e. All SASP employed as of July 1, 1990 will continue their service with JUSMAG at
their current rate of pay and benefits up to 30 June 1991, with an annual renewal of
employment thereafter subject to renewal of their appointment with the AFP (employees
and rates of pay are indicated at Enclosure 3). No promotion or transfer internal to
JUSMAG of the listed personnel will result in the reduction of their pay and benefits.
f. All SASP will, after proper classification, be paid salaries and benefits at established
AFP civilian rates. Rules for computation of pay and allowances will be made available
to the Comptroller, JUSMAG, by the Comptroller, GHQ, AFP. Additionally, any legally
mandated changes in salary levels or methods of computation shall be transmitted
within 48 hours of receipt by Comptroller, GHQ to Comptroller, JUSMAG.
g. The AFP agrees not to terminate SASP without 60 days prior written notice to Chief,
JUSMAG-Philippines. Any termination of these personnel thought to be necessary
because of budgetary restrictions or manpower ceiling will be subject to consultations
between AFP and JUSMAG to ensure that JUSMAG's mission of dedicated support to
the AFP will not be degraded or harmed in any way.
h. The AFP agrees to assume the severance pay/retirement pay liability for all
appointed SASP. (Enclosure 3 lists the severance pay liability date for current SASP).
Any termination of services, other than voluntary resignations or termination for cause,
will result in immediate payments of AFP of all termination pay to the entitled employee.
Vouchers for severance/retirement pay and accrued bonuses and annual leave will be
presented to the Comptroller, GHQ, AFP, not later than 14 calendar days prior to
required date of payment.
i. All SASP listed in Enclosure 3 will continue to participate in the Philippine Social
Security System.
A year later, or in 1992, the United States Embassy sent another note of similar import to the
Department of Foreign Affairs (No. 227, dated April 8, 1992), extending the funding agreement for the
salaries of SASP and security guards until December 31, 1992.
From the foregoing, it is apparent that when JUSMAG took the services of private respondent, it was
performing a governmental function on behalf of the United States pursuant to the Military Assistance
Agreement dated March 21, 1947. Hence, we agree with petitioner that the suit is, in effect, one
against the United States Government, albeit it was not impleaded in the complaint. Considering that
the United States has not waived or consented to the suit, the complaint against JUSMAG cannot not
prosper.
In this jurisdiction, we recognize and adopt the generally accepted principles of international law as
part of the law of the land.
15
Immunity of State from suit is one of these universally recognized principles. In
international law, "immunity" is commonly understood as an exemption of the state and its organs from the judicial
jurisdiction of another state.
16
This is anchored on the principle of the sovereign equality of states under which one state
cannot assert jurisdiction over another in violation of the maxim par in parem non habet imperium (an equal has no power
over an equal).
17

Under the traditional rule of State immunity, a state cannot be sued in the courts of another State,
without its consent or waiver. However, in Santos, et al., vs. Santos, et al.,
18
we recognized an exception
to the doctrine of immunity from suit by a state, thus:
. . . . Nevertheless, if, where and when the state or its government enters into a
contract, through its officers or agents, in furtherance of a legitimate aim and purpose
and pursuant to constitutional legislative authority, whereby mutual or reciprocal
benefits accrue and rights and obligations arise therefrom, and if the law granting the
authority to enter into such contract does not provide for or name the officer against
whom action may be brought in the event of a breach thereof, the state itself may be
sued, even without its consent, because by entering into a contract, the sovereign state
has descended to the level of the citizen and its consent to be sued is implied from the
very act of entering into such contract. . . . . (emphasis ours)
It was in this light that the state immunity issue in Harry Lyons, Inc., vs. United States of
America
19
was decided.
In the case of Harry Lyons, Inc., the petitioner entered into a contract with the United States
Government for stevedoring services at the U.S. Naval Base, Subic Bay, Philippines. It then sought to
collect from the US government sums of money arising from the contract. One of the issues posed in
the case was whether or not the defunct Court of First Instance had jurisdiction over the defendant
United States, a sovereign state which cannot be sued without its consent. This Court upheld the
contention of Harry Lyons, Inc., that "when a sovereign state enters into a contract with a private
person, the state can be sued upon the theory that it has descended to the level of an individual from
which it can be implied that it has given its consent to be sued under the contract."
The doctrine of state immunity from suit has undergone further metamorphosis. The view evolved that
the existence of a contract does not, per se, mean that sovereign states may, at all times, be sued in
local courts. The complexity of relationships between sovereign states, brought about by their
increasing commercial activities, mothered a more restrictive application of the doctrine.
20
Thus,
in United States of America vs. Ruiz,
21
we clarified that our pronouncement in Harry Lyons, supra, with respect to the
waiver of State immunity, was obiter and "has no value as an imperative authority."
As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign orgovernmental activities ( jure imperii).
22
The mantle of state
immunity cannot be extended to commercial, private and proprietary acts ( jure gestionis). As aptly stated by this Court
(En banc) in US vs. Ruiz, supra:
The restrictive application of State immunity is proper when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic
affairs. Stated differently, a State may be said to have descended to the level of an
individual and thus can be deemed to have tacitly given its consent to be
used only when it enters into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions. (emphasis ours)
We held further, that the application of the doctrine of state immunity depends on the legal nature of
the act. Ergo, since a governmental function was involved the transaction dealt with the
improvement of the wharves in the naval installation at Subic Bay it was held that the United
States was not deemed to have waived its immunity from suit.
Then came the case of United States vs. Hon. Rodrigo, et al.
23
In said case, Genove was employed as a
cook in the Main Club located at U.S. Air Force Recreation Center, John Hay Air Station. He was dismissed from service
after he was found to have polluted the stock of soup with urine. Genove countered with a complaint for damages.
Apparently, the restaurant services offered at the John Hay Air Station partake of the nature of a business enterprise
undertaken by the United States government in its proprietary capacity. The Court then noted that the restaurant is well
known and available to the general public, thus, the services are operated for profit, as a commercial and not a
governmental activity. Speaking through Associate Justice Isagani Cruz, the Court (En Banc) said:
The consequence of this finding is that the petitioners cannot invoke the doctrine of
state immunity to justify the dismissal of the damage suit against them by Genove. Such
defense will not prosper even if it be established that they were acting as agents of the
United States when they investigated and later dismissed Genove. For the matter, not
even the United States government itself can claim such immunity. The reason is that
by entering into the employment contract with Genove in the discharge of its proprietary
functions, it impliedly divested itself of its sovereign immunity from suit. (emphasis ours)
Conversely, if the contract was entered into in the discharge of its governmental functions, the
sovereign state cannot be deemed to have waived its immunity from suit.
24
Such is the case at bench.
Prescinding from this premise, we need not determine whether JUSMAG controls the employment conditions of the
private respondent.
We also hold that there appears to be no basis for public respondent to rule that JUSMAG is stopped
from denying the existence of employer-employee relationship with private respondent. On the
contrary, in its Opposition before the public respondent, JUSMAG consistently contended that the
(74) SASP, including private respondent, working in JUSMAG, are employees of the Armed Forces of
the Philippines. This can be gleaned from: (1) the Military Assistance Agreement, supra, (2) the
exchange of notes between our Government, thru Department of Foreign Affairs, and the United
States, thru the US Embassy to the Philippines, and (3) the Agreement on May 21,
1991,supra between the Armed Forces of the Philippines and JUSMAG.
We symphatize with the plight of private respondent who had served JUSMAG for more than twenty
(20) years. Considering his length of service with JUSMAG, he deserves a more compassionate
treatment. Unfortunately, JUSMAG is beyond the jurisdiction of this Court. Nonetheless, the
Executive branch, through the Department of Foreign Affairs and the Armed Forces of the
Philippines, can take the cudgel for private respondent and the other SASP working for JUSMAG,
pursuant to the aforestated Military Assistance Agreement.
IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED. Accordingly, the impugned
Resolution dated January 29, 1993 of the National Labor Relations Commission is REVERSED and
SET ASIDE. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. Nos. 109095-109107 February 23, 1995
ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO,
MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO,
SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B. ESPINA, all
represented by MARIANO R. ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION
(UNRFNRE) represented by its operations manager, DR. KYRIACOS LOUCA, OSCAR N.
ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT, Commissioners of National Labor
Relations Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING PETILLA,
Labor Arbiter of Butuan City, respondents.

QUIASON, J .:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Resolution
dated January 25, 1993 of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan
de Oro City.
We dismiss the petition.
I
Petitioners were dismissed from their employment with private respondent, the United Nations
Revolving Fund for Natural Resources Exploration (UNRFNRE), which is a special fund and
subsidiary organ of the United Nations. The UNRFNRE is involved in a joint project of the Philippine
Government and the United Nations for exploration work in Dinagat Island.
Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91 and
SRAB 10-07-00159-91 for illegal dismissal and damages.
In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction
over its personality since it enjoyed diplomatic immunity pursuant to the 1946 Convention on the
Privileges and Immunities of the United Nations. In support thereof, private respondent attached a
letter from the Department of Foreign Affairs dated August 26, 1991, which acknowledged its
immunity from suit. The letter confirmed that private respondent, being a special fund administered by
the United Nations, was covered by the 1946 Convention on the Privileges and Immunities of the
United Nations of which the Philippine Government was an original signatory (Rollo, p. 21).
On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the
ground that private respondent was protected by diplomatic immunity. The dismissal was based on
the letter of the Foreign Office dated September 10, 1991.
Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which
affirmed the dismissal of the complaints in its Resolution dated January 25, 1993.
Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC
resolution.
II
Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC
are final and executory. Thus, they may only be questioned through certiorari as a special civil action
under Rule 65 of the Revised Rules of Court.
Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed
before the respondent tribunal, to allow it an opportunity to correct its assigned errors (Liberty
Insurance Corporation v. Court of Appeals, 222 SCRA 37 [1993]).
In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant
petition. Moreover, the petition lacks any explanation for such omission, which may merit its being
considered as falling under the recognized exceptions to the necessity of filing such motion.
Notwithstanding, we deem it wise to give due course to the petition because of the implications of the
issue in our international relations.
Petitioners argued that the acts of mining exploration and exploitation are outside the official functions
of an international agency protected by diplomatic immunity. Even assuming that private respondent
was entitled to diplomatic immunity, petitioners insisted that private respondent waived it when it
engaged in exploration work and entered into a contract of employment with petitioners.
Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to
labor and promote full employment and equality of employment opportunities for all (1987
Constitution, Art. XIII, Sec. 3).
The Office of the Solicitor General is of the view that private respondent is covered by the mantle of
diplomatic immunity. Private respondent is a specialized agency of the United Nations. Under Article
105 of the Charter of the United Nations:
1. The Organization shall enjoy in the territory of its Members such privileges and
immunities as are necessary for the fulfillment of its purposes.
2. Representatives of the Members of the United Nations and officials of the
Organization shall similarly enjoy such privileges and immunities as are necessary for
the independent exercise of their functions in connection with the organization.
Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, to which the Philippines was a signatory (Vol. 1, Philippine Treaty
Series, p. 621). We quote Sections 4 and 5 of Article III thereof:
Sec. 4. The specialized agencies, their property and assets, wherever located and by
whomsoever held shall enjoy immunity from every form of legal process except insofar
as in any particular case they have expressly waived their immunity. It is, however,
understood that no waiver of immunity shall extend to any measure of execution
(Emphasis supplied).
Sec. 5. The premises of the specialized agencies shall be inviolable. The property and
assets of the specialized agencies, wherever located and by whomsoever held, shall be
immune from search, requisition, confiscation, expropriation and any other form of
interference, whether by executive, administrative, judicial or legislative action
(Emphasis supplied).
As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the
generally accepted principles of international law (1987 Constitution, Art. II, Sec. 2). Being a member
of the United Nations and a party to the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, the Philippine Government adheres to the doctrine of
immunity granted to the United Nations and its specialized agencies. Both treaties have the force and
effect of law.
In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:
It is a recognized principle of international law and under our system of separation of
powers thatdiplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government, and
where the plea of diplomatic immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law officer of the
government, the Solicitor General or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction by
seizure and detention of property, as to embarrass the executive arm of the government
in conducting foreign relations, it is accepted doctrine that "in such cases the judicial
department of (this) government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic jurisdiction (Emphasis supplied).
We recognize the growth of international organizations dedicated to specific universal endeavors,
such as health, agriculture, science and technology and environment. It is not surprising that their
existence has evolved into the concept of international immunities. The reason behind the grant of
privileges and immunities to international organizations, its officials and functionaries is to secure
them legal and practical independence in fulfilling their duties (Jenks, International Immunities 17
[1961]).
Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield
the affairs of international organizations, in accordance with international practice, from political
pressure or control by the host country to the prejudice of member States of the organization, and to
ensure the unhampered performance of their functions" (International Catholic Migration Commission
v. Calleja, 190 SCRA 130 [1990]).
In the International Catholic Migration Commission case, we held that there is no conflict between the
constitutional duty of the State to protect the rights of workers and to promote their welfare, and the
grant of immunity to international organizations. Clauses on jurisdictional immunity are now standard
in the charters of the international organizations to guarantee the smooth discharge of their functions.
The diplomatic immunity of private respondent was sufficiently established by the letter of the
Department of Foreign Affairs, recognizing and confirming the immunity of UNRFNRE in accordance
with the 1946 Convention on Privileges and Immunities of the United Nations where the Philippine
Government was a party. The issue whether an international organization is entitled to diplomatic
immunity is a "political question" and such determination by the executive branch is conclusive on the
courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No. 101949,
Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).
Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity,
which is not so in the case at bench (Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, Art. III, Sec. 4).
Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is by
virtue of a joint project entered into by the Philippine Government and the United Nations for mineral
exploration in Dinagat Island. Its mission is not to exploit our natural resources and gain pecuniarily
thereby but to help improve the quality of life of the people, including that of petitioners.
This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations states that "each specialized agency
shall make a provision for appropriate modes of settlement of: (a) disputes arising out of contracts or
other disputes of private character to which the specialized agency is a party."
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 86773 February 14, 1992
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT
(SEAFDEC-AQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE
DIV.), BEN DELOS REYES (FINANCE OFFICER), petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.
Ramon Encarnacion for petitioners.
Caesar T. Corpus for private respondent.

NOCON, J .:
This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor
Relations Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian
Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil
Cuevas and Ben de los Reyes liable to pay private respondent Juvenal Lazaga the amount of
P126,458.89 plus interest thereon computed from May 16, 1986 until full payment thereof is made, as
separation pay and other post-employment benefits, and the resolution denying the petitioners'
motion for reconsideration of said decision dated January 9, 1989.
The antecedent facts of the case are as follows:
SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries
Development Center, organized through an agreement entered into in Bangkok, Thailand on
December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and
the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the
SEAFDEC).
On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a
probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on
January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00.
Thereafter, he was appointed to the position of Professional III and designated as Head of External
Affairs Office with the same pay and benefits.
On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of
termination to private respondent informing him that due to the financial constraints being
experienced by the department, his services shall be terminated at the close of office hours on May
15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his basic salary
for every year of service plus other benefits (Rollo, p. 153).
Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed
on March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral
damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition
for Certiorari).
Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case
inasmuch as the SEAFDEC-AQD is an international organization and that private respondent must
first secure clearances from the proper departments for property or money accountability before any
claim for separation pay will be paid, and which clearances had not yet been obtained by the private
respondent.
A formal hearing was conducted whereby private respondent alleged that the non-issuance of the
clearances by the petitioners was politically motivated and in bad faith. On the other hand, petitioners
alleged that private respondent has property accountability and an outstanding obligation to
SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is not entitled to
accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of the same during his
employment with the SEAFDEC-AQD (Annex "D", Id.).
On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondents:
1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16,
1986 until full payment thereof is made, as separation pay and other post-employment
benefits;
2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's
fees.
All other claims are hereby dismissed.
SO ORDERED. (Rollo, p. 51, Annex "E")
On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award
of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.)
On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was
denied on January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the
NLRC has no jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-AQD is
immune from suit owing to its international character and the complaint is in effect a suit against the
State which cannot be maintained without its consent.
The petition is impressed with merit.
Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD)
is an international agency beyond the jurisdiction of public respondent NLRC.
It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia,
Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of
Thailand and Republic of Vietnam (Annex "H", Petition).
The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on
January 16,1968. Its purpose is as follows:
The purpose of the Center is to contribute to the promotion of the fisheries development
in Southeast Asia by mutual co-operation among the member governments of the
Center, hereinafter called the "Members", and through collaboration with international
organizations and governments external to the Center. (Agreement Establishing the
SEAFDEC, Art. 1; Annex "H" Petition) (p.310, Rollo)
SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in
Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be
established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the
Agreement establishing SEAFDEC mandates:
1. The Council shall be the supreme organ of the Center and all powers of the Center
shall be vested in the Council.
Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys
functional independence and freedom from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public
International Law (p. 83, 1956 ed.):
Permanent international commissions and administrative bodies have been created by
the agreement of a considerable number of States for a variety of international
purposes, economic or social and mainly non-political. Among the notable instances are
the International Labor Organization, the International Institute of Agriculture, the
International Danube Commission. In so far as they are autonomous and beyond the
control of any one State, they have a distinct juridical personality independent of the
municipal law of the State where they are situated. As such, according to one leading
authority "they must be deemed to possess a species of international personality of their
own." (Salonga and Yap, Public International Law, 83 [1956 ed.])
Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be
represented by one Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC,
Art. 5, Par. 1, Annex "H",ibid.) and that its national laws and regulations shall apply only insofar as its
contribution to SEAFDEC of "an agreed amount of money, movable and immovable property and
services necessary for the establishment and operation of the Center" are concerned (Art. 11, ibid.). It
expressly waived the application of the Philippine laws on the disbursement of funds of petitioner
SEAFDEC-AQD (Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over
SEAFDEC-AQD in Opinion No. 139, Series of 1984
4. One of the basic immunities of an international organization is immunity from local
jurisdiction, i.e.,that it is immune from the legal writs and processes issued by the
tribunals of the country where it is found. (See Jenks, Id., pp. 37-44) The obvious
reason for this is that the subjection of such an organization to the authority of the local
courts would afford a convenient medium thru which the host government may interfere
in there operations or even influence or control its policies and decisions of the
organization; besides, such subjection to local jurisdiction would impair the capacity of
such body to discharge its responsibilities impartially on behalf of its member-states. In
the case at bar, for instance, the entertainment by the National Labor Relations
Commission of Mr. Madamba's reinstatement cases would amount to interference by
the Philippine Government in the management decisions of the SEARCA governing
board; even worse, it could compromise the desired impartiality of the organization
since it will have to suit its actuations to the requirements of Philippine law, which may
not necessarily coincide with the interests of the other member-states. It is precisely to
forestall these possibilities that in cases where the extent of the immunity is specified in
the enabling instruments of international organizations, jurisdictional immunity from the
host country is invariably among the first accorded. (See Jenks, Id.; See also Bowett,
The Law of International Institutions, pp. 284-1285).
Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing
because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of
action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can provide
one. Settled is the rule that the decision of a tribunal not vested with appropriate jurisdiction is null
and void. Thus, in Calimlim vs. Ramirez, this Court held:
A rule, that had been settled by unquestioned acceptance and upheld in decisions so
numerous to cite is that the jurisdiction of a court over the subject matter of the action is
a matter of law and may not be conferred by consent or agreement of the parties. The
lack of jurisdiction of a court may be raised at any stage of the proceedings, even on
appeal. This doctrine has been qualified by recent pronouncements which it stemmed
principally from the ruling in the cited case of Sibonghanoy. It is to be regretted,
however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstances involved
in Sibonghanoy which justified the departure from the accepted concept of non-
waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine
had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as
the exception, but rather the general rule, virtually overthrowing altogether the time-
honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.
(Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])
Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286
[1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court
in said case explained why it took cognizance of the case. Said the Court:
We would note, finally, that the present petition relates to a controversy between two
claimants to the same position; this is not a controversy between the SEAFDEC on the
one hand, and an officer or employee, or a person claiming to be an officer or
employee, of the SEAFDEC, on the other hand. There is before us no question
involving immunity from the jurisdiction of the Court, there being no plea for such
immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the
consent of SEAFDEC (Id., at 300; emphasis supplied).
WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the
courts or local agency of the Philippine government, the questioned decision and resolution of the
NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET
ASIDE for having been rendered without jurisdiction. No costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 144767 March 21, 2002
DILY DANY NACPIL, petitioner,
vs.
INTERNATIONAL BROADCASTING CORPORATION, respondent.
KAPUNAN, J .:
This is a petition for review on certiorari under Rule 45, assailing the Decision of the Court of Appeals
dated November 23, 1999 in CA-G.R. SP No. 52755
1
and the Resolution dated August 31, 2000
denying petitioner Dily Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the
decisions promulgated by the Labor Arbiter and the National Labor Relations Commission (NLRC),
which consistently ruled in favor of petitioner.
Petitioner states that he was Assistant General Manager for Finance/Administration and Comptroller
of private respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997.
According to petitioner, when Emiliano Templo was appointed to replace IBC President Tomas
Gomez III sometime in March 1997, the former told the Board of Directors that as soon as he
assumes the IBC presidency, he would terminate the services of petitioner. Apparently, Templo
blamed petitioner, along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement of
IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed, insulted, humiliated and
pressured petitioner into resigning until the latter was forced to retire. However, Templo refused to
pay him his retirement benefits, allegedly because he had not yet secured the clearances from the
Presidential Commission on Good Government and the Commission on Audit. Furthermore, Templo
allegedly refused to recognize petitioner's employment, claiming that petitioner was not the Assistant
General Manager/Comptroller of IBC but merely usurped the powers of the Comptroller. Hence, in
1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal and non-payment of
benefits.1wphi1. nt
Instead of filing its position paper, IBC filed a motion to dismiss alleging that the Labor Arbiter had no
jurisdiction over the case. IBC contended that petitioner was a corporate officer who was duly elected
by the Board of Directors of IBC; hence, the case qualifies as an intra-corporate dispute falling within
the jurisdiction of the Securities and Exchange Commission (SEC). However, the motion was denied
by the Labor Arbiter in an Order dated April 22, 1998.
2

On August 21, 1998, the Labor Arbiter rendered a Decision stating that petitioner had been illegally
dismissed. The dispositive portion thereof reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the
complainant and against all the respondents, jointly and severally, ordering the latter:
1. To reinstate complainant to his former position without diminution of salary or loss of
seniority rights, and with full backwages computed from the time of his illegal dismissal
on May 16, 1997 up to the time of his actual reinstatement which is tentatively
computed as of the date of this decision on August 21, 1998 in the amount of
P1,231,750.00 (i.e., P75,000.00 a month x 15.16 months = P1,137,000.00 plus
13
th
month pay equivalent to 1/12 of P 1,137,000.00 = P94,750.00 or the total amount of
P 1,231,750.00). Should complainant be not reinstated within ten (10) days from receipt
of this decision, he shall be entitled to additional backwages until actually reinstated.
2. Likewise, to pay complainant the following:
a) P 2 Million as and for moral damages;
b) P500,000.00 as and for exemplary damages; plus and (sic)
c) Ten (10%) percent thereof as and for attorney's fees.
SO ORDERED.
3

IBC appealed to the NLRC, but the same was dismissed in a Resolution dated March 2, 1999, for its
failure to file the required appeal bond in accordance with Article 223 of the Labor Code.
4
IBC then
filed a motion for reconsideration that was likewise denied in a Resolution dated April 26, 1999.
5

IBC then filed with the Court of Appeals a petition for certiorari under Rule 65, which petition was
granted by the appellate court in its Decision dated November 23, 1999. The dispositive portion of
said decision states:
WHEREFORE, premises considered, the petition for Certiorari is GRANTED. The assailed
decisions of the Labor Arbiter and the NLRC are REVERSED and SET ASIDE and the
complaint is DISMISSED without prejudice.
SO ORDERED.
6

Petitioner then filed a motion for reconsideration, which was denied by the appellate court in a
Resolution dated August 31, 2000.
Hence, this petition.
Petitioner Nacpil submits that:
I.
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS APPOINTED BY
RESPONDENT'S BOARD OF DIRECTORS AS COMPTROLLER. THIS FINDING IS
CONTRARY TO THE COMMON, CONSISTENT POSITION AND ADMISSION OF BOTH
PARTIES. FURTHER, RESPONDENT'S BY-LAWS DOES NOT INCLUDE COMPTROLLER
AS ONE OF ITS CORPORATE OFFICERS.
II.
THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT
SUBSTITUTED THE NATIONAL LABOR RELATIONS COMMISSION'S DECISION TO
APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN THE INSTANT CASE. THE
ONLY ISSUE FOR ITS DETERMINATION IS WHETHER NLRC COMMITTED GRAVE
ABUSE OF DISCRETION IN DOING THE SAME.
7

The issue to be resolved is whether the Labor Arbiter had jurisdiction over the case for illegal
dismissal and non-payment of benefits filed by petitioner. The Court finds that the Labor Arbiter had
no jurisdiction over the same.
Under Presidential Decree No. 902-A (the Revised Securities Act), the law in force when the
complaint for illegal dismissal was instituted by petitioner in 1997, the following cases fall under the
exclusive of the SEC:
a) Devices or schemes employed by or any acts of the board of directors, business associates,
its officers or partners, amounting to fraud and misrepresentation which may be detrimental to
the interest of the public and/or of the stockholders, partners, members of associations or
organizations registered with the Commission;
b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the State insofar
as it concerns their individual franchise or right to exist as such entity;
c) Controversies in the election or appointment of directors, trustees, officers, or
managers of such corporations, partnerships or associations;
d) Petitions of corporations, partnerships, or associations to be declared in the state of
suspension of payments in cases where the corporation, partnership or association possesses
property to cover all of its debts but foresees the impossibility of meeting them when they
respectively fall due or in cases where the corporation, partnership or association has no
sufficient assets to cover its liabilities, but is under the Management Committee created
pursuant to this decree. (Emphasis supplied.)
The Court has consistently held that there are two elements to be considered in determining whether
the SEC has jurisdiction over the controversy, to wit: (1) the status or relationship of the parties; and
(2) the nature of the question that is the subject of their controversy.
8

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

Petitioner's argument is untenable. Even assuming that he was in fact appointed by the General
Manager, such appointment was subsequently approved by the Board of Directors of the IBC.
11
That
the position of Comptroller is not expressly mentioned among the officers of the IBC in the By-Laws is
of no moment, because the IBC's Board of Directors is empowered under Section 25 of the
Corporation Code
12
and under the corporation's By-Laws to appoint such other officers as it may
deem necessary. The By-Laws of the IBC categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a Vice-President, a Secretary-
Treasurer, a General Manager, and such other officers as the Board of Directors may
from time to time does fit to provide for. Said officers shall be elected by majority vote
of the Board of Directors and shall have such powers and duties as shall hereinafter provide
(Emphasis supplied).
13

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

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

As petitioner's appointment as comptroller required the approval and formal action of the IBC's Board
of Directors to become valid,
17
it is clear therefore holds that petitioner is a corporate officer whose
dismissal may be the subject of a controversy cognizable by the SEC under Section 5(c) of P.D. 902-
A which includes controversies involving both election and appointment of corporate directors,
trustees, officers, and managers.
18
Had petitioner been an ordinary employee, such board action
would not have been required.
Thus, the Court of Appeals correctly held that:
Since complainant's appointment was approved unanimously by the Board of Directors of the
corporation, he is therefore considered a corporate officer and his claim of illegal dismissal is a
controversy that falls under the jurisdiction of the SEC as contemplated by Section 5 of P.D.
902-A. The rule is that dismissal or non-appointment of a corporate officer is clearly an intra-
corporate matter and jurisdiction over the case properly belongs to the SEC, not to the
NLRC.
19

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

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

Petitioner further argues that the IBC failed to perfect its appeal from the Labor Arbiter's Decision for
its non-payment of the appeal bond as required under Article 223 of the Labor Code, since
compliance with the requirement of posting of a cash or surety bond in an amount equivalent to the
monetary award in the judgment appealed from has been held to be both mandatory and
jurisdictional.
22
Hence, the Decision of the Labor Arbiter had long become final and executory and
thus, the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in giving due course to the IBC's petition for certiorari, and in deciding the case on the
merits.
The IBC's failure to post an appeal bond within the period mandated under Article 223 of the Labor
Code has been rendered immaterial by the fact that the Labor Arbiter did not have jurisdiction over
the case since as stated earlier, the same is in the nature of an intra-corporate controversy. The
Court has consistently held that where there is a finding that any decision was rendered without
jurisdiction, the action shall be dismissed. Such defense can be interposed at any time, during appeal
or even after final judgment.
23
It is a well-settled rule that jurisdiction is conferred only by the
Constitution or by law. It cannot be fixed by the will of the parties; it cannot be acquired through,
enlarged or diminished by, any act or omission of the parties.
24

Considering the foregoing, the Court holds that no error was committed by the Court of Appeals in
dismissing the case filed before the Labor Arbiter, without prejudice to the filing of an appropriate
action in the proper court. 1wphi1.nt
It must be noted that under Section 5.2 of the Securities Regulation Code (Republic Act No. 8799)
which was signed into law by then President Joseph Ejercito Estrada on July 19, 2000, the SEC's
jurisdiction over all cases enumerated in Section 5 of P.D. 902-A has been transferred to the
Regional Trial Courts.
25

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

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-63742 April 17, 1989
TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, petitioner,
vs.
HON. PEDRO GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS,
WENCESLAO DURAN, SERGIO SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO
ZERNA, ANTONIO DIVINAGRACIA, PEDRO SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ,
FRANCISCO CABILAO and ESPERIDION MOSO, respondents.
G.R. No. 84300 April 17, 1989
JOSEFINO DATUIN, petitioner,
vs.
TARLAC WATER DISTRICT, respondent.
Rodulfo O. Navarro and Baldomero Limbaga for petitioner in G.R. No. 63742.
Joaquin R. Hitosis for respondents in G.R. No. 63742.
Isabelo C. Salamida for petitioner in G.R. No. 84300.
Conrado C. Ginelo Jr. for respondent in G.R. No. 84300.
Bernardito A. Florido for Philippine Association of Water Districts.
Reuben A. Espancho for Esperidion Moso.

GRIO-AQUINO, J .:
The common issue in these consolidated cases is whether or not water districts created under PD
No. 198, as amended, are private corporations or government-owned or controlled corporations.
Another issue in G.R. No. 63742 is whether respondent Judge acted without, or in excess of,
jurisdiction or with grave abuse of discretion in dismissing Civil Case No. 8144 for alleged lack of
jurisdiction over the subject matter.
I. G.R. No. 63742
On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo,
filed in the Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case
No. 8144, an action for injunction with preliminary mandatory injunction and damages, against
respondent Municipality of Pamplona and its officials to prevent them from interfering in the
management of the Tanjay Waterworks System.
Respondent Judge set the hearing of the application for injunction on March 16, 1983. The
Municipality and its officials answered the complaint. Esperidion Moso filed a separate answer.
When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five (5)
days to submit their respective position papers on the issue of the court's jurisdiction (or lack of it),
over the action. The respondents' position paper questioned the court's jurisdiction over the case and
asked for its dismissal of the complaint (Annex F). Instead of a position paper, the petitioner filed a
reply with opposition to the motion to dismiss (Annex G).
On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of
jurisdiction over the subject matter (water) and over the parties (both being government
instrumentalities) by virtue of Art. 88 of PD No. 1067 and PD No. 242. He declared that the
petitioner's recourse to the court was premature because the controversy should have been
ventilated first before the National Water Resources Council pursuant to Arts. 88 and 89 of PD No.
1067. He further ruled that as the parties are government instrumentalities, the dispute should be
administratively settled in accordance with PD No. 242.
Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in
excess of jurisdiction or with grave abuse of discretion in dismissing the case.
II. G.R. No. 84300
Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water
District in the Department of Labor and Employment (DOLE) which decided in his favor. However,
upon respondent's motion for reconsideration (which was treated as an appeal) the National Labor
Relations Commission (NLRC) reversed the decision and dismissed the complaint "for lack of
jurisdiction," holding that as the respondent Tarlac Water District is a corporation created by a special
law (PD No. 198), its officers and employees belong to the civil service and their separation from
office should be governed by Civil Service Rules and Regulations.
Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro C.
Gabaton, et al., G.R. No. 63742, because the lone issue in both cases is whether or not water
districts created under PD No. 198, as amended, are private corporations or government-owned or
controlled corporations. The two cases were consolidated pursuant to the resolution dated July 25,
1988 of this Court.
Actually the question of the corporate personality of local water districts is not new. The Court ruled in
the recent case of Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988, that they are
quasi public corporations whose employees belong to the civil service, hence, the dismissal of those
employees shall be governed by the civil service law, rules and regulations. The pertinent part of this
Court's decision reads as follows:
The only question here is whether or not local water districts are government owned or
controlled corporations whose employees are subject to the provisions of the Civil
Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of
private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198,
known as the 'Provincial Water Utilities Act of 1973' which went into effect on 25 May
1973, and which provides as follows:
Exemption from Civil Service. The district and its employees, being engaged in a
proprietary function, are hereby exempt from the provisions of the Civil Service Law.
Collective Bargaining shall be available only to personnel below supervisory
levels: Provided, however, That the total of all salaries, wages, emoluments, benefits or
other compensation paid to all employees in any month shall not exceed fifty percent
(50%) of average net monthly revenue, said net revenue representing income from
water sales and sewerage service charges, less pro-rata share of debt service and
expenses for fuel or energy for pumping during the preceding fiscal year.
The Labor Arbiter failed to take into account the provisions of Presidential, Decree No.
1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25 of
P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as Section 25 in
the following manner:
Section 26. of the same decree P.D. 198 is hereby amended to read as Section 25 as
follows:
Section 25. Authorization. The district may exercise all the powers which are
expressly granted by this Title or which are necessarily implied from or incidental to the
powers and purposes herein stated. For the purpose of carrying out the objectives of
this Act, a district is hereby granted the power of eminent domain, the exercise thereof
shall, however, be subject to review by the Administration.
Thus, Section 25 of P.D. 198 exempting the employees of water districts from the
application of the Civil Service Law was removed from the statute books.
This is not the first time that officials of the Department of Labor and Employment have
taken the position that the Labor Arbiter here adopted. In Baguio Water District vs.
Cresenciano B. Trajano etc., et al. (127 SCRA 730 [1984]), the petitioner Water District
sought review of a decision of the Bureau of Labor Relations which affirmed that of a
Med-Arbiter calling for a certification election among the regular rank-and-file
employees of the Baguio Water District (BWD). In granting the petition, the Court said
The Baguio Water District was formed pursuant to Title II Local Water District Law
of P.D. No. 198, as amended. The BWD is by Sec. 6 of that decree 'a quasi-public
corporation performing public service and supplying public wants'.
x x x x x x
We grant the petition for the following reasons:
I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of
P.E. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The
amendatory decree took effect on June 11, 1978.
x x x x x x x x x
3. The BWD is a corporation created pursuant to a special law P.D. No. 198, as
amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art.
XII-B, [1973] Constitution; P.D. No. 868.)
The hiring and firing of employees of government-owned or controlled corporations are governed by
the Civil Service Law and Civil Service Rules and Regulations. In National Housing Corporation vs.
Juco, 134 SCRA 172,176, We held:
There should no longer be any question at this time that employees of government-
owned or controlled corporations are governed by the civil service law and civil service
rules and regulations.
Section 1, Article XII-B of the [1973] Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision, and instrumentality of
the Government, including every government-owned or controlled corporation ... .
The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:
A Civil Service embracing all branches and subdivisions of the Government shall be
provided by law.
The inclusion of 'government-owned or controlled corporations' within the embrace of
the civil service shows a deliberate effort of the framers to plug an earlier loophole
which allowed government-owned or controlled corporations to avoid the full
consequences of the all-encompassing coverage of the civil service system. The same
explicit intent is shown by the addition of 'agency' and 'instrumentality' to branches and
subdivisions of the Government. All offices and firms of the government are covered.
The amendments introduced in 1973 are not Idle exercises or meaningless gestures.
They carry the strong message that civil service coverage is broad and all-embracing
insofar as employment in the government in any of its governmental or corporate arms
is concerned.
x x x x x x x x x
Section 1 of Article XII-B, 1973 Constitution uses the word 'every' to modify the phrase
'government-owned or controlled corporation'
'Every' means each one of a group, without exception. It means all possible and all,
taken one by one. Of course, our decision in this case refers to a corporation created as
a government-owned or controlled entity. It does not cover cases involving private firms
taken over by the government in foreclosure or similar proceedings. We reserve
judgment on these latter cases when the appropriate controversy is brought to this
Court. (Emphasis ours)
Significantly, Article XIB Section 2(l) of the 1987 Constitution provides that "(t)he civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the government, including
government-owned or controlled corporations with original charters." Inasmuch as PD No. 198, as
amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water
District and all water districts in the country, they come under the coverage of the civil service law,
rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807.)
In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was
water, the case should have been brought first to the National Water Resources Council in
accordance with Articles 88 and 89 of PD No. 1067, and, as the parties are government
instrumentalities (The Tanjay Water District and the Municipality of Pamplona), the dispute should be
administratively settled in accordance with PD No. 242.
Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as
follows:
ART. 88. The [Water Resources] Council shall have original jurisdiction over all disputes
relating to appropriation, utilization, exploitation, development, control, conservation and
protection of waters within the meaning and context of the provisions of this Code.
The decisions of the Council on water rights controversies shall be immediately
executory and the enforcement thereof may be suspended only when a bond, in an
amount fixed by the Council to answer for damages occasioned by the suspension or
stay of execution, shall have been filed by the appealing party, unless the suspension is
by virtue of an order of a competent court.
All disputes shall be decided within sixty (60) days after the parties submit the same for
decision or resolution.
The Council shall have the power to issue writs of execution and enforce its decisions
with the assistance of local or national police agencies.
ART. 89. The decisions of the Council on water rights controversies may be appealed to
the Court of First Instance of the province where the subject matter of the controversy is
situated within fifteen (15) days from the date the party appealing receives a copy of the
decision, on any of the following grounds: (2) grave abuse of discretion question of law;
and (3) questions of fact and law. (Emphasis supplied.)
Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold
that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water
Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of
First Instance (now Regional Trial Court) has only appellate jurisdiction over the case.
P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the
settlement of:
.... all disputes, claims and controversies solely between or among the departments,
bureaus, offices, agencies and instrumentalities of the National Government, including
government-owned or controlled corporations but excluding constitutional offices or
agencies, arising from the interpretation and application of statutes, contracts or
agreements.
by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel,
depending on the parties involved and whether the case raises pure questions of law or mixed
questions of law and fact.
P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the
"interpretation and application of statutes, contracts, or agreements" of the parties herein. As
previously stated, it involves the appropriation, utilization, and control of water.
Our determination in the earlier cases (Baguio Water District vs. Trajano, 127 SCRA 730; Hagonoy
Water District vs. NLRC, G.R. No. 81490, August 31, 1988) that water districts are government
instrumentalities and that their employees belong to the civil service, disposes of Datuin's petition in
G.R. No. 84300. The National Labor Relations Commission has no jurisdiction over his complaint for
illegal dismissal.
WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the
petitioners in G.R. No. 63742 filing their complaint in the National Water Resources Council and the
petitioner in G.R. No. 84300 seeking redress in the Civil Service Commission. No costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-63742 April 17, 1989
TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, petitioner,
vs.
HON. PEDRO GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS,
WENCESLAO DURAN, SERGIO SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO
ZERNA, ANTONIO DIVINAGRACIA, PEDRO SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ,
FRANCISCO CABILAO and ESPERIDION MOSO, respondents.
G.R. No. 84300 April 17, 1989
JOSEFINO DATUIN, petitioner,
vs.
TARLAC WATER DISTRICT, respondent.
Rodulfo O. Navarro and Baldomero Limbaga for petitioner in G.R. No. 63742.
Joaquin R. Hitosis for respondents in G.R. No. 63742.
Isabelo C. Salamida for petitioner in G.R. No. 84300.
Conrado C. Ginelo Jr. for respondent in G.R. No. 84300.
Bernardito A. Florido for Philippine Association of Water Districts.
Reuben A. Espancho for Esperidion Moso.

GRIO-AQUINO, J .:
The common issue in these consolidated cases is whether or not water districts created under PD
No. 198, as amended, are private corporations or government-owned or controlled corporations.
Another issue in G.R. No. 63742 is whether respondent Judge acted without, or in excess of,
jurisdiction or with grave abuse of discretion in dismissing Civil Case No. 8144 for alleged lack of
jurisdiction over the subject matter.
I. G.R. No. 63742
On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo,
filed in the Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case
No. 8144, an action for injunction with preliminary mandatory injunction and damages, against
respondent Municipality of Pamplona and its officials to prevent them from interfering in the
management of the Tanjay Waterworks System.
Respondent Judge set the hearing of the application for injunction on March 16, 1983. The
Municipality and its officials answered the complaint. Esperidion Moso filed a separate answer.
When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five (5)
days to submit their respective position papers on the issue of the court's jurisdiction (or lack of it),
over the action. The respondents' position paper questioned the court's jurisdiction over the case and
asked for its dismissal of the complaint (Annex F). Instead of a position paper, the petitioner filed a
reply with opposition to the motion to dismiss (Annex G).
On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of
jurisdiction over the subject matter (water) and over the parties (both being government
instrumentalities) by virtue of Art. 88 of PD No. 1067 and PD No. 242. He declared that the
petitioner's recourse to the court was premature because the controversy should have been
ventilated first before the National Water Resources Council pursuant to Arts. 88 and 89 of PD No.
1067. He further ruled that as the parties are government instrumentalities, the dispute should be
administratively settled in accordance with PD No. 242.
Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in
excess of jurisdiction or with grave abuse of discretion in dismissing the case.
II. G.R. No. 84300
Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water
District in the Department of Labor and Employment (DOLE) which decided in his favor. However,
upon respondent's motion for reconsideration (which was treated as an appeal) the National Labor
Relations Commission (NLRC) reversed the decision and dismissed the complaint "for lack of
jurisdiction," holding that as the respondent Tarlac Water District is a corporation created by a special
law (PD No. 198), its officers and employees belong to the civil service and their separation from
office should be governed by Civil Service Rules and Regulations.
Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro C.
Gabaton, et al., G.R. No. 63742, because the lone issue in both cases is whether or not water
districts created under PD No. 198, as amended, are private corporations or government-owned or
controlled corporations. The two cases were consolidated pursuant to the resolution dated July 25,
1988 of this Court.
Actually the question of the corporate personality of local water districts is not new. The Court ruled in
the recent case of Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988, that they are
quasi public corporations whose employees belong to the civil service, hence, the dismissal of those
employees shall be governed by the civil service law, rules and regulations. The pertinent part of this
Court's decision reads as follows:
The only question here is whether or not local water districts are government owned or
controlled corporations whose employees are subject to the provisions of the Civil
Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of
private respondent Villanueva by relying on Section 25 of Presidential Decree No. 198,
known as the 'Provincial Water Utilities Act of 1973' which went into effect on 25 May
1973, and which provides as follows:
Exemption from Civil Service. The district and its employees, being engaged in a
proprietary function, are hereby exempt from the provisions of the Civil Service Law.
Collective Bargaining shall be available only to personnel below supervisory
levels: Provided, however, That the total of all salaries, wages, emoluments, benefits or
other compensation paid to all employees in any month shall not exceed fifty percent
(50%) of average net monthly revenue, said net revenue representing income from
water sales and sewerage service charges, less pro-rata share of debt service and
expenses for fuel or energy for pumping during the preceding fiscal year.
The Labor Arbiter failed to take into account the provisions of Presidential, Decree No.
1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25 of
P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered as Section 25 in
the following manner:
Section 26. of the same decree P.D. 198 is hereby amended to read as Section 25 as
follows:
Section 25. Authorization. The district may exercise all the powers which are
expressly granted by this Title or which are necessarily implied from or incidental to the
powers and purposes herein stated. For the purpose of carrying out the objectives of
this Act, a district is hereby granted the power of eminent domain, the exercise thereof
shall, however, be subject to review by the Administration.
Thus, Section 25 of P.D. 198 exempting the employees of water districts from the
application of the Civil Service Law was removed from the statute books.
This is not the first time that officials of the Department of Labor and Employment have
taken the position that the Labor Arbiter here adopted. In Baguio Water District vs.
Cresenciano B. Trajano etc., et al. (127 SCRA 730 [1984]), the petitioner Water District
sought review of a decision of the Bureau of Labor Relations which affirmed that of a
Med-Arbiter calling for a certification election among the regular rank-and-file
employees of the Baguio Water District (BWD). In granting the petition, the Court said
The Baguio Water District was formed pursuant to Title II Local Water District Law
of P.D. No. 198, as amended. The BWD is by Sec. 6 of that decree 'a quasi-public
corporation performing public service and supplying public wants'.
x x x x x x
We grant the petition for the following reasons:
I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of
P.E. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The
amendatory decree took effect on June 11, 1978.
x x x x x x x x x
3. The BWD is a corporation created pursuant to a special law P.D. No. 198, as
amended. As such its officers and employees are part of the Civil Service. (Sec. 1, Art.
XII-B, [1973] Constitution; P.D. No. 868.)
The hiring and firing of employees of government-owned or controlled corporations are governed by
the Civil Service Law and Civil Service Rules and Regulations. In National Housing Corporation vs.
Juco, 134 SCRA 172,176, We held:
There should no longer be any question at this time that employees of government-
owned or controlled corporations are governed by the civil service law and civil service
rules and regulations.
Section 1, Article XII-B of the [1973] Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision, and instrumentality of
the Government, including every government-owned or controlled corporation ... .
The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:
A Civil Service embracing all branches and subdivisions of the Government shall be
provided by law.
The inclusion of 'government-owned or controlled corporations' within the embrace of
the civil service shows a deliberate effort of the framers to plug an earlier loophole
which allowed government-owned or controlled corporations to avoid the full
consequences of the all-encompassing coverage of the civil service system. The same
explicit intent is shown by the addition of 'agency' and 'instrumentality' to branches and
subdivisions of the Government. All offices and firms of the government are covered.
The amendments introduced in 1973 are not Idle exercises or meaningless gestures.
They carry the strong message that civil service coverage is broad and all-embracing
insofar as employment in the government in any of its governmental or corporate arms
is concerned.
x x x x x x x x x
Section 1 of Article XII-B, 1973 Constitution uses the word 'every' to modify the phrase
'government-owned or controlled corporation'
'Every' means each one of a group, without exception. It means all possible and all,
taken one by one. Of course, our decision in this case refers to a corporation created as
a government-owned or controlled entity. It does not cover cases involving private firms
taken over by the government in foreclosure or similar proceedings. We reserve
judgment on these latter cases when the appropriate controversy is brought to this
Court. (Emphasis ours)
Significantly, Article XIB Section 2(l) of the 1987 Constitution provides that "(t)he civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the government, including
government-owned or controlled corporations with original charters." Inasmuch as PD No. 198, as
amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water
District and all water districts in the country, they come under the coverage of the civil service law,
rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807.)
In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was
water, the case should have been brought first to the National Water Resources Council in
accordance with Articles 88 and 89 of PD No. 1067, and, as the parties are government
instrumentalities (The Tanjay Water District and the Municipality of Pamplona), the dispute should be
administratively settled in accordance with PD No. 242.
Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as
follows:
ART. 88. The [Water Resources] Council shall have original jurisdiction over all disputes
relating to appropriation, utilization, exploitation, development, control, conservation and
protection of waters within the meaning and context of the provisions of this Code.
The decisions of the Council on water rights controversies shall be immediately
executory and the enforcement thereof may be suspended only when a bond, in an
amount fixed by the Council to answer for damages occasioned by the suspension or
stay of execution, shall have been filed by the appealing party, unless the suspension is
by virtue of an order of a competent court.
All disputes shall be decided within sixty (60) days after the parties submit the same for
decision or resolution.
The Council shall have the power to issue writs of execution and enforce its decisions
with the assistance of local or national police agencies.
ART. 89. The decisions of the Council on water rights controversies may be appealed to
the Court of First Instance of the province where the subject matter of the controversy is
situated within fifteen (15) days from the date the party appealing receives a copy of the
decision, on any of the following grounds: (2) grave abuse of discretion question of law;
and (3) questions of fact and law. (Emphasis supplied.)
Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold
that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water
Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of
First Instance (now Regional Trial Court) has only appellate jurisdiction over the case.
P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the
settlement of:
.... all disputes, claims and controversies solely between or among the departments,
bureaus, offices, agencies and instrumentalities of the National Government, including
government-owned or controlled corporations but excluding constitutional offices or
agencies, arising from the interpretation and application of statutes, contracts or
agreements.
by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel,
depending on the parties involved and whether the case raises pure questions of law or mixed
questions of law and fact.
P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the
"interpretation and application of statutes, contracts, or agreements" of the parties herein. As
previously stated, it involves the appropriation, utilization, and control of water.
Our determination in the earlier cases (Baguio Water District vs. Trajano, 127 SCRA 730; Hagonoy
Water District vs. NLRC, G.R. No. 81490, August 31, 1988) that water districts are government
instrumentalities and that their employees belong to the civil service, disposes of Datuin's petition in
G.R. No. 84300. The National Labor Relations Commission has no jurisdiction over his complaint for
illegal dismissal.
WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the
petitioners in G.R. No. 63742 filing their complaint in the National Water Resources Council and the
petitioner in G.R. No. 84300 seeking redress in the Civil Service Commission. No costs.
SO ORDERED.

Why the preference for Labor over Capital
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-2779 October 18, 1950
DANIEL SANCHEZ, ET AL., plaintiffs-appellees,
vs.
HARRY LYONS CONSTRUCTION, INC., ET AL., defendants-appellants.
Gibbs, Gibbs, Chuidian and Quasha for appellant Harry Lyons Construction, Inc.
Cecilio I. Lim and Antonio M. Castro for appellees.

MORAN, C. J .:
This case originated in the Municipal Court of Manila upon a complaint filed on March 9, 1948, by the
herein appellees as plaintiffs, against the herein appellants as defendants, for the sum of P2,210 plus
interest, which plaintiffs claimed as one month advance pat due them. On April 28, 1948, the parties
entered into a stipulation of facts upon which said municipal court rendered judgment for the plaintiffs.
Upon denial of their motion for reconsideration of this judgment, the defendants filed an appeal to the
Court of First Instance of Manila, wherein the parties submitted the case upon the same facts agreed
upon in the Municipal Court. On October 2, 1948, the Court of First Instance of Manila rendered its
decision holding for plaintiffs, as follows:
Wherefore judgment is hereby rendered
1. Ordering defendant Material Distributors, Inc. to pay plaintiff Enrique Ramirez the sum of
P360 and plaintiff Juan Ramirez the sum of P250 with legal interest on each of the said sums
from the date of the filing of the complaint in the Municipal Court of Manila until the date of full
payment thereof; and
2. Ordering defendant Harry Lyons Construction, Inc. to pay plaintiff Daniel Sanchez the sum
of P250, and plaintiff Mariano Javier, Venancio Diaz, Esteban Bautista, Faustino Aquillo,
Godofredo Diamante, Marcial Lazaro, Ambrosio de la Cruz, and Marcelino Maceda the sum of
P150 each, with legal interest on each of the said sums from the date of the filing of the
complaint in the Municipal Court of Manila until the date of full payment thereof.
One half of the costs is to be paid by Material Distributors, Inc. and the other half by Harry
Lyons Construction, Inc.
From this judgment, defendants filed an appeal with this court purely upon a question of law. The
stipulation of facts entered into by the parties on April 28, 1948, is as follows:lawphil. net
STIPULATION OF FACTS.
Come now the plaintiffs and the defendants, by their respective undersigned attorneys and to
this Honorable Court, respectfully submit the following stipulation of facts:
1. That the plaintiffs were respectively employed as follows:
EMPLOYED BY DEFENDANT MATERIAL DISTRIBUTORS, INC.
Name Date of Position Salary
employment
Enrique Ramirez .............. 12/16/46 Warehouseman P450 a mo.
Juan Ramirez ................... do do 250 a mo.
NOTE. The salary of Enrique Ramirez was later reduced to P360 per month. This was the
amount he was receiving at the time of his dismissal.
EMPLOYED BY DEFENDANT HARRY LYONS CONSTRUCTION, INC.
Daniel Sanchez ................ 1/1/47 Carpenter- P250 a mo.
Foreman
Mariano Javier ................. ....do.................. Guard................. 5 a day
Venancio Diaz ................. ....do.................. do....................... 5 a day
Esteban Bautista ............ ....do.................. do....................... 5 a day
Faustino Aquillo ............ ....do.................. do....................... 5 a day
Godofredo Diamante ..... ....do.................. do....................... 5 a day
Marcial Lazaro ................ ....do.................. do....................... 5 a day
Ambrosio de la Cruz ..... ....do.................. do....................... 5 a day
Marcelino Macada ........ ....do.................. do....................... 5 a day
as per contracts of employment, copies of which are attached to defendants' answer marked
Exhibits 1 to 11 inclusive
2. That in said contracts of employment the plaintiff agreed as follows:
"I accept the foregoing appointment, and in consideration thereof I hereby agree that such
employment may be terminated at any time, without previous notice, and I further agree that
salary and wages, shall be computed and paid at the rate specified up to the date of such
termination.
"Also in consideration of such employment I hereby expressly waive the benefit of article 302
of the Code of Commerce and that of any other law, ruling, or custom which might require
notice of discharge or payment of salary or wages after date of the termination of such
employment."
3. That the plaintiffs were dismissed by the defendants on December 31, 1947 without one
months' previous notice.
4. That each of the plaintiffs demanded payment of one month's salary from the defendants
and that the latter refused to pay the same.
WHEREFORE, it is respectfully prayed that judgment on the foregoing stipulation of facts be
rendered by this Honorable Court.
The points in issue herein are: first, whether plaintiffs, both those paid on a monthly and daily basis,
are entitled to the benefit granted in article 302 of the Code of Commerce; and secondly, if they are
so entitled, was their waiver of such benefits legal and valid?
Article 302 of the Code of Commerce reads as follows:
ART. 302. In cases in which no special time is fixed in the contracts of service, any one of the
parties thereto may cancel it, advising the other party thereof one month in advance.
The factor or shop clerk shall be entitled, in such case, to the salary due for said month.
It is a clear doctrine, as gleaned from the provision of the law and settled jurisprudence, 1 that in a mercantile
contract of service in which no special time is fixed, any one of the parties may cancel said contract upon giving of a one-month notice, called a mesada, to the
other party. The law gives an added proviso that in the case of factors or shop clerks, these shall be entitled to salary during this one month of standing notice. In
any case, the one-month notice must be given to any employee, whether factor, shop clerk or otherwise, so long as the two conditions concur, namely, that no
special time is fixed in the contract of service, and that said employee is a commercial employee. And when such notice is not given under these conditions, not
only the factor or shop clerk but any employee discharged without cause, is entitled to indemnity which may be one month's salary. 2
In the instant case, there lies no doubt that plaintiffs are commercial employees of appellant
corporations, rendering service as warehousemen, carpenter-foreman and guards. There is likewise
no doubt as can be seen from the contracts of employment submitted as exhibits, that no special time
has been fixed in the contracts of services between plaintiffs-appellees and defendants-appellants.
The stated computation or manner of payment, whether monthly or daily, does not represent nor
determine a special time of employment. Thus, a commercial employee may be employed for one
year and yet receive his salary on the daily or weekly or monthly or other basis.
Appellants allege that the use of the word "temporary" in the contracts of services of some of the
plaintiffs shows that their employment was with a term, and the term was "temporary, on a day to day
basis." The record discloses that this conclusion is unwarranted. The contracts simply say "You
are hereby employed as temporary guard with a compensation at the rate of P5 a day . . . ." The word
"temporary" as used herein does not mean the special time fixed in the contracts referred to in article
302 of the Code of Commerce. The daily basis therein stipulated is for the computation of pay, and is
not necessarily the period of employment. Hence, this Court holds that plaintiffs-appellants come
within the purview of article 302 of the Code of Commerce.
Now, as the second question, namely, the validity of plaintiffs' waiver of the benefits given them by
said article 302. This court holds that such a waiver, made in advance, is void as being contrary to
public policy. Granting that the "mesada" given in article 302 of the Code of Commerce, is for the
bilateral benefit of both employer and employee, nevertheless, this does not preclude the finding that
a waiver of such "mesada" in advance by the employee is contrary to public policy.
Public policy, with regard to labor, is clearly stated in article II, section 5, of the Philippine
Constitution, which reads
The promotion of social justice to insure the well-being and economic security of all the people
should be the concern of the State.
and article XIV, section 6, which reads
The State shall afford protection to labor, especially to working women and minors, and shall
regulate the relations between land-owner and tenant, and between labor and capital in
industry and in agriculture. . . .
Article 302 of the Code of Commerce must be applied in consonance with these provisions of our
constitution. In the matter of employment bargaining, there is no doubt that the employer stands on
higher footing than the employee. First of all, there is greater supply than demand for labor. Secondly,
the need for employment by labor comes from vital and even desperate, necessity. Consequently, the
law must protect labor, at least, to the extent of raising him to equal footing in bargaining relations
with capital and to shield him from abuses brought about by the necessity for survival. It is safe to
presume therefore, that an employee or laborer who waives in advance any benefit granted him by
law does so, certainly not in his interest or through generosity but under the forceful intimidation of
urgent need, and hence, he could not have so acted freely and voluntarily.
For all the foregoing, this court hereby affirms the decision of the lower court, with costs against
appellants.
Ozaeta, Paras, Feria, Pablo, Tuason, Bengzon and Reyes, JJ., concur.
What are the basic principles in the constitution and labor related laws on
protection to labor
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78763 July 12,1989
MANILA ELECTRIC COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, and APOLINARIO M. SIGNO, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Dominador Maglalang for private respondent.

MEDIALDEA, J .:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the
resolution of the respondent National Labor Relations Commission dated March 12, 1987 (p.
28, Rollo) in NLRC Case No. NCR-8-3808-83, entitled, "Apolinario M. Signo, Complainant, versus
Manila Electric Company, Respondents", affirming the decision of the Labor Arbiter which ordered the
reinstatement of private respondent herein, Apolinario Signo, to his former position without
backwages.
The antecedent facts are as follows:
Private respondent Signo was employed in petitioner company as supervisor-leadman since January
1963 up to the time when his services were terminated on May 18, 1983.
In 1981, a certain Fernando de Lara filed an application with the petitioner company for electrical
services at his residence at Peafrancia Subdivision, Marcos Highway, Antipolo, Rizal. Private
respondent Signo facilitated the processing of the said application as well as the required
documentation for said application at the Municipality of Antipolo, Rizal. In consideration thereof,
private respondent received from Fernando de Lara the amount of P7,000.00. Signo thereafter filed
the application for electric services with the Power Sales Division of the company.
It was established that the area where the residence of de Lara was located is not yet within the
serviceable point of Meralco, because the place was beyond the 30-meter distance from the nearest
existing Meralco facilities. In order to expedite the electrical connections at de Lara's residence,
certain employees of the company, including respondent Signo, made it appear in the application that
the sari-sari store at the corner of Marcos Highway, an entrance to the subdivision, is applicant de
Lara's establishment, which, in reality is not owned by the latter.
As a result of this scheme, the electrical connections to de Lara's residence were installed and made
possible. However, due to the fault of the Power Sales Division of petitioner company, Fernando de
Lara was not billed for more than a year.
Petitioner company conducted an investigation of the matter and found respondent Signo responsible
for the said irregularities in the installation. Thus, the services of the latter were terminated on May
18, 1983.
On August 10 1983, respondent Signo filed a complaint for illegal dismissal, unpaid wages, and
separation pay.
After the parties had submitted their position papers, the Labor Arbiter rendered a decision (p.
79, Rollo) on April 29, 1985, which stated, inter alia:
Verily, complainant's act of inducing the Meralco employees to effectuate the installation
on Engr. de Lara's residence prejudiced the respondent, and therefore, complainant
himself had indeed became a participant in the transactions, although not directly, which
turned out to be illegal, not to mention that some of the materials used therein belongs
to Meralco, some of which were inferior quality. . . .
While complainant may deny the violation, he cannot do away with company's Code on
Employee Discipline, more particularly Section 7, par. 8 and Section 6, par. 24 thereof
However, as admitted by the respondent, the infraction of the above cited Code is
punishable by reprimand to dismissal."
... . And in this case, while considering that complainant indeed committed the above-
cited infractions of company Code of Employee Discipline, We shall also consider his
records of uninterrupted twenty (20) years of service coupled with two (2)
commendations for honesty. Likewise, We shall take note that subject offense is his
first, and therefore, to impose the extreme penalty of dismissal is certainly too drastic. A
penalty short of dismissal is more in keeping with justice, and adherence to
compassionate society.
WHEREFORE, respondent Meralco is hereby directed to reinstate complainant
Apolinario M. Signo to his former position as Supervisor Leadman without backwages,
considering that he is not at all faultless. He is however, here warned, that commission
of similar offense in the future, shall be dealt with more severely.
SO ORDERED.
Both parties appealed from the decision to the respondent Commission. On March 12, 1987, the
respondent Commission dismissed both appeals for lack of merit and affirmed in toto the decision of
the Labor Arbiter.
On June 23, 1987, the instant petition was filed with the petitioner contending that the respondent
Commission committed grave abuse of discretion in affirming the decision of the Labor Arbiter. A
temporary restraining order was issued by this Court on August 3, 1987, enjoining the respondents
from enforcing the questioned resolution of the respondent Commission.
The issue to resolve in the instant case is whether or not respondent Signo should be dismissed from
petitioner company on grounds of serious misconduct and loss of trust and confidence.
Petitioner contends that respondent Signo violated Sections 6 and 7 of the company's Code on
Employee Discipline, which provide:
Section 6, Par. 24Encouraging, inducing or threatening another employee to perform
an act constituting a violation of this Code or of company work, rules or an offense in
connection with the official duties of the latter, or allowing himself to be persuaded,
induced or influenced to commit such offense.
PenaltyReprimand to dismissal, depending upon the gravity of the offense.
Section 7, Par. 8Soliciting or receiving money, gift, share, percentage or benefits from
any person, personally or through the mediation of another, to perform an act prejudicial
to the Company.
PenaltyDismissal. (pp. 13-14, Rollo)
Petitioner further argues that the acts of private respondent constituted breach of trust and caused
the petitioner company economic losses resulting from the unbilled electric consumption of de Lara;
that in view thereof, the dismissal of private respondent Signo is proper considering the
circumstances of the case.
The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss
or lay-off an employee for just and authorized causes enumerated under Articles 282 and 283 of the
Labor Code. However, the right of an employer to freely discharge his employees is subject to
regulation by the State, basically in the exercise of its paramount police power. This is so because the
preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of
corporate profits (Euro-Linea, Phil. Inc. v. NLRC, G.R. No. 75782, December 1, 1987,156 SCRA 78).
There is no question that herein respondent Signo is guilty of breach of trust and violation of company
rules, the penalty for which ranges from reprimand to dismissal depending on the gravity of the
offense. However, as earlier stated, the respondent Commission and the Labor Arbiter found that
dismissal should not be meted to respondent Signo considering his twenty (20) years of service in the
employ of petitioner, without any previous derogatory record, in addition to the fact that petitioner
company had awarded him in the past, two (2) commendations for honesty. If ever the petitioner
suffered losses resulting from the unlisted electric consumption of de Lara, this was found to be the
fault of petitioner's Power Sales Division.
We find no reason to disturb these findings. Well-established is the principle that findings of
administrative agencies which have acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect but even finality. Judicial review by this Court
on labor cases does not go so far as to evaluate the sufficiency of the evidence upon which the
proper labor officer or office based his or its determination but is limited to issues of jurisdiction or
grave abuse of discretion (Special Events and Central Shipping Office Workers Union v. San Miguel
Corporation, G.R. Nos. L-51002-06, May 30,1983,122 SCRA 557).
This Court has held time and again, in a number of decisions, that notwithstanding the existence of a
valid cause for dismissal, such as breach of trust by an employee, nevertheless, dismissal should not
be imposed, as it is too severe a penalty if the latter has been employed for a considerable length of
time in the service of his employer. (Itogon-Suyoc Mines, Inc. v. NLRC, et al., G.R. No. L- 54280,
September 30,1982,117 SCRA 523; Meracap v. International Ceramics Manufacturing Co., Inc., et
al., G.R. Nos. L-48235-36, July 30,1979, 92 SCRA 412; Sampang v. Inciong, G.R. No. 50992, June
19,1985,137 SCRA 56; De Leon v. NLRC, G.R. No. L-52056, October 30,1980, 100 SCRA 691;
Philippine Airlines, Inc. v. PALEA, G.R. No. L-24626, June 28, 1974, 57 SCRA 489).
In a similar case, this Court ruled:
As repeatedly been held by this Court, an employer cannot legally be compelled to
continue with the employment of a person who admittedly was guilty of breach of trust
towards his employer and whose continuance in the service of the latter is patently
inimical to its interest. The law in protecting the rights of the laborers, authorized neither
oppression nor self- destruction of the employer.
However, taking into account private respondent's 'twenty-three (23) years of service
which undisputedly is unblemished by any previous derogatory record' as found by the
respondent Commission itself, and since he has been under preventive suspension
during the pendency of this case, in the absence of a showing that the continued
employment of private respondent would result in petitioner's oppression or self-
destruction, We are of the considered view that his dismissal is a drastic punishment. ...
.
xxx xxx xxx
The ends of social and compassionate justice would therefore be served if private
respondent is reinstated but without backwages in view of petitioner's obvious good
faith. (Itogon- Suyoc Mines, Inc. v. NLRC, et al., 11 7 SCRA 528)
Further, in carrying out and interpreting the Labor Code's provisions and its implementing regulations,
the workingman's welfare should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and compassionate spirit of the law as
provided for in Article 4 of the New Labor Code which states that "all doubts in the implementation
and interpretation of the provisions of the Labor Code including its implementing rules and regulations
shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140).
In view of the foregoing, reinstatement of respondent Signo is proper in the instant case, but without
the award of backwages, considering the good faith of the employer in dismissing the respondent.
ACCORDINGLY, premises considered, the petition is hereby DISMISSED and the assailed decision
of the National Labor Relations Commission dated March 12, 1987 is AFFIRMED. The temporary
restraining order issued on August 3, 1987 is lifted.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162053 March 7, 2007
ST. LUKE'S MEDICAL CENTER EMPLOYEE'S ASSOCIATION-AFW (SLMCEA-AFW) AND
MARIBEL S. SANTOS,Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND ST. LUKE'S MEDICAL CENTER,
INC.,Respondents.
D E C I S I O N
AZCUNA, J .:
Challenged in this petition for review on certiorari is the Decision
1
of the Court of Appeals (CA) dated
January 29, 2004 in CA-G.R. SP No. 75732 affirming the decision
2
dated August 23, 2002 rendered
by the National Labor Relations Commission (NLRC) in NLRC CA No. 026225-00.
The antecedent facts are as follows:
Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology department of private
respondent St. Luke's Medical Center, Inc. (SLMC) on October 13, 1984. She is a graduate of
Associate in Radiologic Technology from The Family Clinic Incorporated School of Radiologic
Technology.
On April 22, 1992, Congress passed and enacted Republic Act No. 7431 known as the "Radiologic
Technology Act of 1992." Said law requires that no person shall practice or offer to practice as a
radiology and/or x-ray technologist in the Philippines without having obtained the proper certificate of
registration from the Board of Radiologic Technology.
On September 12, 1995, the Assistant Executive Director-Ancillary Services and HR Director of
private respondent SLMC issued a final notice to all practitioners of Radiologic Technology to comply
with the requirement of Republic Act No. 7431 by December 31, 1995; otherwise, the unlicensed
employee will be transferred to an area which does not require a license to practice if a slot is
available.
On March 4, 1997, the Director of the Institute of Radiology issued a final notice to petitioner Maribel
S. Santos requiring the latter to comply with Republic Act. No. 7431 by taking and passing the
forthcoming examination scheduled in June 1997; otherwise, private respondent SLMC may be
compelled to retire her from employment should there be no other position available where she may
be absorbed.
On May 14, 1997, the Director of the Institute of Radiology, AED-Division of Ancillary Services issued
a memorandum to petitioner Maribel S. Santos directing the latter to submit her PRC Registration
form/Examination Permit per Memorandum dated March 4, 1997.
On March 13, 1998, the Director of the Institute of Radiology issued another memorandum to
petitioner Maribel S. Santos advising her that only a license can assure her of her continued
employment at the Institute of Radiology of the private respondent SLMC and that the latter is giving
her the last chance to take and pass the forthcoming board examination scheduled in June 1998;
otherwise, private respondent SLMC shall be constrained to take action which may include her
separation from employment.
On November 23, 1998, the Director of the Institute of Radiology issued a notice to petitioner Maribel
S. Santos informing the latter that the management of private respondent SLMC has approved her
retirement in lieu of separation pay.
On November 26, 1998, the Personnel Manager of private respondent SLMC issued a "Notice of
Separation from the Company" to petitioner Maribel S. Santos effective December 30, 1998 in view of
the latter's refusal to accept private respondent SLMC's offer for early retirement. The notice also
states that while said private respondent exerted its efforts to transfer petitioner Maribel S. Santos to
other position/s, her qualifications do not fit with any of the present vacant positions in the hospital.
In a letter dated December 18, 1998, a certain Jack C. Lappay, President of the Philippine
Association of Radiologic Technologists, Inc., wrote Ms. Judith Betita, Personnel Manager of private
respondent SLMC, requesting the latter to give "due consideration" to the organization's three (3)
regular members of his organization (petitioner Maribel S. Santos included) "for not passing yet the
Board of Examination for X-ray Technology," "by giving them an assignment in any department of
your hospital awaiting their chance to pass the future Board Exam."
On January 6, 1999, the Personnel Manager of private respondent SLMC again issued a "Notice of
Separation from the Company" to petitioner Maribel S. Santos effective February 5, 1999 after the
latter failed to present/ submit her appeal for rechecking to the Professional Regulation Commission
(PRC) of the recent board examination which she took and failed.
On March 2, 1999, petitioner Maribel S. Santos filed a complaint against private respondent SLMC for
illegal dismissal and non-payment of salaries, allowances and other monetary benefits. She likewise
prayed for the award of moral and exemplary damages plus attorney's fees.
In the meantime, petitioner Alliance of Filipino Workers (AFW), through its President and Legal
Counsel, in a letter dated September 22, 1999 addressed to Ms. Rita Marasigan, Human Resources
Director of private respondent SLMC, requested the latter to accommodate petitioner Maribel S.
Santos and assign her to the vacant position of CSS Aide in the hospital arising from the death of an
employee more than two (2) months earlier.
In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:
Gentlemen:
Thank you for your letter of September 22, 1999 formally requesting to fill up the vacant regular
position of a CSS Aide in Ms. Maribel Santos' behalf.
The position is indeed vacant. Please refer to our Recruitment Policy for particulars especially on
minimum requirements of the job and the need to meet said requirements, as well as other pre-
employment requirements, in order to be considered for the vacant position. As a matter of fact, Ms.
Santos is welcome to apply for any vacant position on the condition that she possesses the
necessary qualifications.
As to the consensus referred to in your letter, may I correct you that the agreement is, regardless of
the vacant position Ms. Santos decides to apply, she must go through the usual application
procedures. The formal letter, I am afraid, will not suffice for purposes of recruitment processing. As
you know, the managers requesting to fill any vacancy has a say on the matter and correctly so. The
manager's inputs are necessarily factored into the standard recruitment procedures. Hence, the need
to undergo the prescribed steps.
Indeed we have gone through the mechanics to accommodate Ms. Santos' transfer while she was
employed with SLMC given the prescribed period. She was given 30 days from issuance of the notice
of termination to look for appropriate openings which incidentally she wittingly declined to utilize. She
did this knowing fully well that the consequences would be that her application beyond the 30-day
period or after the effective date of her termination from SLMC would be considered a re-application
with loss of seniority and shall be subjected to the pertinent application procedures.
Needless to mention, one of the 3 X-ray Technologists in similar circumstances as Ms. Santos at the
time successfully managed to get herself transferred to E.R. because she opted to apply for the
appropriate vacant position and qualified for it within the prescribed 30-day period. The other X-ray
Technologist, on the other hand, as you may recall, was eventually terminated not just for his failure
to comply with the licensure requirement of the law but for cause (refusal to serve a customer).
Why Ms. Santos opted to file a complaint before the Labor Courts and not to avail of the opportunity
given her, or assuming she was not qualified for any vacant position even if she tried to look for one
within the prescribed period, I simply cannot understand why she also refused the separation pay
offered by Management in an amount beyond the minimum required by law only to re-apply at SLMC,
which option would be available to her anyway even (if she) chose to accept the separation pay!
Well, here's hoping that our Union can timely influence our employees to choose their options well as
it has in the past.
(Signed)
RITA MARASIGAN
Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita, Personnel Manager of private
respondent SLMC wrote Mr. Angelito Calderon, President of petitioner union as follows:
Dear Mr. Calderon:
This is with regard to the case of Ms. Maribel Santos. Please recall that last Oct. 8, 1999, Ms. Rita
Marasigan, HR Director, discussed with you and Mr. Greg Del Prado the terms regarding the re-hiring
of Ms. Maribel Santos. Ms. Marasigan offered Ms. Santos the position of Secretary at the Dietary
Department. In that meeting, Ms. Santos replied that she would think about the offer. To date, we still
have no definite reply from her. Again, during the conference held on Dec. 14, 1999, Atty. Martir
promised to talk to Ms. Santos, and inform us of her reply by Dec. 21, 1999. Again we failed to hear
her reply through him.
Please be informed that said position is in need of immediate staffing. The Dietary Department has
already been experiencing serious backlog of work due to the said vacancy. Please note that more
than 2 months has passed since Ms. Marasigan offered this compromise. Management cannot afford
to wait for her decision while the operation of the said department suffers from vacancy.
Therefore, Management is giving Ms. Santos until the end of this month to give her decision. If we fail
to hear from her or from you as her representatives by that time, we will consider it as a waiver and
we will be forced to offer the position to other applicants so as not to jeopardize the Dietary
Department's operation.
For your immediate action.
(Signed)
JUDITH BETITA
Personnel Manager
On September 5, 2000, the Labor Arbiter came out with a Decision ordering private respondent
SLMC to pay petitioner Maribel S. Santos the amount of One Hundred Fifteen Thousand Five
Hundred Pesos (P115,500.00) representing her separation pay. All other claims of petitioner were
dismissed for lack of merit.
Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public respondent NLRC.
On August 23, 2002, public respondent NLRC promulgated its Decision affirming the Decision of the
Labor Arbiter. It likewise denied the Motion for Reconsideration filed by petitioners in its Resolution
promulgated on December 27, 2002.
Petitioner thereafter filed a petition for certiorari with the CA which, as previously mentioned, affirmed
the decision of the NLRC.
Hence, this petition raising the following issues:
I. Whether the CA overlooked certain material facts and circumstances on petitioners' legal
claim in relation to the complaint for illegal dismissal.
II. Whether the CA committed grave abuse of discretion and erred in not resolving with clarity
the issues on the merit of petitioner's constitutional right of security of tenure.
3

For its part, private respondent St. Luke's Medical Center, Inc. (SLMC) argues in its comment
4
that: 1)
the petition should be dismissed for failure of petitioners to file a motion for reconsideration; 2) the CA
did not commit grave abuse of discretion in upholding the NLRC and the Labor Arbiter's ruling that
petitioner was legally dismissed; 3) petitioner was legally and validly terminated in accordance with
Republic Act Nos. 4226 and 7431; 4) private respondent's decision to terminate petitioner Santos was
made in good faith and was not the result of unfair discrimination; and 5) petitioner Santos' non-
transfer to another position in the SLMC was a valid exercise of management prerogative.
The petition lacks merit.
Generally, the Court has always accorded respect and finality to the findings of fact of the CA
particularly if they coincide with those of the Labor Arbiter and the NLRC and are supported by
substantial evidence.
5
True this rule admits of certain exceptions as, for example, when the judgment
is based on a misapprehension of facts, or the findings of fact are not supported by the evidence on
record
6
or are so glaringly erroneous as to constitute grave abuse of discretion.
7
None of these
exceptions, however, has been convincingly shown by petitioners to apply in the present case.
Hence, the Court sees no reason to disturb such findings of fact of the CA.
Ultimately, the issue raised by the parties boils down to whether petitioner Santos was illegally
dismissed by private respondent SLMC on the basis of her inability to secure a certificate of
registration from the Board of Radiologic Technology.
The requirement for a certificate of registration is set forth under R.A. No. 7431
8
thus:
Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray Technology. - Unless
exempt from the examinations under Sections 16 and 17 hereof, no person shall practice or offer to
practice as a radiologic and/or x-ray technologist in the Philippines without having obtained the proper
certificate of registration from the Board.
It is significant to note that petitioners expressly concede that the sole cause for petitioner Santos'
separation from work is her failure to pass the board licensure exam for X-ray technicians, a
precondition for obtaining the certificate of registration from the Board. It is argued, though, that
petitioner Santos' failure to comply with the certification requirement did not constitute just cause for
termination as it violated her constitutional right to security of tenure. This contention is untenable.
While the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be
reasonably regulated pursuant to the police power of the State to safeguard health, morals, peace,
education, order, safety, and the general welfare of the people. Consequently, persons who desire to
engage in the learned professions requiring scientific or technical knowledge may be required to take
an examination as a prerequisite to engaging in their chosen careers.
9
The most concrete example of
this would be in the field of medicine, the practice of which in all its branches has been closely
regulated by the State. It has long been recognized that the regulation of this field is a reasonable
method of protecting the health and safety of the public to protect the public from the potentially
deadly effects of incompetence and ignorance among those who would practice medicine.
10
The
same rationale applies in the regulation of the practice of radiologic and x-ray technology. The clear
and unmistakable intention of the legislature in prescribing guidelines for persons seeking to practice
in this field is embodied in Section 2 of the law:
Sec. 2. Statement of Policy. - It is the policy of the State to upgrade the practice of radiologic
technology in the Philippines for the purpose of protecting the public from the hazards posed by
radiation as well as to ensure safe and proper diagnosis, treatment and research through the
application of machines and/or equipment using radiation.
11

In this regard, the Court quotes with approval the disquisition of public respondent NLRC in its
decision dated August 23, 2002:
The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's inherent
police power. It should be noted that the police power embraces the power to prescribe regulations to
promote the health, morals, educations, good order, safety or general welfare of the people. The state
is justified in prescribing the specific requirements for x-ray technicians and/or any other professions
connected with the health and safety of its citizens. Respondent-appellee being engaged in the
hospital and health care business, is a proper subject of the cited law; thus, having in mind the legal
requirements of these laws, the latter cannot close its eyes and [let] complainant-appellant's private
interest override public interest.
Indeed, complainant-appellant cannot insist on her "sterling work performance without any derogatory
record" to make her qualify as an x-ray technician in the absence of a proper certificate of
Registration from the Board of Radiologic Technology which can only be obtained by passing the
required examination. The law is clear that the Certificate of Registration cannot be substituted by any
other requirement to allow a person to practice as a Radiologic Technologist and/or X-ray
Technologist (Technician).
12

No malice or ill-will can be imputed upon private respondent as the separation of petitioner Santos
was undertaken by it conformably to an existing statute. It is undeniable that her continued
employment without the required Board certification exposed the hospital to possible sanctions and
even to a revocation of its license to operate. Certainly, private respondent could not be expected to
retain petitioner Santos despite the inimical threat posed by the latter to its business. This
notwithstanding, the records bear out the fact that petitioner Santos was given ample opportunity to
qualify for the position and was sufficiently warned that her failure to do so would result in her
separation from work in the event there were no other vacant positions to which she could be
transferred. Despite these warnings, petitioner Santos was still unable to comply and pass the
required exam. To reiterate, the requirement for Board certification was set by statute. Justice,
fairness and due process demand that an employer should not be penalized for situations where it
had no participation or control.
13

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

While our laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also
recognizes that management has rights which are also entitled to respect and enforcement in the
interest of fair play.
16
Labor laws, to be sure, do not authorize interference with the employer's
judgment in the conduct of the latter's business. Private respondent is free to determine, using its own
discretion and business judgment, all elements of employment, "from hiring to firing" except in cases
of unlawful discrimination or those which may be provided by law. None of these exceptions is
present in the instant case.
The fact that another employee, who likewise failed to pass the required exam, was allowed by
private respondent to apply for and transfer to another position with the hospital does not constitute
unlawful discrimination. This was a valid exercise of management prerogative, petitioners not having
alleged nor proven that the reassigned employee did not qualify for the position where she was
transferred. In the past, the Court has ruled that an objection founded on the ground that one has
better credentials over the appointee is frowned upon so long as the latter possesses the minimum
qualifications for the position.
17
Furthermore, the records show that Ms. Santos did not even seriously
apply for another position in the company.
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
ADOLFO S. AZCUNA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chairperson
Chief Justice
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
RENATO C. CORONA
Asscociate Justice
CANCIO C. GARCIA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court's Division.
REYNATO S. PUNO
Chief Justice
Management Prerogatives
FIRST DIVISION


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



-versus-



ARJAY RONNEL H. JULVE,
Respondent.

G.R. No. 169750

Present:

PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,

*
AZCUNA, and
GARCIA, JJ.


Promulgated:

February 27, 2007
x-----------------------------------------------------------------------------------------x


DECISION


SANDOVAL-GUTIERREZ, J.:

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

On August 1, 1997, the Rural Bank of Cantilan, Inc., petitioner, hired respondent as a
management trainee. Later, he was appointed as planning and marketing officer.
On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank,
issued a memorandum addressed to all its branch managers informing them of the abolition of
the positions of planning and marketing officer and remedial officer; that this was undertaken
in accordance with the banks Personnel Streamlining Program; and that the operations officer
shall absorb the functions of the abolished offices.
On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been
appointed bookkeeper I at the banks branch in Madrid, Surigao del Sur effective immediately
with the same salary corresponding to his old position. Initially, respondent agreed to accept
the appointment, but eventually, he changed his mind and made the following notation on
Hotchkiss memorandum, thus:

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

Thank you.
On August 9, 2001, Hotchkiss appointed respondent as bookkeeper I and assistant
branch head of the Madrid branch. However, he did not report for work.
On September 11, 2001, Hotchkiss directed respondent to explain why he should not be
sanctioned for his failure to assume his new post at the Madrid branch.

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

I regret to say that I am not accepting the position of Asst. Branch Head of
RBCI-Madrid Branch for the very reason that the papers were not left with me by
the Admin. Officer after she let me read them. Considering that Asst. Branch Head is
a newly-created position, I requested her for a copy of the said papers first so I can
thoroughly study them before making my decision. But she immediately took them
back from me after I told her about this.
On September 14, 2001, respondent filed with the Regional Arbitration Branch No. XIII,
National Labor Relations Commission (NLRC), Butuan City, a complaint for constructive
dismissal against petitioners, docketed as NLRC Case No. RAB-13-09-00276-2001.
On January 14, 2002, the Labor Arbiter rendered a Decision, the dispositive portion of
which is partly reproduced below:

WHEREFORE, premises considered, judgment is hereby entered:
1. Declaring complainant as constructively illegally dismissed;

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

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

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

P12,192.50 + 1,000 x 4 = P52,768.00
Plus P52,768/13 (13
th
mo. Pay) = P4,397.33

TOTAL BACKWAGES P57,165.33
and

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

Complainants other claims are dismissed for lack of merit.
SO ORDERED.

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

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

SO ORDERED.
The NLRC held that respondents reassignment is not a demotion. There was neither
diminution in functions and pay. Thus, he was not constructively dismissed from
employment. Moreover, respondent himself admitted that he decided not to report for work
at his new station. Yet, he continued receiving his salaries and allowances.
Respondent filed a motion for reconsideration but it was denied by the NLRC.
Respondent then filed with the Court of Appeals a petition for certiorari, docketed as
CA-G.R. SP No. 77206.
On September 23, 2004, the Court of Appeals rendered its Decision granting the
petition, thus:

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

SO ORDERED.

Petitioners filed a motion for reconsideration. However, it was denied by the appellate
court in its Resolution dated September 6, 2005.
The only issue before us is whether the Court of Appeals erred in holding that
respondent was constructively dismissed from employment.
In resolving this issue, we rely on the following guide posts:
Under the doctrine of management prerogative, every employer has the inherent right
to regulate, according to his own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, the time, place and manner of work,
work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and
recall of employees.
[2]
The only limitations to the exercise of this prerogative are those
imposed by labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also
protects the employers right to expect from its employees not only good performance,
adequate work, and diligence, but also good conduct and loyalty.
[3]
In fact, the Labor Code
does not excuse employees from complying with valid company policies and reasonable
regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines:
(a) a transfer is a movement from one position to another of equivalent rank, level or salary
without break in the service or a lateral movement from one position to another of equivalent
rank or salary;
[4]
(b) the employer has the inherent right to transfer or reassign an employee
for legitimate business purposes;
[5]
(c) a transfer becomes unlawful where it is motivated by
discrimination or bad faith or is effected as a form of punishment or is a demotion without
sufficient cause;
[6]
(d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee.
[7]

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

In light of the above guidelines, we agree with the NLRC in ruling that respondent was
not constructively dismissed from employment.
Respondent contends that the abolition of his position as planning and marketing officer
and his appointment as bookkeeper I and assistant branch head of the Madrid Branch is a
demotion. However, a look at the functions of his new position shows the contrary. The
bookkeeper and assistant branch head is not only charged with preparing financial reports and
monthly bank reconciliations, he is also the head of the Accounting Department of a
branch. Under any standard, these are supervisory and administrative tasks which entail great
responsibility. Moreover, respondents transfer did not decrease his pay.
Nor was respondents transfer motivated by ill-will or prejudice on the part of
petitioners. His position was not the only one abolished pursuant to the banks Personnel
Streamlining Program. We recall that the position of remedial officer was likewise
abolished. Petitioners reason was to acquire savings from the salaries it would pay to full-
time personnel in these positions.
Finally, we note that despite respondents refusal to accept the new appointment,
petitioners did not dismiss him. Rather, it was he who opted to terminate his employment
when he purposely failed to report for work.
In fine, we hold that the Court of Appeals erred when it concluded that respondent was
constructively dismissed from employment.
WHEREFORE, we GRANT the petition and REVERSE the Decision of the Court of Appeals
in CA-G.R. SP No. 77206. The Resolutions of the NLRC dated November 19, 2002 and February
26, 2003, dismissing respondents complaint are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 155421 July 7, 2004
ELMER M. MENDOZA, petitioner,
vs.
RURAL BANK OF LUCBAN, respondent.


D E C I S I O N


PANGANIBAN, J .:
The law protects both the welfare of employees and the prerogatives of management. Courts will not
interfere with business judgments of employers, provided they do not violate the law, collective
bargaining agreements, and general principles of fair play and justice. The transfer of personnel from
one area of operation to another is inherently a managerial prerogative that shall be upheld if
exercised in good faith -- for the purpose of advancing business interests, not of defeating or
circumventing the rights of employees.
The Case
The Court applies these principles in resolving the instant Petition for Review
1
under Rule 45 of the
Rules of Court, assailing the June 14, 2002 Decision
2
and September 25, 2002 Resolution
3
of the
Court of Appeals (CA) in CA-GR SP No. 68030. The assailed Decision disposed as follows:
"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit."
4

The challenged Resolution denied petitioner's Motion for Reconsideration.
The Facts
On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution
Nos. 99-52 and 99-53, which read:
"Board Res. No. 99-52
"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the bank to
familiarize bank employees with the various phases of bank operations and further strengthen
the existing internal control system[,] all officers and employees are subject to reshuffle of
assignments. Moreover, this resolution does not preclude the transfer of assignment of bank
officers and employees from the branch office to the head office and vice-versa."
"Board Res. No. 95-53
"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to
their new assignments without changes in their compensation and other benefits.
NAME OF
EMPLOYEES
PRESENT
ASSIGNMENT
NEW ASSIGNMENT
JOYCE V. ZETA Bank Teller C/A Teller
CLODUALDO
ZAGALA
C/A Clerk Actg. Appraiser
ELMER L. MENDOZA Appraiser Clerk-Meralco
Collection
CHONA R.
MENDOZA
Clerk-Meralco
Collection
Bank Teller"
5

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

On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his
opinion on the reshuffle, as follows:
"RE: The recent reshuffle of employees as per
Board Resolution dated April 25, 1999
"Dear Sir:
"This is in connection with the aforementioned subject matter and which the undersigned
received on April 25, 1999.
"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to
Clerk-Meralco Collection is deemed to be a demotion without any legal basis. Before this
action on your part[,] the undersigned has been besieged by intrigues due to [the] malicious
machination of a certain public official who is bruited to be your good friend. These malicious
insinuations were baseless and despite the fact that I have been on my job as Appraiser for
the past six (6) years in good standing and never involved in any anomalous conduct, my
being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a
prelude to my termination in due time. This will constitute an unfair labor practice.
"Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until
the reason [for] my being reshuffled is made clear.
"Your kind consideration on this request will be highly appreciated."
8

On May 10, 1999, Daya replied:
"Dear Mr. Mendoza,
"Anent your undated letter expressing your resentment/comments on the recent
management's decision to reshuffle the duties of bank employees, please be informed that it
was never the intention (of management) to downgrade your position in the bank considering
that your due compensation as Bank Appraiser is maintained and no future reduction was
intended.
"Aside from giving bank employees a wider experience in various banking operations, the
reshuffle will also afford management an effective tool in providing the bank a sound internal
control system/check and balance and a basis in evaluating the performance of each
employee. A continuing bankwide reshuffle of employees shall be made at the discretion of
management which may include bank officers, if necessary as expressed in Board Resolution
No. 99-53, dated April 25, 1999. Management merely shifted the duties of employees, their
position title [may be] retained if requested formally.
"Being a standard procedure in maintaining an effective internal control system recommended
by the Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a
prerogative of bank management."
9

On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a letter in which he
applied for a leave of absence from work:
"Dear Sir:
"I wish I could continue working but due to the ailment that I always feel every now and then, I
have the honor to apply for at least ten (10) days sick leave effective June 7, 1999.
"Hoping that this request [merits] your favorable and kind consideration and understanding."
10

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

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

The labor arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:
"WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring respondents guilty of illegal dismissal.
2. Ordering respondents to reinstate complainant to his former position without loss of
seniority rights with full backwages from date of dismissal to actual reinstatement in the
amount of P55,000.00 as of June 30, 2000.
3. Ordering the payment of separation pay if reinstatement is not possible in the amount
ofP30,000.00 in addition to 13
th
month pay of P5,000.00 and the usual P10,000.00
annual bonus afforded the employees.
4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the
amount ofP5,000.00
5. Ordering the payment of moral damages in the amount of P50,000.00.
6. Ordering the payment of exemplary damages in the amount of P25,000.00
7. Ordering the payment of Attorney's fees in the amount of P18,000.00 which is 10% of
the monetary award."
13

On appeal, the NLRC reversed the labor arbiter.
14
In its July 18, 2001 Resolution, it held:
"We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its
implementation of its Board Resolution directing the reshuffle of employees at its Tayabas
branch to positions other than those they were occupying. While at first the employees thereby
affected would experience difficulty in adjusting to their new jobs, it cannot be gainsaid that the
objective for the reshuffle is noble, as not only would the employees obtain additional
knowledge, they would also be more well-rounded in the operations of the bank and thus help
the latter further strengthen its already existing internal control system.
"The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from
an appraiser he was made to perform the work of a clerk in the collection of Meralco
payments, which he may have considered as beneath him and his experience, being a pioneer
employee. But it cannot be discounted either that other employees at the Tayabas branch
were similarly reshuffled. The only logical conclusion therefore is that the Board Resolution
was not aimed solely at the [petitioner], but for all the other employees of the x x x bank as
well. Besides, the complainant has not shown by clear, competent and convincing evidence
that he holds a vested right to the position of Appraiser. x x x.
"How and by what manner a business concern conducts its affairs is not for this Commission to
interfere with, especially so if there is no showing, as in the case at bar, that the reshuffle was
motivated by bad faith or ill-will. x x x."
15

After the NLRC denied his Motion for Reconsideration,
16
petitioner brought before the CA a Petition
for Certiorari
17
assailing the foregoing Resolution.
Ruling of the Court of Appeals
Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled
thus:
"The so-called 'harassment' which Mendoza allegedly experienced in the aftermath of the
reshuffling of employees at the bank is but a figment of his imagination as there is no evidence
extant on record which substantiates the same. His alleged demotion, the 'cold shoulder'
stance, the things about his chair and table, and the alleged reason for the harassment are but
allegations bereft of proof and are perforce inadmissible as self-serving statements and can
never be considered repositories of truth nor serve as foundations of court decisions anent the
resolution of the litigants' rights.
"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as
there was no [diminution] of his salary benefits and rank. He could even retain his position title,
had he only requested for it pursuant to the reply of the Chairman of the bank's board of
directors to Mendoza's letter protesting the reshuffle. There is, therefore, no cause to doubt the
reasons which the bank propounded in support of its move to reshuffle its employees, viz:
1. to 'familiarize bank employees with the various phases of bank operations,' and
2. to 'further strengthen the existing internal control system' of the bank.
"The reshuffling of its employees was done in good faith and cannot be made the basis of a
finding of constructive dismissal.
"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does
not signify that the bank has dismissed the former from its employ. Mendoza separated himself
from the bank's employ when, on June 24, 1999, while on leave, he filed the illegal dismissal
case against his employer for no apparent reason at all."
18

Hence, this Petition.
19

The Issues
Petitioner raises the following issues for our consideration:
"I. Whether or not the petitioner is deemed to have voluntarily separated himself from the
service and/or abandoned his job when he filed his Complaint for constructive and
consequently illegal dismissal;
"II. Whether or not the reshuffling of private respondent'[s] employees was done in good faith
and cannot be made as the basis of a finding of constructive dismissal, even as the
[petitioner's] demotion in rank is admitted by both parties;
"III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann
Department Store (323 SCRA 445)] is applicable to the case at bar;
"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's money claims,
damages, and unpaid salaries for the period July 1-30, 1999, although this was not disputed by
the private respondent; and
"V. Whether or not the entire proceedings before the Honorable Court of Appeals and the
NLRC are a nullity since the appeal filed by private respondent before the NLRC on August 5,
2000 was on the 15
th
day or five (5) days beyond the reglem[e]ntary period of ten (10) days as
provided for by law and the NLRC Rules of Procedure."
20

In short, the main issue is whether petitioner was constructively dismissed from his employment.
The Court's Ruling
The Petition has no merit.
Main Issue:
Constructive Dismissal
Constructive dismissal is defined as an involuntary resignation resorted to when continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution of pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.
21
Petitioner argues that he was compelled to file an action for
constructive dismissal, because he had been demoted from appraiser to clerk and not given any work
to do, while his table had been placed near the toilet and eventually removed.
22
He adds that the
reshuffling of employees was done in bad faith, because it was designed primarily to force him to
resign.
23

Management Prerogative
to Transfer Employees
Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often
decline to interfere in legitimate business decisions of employers.
24
Indeed, labor laws discourage
interference in employers' judgments concerning the conduct of their business.
25
The law must protect
not only the welfare of employees, but also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign
employees from one office or area of operation to another -- provided there is no demotion in rank or
diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination,
made in bad faith, or effected as a form of punishment or demotion without sufficient cause.
26
This
privilege is inherent in the right of employers to control and manage their enterprise effectively.
27
The
right of employees to security of tenure does not give them vested rights to their positions to the
extent of depriving management of its prerogative to change their assignments or to transfer them.
28

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining
agreements, and general principles of fair play and justice.
29
The test for determining the validity of
the transfer of employees was explained in Blue Dairy Corporation v. NLRC
30
as follows:
"[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion, bearing in mind the basic elements of
justice and fair play. Having the right should not be confused with the manner in which that
right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in
rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to
overcome this burden of proof, the employee's transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because continued employment is rendered
impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in
pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or
disdain by an employer has become so unbearable to the employee leaving him with no option
but to forego with his continued employment."
31

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

Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with
the various phases of bank operations and further strengthen the existing internal control system"
33
of
all officers and employees. We have previously held that employees may be transferred -- based on
their qualifications, aptitudes and competencies -- to positions in which they can function with
maximum benefit to the company.
34
There appears no justification for denying an employer the right
to transfer employees to expand their competence and maximize their full potential for the
advancement of the establishment. Petitioner was not singled out; other employees were also
reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges
and other benefits. This fact is clear in respondent's Board Resolutions, the April 30, 1999 letter of
Bank President Daya to Branch Manager Cada, and the May 10, 1999 letter of Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no
credence by both lower tribunals was his bare and self-serving statement that he had been positioned
near the comfort room, made to work without a table, and given no work assignment.
35
Purely
conjectural is his claim that the reshuffle of personnel was a harassment in retaliation for an alleged
falsification case filed by his relatives against a public official.
36
While the rules of evidence prevailing
in courts of law are not controlling in proceedings before the NLRC,
37
parties must nonetheless
submit evidence to support their contentions.
Secondary Issues:
Serrano v. NLRC Inapplicable
Serrano v. NLRC
38
does not apply to the present factual milieu. The Court ruled therein that the lack
of notice and hearing made the dismissal of the employee ineffectual, but not necessarily
illegal.
39
Thus, the procedural infirmity was remedied by ordering payment of his full back wages from
the time of his dismissal.
40
The absence of constructive dismissal in the instant case precludes the
application of Serrano. Because herein petitioner was not dismissed, then he is not entitled to his
claimed monetary benefits.
Alleged Nullity of NLRC
and CA Proceedings
Petitioner argues that the proceedings before the NLRC and the CA were void, since respondent's
appeal before the NLRC had allegedly been filed beyond the reglementary period.
41
A careful scrutiny
of his Petition for Review
42
with the appellate court shows that this issue was not raised there.
Inasmuch as the instant Petition challenges the Decision of the CA, we cannot rule on arguments that
were not brought before it. This ruling is consistent with the due-process requirement that no question
shall be entertained on appeal, unless it has been raised in the court below.
43

WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25, 2002
Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
The POEA
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-79436-50 January 17, 1990
EASTERN ASSURANCE & SURETY CORPORATION, petitioner,
vs.
SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA
VENTURA, ESTER TRANGUILLAN, et al., respondents.
Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioner.

NARVASA, J .:
In connection with the application with the Philippine Overseas Employment Administration (POEA) of
J & B Manpower Specialist, Inc. for a license to engage in business as a recruitment agency, a surety
bond was filed on January 2, 1985 by the applicant and the Eastern Assurance and Surety
Corporation, herein petitioner, in virtue of which they both held themselves
. . . firmly bound unto (said) Philippine Overseas Employment Administration, Ministry of
Labor in the penal sum of PESOS ONE HUNDRED FIFTY THOUSAND ONLY . . .
(Pl50,000.00) for the payment of which will and truly to be made, . . . (they bound
themselves, their) heirs, executors, administrators, successors and assigns, jointly and
severally . .
The bond stipulated that:
a) it was "conditioned upon the true and faithful performance and observance of the . . . principal (J &
B Manpower Specialist, Inc.) of its duties and obligations in accordance with all the rules and
regulations promulgated by the Ministry of Labor Philippine Overseas Employment Administration and
with the terms and conditions stipulated in the License;
b) the liability of the . . . Surety (petitioner) shall in no case exceed the sum of PESOS ONE
HUNDRED FIFTY THOUSAND (P150,000.00) ONLY, PHILIPPINE CURRENCY;
1

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

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

From June 1983 to December 1985 . . . thirty three (33) . . . (persons) applied for
overseas employment with . . . (J & B). In consideration of promised deployment,
complainants paid respondent various amounts for various fees. Most of' the receipts
issued were sighed by Mrs. Baby Bundalian, Executive Vice-President of . . . (J & B).
Because of non-deployment . . . (the applicants) filed separate complaints with the
Licensing and Regulation Office of POEA against . . . (J & B) for violation of Articles 32
and 34 (a) of the Labor Code between the months of April to October 1985.
Despite summons/notices of hearing,, . . . (J & B) failed to file Answer nor appear in the
hearings conducted.
In its separate Answer, . . . EASCO essentially disclaimed liability on the ground that the
claims were not expressly covered by the bond, that POEA had no jurisdiction to order
forfeiture of the bond, that some of the claims were paid beyond or prior to the period of
effectivity of the bond.
On September 8, 1986, the POEA Administrator issued the Order in favor of
complainants ruling thus:
After careful evaluation, we find that the receipts and testimonies of
complainants, in the absence of controverting evidence substantially
establish that respondent charged and collected fees from them in
amounts exceeding what is prescribed by this Administration.
Complainants' non-deployment strongly indicates that there was no
employment obtained for them. Hence, violation of Articles 32 and 34 (a)
of the Labor Code, as amended, is established against respondent. The
claims of complainants having arose (arisen) out of acts of the principal
covered under the surety (bond), the respondent surety is equally liable
therefor.
Except for complainants Ramos, Samson, de Leon and Rizada, whose claims were
transacted prior to the effectivity of the bond, . . . EASCO was declared jointly and
severally liable with . . . (J & B) to twenty-nine (29) complainants.
(The dispositive portion of the POEA Administrator's Order also contained the following
statement and direction, viz.:
Respondent was suspended on May 23, 1985, June 26, 1985 and
January 17, 1986 all for illegal exaction. Considering its track record of
illegal exaction activities and considering further the gross violation of
recruitment rules and regulations established against it in the instant
cases, and the expiration of its license on February 15, 1985, it is hereby
forever banned from participation in the overseas employment program. It
is ordered to cease and desist from further engaging in recruitment
activities otherwise it shall be prosecuted for illegal recruitment.')
(J & B filed a motion for reconsideration). On December 19, 1986, the then deputy
Minister of Labor and Employment denied the . . . Motion for Reconsideration for lack of
merit and affirmed the findings in the Order of the POEA Administrator finding no
reversible error therein.
On appeal by EASCO J & B having as aforestated taken no part in the proceeding despite due
service of summons the judgment was modified by the Secretary of Labor, by Order dated July 1,
1987, disposing as follows:
4

WHEREFORE, in view of the foregoing, the Resolution of the then Deputy Minister of
Labor dated December 19, 1986 affirming the Order of the POEA Administrator dated
September 8, 1986 is hereby MODIFIED. Respondent J & B Manpower Specialist is
directed to refund all thirty-three (33) complainants as listed in the Order of September
8, 1986 in the amounts listed thereto with the modification that complainants Lucena
Cabasal and Felix Rivero are both entitled only to P15,980 and not P15,980
each. Respondent Eastern Assurance and Surety Corporation is hereby found jointly
and severally liable with respondent J & B Manpower Specialist to refund nineteen (19)
complainants in the modified amounts . . . (particularly specified).
The other findings in the Order of the POEA Administrator dated September 8, 1986
affirmed in the Resolution of the then Deputy Minister . . . are also hereby AFFIRMED.
This Order is FINAL. No further Motion for Reconsideration hereof shall be entertained.
It is noteworthy that EASCO's liability for the refund, jointly and severally with its principal, was limited
to 19 named complainants (in contrast to verdicts of the POEA and the Deputy Minister which both
ordered payment to no less than 33 complainants) and was correspondingly reduced from
P308,751.75 and US $ 400.00
5
to the aggregate amount of P 140,817.75.
6

The special civil action of certiorari at bar was thereafter instituted by EASCO
7
praying for the nullification
of the POEA Administrator's Order of September 8, 1986, the Resolution of the Deputy Minister of Labor of' December 19,
1986, and the Order of the Secretary of Labor of July 1, 1987, It theorizes that:
1) the POEA had no jurisdiction over the claims for refund filed by non-employees;
2) neither did the Secretary of Labor have jurisdiction of the claims;
3) assuming they had jurisdiction, both the POEA and Secretary of Labor also
committed legal errors and acted with grave abuse of discretion when they ruled that
petitioner is liable on the claims.
EASCO contends that the POEA had no "adjudicatory jurisdiction" over the monetary claims in
question because the same "did not arise from employer-employee relations." Invoked in support of
the argument is Section 4 (a) of EO 797 providing in part
8
that the POEA has
. . . original and exclusive jurisdiction over all cases, including money claims, involving
employer-employee relations arising out of or by virtue of any law or contract involving
Filipino workers for overseas employment including seamen . . .
The complaints are however for violation of Articles 32 and 34 a) of the Labor Code. Article 32
and paragraph (a) of Article 34 read as follows:
Art. 32. Fees to be paid by workers.Any person applying with a private fee-charging
employment agency for employment assistance shall not be charged any fee until he
has obtained employment through its efforts or has actually commenced employment.
Such fee shall be always covered with the approved receipt clearly showing the amount
paid. The Secretary of Labor shall promulgate a schedule of allowable fees.
Art. 34. Prohibited practices.It shall be unlawful for any individual, entity, licensee, or
holder of authority:
a) To charge or accept, directly or indirectly, any amount greater than that specified in
the schedule of allowable fees prescribed by the Secretary of Labor, or to make a
worker pay any amount greater than actually received by him as a loan or advance; . . .
The penalties of suspension and cancellation of license or authority are prescribed for violations of
the above quoted provisions, among others. And the Secretary of Labor has the power under Section
35 of the law to apply these sanctions, as well as the authority, conferred by Section 36, not only, to
"restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate
rules and regulations to carry out the objectives and implement the provisions" governing said
activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the
POEA
9
"on its own initiative or upon filing of a complaint or report or upon request for investigation by any aggrieved
person, . . . (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or authority
of any agency or entity" for certain enumerated offenses including
1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or
any fee or bond in excess of what is prescribed by the Administration, and
2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and
regulations.
10

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

Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by
the respondent agency or contractor, specially the refund or reimbursement of such fees as may have
been fraudulently or otherwise illegally collected, or such money, goods or services imposed and
accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on
an offending recruitment agency or contractor to suspension or cancellation of its license, without the
concomitant obligation to repair the injury caused to its victims. It would result either in rewarding
unlawful acts, as it would leave the victims without recourse, or in compelling the latter to litigate in
another forum, giving rise to that multiplicity of actions or proceedings which the law abhors.
Even more untenable is EASCO's next argument that the recruiter and its victims are in pari delicto
the former for having required payment, and the latter for having voluntarily paid, "prohibited
recruitment fees" and therefore, said victims are barred from obtaining relief. The sophistical, if not
callous, character of the argument is evident upon the most cursory reading thereof; it merits no
consideration whatever.
The Court is intrigued by EASCO's reiteration of its argument that it should not be held liable for
claims which accrued prior to or after the effectivity of its bond, considering that the respondent
Secretary had conceded the validity of part of said argument, at least. The Secretary ruled that
EASCO's "contention that it should not be held liable for claims/payments made to respondent
agency before the effectivity of the surety bond on January 2, 1985 is well taken." According to the
Secretary:
12

. . . A close examination of the records reveal(s) that respondent EASCO is not jointly
and severally liable with respondent agency to refund complainants Lucena Cabasal,
Felix Rivero, Romulo del Rosario, Rogelio Banzuela, Josefina Ogatis, Francisco Sorato,
Sonny Quiazon, Josefina Dictado, Mario del Guzman and Rogelio Mercado (10 in
all). These complainants paid respondent agency in 1984, or before the effectivity of the
bond on January 2, 1985 as evidence by the reciept and their testimonies.
The related argument, that it is also not liable for claims filed after the expiry (on January 2, 1986) of
the period stipulated in the surety bond for the filing of claims against the bond, must however be
rejected, as the Secretary did. The Court discerns no grave abuse of discretion in the Secretary's
statement of his reasons for doing so, to wit:
. . . While it may be true that respondent EASCO received notice of their claims after the
ten (10) day expiration period from cancellation or after January 12, 1986 as provided in
the surety bond, records show that . . . EASCO's principal, respondent agency, was
notified/ summoned prior to the expiration period or before January 12, 1986.
Respondent agency received summons on July 24, 1985 with respect to claims of
complainants Penarroyo, dela Cruz and Canti. It also received summons on November
26, 1985 with respect to Giovanni Garbillons' claim. Respondent agency was likewise
considered constructively notified of the claims of complainants Calayag, Danuco
Domingo and Campena on October 6, 1985. In this connection, it may be stressed that
the surety bond provides that notice to the principal is notice to the surety. Besides, it
has been held that the contract of a compensated surety like respondent EASCO is to
be interpreted liberally in the interest of the promises and beneficiaries rather than
strictly in favor of the surety (Acoustics Inc. v. American Surety, 74 Nev-6, 320 P2d.
626, 74 Am. Jur. 2d).
So, too, EASCO's claim that it had not been properly served with summons as regards a few of the
complaints must be rejected, the issue being factual, and the Court having been cited to no grave
error invalidating the respondent Secretary's conclusion that summons had indeed been duly served.
Finally, EASCO's half-hearted argument that its liability should be limited to the maximum amount set
in its surety bond, i.e., P150,000.00, is palpably without merit, since the aggregate liability imposed on
it, P140,817.75, supra, does not in fact exceed that limit.
WHEREFORE, the petition is DISMISSED for lack of merit, and this decision is declared to be
immediately executory. Costs against petitioner.
SO ORDERED.
Solidary Liability of Recruitment Agencies
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 82310 June 18, 1990
FEAGLE CONSTRUCTION CORPORATION, petitioner,
vs.
GAVINO GAYDA, ELPIDIO AGPALAYA, MIGUELITO BATOON, ELIGIO CUENCO, CLARO
CUNANAN, SANTIAGO CURAMENG, MANUEL DACO, EDUARDO DEPONE, RAYMUNDO
ERVERA, JOSE ESTABILLO, ROGELIO FIGUEROA, ARTEMIO HULINGNGA, JORGE ITING,
EMILIANO NACAM, ALEXANDER MAPUTOL, AVELINO MENDOZA, ROGELIO NOO, ROLANDO
PATINIO, VITALIANO PENA, ROLLY PERALES, DOMINADOR STA. CATALINA, ARSENIO
SANTOS, FELIPE TESADO and NATIONAL LABOR RELATIONS COMMISSION,respondents.
G.R. No. 87998 June 18, 1990
FEAGLE CONSTRUCTION CORPORATION, petitioner,
vs.
JOSEPH ORPILIA AND NATIONAL LABOR RELATIONS COMMISSION, respondents.
Jacinto D. Jimenez for petitioner.
Millora, Nario, Canto & Pontejos for private respondents.

GANCAYCO, J.:
The singular issue in this case is whether or not petitioner may be held solidarily liable with the
foreign employer for any unpaid claims of private respondents against their foreign principal employer
for any unpaid claims of private respondents against their foreign principal employer even as they
have a stipulation to this effect.
This petition (G.R. No. 82310) was previously dismissed on March 23, 1988 for failure of Petitioner to
sufficiently to show that the respondent Commission had committed a grave abuse of discretion in
rendering its questioned judgment.
1
An amended petition was filed on April 4, 1988.
2
The amended petition was
given due course on July 4, 1988.
3

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

The modified decision of administrator Achacoso has the following dispositive portion.
WHEREFORE, premises considered, respondents Feagle Construction Corporation,
Florentino Aguila and Rene Aguila and its (sic) foreign principal Algosaibi Bison, Ltd.,
Dammam, Saudi Arabia are hereby held jointly and severally liable to pay herein
complainants within ten (10) days from receipt of this Order, the peso equivalent at the
time of actual payment of the sum appearing opposite complainants' names
representing their total claim for unpaid salaries/wages, remittances and other benefits,
to wit:
1
.
Elpidio
Agpalza
S.R.
19,245.00
2. Miguel
Batoon
9,433.00
3. Eligio
Cuenco
18,015.00
4. Claro
Cunanan
16,409.00
5. Santiago
Curameng
13,065.00
6. Manuel
Daco
9,062.00
7. Eduardo
Depone
24,038.00
8. Raymundo
Ervera
15,235.00
9. Jose
Estabillo
9,358.00
10. Rogelio
Figueroa
19,554.00
11. Gavino
Gayda
14,977.00
12. Artemio
Hulingnga
8,581.00
13. Jorge Iting 18,436.00
14. Erqiliano
Macam
13,436.00
15. Alexander
Maputol
16,394.00
16. Avelino
Mendoza
8,124.00
17. Rogelio
Noo
18,930.00
18. Rolando
Patinio
18,598.00
19. Vitiliano
Pena
16,187.00
20. Rolly
Perales
10,713.00
21. Dominador
Sta.
Catalina
12,767.00
22. Arsenio L.
Santos
17,708.00
23. Felipe
Tesado
14,236.00
TOTAL S.R.
342,501.00
We take note that complainants have been paid of (sic) their plane fare bonds as
evidenced by check vouchers duly signed by individual complainants, hence, such claim
is considered settled and/or fully paid.
Respondent are further ordered to pay attorneys fees equivalent to five percent (5%) of
the total amount of the claims.
All other claims are hereby dismissed for lack of merit.
No pronouncement as to cost.
6

A temporary restraining order was issued by this Court on September 12, 1988 and the petitioner filed
the required bond in the amount of P50,000.00.
7
The following antecedent pertinent facts are not disputed:
1. Private respondents have been employed with Algosaibi-Bison, Ltd. in Saudi Arabia
for three to five years working on construction projects for the Kingdom of Saudi Arabia.
2. Sometime in 1983, Algosaibi-Bison, Ltd. started encountering financial difficulties
because of the drop in the price of oil. Because of the drop in the price of oil, the income
of the Kingdom of Saudi Arabia plunged from about one hundred billion dollars a year to
eighteen billion dollars a year. As a result, the Kingdom of Saudi Arabia encountered
financial difficulties in paying Algosaibi-Bison, Ltd. for its construction projects.
3. Starting in 1983, the remittance of the allotments of the beneficiaries of Filipino
workers employed with Algosaibi-Bison, Ltd. was delayed. Although all the allotments
for 1983 and 1984 were eventually paid, all these payments were delayed.
4. During all these years petitioner never charged Filipino workers like private
respondents a single centavo for sending them to work for Algosaibi-Bison, Ltd.
Petitioner advanced all mobilization expenses out of its funds.
5. Because of its financial difficulties, Algosaibi-Bison, Ltd. could not even reimburse
petitioner for the mobilization expenses petitioner advanced, such as passport fees,
medical fees, and visa application fees. Petitioner insisted that Algosaibi-Bison, Ltd.
should give top priority to the payment of the wages and the allotments of the Filipino
workers employed with it.
6. Because of this development, petitioner decided to stop sending back Filipino
workers to work with Algosaibi-Bison, Ltd. Workers are given a one-month vacation
after a year with re-entry visa.
7. Sometime in July, 1984, the Filipino workers employed with Algosaibi-Bison, Ltd. who
had returned to Manila, including private respondents, requested for a meeting with the
management of petitioner. About forty (40) Filipino workers attended the meeting.
During the meeting, the workers requested petitioner to return them to their job site in
Saudi Arabia. Mr. Florentino B. Aguila, the president of petitioner, informed the workers
that petitioner did not want to send back any workers to Saudi Arabia because of the big
risk due to the financial difficulties of Algosaibi-Bison, Ltd.
8. However, the workers pleaded with Mr. Florentino B. Aguila to send them back to
Saudi Arabia. They explained that they were jobless in the Philippines, because of the
depressed economic condition of the country. Rather than remain jobless, they would
rather to take a chance in Saudi Arabia. They assured petitioner that they were willing to
assume the risk in case the remittance of their salaries would be delayed. They
emphasized that they were willing to sign a written statement indicating that they would
not hold petitioner liable for any delay or non-payment of their salaries and any amounts
due them from Algosaibi-Bison, Ltd. In accordance with their commitment, the said
workers, including private respondents, signed a Statement .... Moreover, the workers
stated they would seek the help of Saudi labor authorities individually in the event they
would not be paid.
9. It was under the foregoing circumstances that petitioner reluctantly agreed to send
back private respondents to Saudi Arabia to help them in their dire financial need if they
would sign the aforementioned 'Statement' ... before they leave for Saudi Arabia. ...
10. While the Filipino workers were in Saudi Arabia, they received their salaries directly
from Algosaibi-Bison, Ltd.
11. When Algosaibi-Bison, Ltd. went into bankruptcy in 1986, all the Filipino workers in
its employ, including private respondents dealt with the liquidator directly and in their
individual capacities. They filed their claims with the liquidator, and the liquidator issued
to each of them a certificate stating the amount payable to each of them as soon as
funds are available. The said Filipino workers, including private respondents, agreed
that the liquidator would pay them directly and individually through their bank accounts
in the Philippines. ...
12. Just the same, to assist the workers, petitioner has written the liquidator to follow up
the claims of the Filipino workers, and the liquidator has replied to it. The reply of the
liquidator confirmed the individual agreement of the said workers, including private
respondents, that they would be paid by the liquidator directly and individually. Thus,
petitioner has nothing to do with the remittance of the payments due private
respondents. In fact, the liquidator even refused to furnish the petitioner a list of their
individual claims and corresponding amounts due each of them. The liquidator
considered these information confidential and privy to said workers. ...
13. Under the law of Saudi Arabia, the claims of the Filipino workers of Algosaibi- Bison,
Ltd. has first priority for payment in the bankruptcy proceeding. Article 15 of the Labor
Law of Saudi Arabia provides:
The amounts to which the workman or his dependents are entitled under
the provisions of this Law shall be considered first class privileged debts,
and for the recovery thereof the workman or his heirs shall have a priority
rights over all the employer's property.'
14. On October 3, 1986, private respondents filed with the Philippine Overseas
Employment Administration a Complaint against petitioner for the payment of their
claims with the liquidator of Algosaibi-Bison, Ltd.
15. On December 2, 1986, petitioner filed its Answer. In its Answer, it pointed out that it
was never furnished with a copy of any Complaint from private respondent Artemio
Hulingnga.
16. On July 20, 1987, the Philippine Overseas Employment Administration rendered a
Decision in favor of private respondents, including respondent Artemio Hulingnga,
although petitioner was never furnished with a copy of his Complaint.
17. On August 7, 1987, petitioner appealed to respondent National Labor Relations
Commission (hereinafter referred to as respondent Commission).
18. On January 29, 1988, respondent Commission rendered a Decision affirming the
Decision of the Philippine Overseas Employment Administration with the modification
that the 'president' and the 'vice president for administration and finance' of petitioner
were exempted from liability for the claims of private respondents. ...
18. On February 11, 1988, petitioner filed a Motion for Reconsideration. ...
19. On February 29, 1988, respondent Commission issued a Resolution denying the
Motion for Reconsideration. ...
20. On March 8, 1988, before receipt of the aforementioned Resolution of respondent
Commission, petitioner filed a Supplemental Motion for Reconsideration. ... Petitioner
received the said Resolution of respondent Commission only after petitioner had filed its
Supplemental Motion for Reconsideration."
8

The petition is impressed with merit.
We agree with Public Respondents that the general rule as provided for in Section 1, Rule II of the
rules and regulations of the Philippine Overseas Employment Administration is that every licensed
private recruitment agency shall be jointly and solidarity liable with the employer for all claims and
liabilities which may arise in connection with the implementation of the contract of employment.
In this case, however, We find it necessary to deviate from the general rule. First, because of
changed circumstances, and second, because of individual agreements between petitioner and
private respondents which cannot be considered void because the same cannot be considered
contrary to law.
It is the uncontradicted contention of petitioner that 13 of private respondents filed their claims for
salaries due in January, February and March of 1986, when their contracts of employment expired
in1985.
9

It is also clear that private respondents executed new and different contracts of employment directly
with Algosaibi-Bison, Ltd. without the participation and consent of the petitioner. The former contracts
with the petitioner expired and private respondents entered into new contracts of employment with the
Algosaibi-Bison, Ltd., without the participation of petitioner.
The claims of private respondents were made directly with the liquidator of Algosaibi- Bison, Ltd. and
they agreed to wait for the promised payment. Again the petitioner had nothing to do with those
claims.
We simply cannot ignore that petitioner was reluctant to send the private respondents back to Saudi
Arabia because as early as 1983, the Algosaibi-Bison, Ltd. started encountering financial difficulties
because of the drop in the price of oil. Private respondents were the ones who insisted that they be
allowed to resume employment. They were informed of the risks involved relating to the financial
reverses of the employer. They insisted to return to Saudi Arabia and they agreed to sign individual
statements, which they did, to the effect that each one of them did not hold petitioner responsible for
delay or non-payment of their salaries and any amounts due them from Algosaibi-Bison, Ltd.
These individual statements voluntary signed by the private respondents to convince the reluctant
petitioner to send them back to Saudi Arabia, notwithstanding their knowledge of the financial
reverses of this employer, are eloquent individual waivers of their rights against petitioner. They were
informed of the risk involved in returning to an employer in serious financial distress. They insisted on
returning to work, even persuading petitioner to allow them to do so, by waiving the possible liability
of petitioner. Under these circumstances, when private respondents were insisting to return to work
despite the warning, We cannot consider their written waivers as to petitioner's responsibilities void.
They were not victims of deceit or deception. They entered into those waivers with open eyes and
clear minds. They were aware of the imminent danger and the great risks involved in their renewed
ventures.
We also consider that as of record in the past, petitioner never took advantage of private
respondents. They were always treated fairly and in accordance with law. Private respondents did not
question the good faith of Petitioner. Their former employer Algosaibi-Bison, Ltd. went into bankruptcy
in 1986 and petitioner had nothing to do with that. Private respondents filed their claims directly with
the Liquidator of their former employer Algosaibi-Bison, Ltd. They were given certificates of the
amounts due them, to be given preference under the laws of Saudi Arabia. They were to be paid
directly, again without participation of the petitioner. Petitioner wrote the Liquidator just to help private
respondents, so that their claims may be expedited.
Holding, therefore, that in view of the circumstances proven in this case, and the very clear waiver of
liability individually signed by private respondents in favor of petitioner, the petitioner cannot be held
jointly and solidarity liable with the employer Algosaibi-Bison, Ltd. for the claims of private
respondents. All other issues need no longer be discussed.
WHEREFORE, the temporary restraining order issued on September 12, 1988, is made permanent
and the bond filed of P50,000.00 by petitioner is canceled. The questioned decision of the National
Labor Relations Commission dated January 29, 1988, and the order denying the motion for
reconsideration of the same in POEA Case No. L-86-10-971, are modified, in that petitioner and its
officials are not solidarily liable with petitioner with the Algosaibi-Bison, Ltd. on the claims filed by
private respondents. Costs against private respondents.
This decision is immediately executory.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 77279 April 15, 1988
MANUELA S. CATAN/M.S. CATAN PLACEMENT AGENCY, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION and FRANCISCO D. REYES, respondents.
Demetria Reyes, Merris & Associates for petitioners.
The Solicitor General for public respondents.
Bayani G. Diwa for private respondent.

CORTES, J .:
Petitioner, in this special civil action for certiorari, alleges grave abuse of discretion on the part of the
National Labor Relations Commission in an effort to nullify the latters resolution and thus free
petitioner from liability for the disability suffered by a Filipino worker it recruited to work in Saudi
Arabia. This Court, however, is not persuaded that such an abuse of discretion was committed. This
petition must fail.
The facts of the case are quite simple.
Petitioner, a duly licensed recruitment agency, as agent of Ali and Fahd Shabokshi Group, a Saudi
Arabian firm, recruited private respondent to work in Saudi Arabia as a steelman.
The term of the contract was for one year, from May 15,1981 to May 14, 1982. However, the contract
provided for its automatic renewal:
FIFTH: The validity of this Contract is for ONE YEAR commencing from the date the
SECOND PARTY assumes hill port. This Contract is renewable automatically if neither
of the PARTIES notifies the other PARTY of his wishes to terminate the Contract by at
least ONE MONTH prior to the expiration of the contractual period. [Petition, pp. 6-7;
Rollo, pp. 7-8].
The contract was automatically renewed when private respondent was not repatriated by his Saudi
employer but instead was assigned to work as a crusher plant operator. On March 30, 1983, while he
was working as a crusher plant operator, private respondent's right ankle was crushed under the
machine he was operating.
On May 15, 1983, after the expiration of the renewed term, private respondent returned to the
Philippines. His ankle was operated on at the Sta. Mesa Heights Medical Center for which he incurred
expenses.
On September 9, 1983, he returned to Saudi Arabia to resume his work. On May 15,1984, he was
repatriated.
Upon his return, he had his ankle treated for which he incurred further expenses.
On the basis of the provision in the employment contract that the employer shall compensate the
employee if he is injured or permanently disabled in the course of employment, private respondent
filed a claim, docketed as POEA Case No. 84-09847, against petitioner with respondent Philippine
Overseas Employment Administration. On April 10, 1986, the POEA rendered judgment in favor of
private respondent, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the complainant and against the
respondent, ordering the latter to pay to the complainant:
1. SEVEN THOUSAND NINE HUNDRED EIGHTY-FIVE PESOS and 60/100
(P7,985.60), Philippine currency, representing disability benefits;
2. TWENTY-FIVE THOUSAND NINETY-SIX Philippine pesos and 20/100 (29,096.20)
representing reimbursement for medical expenses;
3. Ten percent (10%) of the abovementioned amounts as and for attorney's fees. [NLRC
Resolution, p. 1; Rollo, p. 16].
On appeal, respondent NLRC affirmed the decision of the POEA in a resolution dated December 12,
1986.
Not satisfied with the resolution of the POEA, petitioner instituted the instant special civil action for
certiorari, alleging grave abuse of discretion on the part of the NLRC.
1. Petitioner claims that the NLRC gravely abused its discretion when it ruled that petitioner was liable
to private respondent for disability benefits since at the time he was injured his original employment
contract, which petitioner facilitated, had already expired. Further, petitioner disclaims liability on the
ground that its agency agreement with the Saudi principal had already expired when the injury was
sustained.
There is no merit in petitioner's contention.
Private respondents contract of employment can not be said to have expired on May 14, 1982 as it
was automatically renewed since no notice of its termination was given by either or both of the parties
at least a month before its expiration, as so provided in the contract itself. Therefore, private
respondent's injury was sustained during the lifetime of the contract.
A private employment agency may be sued jointly and solidarily with its foreign principal for violations
of the recruitment agreement and the contracts of employment:
Sec. 10. Requirement before recruitment. Before recruiting any worker, the private
employment agency shall submit to the Bureau the following documents:
(a) A formal appointment or agency contract executed by a foreign-based employer in
favor of the license holder to recruit and hire personnel for the former ...
xxx xxx xxx
2. Power of the agency to sue and be sued jointly and solidarily with the
principal or foreign-based employer for any of the violations of the
recruitment agreement and the contracts of employment. [Section 10(a)
(2) Rule V, Book I, Rules to Implement the Labor Code].
Thus, in the recent case of Ambraque International Placement & Services v. NLRC [G.R. No. 77970,
January 28,1988], the Court ruled that a recruitment agency was solidarily liable for the unpaid
salaries of a worker it recruited for employment in Saudi Arabia.
Even if indeed petitioner and the Saudi principal had already severed their agency agreement at the
time private respondent was injured, petitioner may still be sued for a violation of the employment
contract because no notice of the agency agreement's termination was given to the private
respondent:
Art 1921. If the agency has been entrusted for the purpose of contra with specified
persons, its revocation shall not prejudice the latter if they were not given notice thereof.
[Civil Code].
In this connection the NLRC elaborated:
Suffice it to state that albeit local respondent M. S. Catan Agency was at the time of
complainant's accident resulting in his permanent partial disability was (sic) no longer
the accredited agent of its foreign principal, foreign respondent herein, yet its
responsibility over the proper implementation of complainant's employment/service
contract and the welfare of complainant himself in the foreign job site, still existed, the
contract of employment in question not having expired yet. This must be so, because
the obligations covenanted in the recruitment agreement entered into by and between
the local agent and its foreign principal are not coterminus with the term of such
agreement so that if either or both of the parties decide to end the agreement, the
responsibilities of such parties towards the contracted employees under the agreement
do not at all end, but the same extends up to and until the expiration of the employment
contracts of the employees recruited and employed pursuant to the said recruitment
agreement. Otherwise, this will render nugatory the very purpose for which the law
governing the employment of workers for foreign jobs abroad was enacted. [NLRC
Resolution, p. 4; Rollo, p. 18]. (Emphasis supplied).
2. Petitioner contends that even if it is liable for disability benefits, the NLRC gravely abused its
discretion when it affirmed the award of medical expenses when the said expenses were the
consequence of private respondent's negligence in returning to work in Saudi Arabia when he knew
that he was not yet medically fit to do so.
Again, there is no merit in this contention.
No evidence was introduced to prove that private respondent was not medically fit to work when he
returned to Saudi Arabia. Exhibit "B", a certificate issued by Dr. Shafquat Niazi, the camp doctor, on
November 1, 1983, merely stated that private respondent was "unable to walk properly, moreover he
is still complaining [of] pain during walking and different lower limbs movement" [Annex "B", Reply;
Rollo, p. 51]. Nowhere does it say that he was not medically fit to work.
Further, since petitioner even assisted private respondent in returning to work in Saudi Arabia by
purchasing his ticket for him [Exhibit "E"; Annex "A", Reply to Respondents' Comments], it is as if
petitioner had certified his fitness to work. Thus, the NLRC found:
Furthermore, it has remained unrefuted by respondent that complainant's subsequent
departure or return to Saudi Arabia on September 9, 1983 was with the full knowledge,
consent and assistance of the former. As shown in Exhibit "E" of the record, it was
respondent who facilitated the travel papers of complainant. [NLRC Resolution, p. 5;
Rollo, p. 19].
WHEREFORE, in view of the foregoing, the petition is DISMISSED for lack of merit, with costs
against petitioner.
SO ORDERED.
Recuitment Agencies Bond
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 88050 January 30, 1992
STRONGHOLD INSURANCE COMPANY, INC., petitioner,
vs.
HON. COURT OF APPEALS and ADRIANO URTESUELA, respondents.
T.J. Sumawang & Associates for petitioner.
Linsangan Law Office for private respondent.

CRUZ, J .:
The petitioner invokes due process to escape liability on a surety bond executed for the protection of
a Filipino seaman. It is a familiar argument that will be denied, in light of the following findings.
Acting on behalf of its foreign principal, Qatar National Fishing Co., Pan Asian Logistics and Trading,
a domestic recruiting and placement agency, hired Adriano Urtesuela as captain of the vessel M/V
Oryx for the stipulated period of twelve months. The required surety bond, in the amount of
P50,000.00, was submitted by Pan Asian and Stronghold Insurance Co., Inc., the herein petitioner, to
answer for the liabilities of the employer. Urtesuela assumed his duties on April 18, 1982, but three
months later his services were terminated and he was repatriated to Manila. He thereupon filed a
complaint against Pan Asian and his former employer with the Philippine Overseas Employment
Administration for breach of contract and damages.
In due time, the POEA rendered a decision in his favor for the amount of P6,374.94, representing his
salaries for the unexpired portion of his contract and the cash value of his unused vacation leave,
plus attorney's fees and costs, which the respondents were required to pay. The judgment eventually
became final and executory, not having been appealed on time. Pursuant thereto, a writ of execution
was issued against Pan Asian but could be enforced only against its cash bond of P10,000.00, the
company having ceased to operate. Urtesuela then filed a complaint with the Insurance Commission
against Stronghold on the basis of the aforementioned surety bond and prayed for the value thereof
plus attorney's fees and litigation costs.
Under the bond, the petitioner and Pan Asian undertook
To answer for all liabilities which the Philippine Overseas Employment Administration
may adjudge/impose against the Principal in connection with the recruitment of Filipino
seamen.
It is understood that notice to the Principal is notice to the surety. (Exh. "I-2").
WHEREAS, the liability of the surety under this Bond shall in no case exceed the sum of
PESOS: FIFTY THOUSAND ONLY (P50,000.00) Philippine Currency.
After hearing, the Insurance Commission held that the complaint should be reformed because the
provisions in the surety bond were not stipulations pour autrui to entitle Urtesuela to bring the suit
himself. It held that the proper party was the POEA.
1
This ruling was reversed on appeal by the respondent
court in its decision dated April 20, 1989.
2
It was there declared that, as the actual beneficiary of the surety bond,
Urtesuela was competent to sue Stronghold, which as surety was solidarily liable with Pan Asian for the judgment
rendered against the latter by the POEA.
The petitioner asks for reversal of the Court of Appeals. It submits that the decision of the POEA is
not binding upon it because it was not impleaded in the complaint; it was not notified thereof nor did it
participate in the hearing; and it was not specifically directed to pay the damages awarded to the
complainant.
In support of its posture, the petitioner cites abundant jurisprudence, particularly Aguasin
v. Velasquez,
3
where the Court held:
If the surety is to be bound by his undertaking, it is essential according to Section 10 of
Rule 62 in connection with Section 20 of Rule 59 of the Rules of Court that the damages
be awarded upon application and after proper hearing and included in the judgment. As
a corollary to these requirements, due notice to the plaintiff and his surety setting forth
the facts showing his right to damages and the amount thereof under the bond is
indispensable. This has to be so if the surety is not to be condemned or made to pay
without due process of law. It is to be kept in mind that the surety in this case was not a
party to the action and had no notice of or intervention in the trial. It seems elementary
that before being condemned to pay, it was the elementary right of the surety to be
heard and to be informed that the party seeking indemnity would hold it liable and was
going to prove the grounds and extent of its liability. This case is different from those in
which the surety, by law and/or by the terms of his contract, has promised to abide by
the judgment against the principal and renounced the right to be sued or cited.
The Court has gone over the decision and finds that the petitioner is "hoist by its own petard." For as
the quoted excerpt itself says, the case is "different from those in which the surety, by law and/or by
the terms of his contract, has promised to abide by the judgment against the principal and renounced
the right to be sued or cited."
In the surety bond, the petitioner unequivocally bound itself:
To answer for all liabilities which the Philippine Overseas Employment Administration
may adjudge/impose against the Principal in connection with the recruitment of Filipino
seamen.
Strictly interpreted, this would mean that the petitioner agreed to answer for whatever decision might
be rendered against the principal, whether or not the surety was impleaded in the complaint and had
the opportunity to defend itself. There is nothing in the stipulation calling for a direct judgment against
the surety as a co-defendant in an action against the principal. On the contrary, the petitioner agreed
"to answer for all liabilities" that "might be adjudged or imposed by the POEA against the Principal."
But even if this interpretation were rejected, considering the well-known maxim that "the surety is a
favorite of the law," the petitioner would still have to explain its other agreement that "notice to the
Principal is notice to the surety." This was in fact another special stipulation typewritten on the printed
form of the surety bond prepared by the petitioner. Under this commitment, the petitioner is deemed,
by the implied notice, to have been given an opportunity to participate in the litigation and to present
its side, if it so chose, to avoid liability. If it did not decide to intervene as a co-defendant (and perhaps
also as cross-claimant against Pan Asian), it cannot be heard now to complain that it was denied due
process.
The petitioner contends, however, that the said stipulation is unconstitutional and contrary to public
policy, because it is "a virtual waiver" of the right to be heard and "opens wide the door for fraud and
collusion between the principal and the bond obligee" to the prejudice of the surety. Hence,
disregarding the stipulation, the petitioner should be deemed as having received no notice at all of the
complaint and therefore deprived of the opportunity to defend itself.
The Court cannot agree. The argument assumes that the right to a hearing is absolute and may not
be waived in any case under the due process clause. This is not correct. As a matter of fact, the right
to be heard is as often waived as it is invoked, and validly as long as the party is given an opportunity
to be heard on his behalf.
4

The circumstance that the chance to be heard is not availed of does not disparage that opportunity
and deprive the person of the right to due process. This Court has consistently held in cases too
numerous to mention that due process is not violated where a person is not heard because he has
chosen, for whatever reason, not to be heard. It should be obvious that if he opts to be silent where
he has a right to speak, he cannot later be heard to complain that he was unduly silenced.
Neither is public policy offended on the wicked ground of fraud and collusion imagined by the
petitioner. For one thing, the speculation contravenes without proof the presumption of good faith and
unreasonably imputes dishonest motives to the principal and the obligee. For another, it disregards
the fiduciary relationship between the principal and the surety, which is the legal and also practical
reason why the latter is willing to answer for the liabilities of the former.
In a familiar parallel, notice to the lawyer is considered notice to the client he represents even if the
latter is not actually notified. It has not been suspected that this arrangement might result in a
confabulation between the counsel and the other party to the client's prejudice.
At any rate, it is too late now for the petitioner to challenge the stipulation. If it believed then that it
was onerous and illegal, what it should have done was object when its inclusion as a condition in the
surety bond was required by the POEA. Even if the POEA had insisted on the condition, as now
claimed, there was still nothing to prevent the petitioner from refusing altogether to issue the surety
bond. The petitioner did neither of these. The fact is that, whether or not the petitioner objected, it in
the end filed the surety bond with the suggested condition. The consequence of its submission is that
it cannot now argue that it is not bound by that condition because it was coerced into accepting it.
This Court has always been receptive to complaints against the denial of the right to be heard, which
is the very foundation of a free society. This right is especially necessary in the court of justice, where
cases are decided after the parties shall have been given an opportunity to present their respective
positions, for evaluation by the impartial judge. Nevertheless, a party is not compelled to speak if it
chooses to be silent. If it avails itself of the right to be heard, well and good; but if not, that is also its
right. In the latter situation, however, it cannot later complain that, because it was not heard, it was
deprived of due process.
Worthy of consideration also is the private respondent's contention that he sought to enforce the
petitioner's liability not in NSB Case No. 3810-82 as decided by the POEA, but in another forum.
What he did was file an independent action for that purpose with the Insurance Commission on the
basis of the surety bond which bound the petitioner to answer for whatever liabilities might be
adjudged against Qatar National Fishing Co. by the POEA. In the proceedings before the
Commission, the petitioner was given full opportunity (which it took) to present its side, in its answer
with counterclaim to the complaint, in its testimony at the hearings, in its motion to dismiss the
complaint, and in its 10-page memorandum. There is absolutely no question that in that proceeding,
the petitioner was actually and even extensively heard.
The surety bond required of recruitment agencies
5
is intended for the protection of our citizens who are
engaged for overseas employment by foreign companies. The purpose is to insure that if the rights of these overseas
workers are violated by their employers, recourse would still be available to them against the local companies that
recruited them for the foreign principal. The foreign principal is outside the jurisdiction of our courts and would probably
have no properties in this country against which an adverse judgment can be enforced. This difficulty is corrected by the
bond, which can be proceeded against to satisfy that judgment.
Given this purpose, and guided by the benign policy of social justice, we reject the technicalities
raised by the petitioner against its established legal and even moral liability to the private respondent.
These technicalities do not impair the rudiments of due process or the requirements of the law and
must be rejected in deference to the constitutional imperative of justice for the worker.
WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals
AFFIRMED in toto. The respondent court is directed to ENFORCE payment to the private respondent
in full, and with all possible dispatch of the amount awarded to him by the POEA in its decision dated
May 13, 1983. It is so ordered.
Narvasa, C.J., Grio-Aquino and Medialdea, JJ., concur.
POEAs Authority
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-79436-50 January 17, 1990
EASTERN ASSURANCE & SURETY CORPORATION, petitioner,
vs.
SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA
VENTURA, ESTER TRANGUILLAN, et al., respondents.
Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioner.

NARVASA, J .:
In connection with the application with the Philippine Overseas Employment Administration (POEA) of
J & B Manpower Specialist, Inc. for a license to engage in business as a recruitment agency, a surety
bond was filed on January 2, 1985 by the applicant and the Eastern Assurance and Surety
Corporation, herein petitioner, in virtue of which they both held themselves
. . . firmly bound unto (said) Philippine Overseas Employment Administration, Ministry of
Labor in the penal sum of PESOS ONE HUNDRED FIFTY THOUSAND ONLY . . .
(Pl50,000.00) for the payment of which will and truly to be made, . . . (they bound
themselves, their) heirs, executors, administrators, successors and assigns, jointly and
severally . .
The bond stipulated that:
a) it was "conditioned upon the true and faithful performance and observance of the . . . principal (J &
B Manpower Specialist, Inc.) of its duties and obligations in accordance with all the rules and
regulations promulgated by the Ministry of Labor Philippine Overseas Employment Administration and
with the terms and conditions stipulated in the License;
b) the liability of the . . . Surety (petitioner) shall in no case exceed the sum of PESOS ONE
HUNDRED FIFTY THOUSAND (P150,000.00) ONLY, PHILIPPINE CURRENCY;
1

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

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

From June 1983 to December 1985 . . . thirty three (33) . . . (persons) applied for
overseas employment with . . . (J & B). In consideration of promised deployment,
complainants paid respondent various amounts for various fees. Most of' the receipts
issued were sighed by Mrs. Baby Bundalian, Executive Vice-President of . . . (J & B).
Because of non-deployment . . . (the applicants) filed separate complaints with the
Licensing and Regulation Office of POEA against . . . (J & B) for violation of Articles 32
and 34 (a) of the Labor Code between the months of April to October 1985.
Despite summons/notices of hearing,, . . . (J & B) failed to file Answer nor appear in the
hearings conducted.
In its separate Answer, . . . EASCO essentially disclaimed liability on the ground that the
claims were not expressly covered by the bond, that POEA had no jurisdiction to order
forfeiture of the bond, that some of the claims were paid beyond or prior to the period of
effectivity of the bond.
On September 8, 1986, the POEA Administrator issued the Order in favor of
complainants ruling thus:
After careful evaluation, we find that the receipts and testimonies of
complainants, in the absence of controverting evidence substantially
establish that respondent charged and collected fees from them in
amounts exceeding what is prescribed by this Administration.
Complainants' non-deployment strongly indicates that there was no
employment obtained for them. Hence, violation of Articles 32 and 34 (a)
of the Labor Code, as amended, is established against respondent. The
claims of complainants having arose (arisen) out of acts of the principal
covered under the surety (bond), the respondent surety is equally liable
therefor.
Except for complainants Ramos, Samson, de Leon and Rizada, whose claims were
transacted prior to the effectivity of the bond, . . . EASCO was declared jointly and
severally liable with . . . (J & B) to twenty-nine (29) complainants.
(The dispositive portion of the POEA Administrator's Order also contained the following
statement and direction, viz.:
Respondent was suspended on May 23, 1985, June 26, 1985 and
January 17, 1986 all for illegal exaction. Considering its track record of
illegal exaction activities and considering further the gross violation of
recruitment rules and regulations established against it in the instant
cases, and the expiration of its license on February 15, 1985, it is hereby
forever banned from participation in the overseas employment program. It
is ordered to cease and desist from further engaging in recruitment
activities otherwise it shall be prosecuted for illegal recruitment.')
(J & B filed a motion for reconsideration). On December 19, 1986, the then deputy
Minister of Labor and Employment denied the . . . Motion for Reconsideration for lack of
merit and affirmed the findings in the Order of the POEA Administrator finding no
reversible error therein.
On appeal by EASCO J & B having as aforestated taken no part in the proceeding despite due
service of summons the judgment was modified by the Secretary of Labor, by Order dated July 1,
1987, disposing as follows:
4

WHEREFORE, in view of the foregoing, the Resolution of the then Deputy Minister of
Labor dated December 19, 1986 affirming the Order of the POEA Administrator dated
September 8, 1986 is hereby MODIFIED. Respondent J & B Manpower Specialist is
directed to refund all thirty-three (33) complainants as listed in the Order of September
8, 1986 in the amounts listed thereto with the modification that complainants Lucena
Cabasal and Felix Rivero are both entitled only to P15,980 and not P15,980
each. Respondent Eastern Assurance and Surety Corporation is hereby found jointly
and severally liable with respondent J & B Manpower Specialist to refund nineteen (19)
complainants in the modified amounts . . . (particularly specified).
The other findings in the Order of the POEA Administrator dated September 8, 1986
affirmed in the Resolution of the then Deputy Minister . . . are also hereby AFFIRMED.
This Order is FINAL. No further Motion for Reconsideration hereof shall be entertained.
It is noteworthy that EASCO's liability for the refund, jointly and severally with its principal, was limited
to 19 named complainants (in contrast to verdicts of the POEA and the Deputy Minister which both
ordered payment to no less than 33 complainants) and was correspondingly reduced from
P308,751.75 and US $ 400.00
5
to the aggregate amount of P 140,817.75.
6

The special civil action of certiorari at bar was thereafter instituted by EASCO
7
praying for the nullification
of the POEA Administrator's Order of September 8, 1986, the Resolution of the Deputy Minister of Labor of' December 19,
1986, and the Order of the Secretary of Labor of July 1, 1987, It theorizes that:
1) the POEA had no jurisdiction over the claims for refund filed by non-employees;
2) neither did the Secretary of Labor have jurisdiction of the claims;
3) assuming they had jurisdiction, both the POEA and Secretary of Labor also
committed legal errors and acted with grave abuse of discretion when they ruled that
petitioner is liable on the claims.
EASCO contends that the POEA had no "adjudicatory jurisdiction" over the monetary claims in
question because the same "did not arise from employer-employee relations." Invoked in support of
the argument is Section 4 (a) of EO 797 providing in part
8
that the POEA has
. . . original and exclusive jurisdiction over all cases, including money claims, involving
employer-employee relations arising out of or by virtue of any law or contract involving
Filipino workers for overseas employment including seamen . . .
The complaints are however for violation of Articles 32 and 34 a) of the Labor Code. Article 32
and paragraph (a) of Article 34 read as follows:
Art. 32. Fees to be paid by workers.Any person applying with a private fee-charging
employment agency for employment assistance shall not be charged any fee until he
has obtained employment through its efforts or has actually commenced employment.
Such fee shall be always covered with the approved receipt clearly showing the amount
paid. The Secretary of Labor shall promulgate a schedule of allowable fees.
Art. 34. Prohibited practices.It shall be unlawful for any individual, entity, licensee, or
holder of authority:
a) To charge or accept, directly or indirectly, any amount greater than that specified in
the schedule of allowable fees prescribed by the Secretary of Labor, or to make a
worker pay any amount greater than actually received by him as a loan or advance; . . .
The penalties of suspension and cancellation of license or authority are prescribed for violations of
the above quoted provisions, among others. And the Secretary of Labor has the power under Section
35 of the law to apply these sanctions, as well as the authority, conferred by Section 36, not only, to
"restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate
rules and regulations to carry out the objectives and implement the provisions" governing said
activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the
POEA
9
"on its own initiative or upon filing of a complaint or report or upon request for investigation by any aggrieved
person, . . . (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or authority
of any agency or entity" for certain enumerated offenses including
1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or
any fee or bond in excess of what is prescribed by the Administration, and
2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and
regulations.
10

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

Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by
the respondent agency or contractor, specially the refund or reimbursement of such fees as may have
been fraudulently or otherwise illegally collected, or such money, goods or services imposed and
accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on
an offending recruitment agency or contractor to suspension or cancellation of its license, without the
concomitant obligation to repair the injury caused to its victims. It would result either in rewarding
unlawful acts, as it would leave the victims without recourse, or in compelling the latter to litigate in
another forum, giving rise to that multiplicity of actions or proceedings which the law abhors.
Even more untenable is EASCO's next argument that the recruiter and its victims are in pari delicto
the former for having required payment, and the latter for having voluntarily paid, "prohibited
recruitment fees" and therefore, said victims are barred from obtaining relief. The sophistical, if not
callous, character of the argument is evident upon the most cursory reading thereof; it merits no
consideration whatever.
The Court is intrigued by EASCO's reiteration of its argument that it should not be held liable for
claims which accrued prior to or after the effectivity of its bond, considering that the respondent
Secretary had conceded the validity of part of said argument, at least. The Secretary ruled that
EASCO's "contention that it should not be held liable for claims/payments made to respondent
agency before the effectivity of the surety bond on January 2, 1985 is well taken." According to the
Secretary:
12

. . . A close examination of the records reveal(s) that respondent EASCO is not jointly
and severally liable with respondent agency to refund complainants Lucena Cabasal,
Felix Rivero, Romulo del Rosario, Rogelio Banzuela, Josefina Ogatis, Francisco Sorato,
Sonny Quiazon, Josefina Dictado, Mario del Guzman and Rogelio Mercado (10 in
all). These complainants paid respondent agency in 1984, or before the effectivity of the
bond on January 2, 1985 as evidence by the reciept and their testimonies.
The related argument, that it is also not liable for claims filed after the expiry (on January 2, 1986) of
the period stipulated in the surety bond for the filing of claims against the bond, must however be
rejected, as the Secretary did. The Court discerns no grave abuse of discretion in the Secretary's
statement of his reasons for doing so, to wit:
. . . While it may be true that respondent EASCO received notice of their claims after the
ten (10) day expiration period from cancellation or after January 12, 1986 as provided in
the surety bond, records show that . . . EASCO's principal, respondent agency, was
notified/ summoned prior to the expiration period or before January 12, 1986.
Respondent agency received summons on July 24, 1985 with respect to claims of
complainants Penarroyo, dela Cruz and Canti. It also received summons on November
26, 1985 with respect to Giovanni Garbillons' claim. Respondent agency was likewise
considered constructively notified of the claims of complainants Calayag, Danuco
Domingo and Campena on October 6, 1985. In this connection, it may be stressed that
the surety bond provides that notice to the principal is notice to the surety. Besides, it
has been held that the contract of a compensated surety like respondent EASCO is to
be interpreted liberally in the interest of the promises and beneficiaries rather than
strictly in favor of the surety (Acoustics Inc. v. American Surety, 74 Nev-6, 320 P2d.
626, 74 Am. Jur. 2d).
So, too, EASCO's claim that it had not been properly served with summons as regards a few of the
complaints must be rejected, the issue being factual, and the Court having been cited to no grave
error invalidating the respondent Secretary's conclusion that summons had indeed been duly served.
Finally, EASCO's half-hearted argument that its liability should be limited to the maximum amount set
in its surety bond, i.e., P150,000.00, is palpably without merit, since the aggregate liability imposed on
it, P140,817.75, supra, does not in fact exceed that limit.
WHEREFORE, the petition is DISMISSED for lack of merit, and this decision is declared to be
immediately executory. Costs against petitioner.
SO ORDERED.
Acts Constituting ESTAFA
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 141221-36 March 7, 2002
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
FRANCISCO HERNANDEZ (at large), KARL REICHL, and YOLANDA GUTIERREZ DE
REICHL, accused,
KARL REICHL and YOLANDA GUTIERREZ DE REICHL, accused-appellants
PUNO, J .:
This is an appeal from the Joint Decision of the Regional Trial Court, Batangas City in Criminal Case
Nos. 6428, 6429, 6430, 6431, 6432, 6433, 6434, 6435, 6436, 6437, 6438, 6439, 6528, 6529, 6530
and 6531 finding accused-appellants, Spouses Karl Reichl and Yolanda Gutierrez de Reichl guilty of
five (5) counts of estafa and one (1) count of syndicated and large scale illegal recruitment.
1

In April 1993, eight (8) informations for syndicated and large scale illegal recruitment and eight (8)
informations for estafa were filed against accused-appellants, spouses Karl and Yolanda Reichl,
together with Francisco Hernandez. Only the Reichl spouses were tried and convicted by the trial
court as Francisco Hernandez remained at large.1wphi1. nt
The evidence for the prosecution consisted of the testimonies of private complainants; a certification
from the Philippine Overseas Employment Administration (POEA) that Francisco Hernandez, Karl
Reichl and Yolanda Gutierrez Reichl in their personal capacities were neither licensed nor authorized
by the POEA to recruit workers for overseas employment;
2
the receipts for the payment made by
private complainants; and two documents signed by the Reichl spouses where they admitted that
they promised to secure Austrian tourist visas for private complainants and that they would return all
the expenses incurred by them if they are not able to leave by March 24, 1993,
3
and where Karl
Reichl pledged to refund to private complainants the total sum of P1,388,924.00 representing the
amounts they paid for the processing of their papers.
4

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

Private complainant Leonora Perez also gave the following testimony: In July 1992, her sister,
Analiza Perez, introduced her to Francisco Hernandez at their residence in Dolor Subdivision,
Batangas City. Francisco Hernandez convinced her to apply for a job in Italy. When she accepted the
offer, Francisco Hernandez told her to prepare P150,000.00 for the processing of her papers. In
August 1992, Leonora, together with her sister and Francisco Hernandez, went to Ramada Hotel in
Manila to meet with Karl and Yolanda Reichl. At said meeting, Leonora handed her payment
of P50,000.00 to Yolanda Reichl. Yolanda assured her that she would be able to work in Italy.
Francisco Hernandez and the Reichl spouses told Leonora to wait for about three weeks before she
could leave. After three weeks, Francisco Hernandez invited Leonora and the other applicants to the
house of Hilarion Matira in Batangas City to discuss some matters. Francisco Hernandez informed
the applicants that their departure would be postponed to December 17, 1992. December 17 came
and the applicants were still unable to leave as it was allegedly a holiday. Yolanda and Karl Reichl
nonetheless assured Leonora of employment as domestic helper in Italy with a monthly salary of
$1,000.00. Francisco Hernandez and the Reichl spouses promised the applicants that they would
leave for Italy on January 5, 1993. Some time in January 1993, Francisco Hernandez went to the
residence of Leonora and collected the sum of P50,000.00 purportedly for the plane fare. Francisco
issued a receipt for the payment. When the applicants were not able to leave on the designated date,
Francisco Hernandez and the spouses again made another promise. Tired of the recruiters' unfulfilled
promises, the applicants decided to withdraw their application. However, Karl Reichl constantly
assured them that they would land a job in Italy because he had connections in Vienna. The promised
employment, however, never materialized. Thus, Karl Reichl signed a document stating that he would
refund the payment made by the applicants plus interest and other expenses. The document was
executed and signed at the house of one of the applicants, Charito Balmes, at P. Zamora St.,
Batangas City.
7

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

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

Mrs. Elemenita Bautista, the mother of private complainant Melanie Bautista, also took the witness
stand. She stated that in May 1992, Melanie applied for an overseas job through Francisco
Hernandez. Francisco Hernandez told her to prepare P150,000.00 to be used for the processing of
her papers and plane ticket. On June 26, 1992, Melanie made the initial payment of P50,000.00 to
Francisco Hernandez who was then accompanied by Karl and Yolanda Reichl.
10
Upon receipt of the
payment, Francisco Hernandez gave the money to Yolanda Reichl. Melanie made two other
payments: one on August 6, 1992 in the amount of P25,000.00,
11
and another on January 3, 1993 in
the amount of P51,000.00.
12
Three receipts were issued for the payments.
13

Rustico Manalo, the husband of private complainant Estela Abel de Manalo, testified that his wife
applied for the job of domestic helper abroad. In June 1992, Francisco Hernandez introduced them to
Karl and Yolanda Reichl who were allegedly sending workers to Italy. Rustico and his wife prepared
all the relevant documents, i.e., passport, police clearance and marriage contract, and paid a total
placement fee of P130,000.00.
14
They paidP50,000.00 on June 5, 1992, P25,000.00 on August 8,
1992, and P55,000.00 on January 3, 1993. The payments were made at the house of Hilarion Matira
and were received by Francisco Hernandez who, in turn, remitted them to the Reichl spouses.
Francisco Hernandez issued a receipt for the payment. The Reichls promised to take care of Estela's
papers and to secure a job for her abroad. The Reichls vowed to return the payment if they fail on
their promise. As with the other applicants, Estela was also not able to leave the country.
15

The defense interposed denial and alibi.
Accused-appellant Karl Reichl, an Austrian citizen, claimed that he entered the Philippines on July 29,
1992. Prior to this date, he was in various places in Europe. He came to the country on July 29, 1992
to explore business opportunities in connection with the import and export of beer and sugar. He also
planned to establish a tourist spot somewhere in Batangas. Upon his arrival, he and his wife, Yolanda
Reichl, stayed at the Manila Intercontinental Hotel. On August 3, 1992, they moved to Manila Midtown
Hotel. They stayed there until August 26, 1992. After they left Manila Midtown Hotel, they went to
another hotel in Quezon City. Karl Reichl returned to Vienna on September 19, 1992.
16

Mr. Reichl stated that he first met Francisco Hernandez through a certain Jimmy Pineda around
August 1992 at Manila Midtown Hotel. Francisco Hernandez was allegedly looking for a European
equipment to be used for the quarrying operation of his friend. Before accepting the deal, he made
some research on the background of the intended business. Realizing that said business would not
be viable, Karl Reichl advised Francisco Hernandez to instead look for a second-hand equipment
from Taiwan or Japan. He never saw Francisco Hernandez again until he left for Vienna in
September 1992.
17

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

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

Yolanda Gutierrez de Reichl corroborated the testimony of her husband and denied the charges
against her. She claimed that she was in Manila on the dates alleged in the various informations,
thus, she could not have committed the acts charged therein. Yolanda Reichl further stated that she
did not know of any reason why private complainants filed these cases against her and her husband.
She said that several persons were harassing her and pressuring her to pay private complainants the
sum of at least P50,000.00.
21

After assessing the evidence presented by the parties, the trial court rendered a decision convicting
accused-appellants of one (1) count of illegal recruitment in large scale and six (6) counts of estafa.
The dispositive portion of the decision reads:
"WHEREFORE, judgment is hereby rendered finding the accused spouses KARL REICHL and
YOLANDA GUTIERREZ REICHL -
1. NOT GUILTY of the crime of syndicated and large-scale illegal recruitment as
charged in the above-mentioned Criminal Cases Nos. 6435, 6437 and 6529;
2. NOT GUILTY of the crime of estafa as charged in the above-mentioned Criminal
Cases Nos. 6434, 6436 and 6528;
3. GUILTY beyond reasonable doubt of the crime of syndicated and large-scale illegal
recruitment, as charged, in the above-mentioned Criminal Cases Nos. 6429, 6431,
6433, 6439 and 6531;
4. GUILTY beyond reasonable doubt of the crime of estafa, as charged, in the above-
mentioned Criminal Cases Nos. 6428, 6430, 6432, 6438 and 6530.
The Court hereby imposes upon the accused-spouses KARL REICHL and YOLANDA GUTIERREZ
REICHL the following sentences:
1. For the 5 offenses, collectively, of syndicated and large-scale illegal recruitment in Criminal
Cases Nos. 6429, 6431, 6433, 6438 and 6531, to suffer the penalty of life imprisonment, and
to pay a fine of One Hundred Thousand Pesos (P100,000.00);
2. In Criminal Case No. 6428, there being no mitigating or aggravating circumstance, to suffer
the indeterminate sentence of Six (6) Years of prision correctional, as minimum to Sixteen (16)
Years of reclusion temporal, as maximum, and to indemnify the complainant Narcisa
Hernandez in the amount ofP150,000.00;
3. In Criminal Case No. 6430, there being no mitigating or aggravating circumstance, to suffer
the indeterminate sentence of six (6) years of prision correctional as minimum to eleven (11)
years of prision mayor, as maximum and to indemnify the complainant Leonora Perez in the
amount of P100,000.00;
4. In Criminal Case No. 6432, there being no mitigating or aggravating circumstance, to suffer
the indeterminate sentence of six (6) years of prision correctional as minimum to sixteen (16)
years of reclusion temporal, as maximum and to indemnify the complainant Melanie Bautista in
the amount of P150,000.00;
5. In Criminal Case No. 6438, there being no mitigating or aggravating circumstance, to suffer
the indeterminate sentence of six (6) years of prision correctional as minimum to fourteen (14)
years of reclusion temporal as maximum and to indemnify the complainant Estela Abel de
Manalo in the amount ofP130,000.00;
6. In Criminal Case No. 6530, there being no mitigating or aggravating circumstance, to suffer
the indeterminate sentence of six (6) years or prision correctional as minimum to thirteen (13)
years of reclusion temporal as maximum and to indemnify the complainant Charito Balmes in
the amount of P121,300.00; and
7. To pay the costs.
SO ORDERED."
Accused-appellants appealed from the decision of the trial court. They raise the following errors:
"1. The trial court erred in finding accused-appellant Karl Reichl guilty of the crimes of estafa
and illegal recruitment committed by syndicate and in large scale based on the evidence
presented by the prosecution which miserably failed to establish guilt beyond reasonable
doubt.
2. The trial court erred in convicting the accused-appellant of the crime of illegal recruitment on
a large scale by cummulating five separate cases of illegal recruitment each filed by a single
private complainant.
3. The trial court erred in rendering as a matter of course an automatic guilty verdict against
accused-appellant for the crime of estafa after a guilty verdict in a separate crime for illegal
recruitment. It is submitted that conviction in the latter crime does not ipso facto result in
conviction in the former."
22

The appeal is bereft of merit.
Article 38 of the Labor Code defines illegal recruitment as "any recruitment activities, including the
prohibited practices enumerated under Article 34 of (the Labor Code), to be undertaken by non-
licensees or non-holders of authority." The term "recruitment and placement" refers to any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, including
referrals, contract services, promising or advertising for employment, locally or abroad, whether for
profit or not, provided that any person or entity which, in any manner, offers or promises for a fee
employment to two or more persons shall be deemed engaged in recruitment and placement.
23
The
law imposes a higher penalty when the illegal recruitment is committed by a syndicate or in large
scale as they are considered an offense involving economic sabotage. Illegal recruitment is deemed
committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or
confederating with one another in carrying out any unlawful or illegal transaction, enterprise or
scheme. It is deemed committed in large scale if committed against three (3) or more persons
individually or as a group.
24

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

Accused-appellants assert that they merely undertook to secure Austrian visas for private
complainants, which act did not constitute illegal recruitment. They cite the document marked at
Exhibit "J" stating that they promised to obtain Austrian tourist visas for private complainants. We are
not convinced. Private complainants Narcisa Hernandez, Leonora Perez and Charito Balmes
categorically stated that Karl and Yolanda Reichl told them that they would provide them overseas
employment and promised them that they would be able to leave the country on a specified date. We
do not see any reason to doubt the truthfulness of their testimony. The defense has not shown any ill
motive for these witnesses to falsely testify against accused-appellants if it were not true that they
met with the Reichl spouses and the latter represented themselves to have the capacity to secure
gainful employment for them abroad. The minor lapses in the testimony of these witnesses pointed
out by accused-appellants in their brief do not impair their credibility, especially since they corroborate
each other on the material points, i.e., that they met with the three accused several times, that the
three accused promised to give them overseas employment, and that they paid the corresponding
placement fee but were not able to leave the country. It has been held that truth-telling witnesses are
not always expected to give error-free testimonies considering the lapse of time and the treachery of
human memory.
26
Moreover, it was shown that Karl Reichl signed a document marked as Exhibit "C"
where he promised to refund the payments given by private complainants for the processing of their
papers. We are not inclined to believe Mr. Reichl's claim that he was forced by Francisco Hernandez
to sign said document. There is no showing, whether in his testimony or in that of his wife, that private
complainants threatened to harm them if he did not sign the document. Mr. Reichl is an educated
man and it cannot be said that he did not understand the contents of the paper he was signing. When
he affixed his signature thereon, he in effect acknowledged his obligation to ensure the departure of
private complainants and to provide them gainful employment abroad. Such obligation arose from the
promise of overseas placement made by him and his co-accused to private complainants. The
admission made by accused-appellants in Exhibit "J" that they promised to obtain Austrian visas for
private complainants does not negate the fact that they also promised to procure for them overseas
employment. In fact, in Exhibit "J", accused-appellants admitted that each of the private complainants
paid the amount of P50,000.00. However, in Exhibit "C", which was executed on a later date,
accused-appellants promised to refund to each complainant an amount exceeding P150,000.00. This
is an acknowledgment that accused-appellants received payments from the complainants not only for
securing visas but also for their placement abroad.
Accused-appellants' defense of denial and alibi fail to impress us. The acts of recruitment were
committed from June 1992 until January 1993 in Batangas City. Karl Reichl was in Manila from July
29, 1992 until September 19, 1992, and then he returned to the Philippines and stayed in Batangas
from October 21, 1992. Yolanda Reichl, on the other hand, claimed that he was in Manila on the
dates alleged in the various informations. It is of judicial notice that Batangas City is only a few hours'
drive from Manila. Thus, even if the spouses were staying in Manila, it does not prevent them from
going to Batangas to engage in their recruitment business. Furthermore, it appears that the three
accused worked as a team and they conspired and cooperated with each other in recruiting domestic
helpers purportedly to be sent to Italy. Francisco Hernandez introduced Karl and Yolanda Reichl to
the job applicants as his business partners. Karl and Yolanda Reichl themselves gave assurances to
private complainants that they would seek employment for them in Italy. Francisco Hernandez
remitted the payments given by the applicants to the Reichl spouses and the latter undertook to
process the applicants' papers. There being conspiracy, each of the accused shall be equally liable
for the acts of his co-accused even if he himself did not personally take part in its execution.
Accused-appellants argue that the trial court erred in convicting accused-appellants of illegal
recruitment in large scale by cummulating the individual informations filed by private complainants.
The eight informations for illegal recruitment are worded as follows:
Criminal Case No. 6429
"That on or about July 14, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy.
Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, knowing fully well that they are non-licensees nor holders of
authority from the Department of Labor and Employment or any other authorized government
entity, conspiring and confederating together, did then and there, wilfully, unlawfully and
feloniously engage in syndicated and large scale recruitment and placement activities by
enlisting, contracting, procuring, offering and promising for a fee to one Narcisa Autor de
Hernandez and to more than three other persons, job placement abroad, by reason of which
said Narcisa Autor de Hernandez relying on these misrepresentations, paid and/or gave the
amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, Philippine Currency,
to said accused, which acts constitute a violation of the said law.
Contrary to Law."
Criminal Case No. 6431
"That on or about July 1992 and sometime prior and subsequent thereto at Dolor Subdivision,
Batangas City, Philippines and within the jurisdiction of this Honorable Court, the above-named
accused, knowing fully well that they are non-licensees nor holders of authority from the
Department of Labor and Employment or any other authorized government entity, conspiring
and confederating together, did then and there, wilfully, unlawfully and feloniously engage in
syndicated and large scale recruitment and placement activities by enlisting, contracting,
procuring, offering and promising for a fee to one Leonora Perez y Atienza and to more than
three other persons, job placement abroad, by reason of which said Leonora Perez y Atienza
relying on these misrepresentations, paid and/or gave the amount of ONE HUNDRED
THOUSAND (P100,000.00) PESOS, Philippine Currency, to said accused, which acts
constitute a violation of the said law.
Contrary to Law."
Criminal Case No. 6433
"That on or about June 26, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy.
Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, knowing fully well that they are non-licensees nor holders of
authority from the Department of Labor and Employment or any other authorized government
entity, conspiring and confederating together, did then and there, wilfully, unlawfully and
feloniously engage in syndicated and large scale recruitment and placement activities by
enlisting, contracting, procuring, offering and promising for a fee to one Melanie Bautista y
Dolor and to more than three other persons, job placement abroad, by reason of which said
Melanie Bautista y Dolor relying on these misrepresentations, paid and/or gave the amount of
ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, Philippine Currency, to said
accused, which acts constitute a violation of the said law.1wphi1. nt
Contrary to Law."
Criminal Case No. 6435
"That on or about July 12, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy.
Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, knowing fully well that they are non-licensees nor holders of
authority from the Department of Labor and Employment or any other authorized government
entity, conspiring and confederating together, did then and there, wilfully, unlawfully and
feloniously engage in syndicated and large scale recruitment and placement activities by
enlisting, contracting, procuring, offering and promising for a fee to one Annaliza Perez y
Atienza and to more than three other persons, job placement abroad, by reason of which said
Annaliza Perez y Atienza relying on these misrepresentations, paid and/or gave the amount of
ONE HUNDRED SIXTY THOUSAND (P160,000.00) PESOS, Philippine Currency, to said
accused, which acts constitute a violation of the said law.
Contrary to Law.
Criminal Case No. 6437
"That on or about August 15, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy.
Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, knowing fully well that they are non-licensees nor holders of
authority from the Department of Labor and Employment or any other authorized government
entity, conspiring and confederating together, did then and there, wilfully, unlawfully and
feloniously engage in syndicated and large scale recruitment and placement activities by
enlisting, contracting, procuring, offering and promising for a fee to one Edwin Coling y Coling
and to more than three other persons, job placement abroad, by reason of which said Edwin
Coling y Coling relying on these misrepresentations, paid and/or gave the amount of ONE
HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, Philippine Currency, to said accused,
which acts constitute a violation of the said law.
Contrary to Law."
Criminal Case No. 6439
"That on or about June 5, 1992 and sometime prior and subsequent thereto at Hilltop, Brgy.
Kumintang Ibaba, Batangas City, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, knowing fully well that they are non-licensees nor holders of
authority from the Department of Labor and Employment or any other authorized government
entity, conspiring and confederating together, did then and there, wilfully, unlawfully and
feloniously engage in syndicated and large scale recruitment and placement activities by
enlisting, contracting, procuring, offering and promising for a fee to one Estela Abel de Manalo
and to more than three other persons, job placement abroad, by reason of which said Estela
Abel de Manalo relying on these misrepresentations, paid and/or gave the amount of ONE
HUNDRED THIRTY THOUSAND (P130,000.00) PESOS, Philippine Currency, to said
accused, which acts constitute a violation of the said law.
Contrary to Law."
Criminal Case No. 6529
"That on or about July 1992 and sometime prior and subsequent thereto at Brgy. Sta. Rita
Karsada, Batangas City, Philippines and within the jurisdiction of this Honorable Court, the
above-named accused, knowing fully well that they are non-licensees nor holders of authority
from the Department of Labor and Employment or any other authorized government entity,
conspiring and confederating together, did then and there, wilfully, unlawfully and feloniously
engage in syndicated and large scale recruitment and placement activities by enlisting,
contracting, procuring, offering and promising for a fee to one Anicel Umahon y Delgado and to
more than three other persons, job placement abroad, by reason of which said Anicel Umahon
y Delgado relying on these misrepresentations, paid and/or gave the amount of ONE
HUNDRED THIRTY THOUSAND (P130,000.00) PESOS, Philippine Currency, to said
accused, which acts constitute a violation of the said law.
Contrary to Law."
Criminal Case No. 6531
"That on or about November 25, 1992 and sometime prior and subsequent thereto at No. 40 P.
Zamora Street, Batangas City, Philippines and within the jurisdiction of this Honorable Court,
the above-named accused, knowing fully well that they are non-licensees nor holders of
authority from the Department of Labor and Employment or any other authorized government
entity, conspiring and confederating together, did then and there, wilfully, unlawfully and
feloniously engage in syndicated and large scale recruitment and placement activities by
enlisting, contracting, procuring, offering and promising for a fee to one Charito Balmes y
Cantos and to more than three other persons, job placement abroad, by reason of which said
Charito Balmes y Cantos relying on these misrepresentations, paid and/or gave the amount of
ONE HUNDRED TWENTY ONE THOUSAND THREE HUNDRED PESOS (P121,300.00),
Philippine Currency, to said accused, which acts constitute a violation of the said law.
Contrary to Law."
We note that each information was filed by only one complainant. We agree with accused-appellants
that they could not be convicted for illegal recruitment committed in large scale based on several
informations filed by only one complainant. The Court held in People vs. Reyes:
27

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

This, however, does not serve to lower the penalty imposed upon accused-appellants. The charge
was not only for illegal recruitment committed in large scale but also for illegal recruitment committed
by a syndicate. Illegal recruitment is deemed committed by a syndicate if carried out by a group of
three (3) or more persons conspiring and/or confederating with one another in carrying out any
unlawful or illegal transaction, enterprise or scheme defined under the first paragraph of Article 38 of
the Labor Code. It has been shown that Karl Reichl, Yolanda Reichl and Francisco Hernandez
conspired with each other in convincing private complainants to apply for an overseas job and giving
them the guaranty that they would be hired as domestic helpers in Italy although they were not
licensed to do so. Thus, we hold that accused-appellants should be held liable for illegal recruitment
committed by a syndicate which is also punishable by life imprisonment and a fine of one hundred
thousand pesos (P100,000.00) under Article 39 of the Labor Code.
Finally, we hold that the prosecution also proved the guilt of accused-appellants for the crime of
estafa. A person who is convicted of illegal recruitment may, in addition, be convicted of estafa under
Art. 315 (2) of the Revised Penal Code provided the elements of estafa are present. Estafa under
Article 315, paragraph 2 of the Revised Penal Code is committed by any person who defrauds
another by using a fictitious name, or falsely pretends to possess power, influence, qualifications,
property, credit, agency, business or imaginary transactions, or by means of similar deceits executed
prior to or simultaneously with the commission of the fraud. The offended party must have relied on
the false pretense, fraudulent act or fraudulent means of the accused-appellant and as a result
thereof, the offended party suffered damages.
29
It has been proved in this case that accused-
appellants represented themselves to private complainants to have the capacity to send domestic
helpers to Italy, although they did not have any authority or license. It is by this representation that
they induced private complainants to pay a placement fee of P150,000.00. Such act clearly
constitutes estafa under Article 315 (2) of the Revised Penal Code.
IN VIEW WHEREOF, the appeal is DISMISSED. The Decision appealed from is hereby AFFIRMED.
Cost against appellants.
SO ORDERED.
Illegal Recruitment as an Offense Involving Economic Sabotage
FIRST DIVISION
[G.R. Nos. 115150-55. September 27, 1996]
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. REYDANTE CALONZO
Y AMBROSIO, accused-appellant.
D E C I S I O N
BELLOSILLO, J .:
REYDANTE CALONZO Y AMBROSIO was charged with Illegal Recruitment in Large
Scale and five (5) counts of Estafa by Bernardo Miranda, Danilo de los Reyes, Elmer
Clamor, Belarmino Torregrosa and Hazel de Paula. On 5 April 1994 the Regional Trial
Court of Pasig found the accused guilty as charged and sentenced -
1. In Criminal Case No. 98850 for Estafa, to suffer an indeterminate prison term of eleven (11)
years, eleven (11) months and eleven (11) days of prision mayor to fifteen (15) years, eight (8)
months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim
Bernardo Miranda in the amount of P120,000.00 and to pay the costs.
2. In Criminal Case No. 98851 for Estafa, to suffer an indeterminate prison term of
eleven (11) years, eleven (11) months and eleven (11) days of prision mayor to fifteen (15)
years, eight (8) months and twenty-
one (21) days of reclusion temporal, to reimburse the complainant-victim Danilo
de los Reyes in the amount of P120,000.00 and to pay the costs.
3. In Criminal Case No. 98852 for Estafa, to suffer an indeterminate prison term of eleven (11)
years, eleven (11) months and eleven (11) days of prision mayor to fifteen (15) years, eight (8)
months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim
Elmer Clamor in the amount of P120,000.00 and to pay the costs.
4. In Criminal Case No. 98853 for Estafa, to suffer an indeterminate prison term of nine (9) years,
eleven (11) months and eleven (11) days of prision mayor to thirteen (13) years, eight (8) months
and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim Belarmino
Torregrosa in the amount of P100,000.00 and to pay the costs.
5. In Criminal Case No. 98854 for Estafa, to suffer an indeterminate prison term of eleven (11)
years, eleven (11) months and eleven (11) days of prision mayor to fifteen (15) years, eight (8)
months and twenty-one (21) days of reclusion temporal, to reimburse the complainant-victim Hazel
de Paula in the amount of P120,000.00 and to pay the costs.
6. In Criminal Case No. 98855 for Illegal Recruitment (Large Scale), to suffer the penalty of life
imprisonment, to pay a fine of One Hundred Thousand Pesos (P100,000.00) and to pay the costs.
In the successive service of his sentences, the accused shall be credited in full with the period of his
preventive imprisonment.
The above terms shall also be subject to the application of the Three-Fold Rule.
[1]

Accused-appellant in this appeal assails his conviction by the trial court. He claims
that the court below erred in disregarding the testimony of Nenita Mercado, an employee
of the Philippine Overseas Employment Administration (POEA), who categorically stated
that their records indicated that Calonzo never processed complainants' applications for
employment abroad. He concludes from that fact alone that he cannot be deemed to
have engaged in the recruitment of workers for employment abroad.
As regards the estafa cases, accused-appellant contends that the court a quo erred
in giving credence to the testimonies of prosecution witnesses considering that the
amounts claimed to have been collected by him did not correspond to the amounts
indicated in the receipts presented by the complaining witnesses.
The antecedents: Sometime in February 1992 Danilo de los Reyes and his brother-in-
law Belarmino Torregrosa met Reydante Calonzo in the house of Loreta Castaeda at No.
10 P. Burgos Street, Pasig, Metro Manila. In that meeting Calonzo lost no time in
informing them that he could provide them employment abroad, particularly Italy, for a
fee. Calonzo was so glib and persuasive that De los Reyes and Torregrosa were quickly
convinced to cast their lot with him. Upon returning home they took stock of their assets
and resources and came up with the figures sufficient for the processing of their
applications for employment abroad. Two months after their initial meeting, or on 13 April
1992, De los Reyes gave Calonzo P50,000.00. He also pledged the Ford Fiera of his
brother-in-law to Calonzo for P70,000.00 in order to come up with the P120,000.00
processing fee imposed by Calonzo. The latter then informed De los Reyes of his
"scheduled" departure for Italy on 29 April 1992. However, despite the lapse of the period,
De los Reyes and Torregrosa remained in thePhilippines although their recruiter reiterated
his promise to send them to Italy.
On 1 May 1992, instead of sending them to Italy, they were billeted at Aloha Hotel
along Roxas Boulevard. The following day, or on 2 May 1992, they boarded a plane
that was supposed to take them to Italy. But Calonzo had another destination in
mind. They landed in Bangkok instead where their visas for Italy, according to Calonzo,
would be processed. They stayed at P.S. Guest Hotel for one and a half months. While
in Bangkok the accused again collected money from them purportedly to defray the
expenses for their visas. They also incurred expenses for food and accommodation, and
for overstaying, De los Reyes had to pay 2800 bahts to the immigration authorities only to
discover to their utter dismay that Calonzo had already returned to the Philippines.
In their helplessness in a foreign land they sought the help of Loreta Castaeda by
calling her up in Manila. Castaeda promptly fetched them from Bangkok and brought
them back to the Philippines. The day following their arrival they went to the office of
Calonzo on Padre Faura. Despite their frustrations in Bangkok Calonzo still insisted that
he would send them to Italy as he promised. In their naivet which was no match to the
unmitigated audacity of Calonzo, De los Reyes and Torregrosa still clung to the promises
of Calonzo hoping against hope that the latter would still fulfill them. However the
promises remained unfulfilled so they looked again for Calonzo. But this time their quarry
had already absconded.
They verified from the POEA whether Calonzo or his R. A. C. Business Agency was
duly authorized and licensed to recruit people for employment abroad. The POEA
certified that R. A. C. Business Agency was not licensed to recruit workers for overseas
employment.
Torregrosa substantiated the above account. He testified that he gave Calonzo a
total of P100,000.00. On cross-examination however
he stated that he gave such amount on 27 April 1992 and not on 13 April 1992 as
testified to by De los Reyes. But the date appearing on the receipt marked Exhibit A is 13
April 1992. Torregrosa also claimed that while in Bangkok he gave Calonzo an additional
amount of US$100.00.
On her part, Hazel de Paula testified that she first met appellant and the other
complainants at the house of Loreta Castaeda at No. 10 P. Burgos Street, Pasig, Metro
Manila. Convinced that she would eventually be employed in Italy as a domestic helper
she gave Calonzo P120,000.00. Unlike the other complaining witnesses, she was not
able to fly to Bangkok on 2 May 1992 as her passport was not yet available. She left only
on 6 May 1992 where she was met by Calonzo at the airport and brought to the P.S.
Guest Hotel where her companions who had arrived earlier were already billeted. She
said that while in Bangkok Calonzo asked money again from her.
Elmer Clamor, a 28-year old resident of Gen. Trias, Cavite, was similarly situated with
Hazel de Paula. Clamor narrated that he gave Calonzo P120,000.00 for the
latter's commitment to send him to Italy, and in fact while in Bangkok he gave Calonzo
US$250.00 more.
Bernardo Miranda, a construction worker from Talisay, Batangas, was another victim
of Calonzo. Lured by the latter's assurances that he would be sent to Italy, he gave
Calonzo a total of P120,000.00 for the processing of his application for work in
Italy. But, like all the rest of them, Miranda only reached Bangkok. The promised job,
his hard-earned money and Calonzo himself eventually disappeared.
Senior Labor Employment Officer Nenita Mercado of the POEA confirmed that neither
Reydante Calonzo nor his R. A. C. Business Agency was authorized to recruit workers for
employment abroad.
Reydante Calonzo tells us his own story. He admits being engaged in the consultancy
business through his R. A. C. Business Agency but denies any involvement in recruitment
activities. He admits knowing Loreta Castaeda and Leticia Solis as the two have sought
his assistance regarding their real estate business. He denies knowing the complaining
witnesses except Danilo de los Reyes and Belarmino Torregrosa who once visited him in
his office. While he disclaims the receipts presented by the prosecution as official receipts
of his R. A. C. Business Agency he admits that the signatures thereon were similar to
his.
We frustrate the expectations of the accused. Article 13, par. (b), of the Labor Code
defines recruitment and placement as -
(A)ny act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers,
and includes referrals, contract services, promising or advertising for employment, locally or
abroad, whether for profit or not; Provided, that any person or entity which, in any manner, offers
or promises for a fee employment to two or more persons shall be deemed engaged in recruitment
and placement.
Illegal recruitment is specifically defined in Art. 38 of the Code thus -
(a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of
this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal
and punishable under Article 39 of this Code x x x x
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an
offense involving economic sabotage and shall be penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or
more persons conspiring and/or confederating with one another in carrying out any unlawful
or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal
recruitment is deemed committed in large scale if committed against three (3) or more persons
individually or as a group.
All the five (5) complaining witnesses met each other for the first time at the house of
Loreta Castaeda. They were not in any way acquainted with one another prior to that
meeting save for Danilo de los Reyes and his brother-in-law Belarmino Torregrosa. They
all came from different places, yet, they were all united in pointing to the Calonzo as the
person who enticed them to apply for employment abroad. Of course, Calonzo could not
explain what motivated the complaining witnesses to file these cases against him. The
most that Calonzo could do on the witness stand was to deny all the charges against
him. Alas, his denial is at most lame and cannot prevail over the positive assertions of
the complaining witnesses. In People v. Villafuerte
[2]
we ruled -
x x x The absence of evidence as to an improper motive actuating the principal witnesses of the
prosecution strongly tends to sustain no improper motive existed and their testimony is worthy of
full faith and credit. Accused-appellant's denial cannot prevail over the positive assertions of
complainants who had no motive to testify falsely against her except to tell the truth.
Illegal recruitment in large scale is committed when a person "(a) undertakes any
recruitment activity defined under Article 13(b) or any prohibited practice enumerated
under Article 34 of the Labor Code; (b) does not have a license or authority to lawfully
engage in the recruitment and placement of workers; and (c) commits the same
against three or more persons, individually or as a group."
[3]
The testimony of
complainants evidently showed that Calonzo was engaged
in recruitment activities in large scale. Firstly,he deluded complainants into
believing that jobs awaited them in Italy by distinctly impressing upon them that he had the
facility to send them for work abroad. He even showed them his passport to lend
credence to his claim. To top it all, he brought them to Bangkok and not to
Italy. Neither did he have any arrangements in Bangkok for the transfer of his
recruits to Italy. Secondly, POEA likewise certified that neither Calonzo nor R. A. C.
Business Agency was licensed to recruit workers for employment abroad. Appellant
admitted this fact himself. Thirdly, appellant recruited five (5) workers thus making the
crime illegal recruitment in large scale constituting economic sabotage.
In his attempt to exculpate himself, although belatedly, Calonzo denies having
received money from the complainants. But as against their positive testimonies, this
denial of appellant is worthless and at most self-serving. All the complaining witnesses
testified that they gave their money to Calonzo through Loreta Castaeda who in turn
gave the amounts to Calonzo in their presence. In support thereof complainants even
presented receipts issued by the R. A. C. Business Agency with Calonzo's signature
affixed thereon. Nobody corroborated Calonzo's denial. Even Loreta who could have
confirmed such denial testified that all the amounts given by the complainants were turned
over by her to Calonzo. The attempt of the defense at reinforcing such denial proved futile
when it presented Carmeo Alix to testify that appellant owned another import-export
business as it had no relevance to his defense.
As regards the conviction of Calonzo for estafa on five (5) counts we ruled in People v.
Turda
[4]
that recruitment of persons for overseas employment without the necessary
recruiting permit or authority from the POEA constitutes illegal recruitment; however,
where some other crimes or felonies are committed in the process, conviction under the
Labor Code does not preclude punishment under other statutes. In People v.
Romero
[5]
we said that the elements of estafa were: (a) that the accused defrauded
another by abuse of confidence or by means of deceit, and (b) that damage or prejudice
capable of pecuniary estimation is caused to the offended party or third
person. Corollarily, Art. 315 of the Revised Penal Code provides for its penalty thus -
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum
period, if the amount of the fraud is over P12,000 but does not exceed P22,000, and if such amount
exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum
period, adding one year for each additional P10,000; but the total penalty which may be imposed
shall not exceed twenty years. In such a case, and in connection with the accessory penalties which
may be imposed and for the purpose of the other provisions of this Code, the penalty shall be
termed prision mayor or reclusion temporal, as the case may be.
In the case before us, we are convinced that Calonzo defrauded complainants
through deceit. They were obviously misled into believing that he could provide them
employment in Italy. As a result, the five (5) complainants who desperately wanted to
augment their income and improve their lot parted with their hard-earned money. In Crim.
Cases Nos. 98850, 98851, 98852 and 98854 the amount defrauded of each complainant
was P120,000.00. In consonance with Art. 315 of the Revised Penal Code, the imposable
penalty is prision correccional in its maximum period to prision mayor in its minimum
period the range of which is four (4) years, two (2) months and one (1) day, to five (5)
years, five (5) months and ten (10) days as minimum, while the medium period is from five
(5) years, five (5) months and eleven (11) days, to six (6) years, eight (8) months
and twenty (20) days, and the maximum is six (6) years, eight (8) months and twenty-
one (21) days, to eight (8) years. Since the amount of P120,000.00 was defrauded
in each case, the maximum penalty should be taken from the maximum period
of the penalty prescribed, plus one (1) year for every P10,000.00 in excess of P22,000.00
which, in these four (4) cases is equivalent to nine (9) additional years. Hence, the
maximum imposable penalty should be fifteen (15) years, eight (8) months and twenty-one
(21) days, to seventeen (17) years of reclusion temporal medium. Applying the
Indeterminate Sentence Law, the minimum penalty shall be within the range of the
penalty next lower in degree to that prescribed in the Code, i.e.,prision
correccional minimum to prision correccional medium in any of its periods. Prision
correccional minimum to prision correccional medium ranges from six (6) months and one
(1) day, to four (4) years and two (2) months. Clearly, the penalty imposed by the court
below in each of the aforesaid cases, which is eleven (11) years, eleven (11) months and
eleven (11) days of prision mayor medium, to fifteen (15) years, eight (8) months and
twenty-one (21) days of reclusion temporal medium, is properly within the range of the
imposable penalty.
The same principle would apply to Crim. Case No. 98853 where the amount defrauded
was P100,000.00. The trial court therefore correctly imposed the penalty of nine (9)
years, eleven (11) months and eleven (11) days of prision mayor medium, to thirteen (13)
years, eight (8) months and twenty-one (21) days of reclusion temporal minimum, which
is properly within the range of the imposable penalty.
WHEREFORE, the judgment of the court a quo finding accused-
appellant REYDANTE CALONZO Y AMBROSIO guilty of Illegal
Recruitment in Large Scale in Crim. Case No. 98855 (G.R. No. 115155), and
of Estafa in Crim. Case No. 98850 (G.R. No. 115150), Crim. Case No. 98851 (G.R. No.
115151), Crim. Case No. 98852 (G.R. No. 115152), Crim. Case No. 98853 (G.R. No.
115153) and Crim. Case No. 98854 (G.R. No. 115154) as well as the corresponding
penalties imposed by the court a quo is AFFIRMED, with costs against accused-
appellant.
In the service of the various prison terms herein imposed upon accused-appellant, the
provisions of Art. 70 of the Revised Penal Code shall be observed.
SO ORDERED.

Illegal Recruitment Elements
SECOND DIVISION

[G.R. No. 186132 : February 27, 2012]

PEOPLE OF THE PHILIPPINES, APPELLEE, VS. NESTOR TUGUINAY, APPELLANT.

D E C I S I O N

BRION, J.:

We resolve the appeal, filed by accused Nestor Tuguinay (appellant), from the July 21, 2008 decision of the
Court of Appeals (CA) in CA-G.R. H.C. CR- No. 02206.
[1]
cralaw
The RTC Ruling

In its October 29, 2003 decision,
[2]
the Regional Trial Court (RTC) of Baguio City, Branch 60, convicted the
appellant of illegal recruitment in large scale
[3]
and four counts of estafa.
[4]
It gave full credence to the
straightforward testimonies of complainants Ferdinand Aguilar y Pontino, Sakio Balicdang, Lim U. Tany and
Jordan B. Bangcawayan, pointing to the appellant and his co-accused, Nida Bermudez,
[5]
as the persons who
recruited and promised them overseas employment in exchange for sums of money. It found that the appellant
was not licensed to recruit workers for overseas employment, per the June 6, 2001 Certification of the
Philippine Overseas Employment Administration. It noted that the appellant defrauded Aguilar, Balicdang, Tany
and Bangcawayan in the amounts of P63,500.00, P75,000.00, P70,000.00 and P70,000.00, respectively. It
rejected the appellants bare and uncorroborated denial.

For the crime of illegal recruitment in Criminal Case No. 19287-R, the RTC sentenced the appellant to suffer the
penalty of life imprisonment and ordered him to pay a P100,000.00 fine. For each count of estafa committed
against Aguilar, Tany and Bangcawayan in Criminal Case Nos. 19288-R, 19290-R and 19291-R, it sentenced the
appellant to suffer an indeterminate penalty of 4 years and 2 months of prision correccional, as minimum, to 12
years of prision mayor, as maximum. For the crime of estafa committed against Balicdang in Criminal Case No.
19289-R, the RTC sentenced the appellant to suffer an indeterminate penalty of 4 years and 2 months of prision
correccional, as minimum, to 13 years of reclusion temporal, as maximum. It did not impose any civil liability
on the appellant, noting that he had already settled his civil obligations to the complainants.
The CA Ruling

On intermediate appellate review,
[6]
the CA affirmed the RTC's decision, giving full respect to the RTC's
assessment of the testimonies and credibility of the complainants.

We now rule on the final review of the case.
Our Ruling

We deny the appeal, but modify the penalties imposed.

The three elements of the crime of illegal recruitment in large scale, to wit: a) the offender has no valid license
or authority required by law to enable him to lawfully engage in recruitment and placement of workers; b) the
offender undertakes any of the activities within the meaning of "recruitment and placement" under Article 13(b)
of the Labor Code, or any of the prohibited practices enumerated under Article 34 of the said Code (now Section
6 of Republic Act No. 8042); and c) the offender committed the same against three or more persons,
individually or as a group, are present in this case.

The prosecution adduced proof beyond reasonable doubt that the appellant enlisted the four complainants for
overseas employment without any license to do so. The four complainants adequately testified on the demand
for placement fees made by the appellant, and the payments they made. No motive affecting their credibility
was ever imputed against them. We, therefore, rule that the lower courts correctly found the appellant guilty of
illegal recruitment in large scale.

Section 7(b) of Republic Act No. 8042 prescribes a penalty of life imprisonment and a fine of not less than
P500,000.00 nor more than P1,000,000.00 if the illegal recruitment constitutes economic sabotage, i.e., illegal
recruitment in large scale and illegal recruitment committed by a syndicate. The RTC, as affirmed by the CA,
imposed upon the appellant the penalty of life imprisonment and a fine of only P100,000.00. Since the fine of
P100,000.00 is below the minimum set by law, we increase the same to P500,000.00.

We likewise affirm the appellants conviction for the crime of estafa. The two elements of estafa (a) that the
accused defrauded another by abuse of confidence or by means of deceit, and (b) that damage or prejudice
capable of pecuniary estimation is caused to the offended party or third person are also present in this case.
The prosecution evidence duly proved that due to the appellants false representations of overseas jobs, the
complainants paid placement fees to the appellant who failed to secure the promised overseas jobs.

Article 315 of the Revised Penal Code prescribes the penalty for estafa, when the amount of fraud is over
P22,000.00, of prision correccional maximum to prision mayor minimum, adding one year to the maximum
period for each additional P10,000.00, provided that the total penalty shall not exceed 20 years. Applying the
Indeterminate Sentence Law (ISL), we take the minimum term from the penalty next lower than the minimum
prescribed by law, or anywhere within prision correccional minimum and medium (i.e., from 6 months and 1
day to 4 years and 2 months). Thus, the lower courts correctly imposed the minimum term in the 4 counts of
estafa at 4 years and 2 months of prision correccional, since this is within the range of prision
correccional minimum and medium.

For the maximum term under the ISL, we take the maximum period of the prescribed penalty, adding one year
of imprisonment for every P10,000.00 in excess of P22,000.00, provided that the total penalty shall not exceed
20 years. To compute the maximum period of the prescribed penalty, the time included in prision
correccional maximum to prision mayor minimum shall be divided into three equal portions, with each portion
forming a period. Following this computation, the maximum period for prision correccional maximum to prision
mayor minimum is from 6 years, 8 months, and 21 days to 8 years. The incremental penalty, when proper,
shall thus be added to anywhere from 6 years, 8 months, and 21 days to 8 years, at the discretion of the court.
In computing the incremental penalty, the amount defrauded shall be subtracted by P22,000.00, the difference
shall be divided by P10,000.00, and any fraction of a year is discarded.
[7]


Upon review, we modify the maximum term of the indeterminate sentence imposed on the appellant in Criminal
Case Nos. 19288-R to 19291-R.

In Criminal Case No. 19288-R, since the amount defrauded of P63,500.00 exceeds P22,000.00 by P41,500.00,
4 years shall be added to the maximum period of the prescribed penalty (anywhere between 6 years, 8 months,
and 21 days to 8 years). In the absence of any aggravating circumstance, we add the 4 years of incremental
penalty to the lowest of the maximum period, which is 6 years, 8 months and 21 days. The maximum term,
therefore, of the appellant's indeterminate sentence in Criminal Case No. 19288-R is only 10 years, 8 months
and 21 days of prision mayor.

In Criminal Case No. 19289-R, since the amount defrauded of P75,000.00 exceeds P22,000.00 by P53,000.00,
5 years shall be added to the maximum period of the prescribed penalty (anywhere between 6 years, 8 months
and 21 days to 8 years). In the absence of any aggravating circumstance, we add the 5 years of incremental
penalty to the lowest of the maximum period, which is 6 years, 8 months and 21 days. The maximum term,
therefore, of the appellant's indeterminate sentence in Criminal Case No. 19289-R is only 11 years, 8 months
and 21 days of prision mayor.

In Criminal Case Nos. 19290-R and 19291-R, since each of the amounts defrauded of P70,000.00 exceeds
P22,000.00 by P48,000.00, 4 years shall be added to the maximum period of the prescribed penalty (anywhere
between 6 years, 8 months and 21 days to 8 years) in each case. In the absence of any aggravating
circumstance in these cases, we add the 4 years of incremental penalty to the lowest of the maximum period,
which is 6 years, 8 months and 21 days. The maximum term, therefore, of the appellant's indeterminate
sentence in Criminal Case Nos. 19290-R and 19291-R is only 10 years, 8 months and 21 days of prision
mayor.cralaw

WHEREFORE, the July 21, 2008 decision of the Court of Appeals in CA-G.R. H.C. CR No. 02206 is
hereby AFFIRMED with MODIFICATION. Appellant Nestor Tuguinay is found guilty beyond reasonable doubt
of illegal recruitment in large scale in Criminal Case No. 19287-R and is sentenced to suffer the penalty of life
imprisonment and to pay a fine of P500,000.00. He is likewise found guilty beyond reasonable doubt of four
counts of estafa and sentenced to an indeterminate penalty of 4 years and 2 months of prision correccional, as
minimum, to 10 years, 8 months and 21 days of prision mayor, as maximum, in Criminal Case Nos. 19288-R,
19290-R and 19291-R; and an indeterminate penalty of 4 years and 2 months of prision correccional, as
minimum, to 11 years, 8 months and 21 days of prision mayor, as maximum, in Criminal Case No. 19289-R.

SO ORDERED.
SECOND DIVISION

CENTURY CANNING
CORPORATION,
Petitioner,






- versus -




COURT OF APPEALS and
GLORIA C. PALAD,
Respondents.
G.R. No. 152894

Present:

QUISUMBING, J.,
Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.




Promulgated:

August 17, 2007

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

D E C I S I O N

CARPIO, J .:

The Case

This is a petition for review
[1]
of the Decision
[2]
dated 12 November 2001 and the
Resolution dated 5 April 2002 of the Court of Appeals in CA-G.R. SP No. 60379.

The Facts

On 15 July 1997, Century Canning Corporation (petitioner) hired Gloria C. Palad (Palad)
as fish cleaner at petitioners tuna and sardines factory. Palad signed on 17 July 1997 an
apprenticeship agreement
[3]
with petitioner. Palad received an apprentice allowance of P138.75
daily. On 25 July 1997, petitioner submitted its apprenticeship program for approval to the
Technical Education and Skills Development Authority (TESDA) of the Department of Labor
and Employment (DOLE). On 26 September 1997, the TESDA approved petitioners
apprenticeship program.
[4]


According to petitioner, a performance evaluation was conducted on 15 November 1997,
where petitioner gave Palad a rating of N.I. or needs improvement since she scored
only 27.75% based on a 100% performance indicator. Furthermore, according to the
performance evaluation, Palad incurred numerous tardiness and absences. As a consequence,
petitioner issued a termination notice
[5]
dated 22 November 1997 to Palad, informing her of her
termination effective at the close of business hours of 28 November 1997.

Palad then filed a complaint for illegal dismissal, underpayment of wages, and non-
payment of pro-rated 13
th
month pay for the year 1997.

On 25 February 1999, the Labor Arbiter dismissed the complaint for lack of merit but
ordered petitioner to pay Palad her last salary and her pro-rated 13
th
month pay. The dispositive
portion of the Labor Arbiters decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring
that the complaint for illegal dismissal filed by the complainant against the
respondents in the above-entitled case should be, as it is hereby DISMISSED for lack
of merit. However, the respondents are hereby ordered to pay the complainant the
amount of ONE THOUSAND SIX HUNDRED THIRTY-TWO PESOS (P1,632.00),
representing her last salary and the amount of SEVEN THOUSAND TWO
HUNDRED TWENTY EIGHT (P7,228.00) PESOS representing her prorated
13
th
month pay.

All other issues are likewise dismissed.

SO ORDERED.
[6]




On appeal, the National Labor Relations Commission (NLRC) affirmed with
modification the Labor Arbiters decision, thus:

WHEREFORE, premises considered, the decision of the Arbiter dated 25
February 1999 is hereby MODIFIED in that, in addition, respondents are ordered to
pay complainants backwages for two (2) months in the amount of P7,176.00
(P138.75 x 26 x 2 mos.). All other dispositions of the Arbiter as appearing in the
dispositive portion of his decision are AFFIRMED.

SO ORDERED.
[7]




Upon denial of Palads motion for reconsideration, Palad filed a special civil action
for certiorari with the Court of Appeals. On 12 November 2001, the Court of Appeals rendered
a decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the questioned decision of the NLRC
is hereby SET ASIDE and a new one entered, to wit:

(a) finding the dismissal of petitioner to be illegal;
(b) ordering private respondent to pay petitioner her underpayment in wages;
(c) ordering private respondent to reinstate petitioner to her former position
without loss of seniority rights and to pay her full backwages computed from
the time compensation was withheld from her up to the time of her
reinstatement;
(d) ordering private respondent to pay petitioner attorneys fees equivalent to
ten (10%) per cent of the monetary award herein; and
(e) ordering private respondent to pay the costs of the suit.

SO ORDERED.
[8]




The Ruling of the Court of Appeals

The Court of Appeals held that the apprenticeship agreement which Palad signed was not
valid and binding because it was executed more than two months before the TESDA approved
petitioners apprenticeship program. The Court of Appeals cited Nitto Enterprises v. National
Labor Relations Commission,
[9]
where it was held that prior approval by the DOLE of the
proposed apprenticeship program is a condition sine qua non before an apprenticeship
agreement can be validly entered into.

The Court of Appeals also held that petitioner illegally dismissed Palad. The Court of
Appeals ruled that petitioner failed to show that Palad was properly apprised of the required
standard of performance. The Court of Appeals likewise held that Palad was not afforded due
process because petitioner did not comply with the twin requirements of notice and hearing.


The Issues

Petitioner raises the following issues:


1. WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN HOLDING THAT PRIVATE RESPONDENT WAS NOT AN
APPRENTICE; and

2. WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN HOLDING THAT PETITIONER HAD NOT ADEQUATELY
PROVEN THE EXISTENCE OF A VALID CAUSE IN TERMINATING THE
SERVICE OF PRIVATE RESPONDENT.
[10]




The Ruling of the Court

The petition is without merit.

Registration and Approval by the TESDA of Apprenticeship Program Required Before
Hiring of Apprentices

The Labor Code defines an apprentice as a worker who is covered by a written
apprenticeship agreement with an employer.
[11]
One of the objectives of Title II (Training and
Employment of Special Workers) of the Labor Code is to establish apprenticeship standards for
the protection of apprentices.
[12]
In line with this objective, Articles 60 and 61 of the Labor
Code provide:

ART. 60. Employment of apprentices. Only employers in the highly technical
industries may employ apprentices and only in apprenticeable occupations
approved by the Minister of Labor and Employment. (Emphasis supplied)


ART. 61. Contents of apprenticeship agreements. Apprenticeship agreements,
including the wage rates of apprentices, shall conform to the rules issued by the
Minister of Labor and Employment. The period of apprenticeship shall not exceed six
months. Apprenticeship agreements providing for wage rates below the legal
minimum wage, which in no case shall start below 75 percent of the applicable
minimum wage, may be entered into only in accordance with apprenticeship
programs duly approved by the Minister of Labor and Employment. The
Ministry shall develop standard model programs of apprenticeship. (Emphasis
supplied)


In Nitto Enterprises v. National Labor Relations Commission,
[13]
the Court cited Article
61 of the Labor Code and held that an apprenticeship program should first be approved by the
DOLE before an apprentice may be hired, otherwise the person hired will be considered a
regular employee. The Court held:

In the case at bench, the apprenticeship agreement between petitioner and
private respondent was executed on May 28, 1990 allegedly employing the latter as an
apprentice in the trade of care maker/molder. On the same date, an apprenticeship
program was prepared by petitioner and submitted to the Department of Labor and
Employment. However, the apprenticeship agreement was filed only on June 7, 1990.
Notwithstanding the absence of approval by the Department of Labor and
Employment, the apprenticeship agreement was enforced the day it was signed.
Based on the evidence before us, petitioner did not comply with the
requirements of the law. It is mandated that apprenticeship agreements entered
into by the employer and apprentice shall be entered only in accordance with the
apprenticeship program duly approved by the Minister of Labor and
Employment.
Prior approval by the Department of Labor and Employment of the
proposed apprenticeship program is, therefore, a condition sine qua non before
an apprenticeship agreement can be validly entered into.
The act of filing the proposed apprenticeship program with the Department of
Labor and Employment is a preliminary step towards its final approval and does not
instantaneously give rise to an employer-apprentice relationship.
Article 57 of the Labor Code provides that the State aims to establish a
national apprenticeship program through the participation of employers, workers and
government and non-government agencies and to establish apprenticeship standards
for the protection of apprentices. To translate such objectives into existence, prior
approval of the DOLE to any apprenticeship program has to be secured as a
condition sine qua non before any such apprenticeship agreement can be fully
enforced. The role of the DOLE in apprenticeship programs and agreements cannot be
debased.
Hence, since the apprenticeship agreement between petitioner and private
respondent has no force and effect in the absence of a valid apprenticeship program
duly approved by the DOLE, private respondents assertion that he was hired not as an
apprentice but as a delivery boy (kargador or pahinante) deserves credence. He
should rightly be considered as a regular employee of petitioner as defined by Article
280 of the Labor Code x x x. (Emphasis supplied)
[14]



Republic Act No. 7796
[15]
(RA 7796), which created the TESDA, has transferred the
authority over apprenticeship programs from the Bureau of Local Employment of the DOLE to
the TESDA.
[16]
RA 7796 emphasizes TESDAs approval of the apprenticeship program as a
pre-requisite for the hiring of apprentices. Such intent is clear under Section 4 of RA 7796:

SEC. 4. Definition of Terms. As used in this Act:

x x x

j) Apprenticeship training within employment with compulsory related theoretical
instructions involving a contract between an apprentice and an employer on an
approved apprenticeable occupation;






k) Apprentice is a person undergoing training for an approved apprenticeable
occupation during an established period assured by an apprenticeship agreement;

l) Apprentice Agreement is a contract wherein a prospective employer binds
himself to train the apprentice who in turn accepts the terms of training for a
recognized apprenticeable occupation emphasizing the rights, duties and
responsibilities of each party;

m) Apprenticeable Occupation is an occupation officially endorsed by a tripartite
body and approved for apprenticeship by the Authority [TESDA]; (Emphasis
supplied)


In this case, the apprenticeship agreement was entered into between the parties before
petitioner filed its apprenticeship program with the TESDA for approval. Petitioner and Palad
executed the apprenticeship agreement on 17 July 1997 wherein it was stated that the training
would start on 17 July 1997 and would end approximately in December 1997.
[17]
On 25 July
1997, petitioner submitted for approval its apprenticeship program, which the TESDA
subsequently approved on 26 September 1997.
[18]
Clearly, the apprenticeship agreement was
enforced even before the TESDA approved petitioners apprenticeship program. Thus, the
apprenticeship agreement is void because it lacked prior approval from the TESDA.

The TESDAs approval of the employers apprenticeship program is required before the
employer is allowed to hire apprentices. Prior approval from the TESDA is necessary to ensure
that only employers in the highly technical industries may employ apprentices and only in
apprenticeable occupations.
[19]
Thus, under RA 7796, employers can only hire apprentices for
apprenticeable occupations which must be officially endorsed by a tripartite body and approved
for apprenticeship by the TESDA. This is to ensure the protection of apprentices and to obviate
possible abuses by prospective employers who may want to take advantage of the lower wage
rates for apprentices and circumvent the right of the employees to be secure in their
employment.

The requisite TESDA approval of the apprenticeship program prior to the hiring of
apprentices was further emphasized by the DOLE with the issuance of Department Order No.
68-04 on 18 August 2004. Department Order No. 68-04, which provides the guidelines in the
implementation of the Apprenticeship and Employment Program of the government,
specifically states that no enterprise shall be allowed to hire apprentices unless its
apprenticeship program is registered and approved by TESDA.
[20]



Since Palad is not considered an apprentice because the apprenticeship agreement was
enforced before the TESDAs approval of petitioners apprenticeship program, Palad is deemed
a regular employee performing the job of a fish cleaner. Clearly, the job of a fish cleaner is
necessary in petitioners business as a tuna and sardines factory. Under Article 280
[21]
of the
Labor Code, an employment is deemed regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer.


I llegal Termination of Palad

We shall now resolve whether petitioner illegally dismissed Palad.

Under Article 279
[22]
of the Labor Code, an employer may terminate the services of an
employee for just causes
[23]
or for authorized causes.
[24]
Furthermore, under Article
277(b)
[25]
of the Labor Code, the employer must send the employee who is about to be
terminated, a written notice stating the causes for termination and must give the employee the
opportunity to be heard and to defend himself. Thus, to constitute valid dismissal from
employment, two requisites must concur: (1) the dismissal must be for a just or authorized
cause; and (2) the employee must be afforded an opportunity to be heard and to defend
himself.
[26]


In this case, the Labor Arbiter held that petitioner terminated Palad for habitual
absenteeism and poor efficiency of performance. Under Section 25, Rule VI, Book II of the
Implementing Rules of the Labor Code, habitual absenteeism and poor efficiency of
performance are among the valid causes for which the employer may terminate the
apprenticeship agreement after the probationary period.

However, the NLRC reversed the finding of the Labor Arbiter on the issue of the legality
of Palads termination:

As to the validity of complainants dismissal in her status as an apprentice,
suffice to state that the findings of the Arbiter that complainant was dismissed due to
failure to meet the standards is nebulous. What clearly appears is that complainant
already passed the probationary status of the apprenticeship agreement of 200 hours at
the time she was terminated on 28 November 1997 which was already the fourth
month of the apprenticeship period of 1000 hours. As such, under the Code, she can
only be dismissed for cause, in this case, for poor efficiency of performance on the job
or in the classroom for a prolonged period despite warnings duly given to the
apprentice.

We noted that no clear and sufficient evidence exist to warrant her
dismissal as an apprentice during the agreed period. Besides the absence of any
written warnings given to complainant reminding her of poor performance,
respondents evidence in this respect consisted of an indecipherable or
unauthenticated xerox of the performance evaluation allegedly conducted
on complainant. This is of doubtful authenticity and/or credibility, being not
only incomplete in the sense that appearing thereon is a signature (not that of
complainant) side by side with a date indicated as 1/16/98. From the looks of
it, this signature is close to and appertains to the typewritten position of
Division/Department Head, which is below the signature of complainants
immediate superior who made the evaluation indicated as 11-15-97.

The only conclusion We can infer is that this evaluation was made
belatedly, specifically, after the filing of the case and during the progress thereof
in the Arbitral level, as shown that nothing thereon indicate that complainant
was notified of the results. Its authenticity therefor, is a big question mark, and
hence lacks any credibility. Evidence, to be admissible in administrative
proceedings, must at least have a modicum of authenticity. This, respondents
failed to comply with. As such, complainant is entitled to the payment of her wages
for the remaining two (2) months of her apprenticeship agreement.
[27]
(Emphasis
supplied)




Indeed, it appears that the Labor Arbiters conclusion that petitioner validly terminated
Palad was based mainly on the performance evaluation allegedly conducted by petitioner.
However, Palad alleges that she had no knowledge of the performance evaluation conducted
and that she was not even informed of the result of the alleged performance evaluation. Palad
also claims she did not receive a notice of dismissal, nor was she given the chance to explain.
According to petitioner, Palad did not receive the termination notice because Palad allegedly
stopped reporting for work after being informed of the result of the evaluation.

Under Article 227 of the Labor Code, the employer has the burden of proving that the
termination was for a valid or authorized cause.
[28]
Petitioner failed to substantiate its claim
that Palad was terminated for valid reasons. In fact, the NLRC found that petitioner failed to
prove the authenticity of the performance evaluation which petitioner claims to have conducted
on Palad, where Palad received a performance rating of only 27.75%. Petitioner merely relies
on the performance evaluation to prove Palads inefficiency. It was likewise not shown that
petitioner ever apprised Palad of the performance standards set by the company. When the
alleged valid cause for the termination of employment is not clearly proven, as in this case, the
law considers the matter a case of illegal dismissal.
[29]


Furthermore, Palad was not accorded due process. Even if petitioner did conduct a
performance evaluation on Palad, petitioner failed to warn Palad of her alleged poor
performance. In fact, Palad denies any knowledge of the performance evaluation conducted and
of the result thereof. Petitioner likewise admits that Palad did not receive the notice of
termination
[30]
because Palad allegedly stopped reporting for work. The records are bereft of
evidence to show that petitioner ever gave Palad the opportunity to explain and defend herself.
Clearly, the two requisites for a valid dismissal are lacking in this case.

WHEREFORE, we AFFIRM the Decision dated 12 November 2001 and the
Resolution dated 5 April 2002 of the Court of Appeals in CA-G.R. SP No. 60379.

SO ORDERED.
EN BANC
[G.R. No. L-5458. September 16, 1953.]
LUZON STEVEDORING CO., INC., and VISAYAN STEVEDORE
TRANSPORTATION CO., Petitioners, vs. THE PUBLIC SERVICE
COMMISSION and THE PHILIPPINE SHIPOWNERS
ASSOCIATION, Respondents.
D E C I S I O N
TUASON, J.:
Petitioners apply for review of a decision of the Public Service Commission
restraining them "from further operating their watercraft to transport goods
for hire or compensation between points in the Philippines until the rates they
propose to charge are approved by this Commission."
The facts are summarized by the Commission as follows:
". . . respondents are corporations duly organized and existing under the
laws of the Philippines, mainly engaged in the stevedoring or lighterage
and harbor towage business. At the same time, they are engaged in
interisland service which consists of hauling cargoes such as sugar, oil,
fertilizer and other commercial commodities which are loaded in their
barges and towed by their tugboats from Manila to various points in the
Visayan Islands, particularly in the Provinces of Negros Occidental and
Capiz, and from said places to Manila. For this service respondents
charge freightage on a unit price with rates ranging from P0.50 to P0.62
1/2 per bag or picul of sugar loaded or on a unit price per ton in the case
of fertilizer or sand. There is no fixed route in the transportation of these
cargoes, the same being left at the indication of the owner or shipper of
the goods. The barge and the tugboats are manned by the crew of
respondents and, in case of damage to the goods in transit caused by the
negligence of said crews, respondents are liable therefor. The service for
which respondents charge freightage covers the hauling or carriage of the
goods from the point of embarkation to the point of disembarkation
either in Manila or in any point in the Visayan Islands, as the case may
be.
"The evidence also sufficiently establishes that respondents are regularly
engaged in this hauling business serving a limited portion of the public.
Respondent Luzon Stevedoring Company, Inc., has among its regular
customers the San Miguel Glass Factory, PRATRA, Shell Co., of P.I., Ltd.,
Standard Oil Co., of New York and Philippine-Hawaiian; while respondent
Visayan Stevedore Transportation Co., has among its regular customers
the Insular Lumber, Shell Company, Ltd., Kim Kee Chua Yu & Co.,
PRATRA and Luzon Merchandising Corporation. During the period from
January, 1949 and up to the present, respondent Luzon Stevedoring Co.
Inc., has been rendering to PRATRA regularly and on many occasions
such service by carrying fertilizer from Manila to various points in the
Provinces of Negros Occidental and Capiz, such as Hinigatan, Silay,
Fabrica, Marayo, Mambaquid, Victorias and Pilar, and on the return trip
sugar was loaded from said provinces to Manila. For these services, as
evidenced by Exhibits A, A-1, A-2, A-3 and A-4, respondent Luzon
Stevedoring Company, Inc., charged PRATRA at the rate of P0.60 per
picul or bag of sugar and, according to Mr. Mauricio Rodriguez, chief of
the division in charge of sugar and fertilizer of the PRATRA, for the
transportation of fertilizer, this respondent charged P12 per metric ton.
During practically the same period, respondent Visayan Stevedore
Transportation Company transported in its barges and towed by its
tugboats sugar for Kim Kee Chua Yu & Company coming from Victorias,
Marayo and Pilar to Manila, and for Luzon Merchandising Corporation,
from Hinigaran, Bacolod, Marayo and Victorias to Manila. For such service
respondent Visayan Stevedore Transportation Company charge Kim Kee
Chua Yu Company for freightage P0.60 per picul or bag as shown in
Exhibits C, C-1, C-2, C-3, C-4, C- 5, C-6, C-7 and C-8, and Luzon
Merchandising Corporation was also charged for the same service and at
the same rate as shown in Exhibits B, B-1 and B-2."
It was upon these findings that the Commission made the order now sought to
be reviewed, upon complaint of the Philippine Shipowners' Association
charging that the then respondents were engaged in the transportation of
cargo in the Philippines for hire or compensation without authority or approval
of the Commission, having adopted, filed and collected freight charges at the
rate of P0.60 per bag or picul, particularly sugar, loaded and transported in
their lighters and towed by their tugboats between different points in the
Province of Negros Occidental and Manila, which said rates resulted in ruinous
competition with complainant.
Section 13 (b) of the Public Service Law (Commonwealth Act No. 146) defines
public service thus:
"The term 'public service' includes every person that now or hereafter
may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes any
common carrier, railroad, street railway, traction railway, subway, motor
vehicle, either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines,
ferries, and small water craft, engaged in the transportation of
passengers and freight, shipyard, marine railway, marine repair shop,
warehouse, wharf or dock, ice plant, ice-refrigeretion plant, canal,
irrigation system, sewerage, gas, electric light, heat and power, water
supply and power, petroleum, sewerage system, telephone, wire or
wireless telegraph system and broadcasting radio stations."
It is not necessary, under this definition, that one holds himself out as serving
or willing to serve the public in order to be considered public service.
In Luzon Brokerage Company vs. Public Service Commission (40 Off. Gaz., 7th
Supplement, p. 271), this court declared that "Act 454 is clear in including in
the definition of a public service that which is rendered for compensation,
although limited exclusively to the customers of the petitioner."
In that case, the Luzon Brokerage Company, a customs broker, had been
receiving, depositing and delivering goods discharged from ships at the pier to
its customers. As here, the Luzon Brokerage was then rendering transportation
service for compensation to a limited clientele, not to the public at large.
In the United States where, it is said, there is no fixed definition of what
constitutes public service or public utility, it is also held that it is not always
necessary, in order to be a public service, that an organization be dedicated to
public use, i.e., ready and willing to serve the public as a class. It is only
necessary that it must in some way be impressed with a public interest; and
whether the operation of a given business is a public utility depends upon
whether or not the service rendered by it is of a public character and of public
consequence and concern. (51 C. J. 5.) Thus, a business may be affected with
public interest and regulated for public good although not under any duty to
serve the public. (43 Am. Jur., 572.)
It can scarcely be denied that the contracts between the owners of the barges
and the owners of the cargo at bar were ordinary contracts of transportation
and not of lease. Petitioners' watercraft was manned entirely by crews in their
employ and payroll, and the operation of the said craft was under their
direction and control, the customers assuming no responsibility for the goods
handled on the barges. The great preponderance of the evidence contradicts
the assertion that there was any physical or symbolic conveyance of the
possession of the tugboats and barges to the shippers. Whether the
agreements were written or verbal, the manner of payment of freight charges,
the question who loaded and unloaded the cargo, the propriety of the
admission of certain receipts in evidence, etc., to all of which the parties have
given much attention these are matters of form which do not alter the
essential nature of the relationship of the parties to the transactions as
revealed by the fundamental facts of record.
It is contended that "if the Public Service Act were to be construed in such
manner as to include private lease contracts, said law would be
unconstitutional," seemingly implying that, to prevent the law from being in
contravention of the Constitution, it should be so read as to embrace only
those persons and companies that are in fact engaged in public service" with
its corresponding qualification of an offer to serve indiscriminately the public."
It has been already shown that the petitioners' lighters and tugboats were not
leased, but used to carry goods for compensation at a fixed rate for a fixed
weight. At the very least, they were hired, hired in the sense that the shippers
did not have direction, control, and maintenance thereof, which is a
characteristic feature of lease.
On the second proposition, the Public Service Commission has, in our
judgment, interpreted the law in accordance with legislative intent.
Commonwealth Act No. 146 declares in unequivocal language that an
enterprise of any of the kinds therein enumerated is a public service if
conducted for hire or compensation even if the operator deals only with a
portion of the public or limited clientele.
It has been seen that public utility, even where the term is not defined by
statute, is not determined by the number of people actually served. Nor does
the mere fact that service is rendered only under contract prevent a company
from being a public utility. (43 Am. Jur., 573.) On the other hand, casual or
incidental service devoid of public character and interest, it must be admitted,
is not brought within the category of public utility. The demarkation line is not
susceptible of exact description or definitions, each case being governed by its
peculiar circumstances.
"It is impossible to lay down any general rule on the subject whether the
rendering of incidental service to members of the public by an individual
or corporation whose principal business is of a different nature constitute
such person a public utility. In the result reached, the cases are in
conflict, as the question involved depends on such factors as the extent
of service, whether such person or company has held himself or itself out
as ready to serve the public or a portion of the public generally, or in
other ways conducted himself or itself as a public utility. Tn several
cases, it has been held that the incidental service rendered to others
constituted such person or corporation a public utility, but in other cases,
a contrary decision has been reached." (43 Am. Jur., 573.)
The transportation service which was the subject of complaint was not casual
or incidental. It had been carried on regularly for years at almost uniform rates
of charges. Although the number of the petitioners' customers was limited, the
value of goods transported was not inconsiderable. Petitioners did not have
the same customers all the time embraced in the complaint, and there was no
reason to believe that they would not accept, and there was nothing to
prevent them from accepting, new customers that might be willing to avail of
their service to the extent of their capacity. Upon the well-established facts as
applied to the plain letter of Commonwealth Act No. 146, we are of the opinion
that the Public Service Commission's order does not invade private rights of
property or contract.
In at least one respect, the business complained of was a matter of public
concern. The Public Service Law was enacted not only to protect the public
against unreasonable charges and poor, inefficient service, but also to prevent
ruinous competition. That, we venture to say, is the main purpose in bringing
under the jurisdiction of the Public Service Commission motor vehicles, other
means of transportation, ice plants, etc., which cater to a limited portion of the
public under private agreements. To the extent that such agreements may
tend to wreck or impair the financial stability and efficiency of public utilities
who do offer service to the public in general, they are affected with public
interest and come within the police power of the state to regulate.
Just as the legislature may not "declare a company or enterprise to be a public
utility when it is not inherently such," a public utility may not evade control
and supervision of its operation by the government by selecting its customers
under the guise of private transactions.
For the rest, the constitutionality of Commonwealth Act No. 146 was upheld,
implicitly in Luzon Brokerage Company vs. Public Service Commission, supra,
and explicitly in Pangasinan Transportation Company vs. Public Service
Commission (70 Phil., 221).
Were there serious doubts, the courts should still be reluctant to invalidate the
Public Service Law or any provision thereof. Although the legislature can not,
by its mere declaration, make something a public utility which is not in fact
such, "the public policy of the state as announced by the legislature will be
given due weight, and the determination of the legislature that a particular
business is subject to the regulatory power, because the public welfare is
dependent upon its proper conduct and regulation, will not lightly be
disregarded by the courts." (51 C. J. 5.)
The objection to the designation of Attorney Aspillera as commissioner to take
the evidence was tardy. It was made for the first time after decision was
rendered, following a prolonged hearing in which the petitioners
crossexamined the complainant's witnesses and presented their own evidence.
The point is procedural, not jurisdictional, and may be waived by express
consent or acquiescence. So it was held in Everett Steamship Corporation vs.
Chua Hiong, 90 Phil. 64 and La Paz Ice Plant and Cold Storage Company vs.
Comision de Utilidades Pblicas et al., 89 Phil., 109.
Upon the foregoing considerations, the appealed order of the Public Service
Commission is affirmed, with costs against the petitioners.chanroblesvirt
Employment of Apprentice
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 114337 September 29, 1995
NITTO ENTERPRISES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ROBERTO CAPILI, respondents.

KAPUNAN, J .:
This petition for certiorari under Rule 65 of the Rules of Court seeking to annul the decision
1
rendered
by public respondent National Labor Relations Commission, which reversed the decision of the Labor Arbiter.
Briefly, the facts of the case are as follows:
Petitioner Nitto Enterprises, a company engaged in the sale of glass and aluminum products, hired
Roberto Capili sometime in May 1990 as an apprentice machinist, molder and core maker as
evidenced by an apprenticeship agreement
2
for a period of six (6) months from May 28, 1990 to November 28,
1990 with a daily wage rate of P66.75 which was 75% of the applicable minimum wage.
At around 1:00 p.m. of August 2, 1990, Roberto Capili who was handling a piece of glass which he
was working on, accidentally hit and injured the leg of an office secretary who was treated at a nearby
hospital.
Later that same day, after office hours, private respondent entered a workshop within the office
premises which was not his work station. There, he operated one of the power press machines
without authority and in the process injured his left thumb. Petitioner spent the amount of P1,023.04
to cover the medication of private respondent.
The following day, Roberto Capili was asked to resign in a letter
3
which reads:
August 2, 1990
Wala siyang tanggap ng utos mula sa superbisor at wala siyang experiensa kung
papaano gamitin and "TOOL" sa pagbuhat ng salamin, sarili niyang desisyon ang
paggamit ng tool at may disgrasya at nadamay pa ang isang sekretarya ng kompanya.
Sa araw ding ito limang (5) minute ang nakakalipas mula alas-singko ng hapon siya ay
pumasok sa shop na hindi naman sakop ng kanyang trabaho. Pinakialaman at kinalikot
ang makina at nadisgrasya niya ang kanyang sariling kamay.
Nakagastos ang kompanya ng mga sumusunod:
Emergency and doctor fee P715.00
Medecines (sic) and others 317.04
Bibigyan siya ng kompanya ng Siyam na araw na libreng sahod hanggang matanggal
ang tahi ng kanyang kamay.
Tatanggapin niya ang sahod niyang anim na araw, mula ika-30 ng Hulyo at ika-4 ng
Agosto, 1990.
Ang kompanya ang magbabayad ng lahat ng gastos pagtanggal ng tahi ng kanyang
kamay, pagkatapos ng siyam na araw mula ika-2 ng Agosto.
Sa lahat ng nakasulat sa itaas, hinihingi ng kompanya ang kanyang resignasyon,
kasama ng kanyang comfirmasyon at pag-ayon na ang lahat sa itaas ay totoo.

Naiintindihan ko ang lahat ng nakasulat sa itaas, at ang lahat ng ito ay aking
pagkakasala sa hindi pagsunod sa alintuntunin ng kompanya.
(Sgd.) Roberto Capili
Roberto Capili
On August 3, 1990 private respondent executed a Quitclaim and Release in favor of petitioner for and
in consideration of the sum of P1,912.79.
4

Three days after, or on August 6, 1990, private respondent formally filed before the NLRC Arbitration
Branch, National Capital Region a complaint for illegal dismissal and payment of other monetary
benefits.
On October 9, 1991, the Labor Arbiter rendered his decision finding the termination of private
respondent as valid and dismissing the money claim for lack of merit. The dispositive portion of the
ruling reads:
WHEREFORE, premises considered, the termination is valid and for cause, and the
money claims dismissed for lack of merit.
The respondent however is ordered to pay the complainant the amount of P500.00 as
financial assistance.
SO ORDERED.
5

Labor Arbiter Patricio P. Libo-on gave two reasons for ruling that the dismissal of Roberto Capilian
was valid. First, private respondent who was hired as an apprentice violated the terms of their
agreement when he acted with gross negligence resulting in the injury not only to himself but also to
his fellow worker. Second, private respondent had shown that "he does not have the proper attitude in
employment particularly the handling of machines without authority and proper training.
6

On July 26, 1993, the National Labor Relations Commission issued an order reversing the decision of
the Labor Arbiter, the dispositive portion of which reads:
WHEREFORE, the appealed decision is hereby set aside. The respondent is hereby
directed to reinstate complainant to his work last performed with backwages computed
from the time his wages were withheld up to the time he is actually reinstated. The
Arbiter of origin is hereby directed to further hear complainant's money claims and to
dispose them on the basis of law and evidence obtaining.
SO ORDERED.
7

The NLRC declared that private respondent was a regular employee of petitioner by ruling thus:
As correctly pointed out by the complainant, we cannot understand how an
apprenticeship agreement filed with the Department of Labor only on June 7, 1990
could be validly used by the Labor Arbiter as basis to conclude that the complainant
was hired by respondent as a plain "apprentice" on May 28, 1990. Clearly, therefore,
the complainant was respondent's regular employee under Article 280 of the Labor
Code, as early as May 28,1990, who thus enjoyed the security of tenure guaranteed in
Section 3, Article XIII of our 1987 Constitution.
The complainant being for illegal dismissal (among others) it then behooves upon
respondent, pursuant to Art. 227(b) and as ruled in Edwin Gesulgon vs. NLRC, et al.
(G.R. No. 90349, March 5, 1993, 3rd Div., Feliciano, J.) to prove that the dismissal of
complainant was for a valid cause. Absent such proof, we cannot but rule that the
complainant was illegally dismissed.
8

On January 28, 1994, Labor Arbiter Libo-on called for a conference at which only private respondent's
representative was present.
On April 22, 1994, a Writ of Execution was issued, which reads:
NOW, THEREFORE, finding merit in [private respondent's] Motion for Issuance of the
Writ, you are hereby commanded to proceed to the premises of [petitioner] Nitto
Enterprises and Jovy Foster located at No. l 74 Araneta Avenue, Portero, Malabon,
Metro Manila or at any other places where their properties are located and effect the
reinstatement of herein [private respondent] to his work last performed or at the option
of the respondent by payroll reinstatement.
You are also to collect the amount of P122,690.85 representing his backwages as
called for in the dispositive portion, and turn over such amount to this Office for proper
disposition.
Petitioner filed a motion for reconsideration but the same was denied.
Hence, the instant petition for certiorari.
The issues raised before us are the following:
I
WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION IN HOLDING THAT PRIVATE RESPONDENT WAS NOT AN
APPRENTICE.
II
WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION IN HOLDING THAT PETITIONER HAD NOT ADEQUATELY PROVEN
THE EXISTENCE OF A VALID CAUSE IN TERMINATING THE SERVICE OF
PRIVATE RESPONDENT.
We find no merit in the petition.
Petitioner assails the NLRC's finding that private respondent Roberto Capili cannot plainly be
considered an apprentice since no apprenticeship program had yet been filed and approved at the
time the agreement was executed.
Petitioner further insists that the mere signing of the apprenticeship agreement already established an
employer-apprentice relationship.
Petitioner's argument is erroneous.
The law is clear on this matter. Article 61 of the Labor Code provides:
Contents of apprenticeship agreement. Apprenticeship agreements, including the
main rates of apprentices, shall conform to the rules issued by the Minister of Labor and
Employment. The period of apprenticeship shall not exceed six months. Apprenticeship
agreements providing for wage rates below the legal minimum wage, which in no case
shall start below 75% per cent of the applicable minimum wage, may be entered into
only in accordance with apprenticeship program duly approved by the Minister of Labor
and Employment. The Ministry shall develop standard model programs of
apprenticeship. (emphasis supplied)
In the case at bench, the apprenticeship agreement between petitioner and private respondent was
executed on May 28, 1990 allegedly employing the latter as an apprentice in the trade of "care
maker/molder." On the same date, an apprenticeship program was prepared by petitioner and
submitted to the Department of Labor and Employment. However, the apprenticeship Agreement was
filed only on June 7, 1990. Notwithstanding the absence of approval by the Department of Labor and
Employment, the apprenticeship agreement was enforced the day it was signed.
Based on the evidence before us, petitioner did not comply with the requirements of the law. It is
mandated that apprenticeship agreements entered into by the employer and apprentice shall be
entered only in accordance with the apprenticeship program duly approved by the Minister of Labor
and Employment.
Prior approval by the Department of Labor and Employment of the proposed apprenticeship program
is, therefore, a condition sine quo non before an apprenticeship agreement can be validly entered
into.
The act of filing the proposed apprenticeship program with the Department of Labor and Employment
is a preliminary step towards its final approval and does not instantaneously give rise to an employer-
apprentice relationship.
Article 57 of the Labor Code provides that the State aims to "establish a national apprenticeship
program through the participation of employers, workers and government and non-government
agencies" and "to establish apprenticeship standards for the protection of apprentices." To translate
such objectives into existence, prior approval of the DOLE to any apprenticeship program has to be
secured as a condition sine qua non before any such apprenticeship agreement can be fully
enforced. The role of the DOLE in apprenticeship programs and agreements cannot be debased.
Hence, since the apprenticeship agreement between petitioner and private respondent has no force
and effect in the absence of a valid apprenticeship program duly approved by the DOLE, private
respondent's assertion that he was hired not as an apprentice but as a delivery boy ("kargador" or
"pahinante") deserves credence. He should rightly be considered as a regular employee of petitioner
as defined by Article 280 of the Labor Code:
Art. 280. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph:Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity exists. (Emphasis supplied)
and pursuant to the constitutional mandate to "protect the rights of workers and promote their
welfare."
9

Petitioner further argues that, there is a valid cause for the dismissal of private respondent.
There is an abundance of cases wherein the Court ruled that the twin requirements of due process,
substantive and procedural, must be complied with, before valid dismissal exists.
10
Without which, the
dismissal becomes void.
The twin requirements of notice and hearing constitute the essential elements of due process. This
simply means that the employer shall afford the worker ample opportunity to be heard and to defend
himself with the assistance of his representative, if he so desires.
Ample opportunity connotes every kind of assistance that management must accord the employee to
enable him to prepare adequately for his defense including legal representation.
11

As held in the case of Pepsi-Cola Bottling Co., Inc. v. NLRC:
12

The law requires that the employer must furnish the worker sought to be dismissed with
two (2) written notices before termination of employee can be legally effected: (1) notice
which apprises the employee of the particular acts or omissions for which his dismissal
is sought; and (2) the subsequent notice which informs the employee of the employer's
decision to dismiss him (Sec. 13, BP 130; Sec. 2-6 Rule XIV, Book V, Rules and
Regulations Implementing the Labor Code as amended). Failure to comply with the
requirements taints the dismissal with illegality. This procedure is mandatory, in the
absence of which, any judgment reached by management is void and in existent
(Tingson, Jr. vs. NLRC, 185 SCRA 498 [1990]; National Service Corp. vs. NLRC, 168
SCRA 122; Ruffy vs. NLRC. 182 SCRA 365 [1990]).
The fact is private respondent filed a case of illegal dismissal with the Labor Arbiter only three days
after he was made to sign a Quitclaim, a clear indication that such resignation was not voluntary and
deliberate.
Private respondent averred that he was actually employed by petitioner as a delivery boy ("kargador"
or "pahinante").
He further asserted that petitioner "strong-armed" him into signing the aforementioned resignation
letter and quitclaim without explaining to him the contents thereof. Petitioner made it clear to him that
anyway, he did not have a choice.
13

Petitioner cannot disguise the summary dismissal of private respondent by orchestrating the latter's
alleged resignation and subsequent execution of a Quitclaim and Release. A judicious examination of
both events belies any spontaneity on private respondent's part.
WHEREFORE, finding no abuse of discretion committed by public respondent National Labor
Relations Commission, the appealed decision is hereby AFFIRMED.
SO ORDERED.
Apprenticeship Agreement validity
Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION


ATLANTA INDUSTRIES, INC. G.R. No. 187320
and/or ROBERT CHAN,
Petitioners,
Present:

CARPIO MORALES, J., Chairperson,
BRION,

BERSAMIN,
- versus - VILLARAMA, JR., and
SERENO, JJ.

Promulgated:

APRILITO R. SEBOLINO,
KHIM V. COSTALES, January 26, 2011
ALVIN V. ALMOITE, and
JOSEPH S. SAGUN,
Respondents.
x----------------------------------------------------------------------------------------x


D E C I S I O N

BRION, J .:

For resolution is the petition for review on certiorari
[1]
assailing the decision
[2]
and the
resolution
[3]
of the Court of Appeals (CA) rendered on November 4, 2008 and March 25, 2009,
respectively, in CA-G.R. SP. No. 99340.
[4]


The Antecedents

The facts are summarized below.
In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim V.
Costales, Alvin V. Almoite, Joseph S. Sagun, Agosto D. Zao, Domingo S. Alegria, Jr., Ronie
Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong, Jr., Leonardo L. dela Cruz,
Arnold A. Magalang, and Saturnino M. Mabanag filed several complaints for illegal dismissal,
regularization, underpayment, nonpayment of wages and other money claims, as well as claims
for moral and exemplary damages and attorneys fees against the petitioners Atlanta Industries,
Inc. (Atlanta) and its President and Chief Operating Officer Robert Chan. Atlanta is a domestic
corporation engaged in the manufacture of steel pipes.

The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig, but
were later transferred to Labor Arbiter Dominador B. Medroso, Jr.

The complainants alleged that they had attained regular status as they were allowed to
work with Atlanta for more than six (6) months from the start of a purported apprenticeship
agreement between them and the company. They claimed that they were illegally dismissed
when the apprenticeship agreement expired.

In defense, Atlanta and Chan argued that the workers were not entitled to regularization
and to their money claims because they were engaged as apprentices under a government-
approved apprenticeship program. The company offered to hire them as regular employees in
the event vacancies for regular positions occur in the section of the plant where they had
trained. They also claimed that their names did not appear in the list of employees (Master
List)
[5]
prior to their engagement as apprentices.

On May 24, 2005, dela Cruz, Magalang, Zao and Chiong executed a Pagtalikod at
Pagwawalang Saysay before Labor Arbiter Cajilig.

The Compulsory Arbitration Rulings

On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to dela
Cruz, Magalang, Zao and Chiong, but found the termination of service of the remaining nine
to be illegal.
[6]
Consequently, the arbiter awarded the dismissed workers backwages, wage
differentials, holiday pay and service incentive leave pay amounting to P1,389,044.57 in the
aggregate.

Atlanta appealed to the National Labor Relations Commission (NLRC). In the meantime,
or on October 10, 2006, Ramos, Alegria, Villagomez, Costales and Almoite allegedly entered
into a compromise agreement with Atlanta.
[7]
The agreement provided that except for
Ramos, Atlanta agreed to pay the workers a specified amount as settlement, and to acknowledge
them at the same time as regular employees.

On December 29, 2006,
[8]
the NLRC rendered a decision, on appeal, modifying the ruling
of the labor arbiter, as follows: (1) withdrawing the illegal dismissal finding with respect to
Sagun, Mabanag, Sebolino and Pedregoza; (2) affirming the dismissal of the complaints of dela
Cruz, Zao, Magalang and Chiong; (3) approving the compromise agreement entered into by
Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other claims.

Sebolino, Costales, Almoite and Sagun moved for the reconsideration of the decision,
but the NLRC denied the motion in its March 30, 2007
[9]
resolution. The four then sought relief
from the CA through a petition for certiorari under Rule 65 of the Rules of Court. They charged
that the NLRC committed grave abuse of discretion in: (1) failing to recognize their prior
employment with Atlanta; (2) declaring the second apprenticeship agreement valid; (3) holding
that the dismissal of Sagun, Mabanag, Sebolino and Melvin Pedregoza is legal; and (4)
upholding the compromise agreement involving Costales, Ramos, Villagomez, Almoite and
Alegria.

The CA Decision

The CA granted the petition based on the following findings:
[10]


1. The respondents were already employees of the company before they entered into
the first and second apprenticeship agreements Almoite and Costales were employed as early
as December 2003 and, subsequently, entered into a first apprenticeship agreement from May
13, 2004 to October 12, 2004; before this first agreement expired, a second apprenticeship
agreement, from October 9, 2004 to March 8, 2005 was executed. The same is true with
Sebolino and Sagun, who were employed by Atlanta as early as March 3, 2004. Sebolino
entered into his first apprenticeship agreement with the company from March 20,
2004 to August 19, 2004, and his second apprenticeship agreement from August 20,
2004 to January 19, 2005. Sagun, on the other hand, entered into his first agreement from May
28, 2004 toOctober 8, 2004, and the second agreement from October 9, 2004 to March 8, 2005.

2. The first and second apprenticeship agreements were defective as they were
executed in violation of the law and the rules.
[11]
The agreements did not indicate the trade or
occupation in which the apprentice would be trained; neither was the apprenticeship program
approved by the Technical Education and Skills Development Authority (TESDA).
3. The positions occupied by the respondents machine operator, extruder operator
and scaleman are usually necessary and desirable in the manufacture of plastic building
materials, the companys main business. Costales, Almoite, Sebolino and Sagun were,
therefore, regular employees whose dismissals were illegal for lack of a just or authorized cause
and notice.
4. The compromise agreement entered into by Costales and Almoite, together with
Ramos, Villagomez and Alegria, was not binding on Costales and Almoite because they did not
sign the agreement.

The petitioners themselves admitted that Costales and Almoite were initially planned to
be a part of the compromise agreement, but their employment has been regularized as early
as January 11, 2006; hence, the company did not pursue their inclusion in the compromise
agreement.
[12]



The CA faulted the NLRC for failing to appreciate the evidence regarding the
respondents prior employment with Atlanta. The NLRC recognized the prior employment of
Costales and Almoite on Atlantas monthly report for December 2003 for the CPS
Department/Section dated January 6, 2004.
[13]
This record shows that Costales and Almoite
were assigned to the companys first shift from 7:00 a.m. to 3:00 p.m. The NLRC ignored
Sebolino and Saguns prior employment under the companys Production and Work Schedule
for March 7 to 12, 2005 dated March 3, 2004,
[14]
as they had been Atlantas employees as early
as March 3, 2004, with Sebolino scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00
p.m., while Sagun was scheduled to work for the same period but from 7:00 p.m. to 7:00
a.m.The CA noted that Atlanta failed to challenge the authenticity of the two documents before
it and the labor authorities.

Atlanta and Chan moved for reconsideration, but the CA denied the motion in a
resolution rendered on March 25, 2009.
[15]
Hence, the present petition.
The Petition

Atlanta seeks a reversal of the CA decision, contending that the appellate court erred in
(1) concluding that Costales, Almoite, Sebolino and Sagun were employed by Atlanta before
they were engaged as apprentices; (2) ruling that a second apprenticeship agreement is invalid;
(3) declaring that the respondents were illegally dismissed; and (4) disregarding the
compromise agreement executed by Costales and Almoite. It submits the following arguments:

First. The CAs conclusion that the respondent workers were company employees before
they were engaged as apprentices was primarily based on the Monthly Report
[16]
and the
Production and Work Schedule for March 7-12, 2005,
[17]
in total disregard of the Master
List
[18]
prepared by the company accountant, Emelita M. Bernardo. The names of Costales,
Almoite, Sebolino and Sagun do not appear as employees in the Master List which contained
the names of all the persons who were employed by and at petitioner.
[19]


Atlanta faults the CA for relying on the Production and Work Schedule and the Monthly
Report which were not sworn to, and in disregarding the Master List whose veracity was sworn
to by Bernardo and by Alex Go who headed the companys accounting division. It maintains
that the CA should have given more credence to the Master List.

Second. In declaring invalid the apprenticeship agreements it entered into with the
respondent workers, the CA failed to recognize the rationale behind the law on apprenticeship.
It submits that under the law,
[20]
apprenticeship agreements are valid, provided they do not
exceed six (6) months and the apprentices are paid the appropriate wages of at least 75% of the
applicable minimum wage.

The respondents initially executed a five-month apprenticeship program with Atlanta, at
the end of which, they voluntarily and willingly entered into another apprenticeship agreement
with the petitioner for the training of a second skill
[21]
for five months; thus, the petitioners
committed no violation of the apprenticeship period laid down by the law.

Further, the apprenticeship agreements, entered into by the parties, complied with the
requisites under Article 62 of the Labor Code; the companys authorized representative and the
respondents signed the agreements and these were ratified by the companys apprenticeship
committee. The apprenticeship program itself was approved and certified by the
TESDA.
[22]
The CA, thus, erred in overturning the NLRCs finding that the apprenticeship
agreements were valid.

Third. There was no illegal dismissal as the respondent workers tenure ended with the
expiration of the apprenticeship agreement they entered into. There was, therefore, no regular
employer-employee relationship between Atlanta and the respondent workers.

The Case for Costales, Almoite, Sebolino and Sagun

In a Comment filed on August 6, 2009,
[23]
Costales, Almoite, Sebolino and Sagun pray
for a denial of the petition for being procedurally defective and for lack of merit.

The respondent workers contend that the petition failed to comply with Section 4, Rule
45 of the Rules of Court which requires that the petition be accompanied by supporting material
portions of the records. The petitioners failed to attach to the petition a copy of the Production
and Work Schedule despite their submission that the CA relied heavily on the document in
finding the respondent workers prior employment with Atlanta. They also did not attach a
copy of the compromise agreement purportedly executed by Costales and Almoite. For this
reason, the respondent workers submit that the petition should be dismissed.

The respondents posit that the CA committed no error in holding that they were already
Atlantas employees before they were engaged as apprentices, as confirmed by the companys
Production and Work Schedule.
[24]
They maintain that the Production and Work Schedule meets
the requirement of substantial evidence as the petitioners failed to question its authenticity.
They point out that the schedule was prepared by Rose A. Quirit and approved by Adolfo R.
Lope, head of the companys PE/Spiral Section. They argue that it was highly unlikely that the
head of a production section of the company would prepare and assign work to the
complainants if the latter had not been company employees.

The respondent workers reiterate their mistrust of the Master List
[25]
as evidence that they
were not employees of the company at the time they became apprentices. They label the Master
List as self-serving, dubious and even if considered as authentic, its content contradicts a lot of
petitioners claim and allegations,
[26]
thus -

1. Aside from the fact that the Master List is not legible, it contains only the names
of inactive employees. Even those found by the NLRC to have been employed in the company
(such as Almoite, Costales and Sagun) do not appear in the list. If Costales and Almoite had
been employed with Atlanta since January 11, 2006, as the company claimed,
[27]
their names
would have been in the list, considering that the Master List accounts for all employees as of
May 2006 the notation carried on top of each page of the document.
2. There were no entries of employees hired or resigned in the years 2005 and 2006
despite the as of May 2006 notation; several pages making up the Master List contain names
of employees for the years 1999 - 2004.
3. The fact that Atlanta presented the purported Master List instead of the payroll
raised serious doubts on the authenticity of the list.

In sum, the respondent workers posit that the presentation of the Master List revealed the
intention of the herein petitioner[s] to perpetually hide the fact of [their] prior employment.
[28]


On the supposed apprenticeship agreements they entered into, Costales, Almoite,
Sebolino and Sagun refuse to accept the agreements validity, contending that the companys
apprenticeship program is merely a ploy to continually deprive [them] of their rightful wages
and benefits which are due them as regular employees.
[29]
They submit the following
indubitable facts and ratiocinations:
[30]


1. The apprenticeship agreements were submitted to TESDA only in 2005 (with
dates of receipt on 1/4/05 & 2/22/05
[31]
), when the agreements were supposed to have been
executed in April or May 2004. Thus, the submission was made long after the starting date of
the workers apprenticeship or even beyond the agreements completion/termination date, in
violation of Section 23, Rule VI, Book II of the Labor Code.
2. The respondent workers were made to undergo apprenticeship for occupations
different from those allegedly approved by TESDA. TESDA approvedAtlantas apprenticeship
program on Plastic Molder
[32]
and not for extrusion molding process, engineering, pelletizing
process and mixing process.
3. The respondents were already skilled workers prior to the apprenticeship program
as they had been employed and made to work in the different job positions where they had
undergone training. Sagun and Sebolino, together with Mabanag, Pedregoza, dela Cruz,
Chiong, Magalang and Alegria were even given production assignments and work schedule at
the PE/Spiral Section from May 11, 2004 to March 23, 2005, and some of them were even
assigned to the 3:00 p.m. 11:00 p.m. and graveyard shifts (11:00 p.m. 7:00 a.m.) during the
period.
[33]

4. The respondent workers were required to continue as apprentices beyond six
months. The TESDA certificate of completion indicates that the workers apprenticeship had
been completed after six months. Yet, they were suffered to work as apprentices beyond that
period.

Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally
dismissed, as the reason for the termination of their employment notice of the completion of
the second apprenticeship agreement did not constitute either a just or authorized cause under
Articles 282 and 283 of the Labor Code.

Finally, Costales and Almoite refuse to be bound by the compromise
agreement
[34]
that Atlanta presented to defeat the two workers cause of action. They claim that
the supposed agreement is invalid as against them, principally because they did not sign it.

The Courts Ruling

The procedural issue

The respondent workers ask that the petition be dismissed outright for the petitioners
failure to attach to the petition a copy of the Production and Work Schedule and a copy of the
compromise agreement Costales and Almoite allegedly entered into material portions of the
record that should accompany and support the petition, pursuant to Section 4, Rule 45 of the
Rules of Court.

In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena
[35]
where
the Court addressed essentially the same issue arising from Section 2(d), Rule 42 of the Rules
of Court,
[36]
we held that the phrase of the pleadings and other material portions of the record
xxx as would support the allegation of the petition clearly contemplates the exercise of
discretion on the part of the petitioner in the selection of documents that are deemed to be
relevant to the petition. The crucial issue to consider then is whether or not the documents
accompanying the petition sufficiently supported the allegations therein.
[37]


As in Mariners, we find that the documents attached to the petition sufficiently support
the petitioners allegations. The accompanying CA decision
[38]
and resolution,
[39]
as well as
those of the labor arbiter
[40]
and the NLRC,
[41]
referred to the parties position papers and even
to their replies and rejoinders. Significantly, the CA decision narrates the factual antecedents,
defines the complainants cause of action, and cites the arguments, including the evidence the
parties adduced. If any, the defect in the petition lies in the petitioners failure to provide
legible copies of some of the material documents mentioned, especially several pages in the
decisions of the labor arbiter and of the NLRC. This defect, however, is not fatal as the
challenged CA decision clearly summarized the labor tribunals rulings. We, thus, find no
procedural obstacle in resolving the petition on the merits.

The merits of the case

We find no merit in the petition. The CA committed no reversible error in nullifying the
NLRC decision
[42]
and in affirming the labor arbiters ruling,
[43]
as it applies to Costales,
Almoite, Sebolino and Sagun. Specifically, the CA correctly ruled that the four were illegally
dismissed because (1) they were already employees when they were required to undergo
apprenticeship and (2) apprenticeship agreements were invalid.

The following considerations support the CA ruling.

First. Based on company operations at the time material to the case, Costales, Almoite,
Sebolino and Sagun were already rendering service to the company as employees before they
were made to undergo apprenticeship. The company itself recognized the respondents status
through relevant operational records in the case of Costales and Almoite, the CPS monthly
report for December 2003
[44]
which the NLRC relied upon and, for Sebolino and Sagun, the
production and work schedule for March 7 to 12, 2005
[45]
cited by the CA.

Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first shift
(7:00 a.m. to 3:00 p.m.) of the Sections work. The Production and Work Schedules, in addition
to the one noted by the CA, showed that Sebolino and Sagun were scheduled on different
shifts vis--vis the production and work of the companys PE/Spiral Section for the periods July
5-10, 2004;
[46]
October 25-31, 2004;
[47]
November 8-14, 2004;
[48]
November 16-22,
2004;
[49]
January 3-9, 2005;
[50]
January 10-15, 2005;
[51]
March 7-12, 2005
[52]
and March 17-23,
2005.
[53]


We stress that the CA correctly recognized the authenticity of
the operational documents, for the failure of Atlanta to raise a challenge against
these documents before the labor arbiter, the NLRC and the CA itself.
The appellate court, thus, found the said documents sufficient to establish the employment
of the respondents before their engagement as apprentices.

Second. The Master List
[54]
(of employees) that the petitioners heavily rely upon as proof
of their position that the respondents were not Atlantas employees, at the time they were
engaged as apprentices, is unreliable and does not inspire belief.

The list, consisting of several pages, is hardly legible. It requires extreme effort to sort out
the names of the employees listed, as well as the other data contained in the list. For this reason
alone, the list deserves little or no consideration. As the respondents also pointed out, the list
itself contradicts a lot of Atlantas claims and allegations, thus: it lists only the names of
inactive employees; even the names of those the NLRC found to have been employed by
Atlanta, like Costales and Almoite, and those who even Atlanta claims attained regular status on
January 11, 2006,
[55]
do not appear in the list when it was supposed to account for
all employees as of May 6, 2006. Despite the May 6, 2006 cut off date, the list contains no
entries of employees who were hired or who resigned in 2005 and 2006. We note that the list
contains the names of employees from 1999 to 2004.

We cannot fault the CA for ignoring the Master List even if Bernardo, its head office
accountant, swore to its correctness and authenticity.
[56]
Its substantive unreliability gives it very
minimal probative value. Atlanta would have been better served, in terms of reliable evidence,
if true copies of the payroll (on which the list was based, among others, as Bernardo claimed in
her affidavit) were presented instead.

Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering
service to the company when they were made to undergo apprenticeship (as established by the
evidence) renders the apprenticeship agreements irrelevant as far as the four are concerned. This
reality is highlighted by the CA finding that the respondents occupied positions such as machine
operator, scaleman and extruder operator - tasks that are usually necessary and desirable
in Atlantas usual business or trade as manufacturer of plastic building materials.
[57]
These tasks
and their nature characterized the four as regular employees under Article 280 of the Labor
Code. Thus, when they were dismissed without just or authorized cause, without notice, and
without the opportunity to be heard, their dismissal was illegal under the law.
[58]


Even if we recognize the companys need to train its employees through apprenticeship,
we can only consider the first apprenticeship agreement for the purpose. With the expiration of
the first agreement and the retention of the employees, Atlanta had, to all intents and purposes,
recognized the completion of their training and their acquisition of a regular employee status.
To foist upon them the second apprenticeship agreement for a second skill which was not even
mentioned in the agreement itself,
[59]
is a violation of the Labor Codes implementing
rules
[60]
and is an act manifestly unfair to the employees, to say the least. This we cannot allow.

Fourth. The compromise agreement
[61]
allegedly entered into by Costales and Almoite,
together with Ramos, Villagomez and Alegria, purportedly in settlement of the case before the
NLRC, is not binding on Costales and Almoite because they did not sign it. The company itself
admitted
[62]
that while Costales and Almoite were initially intended to be a part of the
agreement, it did not pursue their inclusion due to their regularization as early as January 11,
2006.
[63]


WHEREFORE, premises considered, we hereby DENY the petition for lack of merit.
The assailed decision and resolution of the Court of Appeals areAFFIRMED. Costs against the
petitioner Atlanta Industries, Inc.

SO ORDERED.
Apprentices without Compensation
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 75112 October 16, 1990
FILAMER CHRISTIAN INSTITUTE, petitioner,
vs.
HONORABLE COURT OF APPEALS, HONORABLE ENRIQUE P. SUPLICO, in his capacity as
Judge of the Regional Trial Court,. Branch XIV, Roxas City and the late POTENCIANO
KAPUNAN, SR., as substituted by his heirs, namely: LEONA KAPUNAN TIANGCO, CICERO
KAPUNAN, JESUS KAPUNAN, SANTIAGO KAPUNAN, POTENCIANO KAPUNAN, JR., PAZ
KAPUNAN PUBLICO, SUSA KAPUNAN GENUINO and ERLINDA KAPUNAN
TESORO, respondents.
Aquilina B. Brotarlo for petitioner.
Rhodora G. Kapunan for the Substituted Heirs of the late respondent.

FERNAN, C.J .:
This is a petition for review of the decision
1
of the Court of Appeals affirming the judgment of the Regional Trial
Court (RTC) of Roxas City, Branch 14 in Civil Case No. V-4222 which found petitioner Filamer Christian Institute and
Daniel Funtecha negligent and therefore answerable for the resulting injuries caused to private respondent Potenciano
Kapunan, Sr.
Private respondent Potenciano Kapunan, Sr., an eighty-two-year old retired schoolteacher (now
deceased), was struck by the Pinoy jeep owned by petitioner Filamer and driven by its alleged
employee, Funtecha, as Kapunan, Sr. was walking along Roxas Avenue, Roxas City at 6:30 in the
evening of October 20, 1977. As a result of the accident, Kapunan, Sr. suffered multiple injuries for
which he was hospitalized for a total of twenty (20) days.
Evidence showed that at the precise time of the vehicular accident, only one headlight of the jeep was
functioning. Funtecha, who only had a student driver's permit, was driving after having persuaded
Allan Masa, the authorized driver, to turn over the wheels to him. The two fled from the scene after
the incident. A tricycle driver brought the unconscious victim to the hospital.
Thereafter, Kapunan, Sr. instituted a criminal case against Funtecha alone in the City Court of Roxas
City for serious physical injuries through reckless imprudence. Kapunan, Sr. reserved his right to file
an independent civil action. The inferior court found Funtecha guilty as charged and on appeal, his
conviction was affirmed by the then Court of First Instance of Capiz.
2

Pursuant to his reservation, Kapunan, Sr. commenced a civil case for damages
3
before the RTC of
Roxas City. Named defendants in the complaint were petitioner Filamer and Funtecha. Also included was Agustin Masa,
the director and president of Filamer Christian Institute, in his personal capacity in that he personally authorized and
allowed said Daniel Funtecha who was his houseboy at the time of the incident, to drive the vehicle in question despite his
knowledge and awareness that the latter did not have the necessary license or permit to drive said vehicle. His son, Allan
Masa, who was with Funtecha at the time of the accident, was not impleaded as a co-defendant.
4

On December 14, 1983, the trial court rendered judgment finding not only petitioner Filamer and
Funtecha to be at fault but also Allan Masa, a non-party. Thus:
WHEREFORE, finding the averments in the complaint as supported by preponderance of evidence to
be reasonable and justified, and that defendants Daniel Funtecha, Filamer Christian Institute and
Allan Masa are at fault and negligent of the acts complained of which causes (sic) injury to plaintiff,
judgment is hereby rendered in favor of the plaintiff and against the defendants, namely: Daniel
Funtecha and Filamer Christian Institute, the employer whose liability is primary and direct, jointly and
severally, to pay plaintiff the following:
(1) to pay the sum of TWO THOUSAND NINE HUNDRED FIFTY PESOS AND FIFTY
CENTAVOS (P2,950.50) as medical expenses (Exh. "A");
(2) to pay TWO HUNDRED FORTY ONE PESOS (P241.00) as doctor's fee (Exh. "C");
(3) to pay THREE HUNDRED NINETY PESOS (P390.00) as additional expenses
incurred for thirty-nine days at P10.00 a day, for remuneration of plaintiff's helper while
recuperating;
(4) to pay FOUR THOUSAND PESOS (P4,000.00) as Court litigation expenses;
(5) to pay THREE THOUSAND PESOS (P3,000.00) as loss of earnings capacity;
(6) to pay TWENTY THOUSAND (P20,000.00) pesos as moral damages;
(7) to pay FOUR THOUSAND FIVE HUNDRED PESOS (P4,500.00) as attorney's fees;
(8) to pay TWENTY THOUSAND PESOS (P20,000.00)as insurance indemnity on the
policy contract;
and without prejudice to the right of defendant Filamer Christian Institute to demand
from co-defendant Daniel Funtecha part-time employee and/or Allan Masa a full time
employee reimbursement of the damages paid to herein plaintiff.
The defendant Agustin Masa as director of defendant Filamer Christian Institute has
also failed to exercise the diligence required of a good father of a family in the
supervision of his employee Allan Masa, being his son. However, the court absolved
defendant Agustin Masa from any personal liability with respect to the complaint filed
against him in his personal and private capacity, cause he was not in the vehicle during
the alleged incident.
For failure to prove their respective counterclaims filed by the defendant Daniel
Funtecha, Dr. Agustin Masa, and Filamer Christian Institute, as against the herein
plaintiff, same are hereby dismissed.
The Zenith Insurance Corporation as third party defendant has failed to prove that there
was a policy violation made by the defendant Filamer Christian Institute which absolves
them from liability under the aforesaid insurance policy. The record shows that the
defendant Daniel Funtecha while driving the said vehicle was having a student drivers
license marked Exh. "1" and accompanied by Allan Masa who is the authorized driver of
said vehicle with a professional drivers license as shown by Exh. "3".
This Court finds that defendant Daniel Funtecha while driving the said vehicle is
considered as authorized driver in accordance with the policy in question marked Exh.
"2-Masa and FCI".
Finding the averments in the third party complaint filed by defendant Filamer Christian
Institute as supported by preponderance of evidence as shown by their exhibits to be
reasonable and justified, judgment is hereby rendered in favor of the said defendant and
third party plaintiff Filamer Christian Institute as against third party defendant Zenith
Insurance Corporation.
The Zenith Insurance Corporation as third party defendant is hereby ordered to pay in
favor of the defendant and third party plaintiff, Filamer Christian Institute, the following:
(1) to pay TWENTY THOUSAND PESOS (P20,000.00) as third party
liability as provided in the Zenith Insurance Corporation policy (Exh. "2");
(2) to pay TEN THOUSAND PESOS (P10,000.00)as moral damages;
(3) to pay FOUR THOUSAND PESOS (P4,000.00) as Court litigation and
actual expenses;
(4) to pay THREE THOUSAND PESOS (P3,000.00) as attorney's fees;
The defendants Daniel Funtecha, Filamer Christian Institute and third party defendant
Zenith Insurance Corporation are hereby ordered jointly and severally, to pay the costs
of the suit.
5

Only petitioner Filamer and third-party defendant Zenith Insurance Corporation appealed the lower
court's judgment to the Court of Appeals and as a consequence, said lower court's decision became
final as to Funtecha. For failure of the insurance firm to pay the docket fees, its appeal was dismissed
on September 18, 1984. On December 17, 1985, the Appellate Court rendered the assailed judgment
affirming the trial court's decision in toto.
6
Hence the present recourse by petitioner Filamer.
It is petitioner Filamer's basic contention that it cannot be held responsible for the tortious act of
Funtecha on the ground that there is no existing employer-employee relationship between them. We
agree.
The Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own
acts or omissions but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observe all the diligence of a good father of a family to
prevent damage. (Emphasis supplied).
The legal issue in this appeal is whether or not the term "employer" as used in Article 2180 is
applicable to petitioner Filamer with reference to Funtecha.
In disclaiming liability, petitioner Filamer has invoked the provisions of the Labor Code,
7
specifically
Section 14, Rule X of Book III which reads:
Sec. 14. Working scholars. There is no employer-employee relationship between
students on the one hand, and schools, colleges or universities on the other, where
students work for the latter in exchange for the privilege to study free of charge;
provided the students are given real opportunity, including such facilities as may be
reasonable, necessary to finish their chosen court under such arrangement. (Emphasis
supplied).
It is manifest that under the just-quoted provision of law, petitioner Filamer cannot be considered as
Funtecha's employer. Funtecha belongs to that special category of students who render service to the
school in exchange for free tuition Funtecha worked for petitioner for two hours daily for five days a
week. He was assigned to clean the school passageways from 4:00 a.m. to 6:00 a.m. with sufficient
time to prepare for his 7:30 a.m. classes. As admitted by Agustin Masa in open court, Funtecha was
not included in the company payroll.
8

The wording of Section 14 is clear and explicit and leaves no room for equivocation. To dismiss the
implementing rule as one which governs only the "personal relationship" between the school and its
students and not where there is already a third person involved, as espoused by private respondents,
is to read into the law something that was not legislated there in the first place. The provision of
Section 14 is obviously intended to eliminate an erstwhile gray area in labor relations and seeks to
define in categorical terms the precise status of working scholars in relation to the learning institutions
in which they work for the privilege of a free education.
But even if we were to concede the status of an employee on Funtecha, still the primary responsibility
for his wrongdoing cannot be imputed to petitioner Filamer for the plain reason that at the time of the
accident, it has been satisfactorily shown that Funtecha was not acting within the scope of his
supposed employment. His duty was to sweep the school passages for two hours every morning
before his regular classes. Taking the wheels of the Pinoy jeep from the authorized driver at 6:30 in
the evening and then driving the vehicle in a reckless manner resulting in multiple injuries to a third
person were certainly not within the ambit of his assigned tasks. In other words, at the time of the
injury, Funtecha was not engaged in the execution of the janitorial services for which he was
employed, but for some purpose of his own. It is but fair therefore that Funtecha should bear the full
brunt of his tortious negligence. Petitioner Filamer cannot be made liable for the damages he had
caused.
Private respondents' attempt to hold petitioner Filamer directly and primarily answerable to the injured
party under Article 2180 of the Civil Code would have prospered had they proceeded against Allan
Masa, the authorized driver of the Pinoy jeep and undisputably an employee of petitioner. It was
Allan's irresponsible act of entrusting the wheels of the vehicle to the inexperienced Funtecha which
set into motion the chain of events leading to the accident resulting in injuries to Kapunan, Sr. But
under the present set of circumstances, even if the trial court did find Allan guilty of negligence, such
conclusion would not be binding on Allan. It must be recalled that Allan was never impleaded in the
complaint for damages and should be considered as a stranger as far as the trial court's judgment is
concerned. It is axiomatic that no man shall be affected by a proceeding to which he is a stranger.
9

WHEREFORE, in view of the foregoing, the decision under review of the Court of Appeals is hereby
SET ASIDE. The complaint for damages
10
is ordered DISMISSED as against petitioner Filamer Christian Institute
for lack of cause of action. No costs.
SO ORDERED.



Managerial Employees not entitled to Overtime Play
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION



G.R. No. 101761. March 24, 1993.
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.
Zoilo V. de la Cruz for private respondent.
D E C I S I O N
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether supervisory
employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers
or members of the managerial staff under Article 82, Book III of the same Code, and hence are not
entitled to overtime rest day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned
and controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and
Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50. 1
Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head
of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from
rank-and-file to department heads. The JE Program was designed to rationalized the duties and
functions of all positions, reestablish levels of responsibility, and recognize both wage and operational
structures. Jobs were ranked according to effort, responsibility, training and working conditions and
relative worth of the job. As a result, all positions were re-evaluated, and all employees including the
members of respondent union were granted salary adjustments and increases in benefits
commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the members of
respondent union were treated in the same manner as rank-and file employees. As such, they used
to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of
the Labor Code as amended. With the implementation of the JE Program, the following adjustments
were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which
are considered managerial staff for purposes of compensation and benefits; (2) there was an
increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the union
members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the highest paid
rank-and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4) they
were entitled to increased company COLA of P225.00 per month; (5) there was a grant of P100.00
allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized
pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the
bargaining representative of all the supervisory employees at the NASUREFCO Batangas Sugar
Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of
herein respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as
follows:
"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby
directed to
1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday
pay enjoyed by them instead of the P100.00 special allowance which was implemented on June 11,
1988; and
2. pay the individual members of complainant union the difference in money value between the
P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to
have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along span of time
during which the benefits were being paid to the supervisors has accused the payment thereof to
ripen into contractual obligation; at the complainants cannot be estopped from questioning the validity
of the new compensation package despite the fact that they have been receiving the benefits
therefrom, considering that respondent union was formed only a year after the implementation of the
Job Evaluation Program, hence there was no way for the individual supervisors to express their
collective response thereto prior to the formation of the union; and the comparative computations
presented by the private respondent union showed that the P100.00 special allowance given
NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay
and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of
benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National
Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the
members of respondent union are not managerial employees, as defined under Article 212 (m) of the
Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC
declared that these supervisory employees are merely exercising recommendatory powers subject to
the evaluation, review and final action by their department heads; their responsibilities do not require
the exercise of discretion and independent judgment; they do not participate in the formulation of
management policies nor in the hiring or firing of employees; and their main function is to carry out
the ready policies and plans of the corporation. 3 Reconsideration of said decision was denied in a
resolution of public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent
commission committed a grave abuse of discretion in refusing to recognized the fact that the
members of respondent union are members of the managerial staff who are not entitled to overtime,
rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits
due to rank-and-file employees together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly
issue.
The primordial issue to be resolved herein is whether the members of respondent union are entitled
to overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be
ascertained first whether or not the union members, as supervisory employees, are to be considered
as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the
Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which
reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer effectively
recommend such managerial actions if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent judgment. All employees not falling within any of
those above definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday
pay, and in ruling that the latter are not managerial employees, adopted the definition stated in the
aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the members of
respondent union are entitled to overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as defined under Article 82, Book III of
the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III
of the Rules to Implement the Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of
their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general supervision special assignments
and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and
above."
It is the submission of petitioner that while the members of respondent union, as supervisors, may not
be occupying managerial positions, they are clearly officers or members of the managerial staff
because they meet all the conditions prescribed by law and, hence, they are not entitled to overtime,
rest day and supervisory employees under Article 212 (m) should be made to apply only to the
provisions on Labor Relations, while the right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial employee and of the officers or members of
the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III of
the implementing rules. In other words, for purposes of forming and joining unions, certification
elections, collective bargaining, and so forth, the union members are supervisory employees. In terms
of working conditions and rest periods and entitlement to the questioned benefits, however, they are
officers or members of the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of
labor. Management also has its own rights which, as such, are entitled to respect and enforcement in
the interest of simple fair play. Out of its concern for those with less privileges in life, this Court has
inclined more often than not toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one
dependent on the circumstances of the particular case, In determining whether an employee is within
the terms of the statutes, the criterion is the character of the work performed, rather than the title of
the employee's position. 6
Consequently, while generally this Court is not supposed to review the factual findings of respondent
commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation
from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show
that these supervisory employees are under the direct supervision of their respective department
superintendents and that generally they assist the latter in planning, organizing, staffing, directing,
controlling communicating and in making decisions in attaining the company's set goals and
objectives. These supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. More specifically, their duties and functions include, among
others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes employee shifting
scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary
action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary
action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by the former;
6) coordinates and communicates with other inter and intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service and
working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed
necessary, and initiates and prepares reports for any observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to subordinates
are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as
defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1)
their primary duty consists of the performance of work directly related to management policies of their
employer; (2) they customarily and regularly exercise discretion and independent judgment; (3) they
regularly and directly assist the managerial employee whose primary duty consist of the management
of a department of the establishment in which they are employed (4) they execute, under general
supervision, work along specialized or technical lines requiring special training, experience, or
knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6) they
do not devote more than 20% of their hours worked in a work-week to activities which are not directly
and clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that the union
members should be considered as officers and members of the managerial staff and are, therefore,
exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and
holiday.
The distinction made by respondent NLRC on the basis of whether or not the union members are
managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced
and inappropriate. It is admitted that these union members are supervisory employees and this is one
instance where the nomenclatures or titles of their jobs conform with the nature of their functions.
Hence, to distinguish them from a managerial employee, as defined either under Articles 82 or 212
(m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here seeks a
determination of whether or not these supervisory employees ought to be considered as officers or
members of the managerial staff. The distinction, therefore, should have been made along that line
and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned
benefits to the union members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to
the rank-and-file employees such as overtime, rest day and holiday pay, simply because they were
treated in the same manner as rank-and-file employees, and their basic pay was nearly on the same
level as those of the latter, aside from the fact that their specific functions and duties then as
supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact is
apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it
lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE Program. Those
positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were
classified correctly and continue to receive overtime, holiday and restday pay. As to them, the
practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-
defined and in most cases their organizational positions re-designated to confirm their superior rank
and duties. Thus, after the JE program, complainants cannot be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted nor controverted by respondent
union in any of its pleadings filed before herein public respondent or with this Court. Hence, it can be
safely concluded therefrom that the members of respondent union were paid the questioned benefits
for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they
could not be categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the payment thereof
could not be construed as constitutive of voluntary employer practice, which cannot be now be
unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over a
long period of time, and must be shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that the employer
agreed to continue giving the benefits knowingly fully well that said employees are not covered by the
law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently establish
that petitioner has been motivated or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of private
respondent union were re-classified under levels S-5 S-8 which were considered under the program
as managerial staff purposes of compensation and benefits, that they occupied re-evaluated
positions, and that their basic pay was increased by an average of 50% of their basic salary prior to
the JE Program. In other words, after the JE Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually accompanied
by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits
which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law
requires prior compliance with the conditions set forth therein. With the promotion of the members of
respondent union, they occupied positions which no longer met the requirements imposed by law.
Their assumption of these positions removed them from the coverage of the law, ergo, their
exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue receiving the
benefits which attach to their former positions, there was nothing to prevent them from refusing to
accept their promotions and their corresponding benefits. As the sating goes by, they cannot have
their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and
fairness, get the best of both worlds at the expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of
management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted implementing the JE Program. There
is no showing that the JE Program was intended to circumvent the law and deprive the members of
respondent union of the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all
aspects of employment. This flows from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating on circumventing the
rights of employees under special laws or valid agreement and are not exercised in a malicious,
harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor Relations
Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion,
and the basic complaint of private respondent union is DISMISSED.
Employees paid Commissions
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC., petitioner,
vs.
HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and Employment,
respondent.
G.R. No. L-102552 December 10, 1993
PHILIPPINE FUJI XEROX CORP., petitioner,
vs.
CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and Employment, and
PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents.
Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc. and Phil Xerox
Corp.
The Solicitor General for public respondents.
NARVASA, C.J.:
What items or items of employee remuneration should go into the computation of thirteenth month
pay is the basic issue presented in these consolidated petitions. Otherwise stated, the question is
whether or not the respondent labor officials in computing said benefit, committed "grave abuse of
discretion amounting to lack of jurisdiction," by giving effect to Section 5 of the Revised Guidelines on
the implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated by then
Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling petitioner's contention that
said provision constituted a usurpation of legislative power because not justified by or within the
authority of the law sought to be implemented besides being violative of the equal protection of the
law clause of the Constitution.
Resolution of the issue entails, first, a review of the pertinent provisions of the laws and implementing
regulations.
Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows:
Sec 1. All employees are hereby required to pay all their employees receiving basic
salary of not more than P1,000.00 a month, regardless of the nature of the employment,
a 13th month pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its equivalent
are not covered by this Decree.
The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on
December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth
month pay" and the employers exempted from giving it, to wit:
Sec. 2. Definition of certain terms. . . .
a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year;
b) "Basic Salary" shall include all remunerations or earnings paid by an employer to an
employee for services rendered but may not include cost of living allowances granted
pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing
payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
Sec. 3. Employers covered. . . . (The law applies) to all employers except to:
xxx xxx xxx
c) Employers already paying their employers a 13-month pay or more in calendar year
or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or task basis, and
those who are paid a fixed amount for performing a specific work, irrespective of the
time consumed in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall be covered by this issuance insofar as
such workers are concerned.
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) shall include Christmas bonus, mid-
year bonus, profit-sharing payments and other cash bonuses amounting to not less than
1/12th of the basic salary but shall not include cash and stock dividends, cost of living
allowances and all other allowances regularly enjoyed by the employee, as well as non-
monetary benefits. Where an employer pays less than 1/12th of the employee's basic
salary, the employer shall pay the difference.
Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by Minister
Ople whichinter alia set out items of compensation not included in the computation of the 13th month
pay, viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.
On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which
contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of
P1,000.00 a month set by the latter, as follows:
Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all
employers are hereby required to pay all their rank-and-file employees a 13th month
pay not later than December 24, of every year.
Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of
the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among
other things, defined with particularity what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed
wage plus commission. The relevant provisions read:
4. Amount and payment of 13th Month Pay.
xxx xxx xxx
The basic salary of an employee for the purpose of computing the 13th month pay shall
include all remunerations or earnings paid by the employer for services rendered but
does not include allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime, premium, night differential and holiday pay,
and cost-of-living allowances. However, these salary-related benefits should be
included as part of the basic salary in the computation of the 13th month pay if by
individual or collective agreement, company practice or policy, the same are treated as
part of the basic salary of the employees.
xxx xxx xxx
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. Employees who are paid on piece work basis are by
law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission are also entitled
to the mandated 13th month pay based on their total earnings during the calendar
year, i.e., on both their fixed or guaranteed wage and commission.
This was the state of the law when the controversies at bar arose out of the following antecedents:
(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of
petitioner Boie-Takeda Chemicals, Inc. by Labor
and Development Officer Reynaldo B. Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its
medical representatives in the computation of their 13th month pay, Ramos served a Notice of
Inspection Results
1
on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda
within ten (10) calendar days from notice to effect restitution or correction of "the underpayment of
13th month pay for the year(s) 1986, 1987 and 1988 of Med Rep (Revised Guidelines on the
Implementation of 13th month pay # 5) in the total amount of P558,810.89."
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing
the view "that the commission paid to our medical representatives are not to be included in the
computation of the 13th month pay . . . (since the) law and its implementing rules speak of REGULAR
or BASIC salary and therefore exclude all other remunerations which are not part of the REGULAR
salary." It pointed out that, "if no sales is (sic) made under the effort of a particular representative,
there is no commission during the period when no sale was transacted, so that commissions are not
and cannot be legally defined as regular in nature.
2

Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and 16,
1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda,
and the matter had perforce to be resolved on the basis of the evidence at hand. On July 24, 1989,
Director Piezas issued an Order
3
directing Boie-Takeda:
. . . to pay . . . (its) medical representatives and its managers the total amount of FIVE
HUNDRED SIXTY FIVE THOUSAND SEVEN HUNDRED FORTY SIX AND FORTY
SEVEN CENTAVOS (P565,746.47) representing underpayment of thirteenth (13th)
month pay for the years 1986, 1987, 1988, inclusive, pursuant to the . . . revised
guidelines within ten (10) days from receipt of this Order.
A motion for reconsideration
4
was seasonably filed by Boie-Takeda under date of August 3, 1989.
Treated as an appeal, it was resolved on
January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the July 24,
1989 Order with modification that the sales commissions earned by Boie-Takeda's medical
representatives before August 13, 1989, the effectivity date of Memorandum Order No. 28 and its
Implementing Guidelines, shall be excluded in the computation of their 13th month pay.
5

Hence the petition docketed as G.R. No. 92174.
(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji
Xerox Corp. on September 7, 1989 pursuant to Routine Inspection Authority No. NCR-LSED-RI-494-
89. In his Notice of Inspection Results,
6
addressed to the Manager, Mr. Nicolas O. Katigbak, Senior
Labor and Employment Officer Nicanor M. Torres noted the following violation committed by
Philippine Fuji Xerox Corp., to wit:
Underpayment of 13th month pay of 62 employees, more or less pursuant to Revised
Guidelines on the Implementation of the 13th month pay law for the period covering
1986, 1987 and 1988.
Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation
within five (5) working days from notice.
No action having been taken thereon by Philippine Fuji Xerox,
Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor Secretary
Franklin Drilon requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were
summoned to appear before Labor Employment and Development Officer Mario F. Santos, NCR
Office, Department of Labor for a conciliation conference. When no amicable settlement was
reached, the parties were required to file their position papers.
Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23, 1990,
7
disposing
as follows:
WHEREFORE, premises considered, Respondent PHILIPPINE FUJI XEROX is hereby
ordered to restitute to its salesmen the portion of the 13th month pay which arose out of
the non-implementation of the said revised guidelines, ten (10) days from receipt hereof,
otherwise,
MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is hereby Ordered
to proceed to the premises of the Respondent for the purpose of computing the said
deficiency (sic) should respondent fail to heed his Order.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an
Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of
merit. Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No. 92174
as involving the same issue.
In their almost identically-worded petitioner, petitioners, through common counsel, attribute grave
abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned
Orders of January 17, 1990 and October 10, 1991, respectively. They maintain that under P.D. 851,
the 13th month pay is based solely on basic salary. As defined by the law itself and clarified by the
implementing and Supplementary Rules as well as by the Supreme Court in a long line of decisions,
remunerations which do not form part of the basic or regular salary of an employee, such as
commissions, should not be considered in the computation of the 13th month pay. This being the
case, the Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then
Secretary Drilon providing for the inclusion of commissions in the 13th month pay, were issued in
excess of the statutory authority conferred by P.D. 851. According to petitioners, this conclusion
becomes even more evident when considered in light of the opinion rendered by Labor Secretary
Drilon himself in "In Re: Labor Dispute at the Philippine Long Distance Telephone Company" which
affirmed the contemporaneous interpretation by then Secretary Ople that commissions are excluded
from the basic salary. Petitioners further contend that assuming that Secretary Drilon did not exceed
the statutory authority conferred by P.D. 851, still the Revised Guidelines are null and void as they
violate the equal protection of the law clause.
Respondents through the Office of the Solicitor General question the propriety of petitioners' attack on
the constitutionality of the Revised Guidelines in a petition for certiorari which, they contend, should
be confined purely to the correction of errors and/or defects of jurisdiction, including matters of grave
abuse of discretion amounting to lack or excess of jurisdiction and not extend to a collateral attack on
the validity and/or constitutionality of a law or statute. They aver that the petitions do not advance any
cogent reason or state any valid ground to sustain the allegation of grave abuse of discretion, and
that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has already been
amended by Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986
so that commissions are now imputed into the computation of the 13th Month Pay. They add that the
Revised Guidelines issued by then Labor Secretary Drilon merely clarified a gray area occasioned by
the silence of the law as to the nature of commissions; and worked no violation of the equal protection
clause of the Constitution, said Guidelines being based on reasonable classification. Respondents
point to the case of Songco vs. National Labor Relations Commission, 183 SCRA 610, wherein the
Court declared that Article 97(f) of the Labor Code is explicit that commission is included in the
definition of the term "wage".
We rule for the petitioners.
Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or
abrogate P.D. 851. As may be gleaned from the language of the Memorandum Order No. 28, it
merely "modified" Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of
13th Month Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and
while entitlement to said benefit was no longer limited to employees receiving a monthly basic salary
of not more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the
employee-recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic
salary" as defined in P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the coverage of the
term "basic salary" as used in P.D. 851. We said at some length:
Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th month pay. Any
compensations or remunerations which are deemed not part of the basic pay is
excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525
and Letter of Instructions No. 174;
b) Profit-sharing payments;
c) All allowances and monetary benefits which are not considered or
integrated as part of the regular basic salary of the employee at the time of
the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential
Decree 851 Presidential Decree 851 issued by then Labor Secretary Blas Ople,
overtime pay, earnings and other remunerations are excluded as part of the basic salary
and in the computation of the 13th month pay.
The exclusion of the cost-of-living allowances under Presidential Decree 525 and Letter
of Instructions No. 174, and profit-sharing payments indicate the intention to strip basic
salary of other payments which are properly considered as "fringe" benefits. Likewise,
the catch-all exclusionary phrase "all allowances and monetary benefits which are not
considered or integrated as part of the basic salary" shows also the intention to strip
basic salary of any and all additions which may be in the form of allowances or "fringe"
benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree
851 is even more emphatic in declaring that earnings and other remunerations which
are not part of the basic salary shall not be included in the computation of the 13th-
month pay.
While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or
earnings paid by an employer to an employee, this cloud is dissipated in the later and
more controlling Supplementary Rules and Regulations which categorically exclude
from the definitions of basic salary earnings and other remunerations paid by an
employer to an employee. A cursory perusal of the two sets of Rules indicates that what
has hitherto been the subject of a broad inclusion is now a subject of broad exclusion.
The Supplementary Rules and Regulations cure the seeming tendency of the former
rules to include all remunerations and earnings within the definition of basic salary.
The all embracing phrase "earnings and other remunerations" which are deemed not
part of the basic salary includes within its meaning payments for sick, vacation, or
maternity leaves, premium for works performed on rest days and special holidays, pays
for regular holidays and night differentials. As such they are deemed not part of the
basic salary and shall not be considered in the computation of the 13th-month pay. If
they were not excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in the computation of the 13th month pay. Then the exclusionary
provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a
few provisions:
Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day provided
that the employee is paid for the overtime work, additional compensation equivalent to
his regular wage plus at least twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and added to the
regular wage or basic salary, for reason of which such is categorically excluded from the
definition of basic salary under the Supplementary Rules and Regulations Implementing
Presidential Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional compensation of at
least thirty percent (30%) of the regular wage of the employee.
It is likewise clear the premiums for special holiday which is at least 30% of the regular
wage is anadditional pay other than and added to the regular wage or basic salary. For
similar reason, it shall not be considered in the computation of the 13th month pay.
Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common,
generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime.
8
This is how the term was also understood in the
case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes providing
that pension should not less than 50 percent of "basic salary" at the time of retirement, the quoted
words meant the salary that an employee (e.g., a policeman) was receiving at the time he retired
without taking into consideration any extra compensation to which he might be entitled for extra
work.
9

In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard
work period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court has made clear do not form part of
the "basic salary."
Respondents would do well to distinguish this case from Songco vs. National Labor Relations
Commission, supra, upon which they rely so heavily. What was involved therein was the term "salary"
without the restrictive adjective "basic". Thus, in said case, we construed the term in its generic sense
to refer to all types of "direct remunerations for services rendered," including commissions. In the
same case, we also took judicial notice of the fact "that some salesmen do not receive any basic
salary but depend on commissions and allowances or commissions alone, although an employer-
employee relationship exists," which statement is quite significant in that it speaks of a "basic salary"
apart and distinct from "commissions" and "allowances". Instead of supporting respondents' stand, it
would appear that Songco itself recognizes that commissions are not part of "basic salary."
In including commissions in the computation of the 13th month pay, the second paragraph of Section
5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded
the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules
cannot add to or detract from the provisions of the law it is designed to implement. Administrative
regulations adopted under legislative authority by a particular department must be in harmony with
the provisions of the law they are intended to carry into effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress.
10

Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these
petitions.
WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5
(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November
126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of
the law said Guidelines were issued to implement, hence issued with grave abuse of discretion
correctible by the writ of prohibition andcertiorari. The assailed Orders of January 17, 1990 and
October 10, 1991 based thereon are SET ASIDE.
SO ORDERED.
epublic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 110068 February 15, 1995
PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES
UNION-TUPAS,respondents.
R E S O L U T I O N
FELICIANO, J .:
On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the
Petition forCertiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068.
The Court upheld the decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month
pay to private respondent employees computed on the basis of their fixed wages plus sales
commissions. The Third Division also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for
Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the
decision handed down by this Court, through its Second Division, on 10 December 1993 in the two
(2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine
Fuji Xerox Corp. vs. Hon. Cresenciano B.Trajano, in G.R. Nos. 92174 and 102552, respectively. In its
decision, the Second Division inter alia declared null and void the second paragraph of Section 5
(a)
1
of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in
the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takeda decision,
considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays
that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims
of private respondent Philippine Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's
Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for
Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation,
and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as
a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well
as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the
doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions
must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare
decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third
Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on
15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.
Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised
Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by
then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity
in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's
theory, at this late stage of the proceedings, cannot be allowed.
More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly
opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the
doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases
present quite different factual situations (although the same word "commissions" was used or
invoked) the legal characterizations of which must accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the sales commission earned by the
salesmen who make or close a sale of duplicating machines distributed by petitioner
corporation, constitute part of the compensation or remuneration paid to salesmen for
serving as salesmen, and hence as part of the "wage" or salary of petitioner's salesmen.
Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage;
the greater part of the salesmen's wages or salaries being composed of the sales or
incentive commissions earned on actual sales closed by them. No doubt this particular
galary structure was intended for the benefit of the petitioner corporation, on the
apparent assumption that thereby its salesmen would be moved to greater enterprise
and diligence and close more sales in the expectation of increasing their sales
commissions. This, however, does not detract from the character of such commissions
as part of the salary or wage paid to each of its salesmen for rendering services to
petitioner corporation.
In other words, the sales commissions received for every duplicating machine sold constituted part of
the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job.
The portion of the salary structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.
Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the
Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a
year. We note the following facts on record:
Salesmen's Total Earnings and 13th Month Pay
For the Year 1986
2

Name of Total Amount Paid Montly Fixed
Salesman Earnings as 13th Month Pay Wages x 12
3

Baylon, P76,610.30 P1,350.00 P16,200.00
Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00
Tomas
Bunagan, 89,287.75 1,266.00 15,192.00
Jorge
Canilan, 74,678.17 1,350.00 16,200.00
Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00
Delfin
Navarro, 98,618.71 1,266.00 15,192.00
Ma. Teresa
Ochosa, 66,275.65 1,406.00 16,872.00
Rolano
Quisumbing, 101,065.75 1,406.00 16,872.00
Teofilo
Rubina, 42,209.73 1,266.00 15,192.00
Emma
Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard
Talampas, 146,510.25 1,434.00 17,208.00
Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*
Cicero
Punzalan, 24,351.89 1,266.00 15,192.00
Reynaldo
Poblador, 25,516.75 323.00*
Alberto
Cruz, 32,950.45 323.00*
Danilo
Baltazar, 15,681.35 323.00*
Carlito
Considering the above circumstances, the Third Division held, correctly, that the sales commissions
were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen.
These commissions are not overtime payments, nor profit-sharing payments nor any other fringe
benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price
of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-
Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded
from the term "basic salary" because these were paid to the medical representatives and rank-and-
file employees as "productivity bonuses."
4
The Second Division characterized these payments as additional
monetary benefits not properly included in the term "basic salary" in computing their 13th month pay. We note that
productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such
bonuses closely resemble profit-sharing payments and have no clear director necessary relation to the amount of work
actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the
employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather
than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of Industrial
Relations,
5
the Court explained the nature of a bonus in the following general terms:
As a rule a bonus is an amount granted and paid to an employee for his industry loyalty
which contributed to the success of the employer's business and made possible the
realization of profits. It is an act of generosity of the employer for which the employee
ought to be thankful and grateful. It is also granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and realization of bigger
profits. . . . . From the legal point of view a bonus is not and mandable and enforceable
obligation. It is so when It is made part of the wage or salary or compensation. In such a
case the latter would be a fixed amount and the former would be a contingent one
dependent upon the realization of profits. . . .
6
(Emphasis supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association,
7
the Court amplified:
. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or
conditions for its payment. If it is an additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if it
is paid only if profits are realized or a certain amount of productivity achieved, it cannot
be considered part of wages. . . . It is also paid on the basis of actual or actual work
accomplished. If the desired goal of production is not obtained, or the amount of actual
work accomplished, the bonus does not accrue. . . .
8
(Emphasis supplied)
More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal
Bank v.National Labor Relations Commission:
9

A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It
is something given in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management prerogative which cannot
be forced upon the employer "who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employee's basic salaries or wages . .
." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]).
10
(Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that
such productivity bonus, when given, should not be deemed to fall within the "basic salary" of
employees when the time comes to compute their 13th month pay.
It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its
medical representatives could not have been "sales commissions" in the same sense that Philippine
Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do
not effect any sale of any article at all. In common commercial practice, in the Philippines and
elsewhere, of which we take judicial notice, medical representatives are employees engaged in the
promotion of pharmaceutical products or medical devices manufactured by their employer. They
promote such products by visiting identified physicians and inform much physicians, orally and with
the aid of printed brochures, of the existence and chemical composition and virtues of particular
products of their company. They commonly leave medical samples with each physician visited; but
those samples are not "sold" to the physician and the physician is, as a matter of professional ethics,
prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-
Takeda's medical representatives were not in fact sales commissions but rather partook of the nature
of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly, that additional payments
made to employees, to the extent they partake of the nature of profit-sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due
to employees. Such additional payments are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by
former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the
13th month pay; viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations which are not part of the basic salary." However, what
particular types of earnings and remuneration are or are not properly included or integrated in the
basic salary are questions to be resolved on a case to case basis, in the light of the specific and
detailed facts of each case. In principle, where these earnings and remuneration are closely akin to
fringe benefits, overtime pay or profit-sharing payments, they are properlyexcluded in computing the
13th month pay. However, sales commissions which are effectively an integral portion of the basic
salary structure of an employee, shall be included in determining his 13th month pay.
We recognize that both productivity bonuses and sales commissions may have an incentive effect.
But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to
the productivity or profit generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A productivity bonus is something
extra for which no specific additional services are rendered by any particular employee and hence not
legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other
hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent
or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a
salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral
part of such salesman's basic pay.
Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second
paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by
former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides
no legal basis for including within the term "commission" there used additional payments to
employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and
to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid
as having been issued in excess of the statutory authority of the Secretary of Labor. That same
second paragraph however, correctly recognizes that commissions, like those paid in Duplicators,
may constitute part of the basic salary structure of salesmen and hence should be included in
determining the 13th month pay; to this extent, the second paragraph is and remains valid.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b)
aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be
entertained.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan, Mendoza and Francisco, JJ., concur.
Service Incentive Leaves

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 107994 August 14, 1995
PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-
TUCP, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents.

KAPUNAN, J .:
This is a petition for certiorari seeking to reverse the decision of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union
and in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of
petitioner for payment of 13th month pay to the drivers and conductors of respondent company.
Petitioner Philippine Agricultural Commercial and Agricultural Workers Union TUCP is the
exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc.
Petitioner union instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City,
for payment of 13th month pay in behalf of the drivers and conductors of respondent company's
Visayan operation on the ground that although said drivers and conductors are compensated on a
"purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are
automatically entitled to the basic minimum pay mandated by law should said commission be less
than their basic minimum for eight (8) hours work.
1

In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and
conductors are compensated on a purely commission basis, they are not entitled to 13th month pay
pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the
Implementation of the Thirteenth Month Pay Law.
2
It further contended that Section 2 of Article XIV of the
Collective Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that "drivers and conductors
paid on a purely commission are not legally entitled to 13th month pay." Said CBA, being the law between the parties,
must be respected, respondent opined.
On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint.
3

The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed
4
so
was the motion for reconsideration of the said decision.
5

Hence, the present petition.
The principal issue posed for consideration is whether or not the bus drivers and conductors of
respondent Vallacar Transit, Inc. are entitled to 13th month pay.
We rule in the affirmative.
It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay"
Law, was promulgated. The same prescribed payment of 13th month pay in the following terms:
Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of
not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month
pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not
covered by this Decree.
The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and
Employment on December 22, 1975, defined the following basic terms:
xxx xxx xxx
(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of an employee within a
calendar year;
(b) basic salary shall include all remunerations or earnings paid by an employer to an employer
for services rendered, but may not include cost of living allowances granted pursuant to
Presidential Decree No. 525 or Letter of Instructions No. 174, profitsharing payments, and all
allowances and monetary benefits which are not considered or integrated as part of the regular
or basic salary of the employee at the time of the promulgation of the Decree on December 16,
1975.
xxx xxx xxx
On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative
authority, issued Memorandum Order No. 28 which provided as follows:
xxx xxx xxx
Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are
hereby required to pay all their rank-and-file employees a 13th month pay not later than
December 24 of every year.
xxx xxx xxx
In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor
and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a)
of the said issuance read:
xxx xxx xxx
Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the
mandated 13th month pay, based on their total earning(s) during the calendar year, i.e., on
both their fixed and guaranteed wage and commission.
xxx xxx xxx
(emphasis ours)
From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a
fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and
file employees a 13th month pay, it is immaterial whether the employees concerned are paid a
guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton
line is that they receive a guaranteed wage. This is correctly construed in the MOLE Explanatory
Bulletin No. 86-12.
In the case at bench, while the bus drivers and conductors of respondent company are considered by
the latter as being compensated on a commission basis, they are not paid purely by what they
receive as commission. As admitted by respondent company, the said bus drivers and conductors are
automatically entitled to the basic minimum pay mandated by law in case the commissions they
earned be less than their basic minimum for eight (8) hours work.
6
Evidently therefore, the commissions
form part of the wage or salary of the bus drivers and conductors. A contrary interpretation would allow an employer to
skirt the law and would result in an absurd situation where an employee who receives a guaranteed minimum basic pay
cannot be entitled to a 13th month pay simply because he is technically referred to by his employer per the CBA as an
employee compensated on a purely commission basis. Such would be a narrow interpretation of the law, certainly not in
accord with the liberal spirit of our labor laws. Moreover, what is controlling is not the label attached to the remuneration
that the employee receives but the nature of the remuneration
7
and the purpose for which the 13th month pay was given
to alleviate the plight of the working masses who are receiving low wages. This is extant from the "WHEREASES" of PD
851, to wit:
WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-
wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since 1970.
WHEREAS, the Christmas season is an opportune time for society to show its concern for the
plight of the working masses so they may properly celebrate Christmas and New Year.
Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due
to them under the law.
Commission is the recompense, compensation, reward of an employee, agent, salesman, executor,
trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount
of his transactions or on the profit of the principal.
8
While said commissions may be in the form of incentives or
encouragement to inspire said bus drivers and conductors to put a little more zeal and industry on their jobs, still, it is safe
to say that the same are direct remunerations for services rendered, given the small remuneration they receive for the
services they render,
9
which is precisely the reason why private respondent allowed the drivers and conductors a
guaranteed minimum wage. The conclusion is ineluctable that said commissions are part of their salary. In Philippine
Duplicators, Inc. v. National Labor Relations Commission,
10
we had the occasion to estate that:
. . . Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as
used in P.D. No. 851 and Memorandum Order No. 28) in the following terms:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in term of money, money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to employee
under a written or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered, and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. "Fair and
reasonable value" shall not include any profit to the employer or to any person
affiliated with the employer.
In the instant case, there is no question that the sales commissions earned by salesmen who
make or close a sale of duplicating machines distributed by petitioner corporation, constitute
part of the compensation or remuneration paid to salesmen for serving as salesmen, and
hence as part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that
petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the
salesmen's wages or salaries being composed of the sales or incentive commissions earned
on actual sales closed by them. No doubt this particular salary structure was intended for the
benefit of petitioner corporation, on the apparent assumption that thereby its salesmen would
be moved to greater enterprise and diligence and close more sales in the expectation of
increasing their sales commissions. This, however, does not detract from the character of such
commissions as part of the salary or wage paid to each or its salesmen for rendering services
to petitioner corporation.
11

In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed
minimum wage in case their commissions be less than the statutory minimum, and commissions only
in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth
(1/12) of their total earnings during the calendar year.
WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor
Relations Commission is hereby REVERSED and SET ASIDE. The case is remanded to the labor
Arbiter for the proper computation of 13th month pay.
SO ORDERED.
[G.R. No. 156367. May 16, 2005]
AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO
BAUTISTA, respondent.
D E C I S I O N
CHICO-NAZARIO, J .:
Before Us is a Petition for Review on Certiorari assailing the Decision
[1]
and
Resolution
[2]
of the Court of Appeals affirming the Decision
[3]
of the National Labor
RelationsCommission (NLRC). The NLRC ruling modified the Decision of the Labor
Arbiter (finding respondent entitled to the award of 13
th
month pay and service incentive
leave pay) by deleting the award of 13
th
month pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by
petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel
routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk
via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total
gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe,
Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus
No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any
warning.
Respondent averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost twenty-
four (24) hours, as he had just arrived in Manila from Roxas, Isabela. Respondent further
alleged that he was not allowed to work until he fully paid the amount of P75,551.50,
representing thirty percent (30%) of the cost of repair of the damaged buses and that
despite respondents pleas for reconsideration, the same was ignored by management.
After a month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal
with Money Claims for nonpayment of 13
th
month pay and service incentive leave pay
against Autobus.
Petitioner, on the other hand, maintained that respondents employment was replete
with offenses involving reckless imprudence, gross negligence, and dishonesty. To
support its claim, petitioner presented copies of letters, memos, irregularity reports, and
warrants of arrest pertaining to several incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative,
respondents employment was terminated only after the latter was provided with an
opportunity to explain his side regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented
by the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,
[4]
the dispositive
portion of which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal
has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to the complainant
the following:
a. his 13
th
month pay from the date of his hiring to the date of his dismissal, presently
computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit.
[5]

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to
the NLRC which rendered its decision on 28 September 2001, the decretal portion of
which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3
provides:
Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the performance thereof. xxx.
Records show that complainant, in his position paper, admitted that he was paid on a commission
basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting
the award of 13
th
month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of
13
th
month pay. The other findings are AFFIRMED.
[6]

In other words, the award of service incentive leave pay was maintained. Petitioner
thus sought a reconsideration of this aspect, which was subsequently denied in a
Resolution by the NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the
review of said decision with the Court of Appeals which was subsequently denied by
theappellate court in a Decision dated 06 May 2002, the dispositive portion of which
reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the
assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby
AFFIRMED in toto. No costs.
[7]

Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291 of
the Labor Code, as amended, is applicable to respondents claim of service
incentive leave pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper interpretation of Article 95
of the Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
Book I II , Rule V: SERVI CE I NCENTI VE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission
basis, or those who are paid in a fixed amount for performing work irrespective of the
time consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations of
the Labor Code to apply only to those employees not explicitly excluded by Section 1 of
Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as field personnel. The phrase other employees whose
performance is unsupervised by the employer must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather,
it serves as an amplification of the interpretation of the definition of field personnel under
the Labor Code as those whose actual hours of work in the field cannot be determined
with reasonable certainty.
[8]

The same is true with respect to the phrase those who are engaged on task or
contract basis, purely commission basis. Said phrase should be related with field
personnel, applying the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow.
[9]
Hence, employees
engaged on task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave, unless, they fall under
the classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of service
incentive leave just because he was paid on purely commission basis is misplaced. What
must be ascertained in order to resolve the issue of propriety of the grant of service
incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to non-
agricultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-
Clerical Commercial Employees Association
[10]
which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty; hence,
they are paid specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers cannot be said to be
field personnel despite the fact that they are performing work away from the principal office of the
employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said
advisory opinion, no employee would ever be considered a field personnel because every
employer, in one way or another, exercises control over his employees. Petitioner further
argues that the only criterion that should be considered is the nature of work of the
employee in that, if the employees job requires that he works away from the principal
office like that of a messenger or a bus driver, then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a
field personnel is not merely concerned with the location where the employee regularly
performs his duties but also with the fact that the employees performance is unsupervised
by the employer. As discussed above, field personnel are those who regularly perform
their duties away from the principal place of business of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. Thus, in order
to conclude whether an employee is a field employee, it is also necessary to ascertain if
actual hours of work in the field can be determined with reasonable certainty by the
employer. In so doing, an inquiry must be made as to whether or not the employees time
and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its
inspectors assigned at strategic places who board the bus and inspect the passengers, the punched
tickets, and theconductors reports. There is also the mandatory once-a-week car barn or shop day,
where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether
or not there are problems thereon as reported by the driver and/or conductor. They too, must be at
specific place as [sic] specified time, as they generally observe prompt departure and arrival from
their point of origin to their point of destination. In each and every depot, there is always the
Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at
specific times and arrive at the estimated proper time. These, are present in the case at bar. The
driver, the complainant herein, was therefore under constant supervision while in the performance
of this work. He cannot be considered a field personnel.
[11]

We agree in the above disquisition. Therefore, as correctly concluded by the appellate
court, respondent is not a field personnel but a regular employee who performs tasks
usually necessary and desirable to the usual trade of petitioners business. Accordingly,
respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive
leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not
the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to
respondents claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-
employee relationship shall be filed within three (3) years from the time the cause of action
accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be
answered is when does the cause of action for money claims accrue in order to determine
the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right
in favor of the plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect or not to violate such right;
and (3) an act or omission on the part of such defendant violative of the right of the plaintiff
or constituting a breach of the obligation of the defendant to the plaintiff.
[12]

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time
when the third element of a cause of action transpired. Stated differently, in the
computation of the three-year prescriptive period, a determination must be made as to the
period when the act constituting a violation of the workers right to the benefits being
claimed was committed. For if the cause of action accrued more than three (3) years
before the filing of the money claim, said cause of action has already prescribed in
accordance with Article 291.
[13]

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it
is established that the benefits being claimed have been withheld from the employee for a
period longer than three (3) years, the amount pertaining to the period beyond the three-
year prescriptive period is therefore barred by prescription. The amount that can only be
demanded by the aggrieved employee shall be limited to the amount of the benefits
withheld within three (3) years before the filing of the complaint.
[14]

It is essential at this point, however, to recognize that the service incentive leave is a
curious animal in relation to other benefits granted by the law to every employee. In the
case of service incentive leave, the employee may choose to either use his leave credits
or commute it to its monetary equivalent if not exhausted at the end of the
year.
[15]
Furthermore, if the employee entitled to service incentive leave does not use or
commute the same, he is entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave. As enunciated by the Court
in Fernandez v. NLRC:
[16]

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules
and Regulations provides that [e]very employee who has rendered at least one year of service shall
be entitled to a yearly service incentive leave of five days with pay. Service incentive leave is a
right which accrues to every employee who has served within 12 months, whether continuous or
broken reckoned from the date the employee started working, including authorized absences and
paid regular holidays unless the working days in the establishment as a matter of practice or policy,
or that provided in the employment contracts, is less than 12 months, in which case said period
shall be considered as one year. It is alsocommutable to its money equivalent if not used or
exhausted at the end of the year. In other words, an employee who has served for one year is
entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award
to three years, as the solicitor general recommends, is to unduly restrict such right.
[17]
[Italics
supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of an
entitled employee to claim his service incentive leave pay accrues from the moment the
employer refuses to remunerate its monetary equivalent if the employee did not make use
of said leave credits but instead chose to avail of its commutation. Accordingly, if the
employee wishes to accumulate his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action to claim the whole amount
of his accumulated service incentive leave shall arise when the employer fails to pay such
amount at the time of his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period commences,
not at the end of the year when the employee becomes entitled to the commutation of his
service incentive leave, but from the time when the employer refuses to pay its monetary
equivalent after demand of commutation or upon termination of the employees services,
as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and interpretation of the
provisions of the Labor Code and its implementing regulations, the workingmans welfare
should be the primordial and paramount consideration.
[18]
The policy is to extend the
applicability of the decree to a greater number of employees who can avail of the benefits
under the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection to labor.
[19]

In the case at bar, respondent had not made use of his service incentive leave nor
demanded for its commutation until his employment was terminated by petitioner. Neither
did petitioner compensate his accumulated service incentive leave pay at the time of his
dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from
the time of his dismissal, that respondent demanded from his former employer
commutation of his accumulated leave credits. His cause of action to claim the payment of
his accumulated service incentive leave thus accrued from the time when his employer
dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave
pay only commenced from the time the employer failed to compensate his accumulated
service incentive leave pay at the time of his dismissal. Since respondent had filed his
money claim after only one month from the time of his dismissal, necessarily, his money
claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby
AFFIRMED. No Costs.
SO ORDERED.

epublic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-58870 December 18, 1987
CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner,
vs.
HON. BLAS OPLE, in his capacity as Minister, Ministry of Labor and Employment, JULIUS
ABELLA, ARSENIO ABELLANA, RODRIGO ALIWALAS, ZOSIMO ALMOCERA, GERONIDES
ANCOG, GREGORIO ASIA, ROGER BAJARIAS, BERNARDO BALATAYO, JR., BASILIO
CABALLES, DEMOCRITO TEVES, VOLTAIRE DELA CERNA, ROBERTO COBARRUBIAS,
VILMA GOMEZ CHUA, RUBEN GALLITO, EDGARDO CONCEPCION, VICTOR COQUILLA, JOSE
DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO GONZALES, JEOGINA GOZO,
MIGUEL CABALLES, CONSUELO JAVELOSA, QUILIANO LASCO, FRANKLIN LAUTA,
JUSTINIANA LARGO, RONALD LICUPA, ALAN MILANO, MARIA MONSANTO, REYNALDO
NOYNAY, RAMON PARADELA, NATALIO PLAZA, LUZPURA QUIROGA, NOE RODIS,
COSMENIA SAAVEDRA, LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO TABANAG,
LUCINO TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES, ERNESTO VILLANUEVA,
DOLORES VILLONDO, EDWARD YAP, ROWENA VIVARES, DOLORES SANANAM, RODRIGO
BACALSO, YOLANDA TABLANTE, ROMERO BALATUCAN, CARMELITA LADOT, PANFILO
CANETE, EMMANUEL CHAVEZ, JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO CUNANAN,
RENE BURT LLANTO, GIL BATAYOLA, VICENTE DELANTE, CANDELARIO DE DIOS, JOSE
MA. ESTELLA, NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME, RAYMUNDO
ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA BLANCO, FE DELMUNDO, ELNORA
MONTERA, MORRISON MONTESCLAROS, ELEAZAR PANIAMOGAN, BERNARDO PILAPIL,
RODOLFO POL, DEMOSTHENES REDOBLE, PACHECO ROMERO, DELLO SABANAL, SARAH
SALINAS, RENATO SOLATORIO, EDUARDO TABLANTE, EMMANUEL TAN, FELICISIMO
TESALUNA, JOSE VERALLO, JR., MAGDALENO VERGARA, ESMERALDA ABARQUEZ, MAC
ARTHUR DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE ELIZORDO ALCANTARA,
REOSEBELLA AMPER, ZENAIDA BACALSO, ELIZA BADANA, GEORGIA BAS, ERLINDA
BURIAS, ELDEFONSO BURIAS, CORAZON CASENAS, REGINO CASTANEDA, GEORGE
CATADA, CARMENCITA G. CHAVEZ, LORETIA CUNANAN, FLORES DELFIN, TERESITA
ESPINO, ELVIE GALANZA, AMADEA GALELA, TERESITA. JUNTILLA, LEONARDA
KAPUNGAN, ADORACION LANAWAN, LINDA LAYAO, GERARDO LAYSON, VIRGILIO
LIBETARIO, RAYMOND PAUL LOGARTA, NORMA LUCERO, ANATOLIA MENDEZ, ELIODORO
MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA OLIVARES, GEORGE ORAIS,
CRISPINA PALANG, GRETA PEGARIDO, MELBA QUIACHON, REMEDIOS QUIROS, VIRGINIA
RANCES, EDNA DELOS REYES, VICENTE TAN, EMERGENCIA ROSELL, JULIETA TATING,
MERCIA TECARRO, FELISA VERGARA, WEMINA VILLACIN, MACRINA YBARSABAL,
MILAGROS CATALAN, JULIETA AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO,
ASUNCION ABAYAN, ESTHER CARREON, ECHEVARRE, BUENAFE SAMSON, CONCEPCION
GONZALES, VITALIANA VENERACION, LEONCIA ABELLAR, REYNITA
VILLACARLOS. respondents.
No. L-68345 December 18, 1987
DIVINE WORD COLLEGE OF LEGAZPI, petitioner,
vs.
The Honorable Deputy Minister of Labor and Employment, VICENTE LEOGARDO, JR., the
HONORABLE REGIONAL DIRECTOR (Regional Office No. 5) of the Ministry of Labor &
Employment GERARDO S. CASTILLO, CECILIA MANUEL and other alleged
complainants, respondents.
Nos. L-69224-5 December 18, 1987
FAR EASTERN UNIVERSITY EMPLOYEES LABOR UNION, petitioner,
vs.
FAR EASTERN UNIVERSITY and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
No. 70832 December 18, 1987
GREGORIO T. FABROS, ROGELIO B. DE GUZMAN, CRESENCIANO ESPINO, JOSE RAMOS
SUNGA, BAYLON BANEZ FERNANDO ELESTERIO, ISMAEL TABO, AMABLE TUIBEO CELSO
TUBAY, RAFAEL HERNANDEZ, GERONIMO JASARENO, MEL BALTAZAR, MA. LOURDES
PASCUAL, T. DEL ROSARIO ACADEMY TEACHERS and EMPLOYEES ASSOCIATION, DENNIS
MONTE, BECKY TORRES, LOIDA VELASCO, ROMLY NERY, DAISY N. AMPIG, PATRICIO
DOLORES, ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners,
vs.
The HON. JAIME C. LAYA, in his capacity as Minister of Education, Culture and
Sports, respondents.
No. L-76524 December 18, 1987
JASMIN BISCOCHO, ROWENA MARIANO, AGNES GALLEGO, MA. ANA ORDENES, ISABEL DE
LEON, LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA ORTIZ, ANGELINA ROXAS, BITUIN
DE PANO, ELIZABETH ORDEN, APOLLO ORDEN, GUILLERMA CERCANO, IMELDA
CARINGAL, EFREN BATIFORA, ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ,
OSCAR RODRIGUEZ, JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS, DOLORES
PALMA, ANTONINA CRUS, CONRADO BANAYAT, TERESITA LORBES, and CORAZON
MIRANDA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and Employment,
ESPIRITU SANTO PAROCHIAL SCHOOL AND ESPIRITU SANTO PAROCHIAL SCHOOL
FACULTY ASSOCIATION,respondents.
No. 76596 December 18, 1987
RICARDO C. VALMONTE and CORAZON BADIOLA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and Employment,
ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION, and ESPIRITU SANTO
PAROCHIAL SCHOOL,respondents.

CORTES, J .:
Six cases involving various private schools, their teachers and non-teaching school personnel, and
even parents with children studying in said schools, as well as the then Minister of Labor and
Employment, his Deputy, the National Labor Relations Commission, and the then Minister of
Education, Culture and Sports, have beenconsolidated in this single Decision in order to dispose of
uniformly the common legal issue raised therein, namely, the allocation of the incremental proceeds
of authorized tuition fee increases of private schools provided for in section 3 (a) of Presidential
Decree No. 451, and thereafter, under the Education Act of 1982 (Batas Pambansa Blg. 232).
Specifically, the common problem presented by these cases requires an interpretation of section 3(a)
of Pres. Decree No. 451 which states:
SEC. 3. Limitations. The increase in tuition or other school fees or other charges as
well as the new fees or charges authorized under the next preceding section shall be
subject to the following conditions;
(a) That no increase in tuition or other school fees or charges shall be approved unless
sixty (60%)per centum of the proceeds is allocated for increase in salaries or wages of
the members of the faculty and all other employees of the school concerned, and the
balance for institutional development, student assistance and extension services, and
return to investments: Provided That in no case shall the return to investments exceed
twelve (12%) per centum of the incremental proceeds;
xxx xxx xxx
In addition, there is also a need for a pronouncement on the effect of the subsequent enactment of
B.P. Blg. 232 which provides for the allocation of tuition fee increases in section 42 thereof.
In a nutshell, the present controversy was precipitated by the claims of some school personnel for
allowances and other benefits and the refusal of the private schools concerned to pay said
allowances and benefits on the ground that said items should be deemed included in the salary
increases they had paid out of the 60% portion of the proceeds from tuition fee increases provided for
in section 3 (a) of Pres. Decree No. 451. The interpretation and construction of laws being a matter of
judicial power and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93 Phil. 696
(1953)], this Court has been called upon to resolve the controversy.
In the process of reading and at times, having to decipher, the numerous pleadings filed in the six
cases, the Court found that the main issue has been approached by the parties from almost
diametrical points, thereby bringing into focus three sub-issues: first, whether or not allowances and
other fringe benefits of faculty members and other school employees may be charged against the
60% portion of the tuition fee increases provided for in section 3(a) of Pres. Dec. No. 451: second,
whether or not the same items may be charged against said portion under the provisions of B.P. Blg.
232: and, third, whether or not schools and their employees may enter into a collective bargaining
agreement allocating more than 60% of said incremental proceeds for salary increases and other
benefits of said employees. After these sub-issues have been resolved, the Court will tackle the other
incidents attending the individual cases, seriatim.
The factual antecedents that brought these cases before this Tribunal are as follows:
I.. FACTUAL BACKGROUND OF EACH CASE
A.
CEBU INSTITUTE OF TECHNOLOGY CASE
This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of Labor
on February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private respondents,
Panfilo Canete, et al., teachers of CIT, for non-payment of: a) cost of living allowances (COLA) under
Pres. Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month pay differentials and c)
service incentive leave. By virtue of an Order issued by the then Deputy Minister of Labor Carmelo C.
Noriel, a labor-management committee composed of one representative each from the Ministry of
Labor and Employment (MOLE), the Minister of Education, Culture and Sports (MECS), and two
representatives each from CIT and from the teachers was created. Said committee was to ascertain
compliance with the legal requirements for the payment of COLA, thirteenth (13th) month pay and
service incentive leave [Rollo, p. 84].
The position taken by CIT during the conference held by the labor management committee was that it
had paid the allowances mandated by various decrees but the same had been integrated in the
teacher's hourly rate. It alleged that the payment of COLA by way of salary increases is in line with
Pres. Dec. No. 451. It also claimed in its position paper that it had paid thirteenth month pay to its
employees and that it was exempt from the payment of service incentive leave to its teachers who
were employed on contract basis [Rollo, pp. 85-86].
After the report and recommendation of the committee, herein public respondent, then Minister of
Labor and Employment issued the assailed Order dated September 29, 1981 and held that the basic
hourly rate designated in the Teachers' Program is regarded as the basic hourly rate of
teachers exclusive of the COLA, and that COLA should not be taken from the 60% incremental
proceeds of the approved increase in tuition fee. The dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the following:
1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.
CIT is further directed to integrate into the basic salaries of its teachers and (sic) COLA
under P.D.'s 525 and 1123 starting on January 1981, pursuant to P.D. 1751. For
purposes of integration, the hourly rate shown in its Teachers' Program for school year
198182 shall be considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with Preliminary
Injunction and/or Restraining Order. The Court issued a Temporary Restraining Order on December
7, 1981 against the enforcement of the questioned Order of the Minister of Labor and Employment.
B.
DIVINE WORD COLLEGE OF LEGAZPI CASE
Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner Divine
Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were charged to
the 60% incremental proceeds of tuition fee increase, the Labor Regulation Section of Regional Office
No. V (Legazpi City) of the Ministry of Labor and Employment conducted an inspection of the
employment records of said school. On the basis of the report on the special inspection that the
school did not comply with Pres. Dec. No. 451, herein respondent Regional Director issued an Order
dated May 30, 1983, requiring compliance by the Divine Word College. The latter filed a
Memorandum of Appeal from said Order which the Regional Director treated as a Motion for
Reconsideration. Upon failure of the school to comply with the aforesaid Order, another Order
(August 2, 1983) was issued by herein respondent Regional Director requiring herein petitioner to pay
the faculty members- complainants (herein private respondents) the amounts indicated therein or the
total sum of Six Hundred Seventeen Thousand Nine Hundred Sixty Seven Pesos and Seventy Seven
Centavos (P 617,967.77). Petitioner's Motion for Reconsideration of the Order was denied.
On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the
Regional Director,viz:
xxx xxx xxx
Coming now to the substantial merit of the case, we share the view that the emergency
allowances due the complainants under the several presidential decrees (PD's 525,
1123, etc.) cannot be charged by the respondent against the 60% of the incremental
proceeds from increase in tuition fees authorized under PD 451, not only because as
per decision of the Supreme Court (UE vs. UE Faculty Association, et. al., G.R. No.
57387, September 30, 1982) said allowances whether mandated by law or secured by
collective bargaining should be taken only from the return to investment referred to in
the decree if the school has no other resources to grant the allowances but not from the
60% incremental proceeds, but also because to hold otherwise would, to our mind,
inevitably result in the loss of one benefit due the complainants-that is the salary or
wage increase granted them by PD 451.
In other words, we believe that by paying the complainants' allowances out of the 60%
incremental proceeds intended for their salary increase they are practically being
deprived of one benefit-their share in the 60% incremental proceeds in terms of salary
or wage increase.
WHEREFORE, for the reasons abovestated, the Order appealed from is hereby
AFFIRMED, and the appeal DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).
This special civil action of certiorari and Prohibition with Preliminary Injunction questions the
interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres. Dec.
No. 45 1, as set forth in the assailed Order.
On March 25, 1985, after considering the allegations, issues and arguments adduced in the Petition
as well as the Comment thereon of the public respondent and dispensing with the private
respondents' Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p. 198). On
April 26, 1985, petitioner filed a Motion for Reconsideration with Motion to Consider the Case En
Banc. On June 26, 1985 the First Division of the Court referred the case to the Court En Banc for
consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C. Laya, etc.
" since it involves the same issue on the application of 60% incremental proceeds of authorized tuition
fee increases [Rollo, p. 235]. The Court EN BANC resolved to accept the case. (Resolution of July
16, 1985). These cases were further consolidated with other cases involving the same issues.
C.
FAR EASTERN UNIVERSITY CASE
On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a complaint
against respondent University for non-payment of legal holiday pay and under-payment of the
thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the Union President, in his
personal capacity, filed another complaint for violation of Pres. Dec. No. 451 against the same
respondent.
The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980, Labor
Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of which is quoted hereunder:
RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10)
days from receipt hereof, to:
1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to the
present; and
2. Pay the 13th month pay differential of complainant's for the covered period December
16, 1975 to December 17, 1978, date of filing of complaint for non-payment of legal
holiday pay and under payment of the 13th month pay, and thereafter. Barred forever
are money claims beyond three (3) years from the time the course (sic) of action
occurred. Respondent's formula on transportation allowance which was deducted from
the 13th month pay is thus subject to this prescriptive period, for purposes of
computation of differentials for the 13th month pay.
The claim under PD 451 is hereby dismissed for lack of merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent
Commission disposed of the appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A. Aquino in
the instant case dated March 10, 1980 is hereby Modified in the sense that
complainant's claims for legal holiday pay and 13th month pay are likewise dismissed
for lack of merit and the dismissal of the claim under P.D. 451 is hereby
Affirmed en (sic) toto.
(Annex "A" to Petition: Rollo, p. 24, 35).
Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit on
November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing the
abovementioned decision of the Commissioner.
D.
FABROS CASE
This petition is in the nature of a class suit brought by petitioners in behalf of the faculty members and
other employees of more than 4000 private schools nationwide. Petitioners seek to enjoin the
implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the ground that the
said order is null and void for being contrary to Pres. Dec. No. 451 and the rulings of the Supreme
Court in the cases of University of the East v. UE Faculty Association [G.R. No. L-57387, September
20, 1982, 117 SCRA 5541, University of Pangasinan Faculty Union v. University of Pangasinan and
NLRC [G.R. No. 63122, February 20, 1984, 127 SCRA 691 ], St. Louis University Faculty Club v.
NLRC and St. Louis University [G.R. No. 65585, September 28, 1984, 132 SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law. On
the matter of tuition and other school fees of private schools, section 42 of said law provides as
follows:
Sec. 42. Tuition and other School Fees. Each private School shall determine its rate
of tuition and other school fees or charges. The rates and charges adopted by schools
pursuant to this provision shall be collectible, and their application or use authorized
subject to rules and regulations promulgated by the Ministry of Education, Culture and
Sports. (Emphasis supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of Education
Jaime C. Laya promulgated on April 1, 1985 the disputed MECS Order No. 25, s. 1985 entitled Rules
and Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act of 1982, Relative
to Student Fees for School Year 1985-1986. The relevant portions of said Order are quoted
hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other school charges as well as other income of
each school shall be treated as an institutional fund which shall be administered and
managed for the support of school purposes strictly: Provided, That for the purpose of
generating additional financial resources or income for the operational support and
maintenance of each school two or more schools may pool their institutional funds, in
whole or in part, subject to the prior approval of their respective governing boards.
7.2. Tuition fees shag be used to cover the general expenses of operating the school in
order to allow it to meet the minimum standards required by the Ministry or any other
higher standard, to which the school aspires. They may be used to meet the costs of
operation for maintaining or improving the quality of instruction/training/research through
improved facilities and through the payment of adequate and competitive compensation
for its faculty and support personnel, including compliance with mandated increases in
personnel compensation and/or allowance.
7.3. Tuition fees shag be used to cover minimum and necessary costs including the
following: (a) compensation of school personnel such as teaching or academic staff,
school administrators, academic non-teaching personnel, and non-academic personnel,
(b) maintenance and operating expenses, including power and utilities, rentals,
depreciation, office supplies; and (c) interest expenses and installment payments on
school debts.
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for
salaries or wages, allowances and fringe benefits of faculty and support staff, including
cost of living allowance, imputed costs of contributed services, thirteenth (13th) month
pay, retirement fund contributions, social security, medicare, unpaid school personnel
claims and payments as may be prescribed by mandated wage orders. collective
bargaining agreements and voluntary employer practices, Provided That increases in
fees specifically authorized for the purposes listed in paragraph 4.3.3 hereof shall be
used entirely for those purposes. (Italics supplied).
7.5. Other student fees and charges as may be approved, including registration, library,
laboratory, athletic, application, testing fees and charges shall be used exclusively for
the indicated purposes, including (a) the acquisition and maintenance of equipment,
furniture and fixtures, and buildings, (b) the payment of debt amortization and interest
charges on debt incurred for school laboratory, athletic, or other purposes, and (c)
personal services and maintenance and operating expenses incurred to operate the
facilities or services for which fees and charges are collected.
The Petition prayed for the issuance of a temporary restraining order which was granted by this Court
after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as follows:
After due consideration of the allegations of the petition dated May 22, 1985 and the
arguments of the parties, the Court Resolved to ISSUE, effective immediately and
continuing until further orders from this Court, a TEMPORARY RESTRAINING ORDER
enjoining the respondent from enforcing or implementing paragraphs 7.4 to 7.5 of
MECS Order No. 25, s. 1985, which provide for the use and application of sixty per
centum (60%) of the increases in tuition and other school fees or charges authorized by
public respondent for the school year 1985-1986 in a manner inconsistent with section
3(a), P.D. No. 451, (which allocates such 60% of the increases exclusively "for
increases in salaries or wages of the members of the faculty and other employees of the
school concerned.") and directing accordingly that such 60% of the authorized
increases shall be held in escrow by the respective colleges and universities, i.e., shall
be kept intact and not disbursed for any purpose pending the Court's resolution of the
issue of the validity of the aforementioned MECS Order in question.
(Rollo, p. 21).
In the same resolution, the Philippine Association of Colleges and Universities (PACU) was
impleaded as respondent.
Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved for
the lifting of the temporary restraining order as to them. In separate resolutions, this Court granted
their prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle University-South,
through their respective counsels, manifested that for the school year 1985-1986, tuition fee increase
was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the tuition fee
increases shall answer for salary increase. However, a budgeted salary increase, exclusive of living
allowances and other benefits, was approved for the same school year which when computed
amounts to more than the 60%.
This Court granted the motions in separate resolutions lifting the temporary restraining order with
respect to these schools in order that they may proceed with the implementation of the general salary
increase for their employees.
In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and the
University itself joined in a petition seeking for leave that 49% of the increase in tuition and other fees
for school year 1985-1986 be released. Petitioners manifested that the remaining balance shall
continue to be held in escrow by the University.
In a resolution dated January 28, 1986, the Court resolved as follows:
Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985 is
hereby ordered LIFTED with respect to Saint Louis University of Baguio City in order
that it may proceed immediately with the implementation of salary increases for its
employees.
D.
BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association
were parties to a labor dispute which arose from a deadlock in collective bargaining. The parties
entered into conciliation proceedings. The union went on strike after efforts at the conciliation failed.
Subsequently, a return to work agreement was forged between the parties and both agreed to submit
their labor dispute to the jurisdiction of the Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment issued an
Order dated April 14, 1986 which provides for the following:
IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the
strike staged by the Union to be legal and orders the following:
a) the School to submit the pertinent record of employment of Romualdo Noriego to the
Research and Information Division of the NLRC for computation of his underpayment of
wages and for the parties to abide by the said computation;
b) the School to submit all pertinent record of collections of tuition fee increases for
school year (sic) 1982-1983, 1983-1984 and 1984-1985 to the Research and
Information Division of the NLRC for proper computation and for equal distribution of the
amount to all employees and teachers during the abovementioned school year (sic) as
their salary adjustment under P.D. 461;
c) the parties to wait for the final resolution of the illegal dismissal (case) docketed as
NLRC NCR Case No. 5-1450-85 and to abide by the said resolution;
d) to furnish the MECS a copy of this order for them to issue the guidelines in the
implementation of PRODED Program;
e) the parties to execute a collective bargaining agreement with an economic package
equivalent to 90% of the proceeds from tuition fee increases for school year 1985-1986
and another 90% for school year 1986-1987 and 85% for school year 1987-1988. The
amount aforementioned shall be divided equally to all members of the bargaining unit as
their respective salary adjustments. Such other benefits being enjoyed by the members
of the bargaining unit prior to the negotiation of the CBA shall remain the same and
shall not be reduced.
f) the School to deduct the amount equivalent to ten (10%) per cent of the backwages
payable to all members of the bargaining unit as negotiation fee and to deliver the same
to the Union Treasurer for proper disposition (Emphasis supplied).
SO ORDERED.
(Rollo, pp. 16-17)
Pursuant to the said order, private respondent Union agreed to incorporate in their proposed
collective bargaining agreement (CBA) with the School the following:
2) The Union and School Administration will incorporate the following in their CBA -
1) The computation of the tuition fee increase shall be gross to gross from
which the corresponding percentage of 90% will be taken. The resulting
amount will be divided among 141.5 employees for 1985-86 and 132.5
employees for 1986-87.
1/2 of the resulting increase will be added to basic and divided by 13.3 to
arrive at monthly increase in basic. The other 1/2 will be divided by 12.3 to
arrive at monthly increase in living allowance.
xxx xxx xxx
4) xxx
Upon request/demand of the Union, School win deduct from backwages of managerial
employees and others outside the bargaining unit what Union win charge its own
members in the form of attorney's fees, special assessment and union dues/agency fee.
5) The signing of the CBA and payment of backwages and others shall be on November
26, 1986 at the Espiritu Santo Parochial School Library.
(Rollo, pp. 3-4).
The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the
respondent School, filed the present petition for prohibition to restrain the implementation of the April
14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant thereto.
They contend that said Order and agreements affect their rights to the 60% incremental proceeds
under Pres. Dec. No. 451 which provide for the exclusive application of the 60% incremental
proceeds to basic salary.
Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on
November 25, 1986 ". . . enjoining the respondents from enforcing, implementing and proceeding with
the questioned order of April 14, 1986 and collective bargaining agreement executed between
respondents Union and the School Administration in pursuance thereof." [Rollo, p. 20].
F.
VALMONTE CASE
This Petition was filed by parents with children studying at respondent school, Espiritu Santo
Parochial School to nullify the Order dated April 14, 1986 issued by public respondent, then Minister
of Labor and Employment, specifically paragraphs (e) and (f) thereof, quoted in the Biscocho case.
The award contained in the said Order is the result of the assumption of jurisdiction by the public
respondent over a labor dispute involving the private respondents school and faculty association. The
latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of its
members for additional economic benefits. After numerous conciliation conferences held while the
union was on strike, the parties voluntarily agreed that the public respondent shall assume jurisdiction
over all the disputes between them. As to the subject matter of the instant case, the public
respondent found that the latest proposals of the respondent school was to give 85% of the proceeds
from tuition fee increases for the school years to be divided among the teachers and employees as
salary adjustments. What the respondent faculty association offered to accept was a package of 95%
for school year 1985-1986, 90% for school year 1986- 1987. The respondent school offered to strike
the middle of the two positions, hence the Order complained of by the petitioners [See Annex "A",
Petition; Rollo, pp. 9, 14-15; Comment of the Respondent Faculty Association: Rollo, p. 26].
II. RESOLUTION OF THE COMMON LEGAL ISSUE
This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet
intertwined, and all deserving, and demanding, the protection of the State. On one arm of the balance
hang the economic survival of private schools and the private school system, undeniably performing a
complementary role in the State's efforts to maintain an adequate educational system in the country.
Perched precariously on the other arm of the same balance is the much-needed financial uplift of
schoolteachers, extolled for all times as the molders of the minds of youth, hence of every nation's
future. Ranged with them with needs and claims as insistent are other school personnel. And then,
anxiously waiting at the sidelines, is the interest of the public at large, and of the State, in the
continued availability to all who desire it, high-standard education consistent with national goals, at a
reasonable and affordable price.
Amidst these opposing forces the task at hand becomes saddled with the resultant implications that
the interpretation of the law would bear upon such varied interests. But this Court can not go beyond
what the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking
body. That is not the same as saying what the law should be or what is the correct rule in a given set
of circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to
question the policies adopted by the legislative branch. Nor is it the business of this Tribunal to
remedy every unjust situation that may arise from the application of a particular law. It is for the
legislature to enact remedial legislation if that be necessary in the premises. But as always, with apt
judicial caution and cold neutrality, the Court must carry out the delicate function of interpreting the
law, guided by the Constitution and existing legislation and mindful of settled jurisprudence. The
Court's function is therefore limited, and accordingly, must confine itself to the judicial task of saying
what the law is, as enacted by the lawmaking body.
FIRST SUB-ISSUE
A. Whether or not allowances and other fringe benefits of employees may be charged
against the 60% portion of the incremental proceeds provided for in sec. 3(a) of Pres.
Dec. No. 451.
1. Arguments raised in the Cebu Institute of Technology case
In maintaining its position that the salary increases it had paid to its employees should be considered
to have included the COLA, Cebu Institute of Technology (CIT) makes reference to Pres. Dec. No.
451 and its Implementing Rules. The line of reasoning of the petitioner appears to be based on the
major premise that under said decree and rules, 60% of the incremental proceeds from tuition fee
increases may be applied to salaries, allowances and other benefits of teachers and other school
personnel. In support of this major premise, petitioner cites various implementing rules and
regulations of the then Minister of Education, Culture and Sports, to the effect that 60% of the
incremental proceeds may be applied to salaries, allowances and other benefits for members of the
faculty and other school personnel [Petition citing Implementing Rules and Regulations of Pres. Dec.
No. 451 of various dates; Rollo, pp. 318-320]. Petitioner concludes that the salary increases it had
granted the CIT teachers out of the 60% portion of the incremental proceeds of its tuition fee
increases from 1974-1980 pursuant to Pres. Dec. No. 451 and the MECS implementing rules and
regulations must be deemed to have included the COLA payable to said employees for those years
[Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and Universities, filed its Memorandum as
Intervenor in support of the proposition that schools may pay the COLA to faculty members and other
employees out of the 60% of the increase in tuition fees. In addition to the arguments already set forth
in the memorandum of the petitioner CIT, intervenor PACU attacks the Decision of this Court
in University of the East v. University of the East Faculty Association et. all G.R. No. 57387 as "not
doctrinal" and inapplicable to the CIT case. The Court held in the UE case, which was promulgated
on September 30, 1982, during the pendency of these cases, that:
... allowances and benefits should be chargeable to the return to investment referred to
in Sec. 3(a), if the schools should happen to have no other resources than incremental
proceeds of authorized tuition fee increases ... (See Dispositive Portion of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA and
other fringe benefits should not be charged against the 60% incremental proceeds of the authorized
tuition fee increase.
The Solicitor General, on the other hand, argues in support of the Order of the public respondent that
Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary
increases of teachers and non- teaching supportive personnel of the school concerned, and that the
Decree does not provide that said salary increases would take the place of the COLA [Rollo, p. 244-
245]. He cites as authority for this stance, two (2) memoranda of the then President dated June 6,
1978 and March 30, 1979 both of which provide that the 60% incremental proceeds of tuition fee
increases "shall be allocated for the increase in the salaries of teachers and supportive personnel. "
Anent the U.E. case, the Solicitor General states that the Supreme Court in deciding said case took
note of the stand of the Office of the President that the 60% incremental proceeds shall be solely
applied to salaries of faculty members and employees.
On August 7, 1986, considering the supervening events, including the change of administration, that
have transpired during the pendency of these cases, the Court required the Solicitor General to state
whether or not he maintains the action and position taken by his predecessor-in-office. In his
Compliance with said Resolution, the Solicitor General Manifested the position that:
a. If the tuition fee increase was collected during the effectivity oil Presidential Decree
No. 451, 60% thereof shall answer exclusively for salary increase of school personnel.
Other employment benefits shall be covered by the 12% allocated for return of
investment, this is in accordance with the ruling of this Honorable Court in University of
the East vs. U.E. Faculty Association, et. al (117 SCRA 554), ... and reiterated
in University of Pangasinan Faculty Union v. University of Pangasinan, et. al. (127
SCRA 691) and St. Louis Faculty Club u. NLRC (132 SCRA 380).
b. If the salary increase was collected during the effectivity of Batas Pambansa Blg. (sic)
232, 60% thereof shall answer not only for salary increase of school personnel but also
for other employment benefits.
(Rollo, at pp. 513-514)
2. Arguments raised in the Divine Word College Case
Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th month
pay and other personnel benefits decreed by law, must be deemed chargeable against the 60%
portion allocated for increase of salaries or wages of faculty and all other school employees. In
support of this stance, petitioner points out that said personnel benefits are not included in the
enumeration of the items for which the balance (less 60%) or 40% portion of the incremental
proceeds may be alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner
likewise cites the interpretation of the respondent Minister of Education, Culture and Sports embodied
in the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13, 1987; Rollo, p. 30],
that the 60% incremental proceeds of authorized tuition fee increases may be applied to increases in
emoluments and/or benefits for members of faculty, including staff and administrative employees of
the school as the valid interpretation of the law, as against that made by the respondent Deputy
Minister of Labor in the assailed Order. If the latter interpretation is upheld, petitioner would go as far
as questioning the constitutionality of Pres. Dec. No. 451 upon the ground that the same
discriminates against the petitioner and other private schools as a class of employers. According to
the petitioner, the discrimination takes the form of requiring said class of employers to give 60% of
their profits to their employees in addition to the COLA mandated by law, while other employers have
to contend only with salary increases and COLA [Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom upon
the ground that the Court's interpretation of a law cannot be applied retroactively to parties who have
relied upon the previous administrative interpretation which has not been declared invalid or
unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further argues on this point that if the court
had intended to invalidate the MECS interpretation of the Decree, it should have positively stated so
in the Decision [Petition; Rollo, p. 50].
The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar,
the ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases
of University of Pangasinan Faculty Union v. University of Pangasinan et all and St. Louis Faculty
Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment and Regional Director of the MOLE
(Region V) likewise attack the validity of the Revised Implementing Rules and Regulations of Pres.
Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60% of
incremental proceeds from tuition fee hikes for retirement plan, faculty development and allowances.
They argue that said rules and regulations were invalid for having been promulgated in excess of the
rule-making authority of the then Minister of Education under Pres. Dec. No. 451 which mandates that
the 60% of incremental proceeds from tuition fee hikes should be allotted solely for salary increases
[Comment; Rollo, pp. 184-185]. Finally, with respect to the issue on the allege unconstitutionality of
Pres. Dec. No. 451, the public respondents posit that a legislation (such as Pres. Dec. No. 451) which
affects a particular class does not infringe the constitutional guarantee of equal protection of the law
as long as it applies uniformly and without discrimination to everyone of that class [Comment; Rollo,
p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is a
defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty, Association
et al. and of University of Pangasinan Faculty Union v. University of Pangasinan and NLRC (supra).
The Union submits that monetary benefits, other than increases in basic salary, are not chargeable to
the 60% incremental proceeds.
The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the Labor
Code which provides a definition of the term "wages" to support its position that "salaries or wages"
as used in Pres. Dec. No. 451 should be interpreted to include other benefits in terms of money.
As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance with
this Court's resolution dated August 7, 1986 requiring him to manifest whether public respondents
maintain the position they have taken in these consolidated cases. The resolution of September 25,
1986 required petitioners to Comment on said Compliance.
The Comment dated December 6, 1986 was received by this Court after petitioner Union was
required to show cause why no disciplinary action should be taken against them for failure to comply
earlier. The Union agreed with the position taken by the Solicitor General that under Pres. Dec. No.
451, 60% of the tuition fee increases, shall answer exclusively for salary increase. However, it
expressed disagreement with the opinion that during the effectivity of B.P. Blg. 232, the 60%
ncremental proceeds shall answer not only for salary increases but also for other employment
benefits. The Union argues that whereas "Pres. Dec. No. 451 is a law on a particular subject, viz.,
increase of tuition fee by educational institutions and how such increase shall be allocated B.P. Blg.
232 is not a law on a particular subject of increase of tuition fee . . . ; at most it is a general legislation
on tuition fee as it touches on such subject in general, " [Comment on Compliance; Rollo, p. 376],
Suppletory to its argument that B.P. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the Union
also invokes the principle that a special or particular law cannot be repealed by a general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This Court has consistently held, beginning with the University of the East case, that if the schools
have no resources other than those derived from tuition fee increases, allowances and benefits
should be charged against the proceeds of tuition fee increases which the law allows for return on
investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60% portion
allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was reiterated in
the University of Pangasinan case and in the Saint Louis Universitycase.
There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of Pres.
Dec. No. 451 imposes among the conditions for the approval of tuition fee increases, the allocation of
60% per cent of the incremental proceeds thereof for increases in salaries or wages of school
personnel and not for any other item such as allowances or other fringe benefits. As aptly put by the
Court in University of Pangasinan Faculty Union v. University of Pangasinan, supra:
... The sixty (60%) percent incremental proceeds from the tuition increase are to be
devoted entirely to wage or salary increases which means increases in basic salary.
The law cannot be construed to include allowances which are benefits over and above
the basic salaries of the employees. To charge such benefits to the 60% incremental
proceeds would be to reduce the increase in basic salary provided by law, an increase
intended also to help the teachers and other workers tide themselves and their families
over these difficult economic times. [Italics supplied] (127 SCRA 691, 702).
This interpretation of the law is consistent with the legislative intent expressed in the Decree itself,
i.e., to alleviate the sad plight of private schools and that of their personnel wrought by slump in
enrollment and increasing operational costs on the part of the schools, and the increasing costs of
living on the part of the personnel (Preamble, Pres. Dec. No. 451). While coming to the aid of the
private school system by simplifying the procedure for increasing tuition fees, the Decree imposes as
a condition for the approval of any such increase in fees, the allocation of 60% of the incremental
proceeds thereof, to increases in salaries or wages of school personnel. This condition makes for
a quid pro quo of the approval of any tuition fee hike by a school, thereby assuring the school
personnel concerned, of a share in its proceeds. The condition having been imposed to attain one of
the main objectives of the Decree, which is to help the school personnel cope with the increasing
costs of living, the same cannot be interpreted in a sense that would diminish the benefit granted said
personnel.
In the light of existing laws which exclude allowances from the basic salary or wage in the
computation of the amount of retirement and other benefits payable to an employee, this Court will
not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e. to include
allowances in the concept of salaries or wages.
As to the alleged implementing rules and regulations promulgated by the then MECS to the effect that
allowances and other benefits may be charged against the 60% portion of the proceeds of tuition fee
increases provided for in Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that these were
issued ultra vires, and therefore not binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the
Decree and to the imposition of limitations upon the approval of tuition fee increases, to wit:
SEC. 4. Rules and Regulations. The Secretary of Education and Culture is hereby
authorized, empowered and directed to issue the requisite rules and regulations for the
effective implementation of this Decree. He may, in addition to the requirements and
limitations provided for under Sections 2 and 3 hereof, impose other requirements and
limitations as he may deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which 60% of the
proceeds of tuition fee increases are allocated under Section 3(a) of the Decree.
Rules and regulations promulgated in accordance with the power conferred by law would have the
force and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555
(1962)] if the same are germane to the subjects of the legislation and if they conform with the
standards prescribed by the same law [People v. Maceren, G.R. No. L-32166, October 18, 1977, 79
SCRA 450]. Since the implementing rules and regulations cited by the private schools adds
allowances and other benefits to the items included in the allocation of 60% of the proceeds of tuition
fee increases expressly provided for by law, the same were issued in excess of the rule-making
authority of said agency, and therefore without binding effect upon the courts. At best the same may
be treated as administrative interpretations of the law and as such, they may be set aside by this
Court in the final determination of what the law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be charged against the 60% portion of
the incremental proceeds of tuition fee increases upon the effectivity of the Education Act of 1982
(B.P. Blg. 232).
1. Arguments raised in the Fabros case
In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the proceeds
from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that section 42 of
B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there is no conflict
between section 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any semblance of
inconsistency to deduce a case of a repeal by implication: second, Pres. Dec. No. 451 is a specific
law upon a particular subject-the purposes and distribution of the incremental proceeds of tuition fee
increases, while B.P. Blg. 232 is a general law on the educational system; as such, a specific law is
not repealed by a subsequent general law in the absence of a clear intention; and third, Pres. Dec.
No. 451 is still the only law on the subject of tuition fee increases there being no prescription or
provision in section 42 of B.P. Blg. 232 or elsewhere in the law. They furthermore aver that the
disputed MECS Order which imposed additional burdens against the 60% incremental proceeds of
tuition fee increases are not provided in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical result
as intimated by petitioners is that the inclusion of paragraph 7.4 and related paragraphs 7 to 7.3 and
7.5 in the questioned MECS order contravenes the statutory authority granted to the public
respondent, and the same are therefore, void.
Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985, complies
with the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres. Dec. No. 451.
PACU notes that theUniversity of the East case invoked by petitioners is not applicable because the
issue in that case does not involve the effect of B.P. Blg. 232 on Pres. Dec. No. 451.
The Solicitor General, representing the public respondent, after giving a summary of the matters
raised by petitioner and respondent PACU, points out that the decisive issue in this case is whether
B.P. Big. 232 has repealed Pres. Dec. No. 451 because on the answer to this question depends the
validity of MECS Order No. 25, s. 1985. Public respondent holds the view consistent with that of
PACU on the matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support this contention,
the Solicitor General compared the respective provisions of the two laws to show the inconsistency
and incompatibility which would result in a repeal by implication.
RESOLUTION OF THE SECOND SUB-ISSUE
On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:
SEC. 42. Tuition and Other School Fees. Each private school shall determine its rate
of tuition and other school fees or charges. The rates and charges adopted by schools
pursuant to this provision shall be collectible and their application or use authorized,
subject to rules and regulations promulgated by the Ministry of Education, Culture and
Sports. (Emphasis supplied).
The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985 revived
the old controversy on the application and use of the incremental proceeds from tuition fee increases.
As can be gleaned from the pleadings and arguments of the parties in these cases, one side,
composed of the teachers and other employees of the private schools, insist on the applicability of
section 3(a) of Pres. Dec. No. 451 as interpreted arid applied in the University of the East, University
of Pangasinan and St Louis University cases, while the private schools uphold the view that the
matter of allocating the incremental proceeds from tuition fee increases is governed by section 42 of
B.P. Blg. 232 as implemented by the MECS Rules and Regulations. As stated, the latter's argument
is premised on the allegation that B.P. Blg. 232 impliedly repealed Pres. Dec. No. 451.
On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in
the Fabros case, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.
In recognition of the vital role of private schools in the country's educational system, the government
has provided measures to regulate their activities. As early as March 10, 1917, the power to inspect
private schools, to regulate their activities, to give them official permits to operate under certain
conditions and to revoke such permits for cause was granted to the then Secretary of Public
Instruction by Act No. 2706 as amended by Act No. 3075 and Commonwealth Act No. 180. Republic
Act No. 6139, enacted on August 31, 1970, provided for the regulation of tuition and other fees
charged by private schools in order to discourage the collection of exorbitant and unreasonable fees.
In an effort to simplify the "cumbersome and time consuming" procedure prescribed under Rep. Act
No. 6139 and "to alleviate the sad plight of private schools," Pres. Dec. No. 451 was enacted on May
11, 1974. While this later statute was being implemented, the legislative body envisioned a
comprehensive legislation which would introduce changes and chart directions in the educational
system, hence, the enactment of B.P. Blg. 232. What then was the effect of B.P. Blg. 232 on Pres.
Dec. No. 451?
The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section
3(a) thereof, finds evident irreconcilable differences.
Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or
charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), where
section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to determine
its rate of tuition and other school fees or charges.
Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be
applied or used to augment the salaries and wages of members of the faculty and other employees of
the school, while B.P. Blg. 232 provides that the increment shall be applied or used in accordance
with the regulations promulgated by the MECS.
A closer look at these differences leads the Court to resolve the question in favor of repeal. As
pointed out by the Solicitor General, three aspects of the disputed provisions of law support the above
conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to apportion
the incremental proceeds of the tuition fee increases; such power is delegated to the Ministry of
Education and Culture under B.P. Blg. 232.Second, Pres. Dec. No. 451 limits the application or use of
the increment to salary or wage increase, institutional development, student assistance and extension
services and return on investment, whereas B.P. Blg. 232 gives the MECS discretion to determine the
application or use of the increments. Third, the extent of the application or use of the increment under
Pres. Dec. No. 451 is fixed at the pre-determined percentage allocations; 60% for wage and salary
increases, 12% for return in investment and the balance of 28% to institutional development, student
assistance and extension services, while under B.P. Blg. 232, the extent of the allocation or use of
the increment is likewise left to the discretion of the MECS.
The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in
the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg.
232 which cover the same subject matter, are so clearly inconsistent and incompatible with each
other that there is no other conclusion but that the latter repeals the former in accordance with section
72 of B.P. Blg. 232 to wit:
Sec. 72. Repealing clause. All laws or parts thereof inconsistent with any provision of
this Act shall be deemed repealed or modified, as the case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the above
conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other school
fees or charges and their use and application, although the latter is broader in scope as
it covers other aspects of the education system. We note substantial differences or
inconsistencies between the provisions of the two laws. P.D. No. 451 prescribes certain
limitations in the increase of tuition and other school fees and their application, whereas
the latter law, B.P. Blg. 232 s silent on the matter. Under P.D. 451, rates of
tuition/school fees need prior approval of the Secretary of Education, Culture (now
Minister of Education, Culture and Sports), who also determines the reasonable rates
for new school fees, whereas under B.P. Blg. 232, each private school determines its
rate of tuition and other school fees or charges. P.D. No. 451 authorizes the Secretary
of Education and Culture to issue requisite rules and regulations to implement the said
Decree and for that purpose, he is empowered to impose other requirements and
limitations as he may deem proper and reasonable in addition to the limitations
prescribed by the Decree for increases in tuition fees and school charges, particularly,
the limitations imposed in the allocation of increases in fees and charges, whereas
under B.P. Blg. 232, the collection and application or use of rates and charges adopted
by the school are subject to rules and regulations promulgated by the Ministry of
Education, Culture and Sports without any mention of the statutory limitations on the
application or use of the fees or charges. The authority granted to private schools to
determine its rates of tuition and unconditional authority vested in the Ministry of
Education, Culture and Sports to determine by rules and regulations the collection and
application or use of tuition or fees rates and charges under B.P. Big. 232 constitute
substantial and irreconcilable incompatibility with the provisions of P.D. No. 451, which
should be for that reason deemed to have been abrogated by the subsequent
legislation.
Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the establishment
and maintenance of an integrated system of education and as such, covers the entire
subject matter of the earlier law, P.D. No. 451. The omission of the limitations or
conditions imposed in P.D. No. 451 for increases in tuition fees and school charges is
an indication of a legislative intent to do away with the said limitations or conditions.
(Crawford, supra, p. 674). It has also been said that
an act which purports to set out in full all that it intends to contain,
operates as a repeal of anything omitted which was contained in the old
act and not included in the amendatory act." (People vs. Almuete 69
SCRA 410; People vs. Adillo 68 SCRA 90) (Ministry of Justice, Op. No.
16, s. 1985).
Having concluded that under B.P. Big. 232 the collection and application or use of tuition and other
school fees are subject only to the limitations under the rules and regulations issued by the Ministry,
the crucial point now shifts to the said implementing rules.
The guidelines and regulations on tuition and other school fees issued after the enactment of B.P.
Blg. 232 consistently permit the charging of allowances and other benefits against the 60%
incremental proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No. 15,
s. 1984; MECS Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s.
1987. The pertinent portion of the latest order reads thus:
In any case of increase at least sixty percent (60%) of the incremental proceeds should
be allocated for increases in or provisions for salaries or wages, allowances and fringe
benefits of faculty and other staff, including accruals to cost of living allowance, 13th
month pay, social security, medicare and retirement contribution and increases as may
be provided in mandated wage orders, collective bargaining agreements or voluntary
employer practices.
The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground that
the additional burdens charged against ". . . the 60% of the proceeds of the increases in tuition fees
constitute both as [sic] an excess of statutory authority and as (sic) a substantial impairment of the
accrued, existing and protected rights and benefits of the members of faculty and non-academic
personnel of private schools." Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged that
these additional burdens under the MECS Order are not provided in the law itself, either in section 42
of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except increases in salaries in the latter
provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-
making authority to fill in the details on the application or use of tuition fees and other school charges.
In the same vein is section 70 of the same law which states:
SEC. 70. Rule-making Authority. The Minister of Education, Culture and Sports
charged with the administration and enforcement of this Act, shall promulgate the
necessary implementing rules and regulations.
Contrary to the petitioners' insistence that the questioned rules and regulations contravene the
statutory authority granted to the Minister of Education, this Court finds that there was a valid exercise
of rule-making authority.
The statutory grant of rule-making power to administrative agencies like the Secretary of Education is
a valid exception to the rule on non-delegation of legislative power provided two conditions concur,
namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and
2) said statute fixes a standard to which the latter must conform [Vigan Electric Light Co., Inc. v.
Public Service Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G.
R. No. L-23825, December 24, 1965].
The Education Act of 1982 is "an act providing for the establishment and maintenance of an
integrated system for education " with the following basic policy:
It is the policy of the State to establish and maintain a complete, adequate and
integrated system of education relevant to the goals of national development. Toward
this end, the government shall ensure, within the context of a free and democratic
system, maximum contribution of the educational system to the attainment of the
following national development goals:
1. To achieve and maintain an accelerating rate of economic development and social
progress;
2. To assure the maximum participation of all the people in the attainment and
enjoyment of the benefits of such growth; and
3. To achieve and strengthen national unity and consciousness and preserve, develop
and promote desirable cultural, moral and spiritual values in a changing world.
The State shall promote the right of every individual to relevant quality education,
regardless of sex, age, creed, socioeconomic status, physical and mental conditions,
racial or ethnic origin, political or other affiliation. The State shall therefore promote and
maintain equality of access to education as well as the enjoyment of the benefits of
education by all its citizens.
The State shall promote the right of the nation's cultural communities in the exercise of
their right to develop themselves within the context of their cultures, customs, traditions,
interests and belief, and recognizes education as an instrument for their maximum
participation in national development and in ensuring their involvement in achieving
national unity. (Section 3, Declaration of Basic Policy).
With the foregoing basic policy as well as, specific policies clearly set forth in its various provisions,
the Act is complete in itself and does not leave any part of the policy-making, a strictly legislative
function, to any administrative agency.
Coming now to the presence or absence of standards to guide the Minister of Education in the
exercise of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October 24,
1970, 35 SCRA 481, 497] is relevant:
The standard may be either expressed or implied. If the former, the non-delegation
objection is easily met. The standard though does not have to be spelled out
specifically. It could be implied from the policy and purpose of the act considered as a
whole. In the Reflector Law, clearly the legislative objective is public safety. What is
sought to be attained as in Calalang v. Williams is "safe transit upon the roads." (Italics
supplied).
Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164, July 31, 1987], the
Court held that the necessary standards are set forth in Section 1 of the 1959 Medical Act, i.e., "the
standardization and regulation of medical education" as well as in other provisions of the Act.
Similarly, the standards to be complied with by Minister of Education in this case may be found in the
various policies set forth in the Education Act of 1982.
MECS Order No. 25, s. 1985 touches upon the economic relationship between some members and
elements of the educational community, i.e., the private schools and their faculty and support staff. In
prescribing the minimum percentage of tuition fee increments to be applied to the salaries,
allowances and fringe benefits of the faculty and support staff, the Act affects the economic status
and the living and working conditions of school personnel, as well as the funding of the private
schools.
The policies and objectives on the welfare and interests of the various members of the educational
community are found in section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. It is likewise declared government
policy to foster, at all times, a spirit of shared purposes and cooperation among the
members and elements of the educational community, and between the community and
other sectors of society, in the realization that only in such an atmosphere can the true
goals and objectives of education be fulfilled.
Moreover, the State shall:
1. Aid and support the natural right and duty of parents in the rearing of the youth
through the educational system.
2. Promote and safeguard the welfare and interests of the students by defining their
rights and obligations, according them privileges, and encouraging the establishment of
sound relationships between them and the other members of the school community.
3. Promote the social and economic status of an school personnel, uphold their rights,
define their obligations, and improve their living and working conditions and career
prospects.
4. Extend support to promote the viability of those institutions through which parents,
students and school personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in section 33:
SEC. 33. Declaration of Policy. It is hereby declared to be a policy of the State that
the national government shall contribute to the financial support of educational
programs pursuant to the goals of education as declared in the Constitution. Towards
this end, the government shall:
1. Adopt measures to broaden access to education through financial assistance and
other forms of incentives to schools, teachers, pupils and students; and
2. Encourage and stimulate private support to education through, inter alia, fiscal and
other assistance measures.
Given the abovementioned policies and objectives, there are sufficient standards to guide the Minister
of Education in promulgating rules and regulations to implement the provisions of the Education Act
of 1982, As in the Ericta and Tablarin cases, there is sufficient compliance with the requirements of
the non-delegation principle.
THIRD SUB-ISSUE
C. Whether or not schools and their employees may enter into a collective bargaining
agreement allocating more than 60% of said incremental proceeds for salary increases
and other benefits of said employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent
Minister of Labor directing the execution of a CBA between the school and the respondent Espiritu
Santo Parochial School Faculty Association which provides for an economic package equivalent to
90% of the proceeds of tuition fee increases for school year 1985-1986, another 90% for school year
1986-1987 and 85% for school year 1987-1988. Pursuant to said Order, petitioners in
the Biscocho case alleged that the parties had agreed to incorporate in their CBA a provision which
allocates one-half (1/2) of the 90% portion of the proceeds or 45% to increases in the monthly basic
salaries and the other one-half (1/2) or 45% to increases in monthly living allowance.
The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite
reasons. In theBiscocho case, the controversy springs from what petitioners perceive to be a
diminution of the benefits to be received by the school employees insofar as the CBA allocates only
45% for salary increases instead of 60%, which petitioners claim to be the portion set aside by Pres.
Dec. No. 451 for that purpose. Parenthetically, the case questions the allocation of the remaining
45% of the 90% economic package under the CBA, to allowances. Stripped down to its essentials,
the question is whether or not the 90% portion of the proceeds of tuition fee increases alloted for the
economic package may be allocated for both salary increases and allowances.
On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the
execution of a CBA which would allocate more than 60% of the proceeds of tuition fee increases for
salary increases of school employees. Furthermore, petitioners question the authority of the then
Minister of Labor and Employment to issue the aforequoted Order insofar as this allocates the tuition
fee increases of the respondent private school. According to them, only the Minister of Education,
Culture and Sports has the authority to promulgate rules and regulations on the use of tuition fees
and increases thereto, pursuant to the provisions of B.P. Blg. 232. They further argue that the
assailed Order collides with the provisions of Pres. Dec. No. 451 insofar as it allocates 90% of the
tuition fee increases for salary adjustments of the members of the bargaining unit which exceeds the
60% of the said increases allocated by the Decree for the same purpose.
Before delving further into the questions raised, this Court notes that in the Valmonte case,
respondent Minister and respondent Faculty Association raise a procedural objection to the filing of
the Petition: the standing of the petitioners to bring this suit. Both respondents decry the petitioners'
lack of the interest required in Rule 65 of the Rules of Court for the filing of the Petition for certiorari
and Prohibition, since the latter do not appear to be in any way aggrieved by the enforcement of the
Order. Petitioners-parents did not even participate in the proceedings below which led to the issuance
of the assailed Order.
This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and
2), only a person aggrieved by the act or proceeding in question may file a petition for certiorari
and/or prohibition. TheValmonte petition fails to indicate how the petitioners would be aggrieved by
the assailed Order. It appears that the petitioners are not parties and never at any time intervened in
the conciliation conferences and arbitration proceedings before the respondent Minister. The parties
therein, who stand to be directly affected by the Order of the respondent Minister, do not contest the
validity of said Order. The petition does not even state that petitioners act as representative of the
parents' association in the School or in behalf of other parents similarly situated.
If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have
intervened and moved for a reconsideration of respondent Minister's Order before filing the instant
petition. Petitioners failed to show that the case falls under any one of the recognized exceptions to
the rule that a motion for reconsideration should first be availed of before filing a petition for certiorari
and prohibition.
In view of the foregoing, the resolution of the third sub-issue will be based mainly on the arguments
raised in theBiscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition fee
increases applied for by the respondent Espiritu Santo Parochial School for school years 1985-1986,
1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232, the allocation of
the proceeds of any authorized tuition fee increase must be governed by specific rules and
regulations issued by the Minister (now Secretary) of Education pursuant to his broadened rule
making authority under section 42 of the new law. Thus, insofar as the proceeds of the authorized
tuition fee increases for school year 1985-1986 are concerned, the allocation must conform with the
pertinent section of MECS Order No. 25, s. 1985, to wit:
7. Application or Use of Tuition and Other School Fees or Charges.
xxx xxx xxx
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used for
salaries or wages, allowances and fringe benefits of faculty and support staff, including
cost of living allowance, imputed costs of contributed services, thirteenth (13th) month
pay, retirement fund contributions, social security, medicare, unpaid school personnel
claims, and payments as may be prescribed by mandated wage orders, collective
bargaining agreements and voluntary employer practices:Provided, That increases in
fees specifically authorized for the purposes fisted in paragraph 4.3.3 hereof shall be
used entirely for those purposes.
xxx xxx xxx
With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable
rules are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order No.
25, s. 1985, the pertinent portion of which is quoted above.
Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988, DECS Order No.
37, s. 1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent (60%) of the incremental proceeds
should be allocated for increases in or provisions for salaries or wages, allowances and
fringe benefits of faculty and other staff, including accruals to cost of living allowance,
13th month pay, social security, medicare and retirement contributions and increases as
may be provided in mandated wage orders, collective bargaining agreements or
voluntary employer practices.
(2) Provided, that in all cases of increase the allocation of the incremental proceeds
shall be without prejudice to the Supreme Court cases on the interpretation and
applicability of existing legislations on tuition and other fees especially on the allocation
and use of any incremental proceeds of tuition and other fees increases. (Emphasis
supplied).
xxx xxx xxx
Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232, the
60% portion of the proceeds of tuition fee increases may now be allotted for both salaries and
allowances and other benefits. The 60% figure is, however, a minimum which means that schools
and their employees may agree on a larger portion, or in this case, as much as 90% for salaries and
allowances and other benefits. This is not in anyway to allow diminution or loss of the portion allotted
for institutional development of the school concerned. Thus, paragraph 7.5 of MECS Order No. 25,
series of 1985 specifically provides that other student fees and charges like registration, library,
laboratory or athletic fees shall be used exclusively for the purposes indicated.
III RESOLUTION OF THE SPECIFIC ISSUES
CEBU INSTITUTE OF TECHNOLOGY CASE
Petitioner assigns three other errors in the petition for certiorari:
1
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN
DIRECTLY ISSUING THE ORDER DATED SEPTEMBER 29,1981 WITHOUT CONDUCTING A
FORMAL INVESTIGATION AND ARBITRATION PROCEEDINGS.
2
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED AND/OR
NOT OBLIGED TO PAY SERVICE INCENTIVE LEAVE.
3
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS
FOR COLA AND SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR
EXTINGUISHED BY PRESCRIPTION.
1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued
without the benefit of a hearing and was merely based on the report of the labor management
committee which is allegedly without power to pass upon the issues raised. On this premise,
petitioner claims that it was denied its right to due process.
Petitioner's contention is without merit. The Labor Management Committee was empowered to
investigate the complaint against the petitioner for non-payment of the cost of living allowance, 13th
month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee,
petitioner was represented by its counsel, registrar and assistant accountant and in the conferences
that were held, the representatives of the petitioner were present. Furthermore, the petitioner's
position paper submitted to the committee reflects that in all the deliberations, it was never denied the
right to present evidence and be heard on all the issues raised, particularly to demonstrate that it had
complied with the various COLA, 13th month pay and service incentive leave decrees. The evidence
presented during the conferences and the position paper of the parties were made the basis of the
committee's report and recommendation which in turn became the basis of the order of the Minister of
Labor directing the petitioner to pay the complainants their COLA and service incentive leave
benefits.
It could not therefore be contended that the petitioner was deprived of his right to be heard when it
appears on the record that it was permitted to ventilate its side of the issues. There was sufficient
compliance with the requirements of due process. In the face of the well- settled principle that
administrative agencies are not strictly bound by the technical rules of procedure, this Court
dismisses the petitioner's claim that formal investigative and arbitration proceedings should be
conducted. "While a day in court is a matter of right in judicial proceedings, in administrative
proceedings it is otherwise since they rest upon different principles." [Cornejo v. Gabriel and
Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and L-
49035, December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits, petitioner claims that private
respondents are engaged by the school on a contract basis as shown by the individual teachers
contract which defines the nature, scope and period of their employment; hence, they are not entitled
to the said benefit according to Rule V of the Implementing Rules and Regulations of the Labor Code
to wit:
Sec. 1. Coverage. This rule [on Service Incentive Leave] shall apply to all
employees, except:
xxx xxx xxx
(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; (MOLE Rules and
Regulations, Rule V, Book III)
The phrase "those who are engaged on task or contract basis" should however, be related with "field
personnel " applying the rule on ejusdem generis that general and unlimited terms are restrained and
limited by the particular terms that they follow, [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90
SCRA 379]. Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers
"to non-agricultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's
claim that private respondents are not entitled to the service incentive leave benefit cannot therefore
be sustained.
3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the same are barred
by laches and/or extinguished by prescription according to Article 291 of the Labor Code which
provides:
Art. 291. Money claims. All money claims arising from employer-employee , relations
accruing during the effectivity of this Code shall be filed within three (3) years from the
time the cause of action accrued; otherwise, they shall be forever barred.
All money claims accruing prior to the effectivity of this Code shall be filed with the
appropriate entities established under this Code within one (1) year from the date of
effectivity, and shall be processed or determined in accordance with implementing rules
and regulations of the Code; otherwise, they shall be forever barred.
xxx xxx xxx
Considering that the complaint alleging non-payment of benefits was filed only on February 11, 1981,
petitioner argues that prescription has already set in.
From the aforequoted provision, it is not fully accurate to conclude that the entire claims for COLA
and service incentive leave are no longer recoverable. This Court finds no reason to disturb the
following pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974, for
the months of August, September and October 1974 must be filed within one (1) year
from November 1, 1974, otherwise they shall be considered prescribed; claims under
the same decree that accrued on or after November 1, 1974 should be initiated within
three (3) years from the date of accrual thereof, otherwise the same shall be deemed
extinguished. Although this particular claim was filed on February 11, 1981, petitioners
herein are entitled to COLA under P.D. 525 from February 1978 up to the present since
the COLA that accrued in February 1978 has not yet prescribed at the time that the
claim was filed in February 1981. In the same vein, petitioners herein should be granted
COLA under P.D. 1123 from February 1978 up to 1981 inasmuch as said decree
became effective only on May 11, 1977. Further, petitioners are entitled to the full
amount of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It must be pointed
out that the earliest of the just cited four (4) decrees, i.e., P.D. 1614, just took effect on
April 1, 1979. Thus, the prescriptive period under Art. 292 of the Labor Code, as
amended, does not as yet apply to money claims under the just mentioned decrees.
DIVINE WORD COLLEGE CASE
In assailing the disputed Order, petitioner contends that the public respondents acted with grave and
patent abuse of discretion amounting to lack of jurisdiction in that:
1. The Regional Director has no jurisdiction over money claims arising from employer-
employee relationship; and
2. The Regional Director and Deputy Minister of Labor adopted the report of the Labor
Standards Division without affording the petitioner the opportunity to be heard.
1. Petitioner school claims that the case at bar is a money claim and should therefore be within the
original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor Code, as
amended.
It appears from the record, however, that the original complaint filed by ten (10) faculty members of
the Divine Word College was for non-compliance with Pres. Dec. No. 451 and with Labor Code
provisions on service incentive leave, holiday and rest day pay and which complaint specifically
prayed that an inspection of the College be conducted.
Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly
authorized representatives (which includes Regional Directors) are accorded the power to investigate
complaints for non- compliance with labor laws, particularly those which deal with labor standards
such as payment of wages and other forms of compensation, working hours, industrial safety, etc.
This is provided for in article 128 of the Labor Code, as amended:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives including labor
regulation officers, shall have access to employers' records and premises at any time of
the day or night, whenever work is being undertaken therein, and the right to copy
therefrom, to question any employee and investigate any fact, condition or matter which
may be necessary to determine violations or which may aid in the enforcement of this
Code and of any labor law, wage order or rules and regulations issued pursuant thereto.
(b) The Secretary of Labor or his duly authorized representatives shall have the power
to order and administer, after due notice and hearing, compliance with the labor
standards provisions of this Code based on the findings of labor regulation officers or
industrial safety engineers made in the course of inspection, and to issue writs of
execution to the appropriate authority for the enforcement of their order, except in cases
where the employer contests the findings of the labor regulations officer and raises
issues which cannot be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection. (Emphasis supplied).
Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases
restates inter alia that "(L)abor standards cases arising from violation of labor standards laws
discovered in the course of inspection or complaints where employer-employee relations still exist"
are under the exclusive original jurisdiction of the Regional Director.
Even assuming that respondent Regional Director was without jurisdiction to entertain the case at
bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in the
proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional Director.
2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore
denied due process.
There is no dispute that an inspection of the College was conducted after a complaint by some faculty
members was filed with the Regional Office of the Ministry of Labor and Employment. A report was
submitted on the basis of the findings contained therein. Petitioner was furnished a copy of said
report to which it filed a comment. Finding this to be without merit, the Regional Director issued an
order giving petitioner ten (10) days to manifest its compliance with the findings, otherwise, another
would be issued to enforce payment. Petitioner appealed but instead of resolving the memorandum of
appeal, which the Regional Director treated as a motion for reconsideration, said Director issued
another Order dated August 2, 1983 directing the payment of the employees' share in the sixty (60%)
percent incremental proceeds. Petitioner moved for a reconsideration of the latest order which the
Regional Director, however, denied, thereby elevating the case to the Office of the Minister of Labor
and Employment.
The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the
inspection conducted. It submitted a comment thereto, which was in effect its position paper. The
arguments therein and evidence attached thereto were considered by respondent Regional Director
in the order issued subsequently. They, therefore, had ample opportunity to present their side of the
controversy.
What due process contemplates is not merely the existence of an actual hearing. The "right to be
heard" focuses more on the substance rather than the form. In the case at bar, petitioner was actually
heard through the pleadings that it filed with the Regional Office V. As it itself admitted in its petition
that it was afforded the right to be heard on appeal [See Rollo, p. 581, petitioner cannot therefore
insist that it was denied due process.
FAR EASTERN UNIVERSITY CASE
Two other issues are raised in this petition, to wit:
1
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS
'EQUIVALENT TO 13TH-MONTH PAY UNDER PRES. DEC. NO. 851.
2
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY WITHDRAWN AFTER
BEING PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.
1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of Pres.
Dec. No. 851 which requires all employers "to pay all their employees receiving a basic salary of not
more than Pl,000 a month, regardless of the nature of the employment, a 13th- month pay" (Sec. 1).
However, "employer[s] already paying their employees a 13th-month pay or its equivalent are not
covered" (Sec. 2). (Emphasis supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:
SEC. 3. Employees. The Decree shall apply to all employers except to: ...
c) Employers already paying their employees 13th-month or more in a calendar year or
its equivalent at the time of this issuance; ...
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus,
mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less
than 1/12th of the basic salary but shall not include cash and stock dividends, cost of
living allowances and all other allowances regularly enjoyed by the employer, as well as
non-monetary benefits. Where an employer pays less than 1/1 2th of the employees
basic salary, the employer shall pay the difference.
In the case at bar, the 13th month pay is paid in the following manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus additional 5% every year thereafter but not
to exceed 100% of basic salary
Christmas Bonus (CB)
50% of basic salary for the first year of service plus additional 5% every year thereafter
but not to exceed 100% of basic salary.
For employees who have served the University for more than 10 years, the University
pays them emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:
Monthly Rate x No. of
months served for the year
Less TA/CB = 13th Mo. pay
12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:
Add salaries from 16 December of previous year to 15th December of present year [and] divide by 12
months = 13th Mo. Pay (Rollo, pp. 60, 72).
The University's answer to the Union's claim of underpayment of the 13th month pay is that the
"transportation allowance" paid to its employees partakes the nature of a mid-year bonus which under
section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and Regulations is
equivalent to the 13th month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants reasoning
that:
CLEARLY, transportation allowance cannot be considered as equivalent" of 13th month
pay as it is neither a Christmas bonus, mid-year bonus, profit sharing payment, or other
cash bonuses, pursuant to paragraphs (c) and (e), Section 3 of PD 851. The regularity
of its payment further cements this proposition.
PERFORCE, complainants are underpaid of their 13th month pay in an amount
equivalent to 50% of their basic salary for the lst year of service, plus additional 5%
every year thereafter but not to exceed 100% of their basic salary which, per
respondent's formula, corresponds to their transportation allowance. (Rollo, p. 61).
On appeal, the Third Division of the National Labor Relations Commission reversed the Labor
Arbiter's ruling by dismissing the complainant's claim for underpayment of the 13th month pay for lack
of merit. The NLRC ruled that:
From the above findings and conclusion, it is clear that insofar as employees with ten
(10) years of service or more are concerned, they receive the equivalent of one (1)
month pay for Christmas bonus and another one (1) month pay as transportation
allowance or a total of fourteen (14) months salary in a year. Obviously, this group of
employees are fully paid of their 13th month pay and are not therefore subject to the
instant claim. As it is only those with less than ten (10) years of service are included or
encompassed by the Labor Arbiter's resolution on this particular issue. With this
clarification, we shall now proceed to discuss the crux of the controversy, that is, the
determination of whether or not the so designated "transportation allowance" being paid
to the employees should be considered among those deemed equivalent to 13th month
pay. As adverted earlier, the Labor Arbiter opined that it cannot be so considered as the
equivalent of 13th month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to delve deeper into the nature and
intendment of the transportation allowances as designated by both the complainants
and the respondent. Complainants claim that the transportation allowance they enjoy
has always been called and termed allowance and never as bonus since the time the
same was given to them. They assert that it simply was intended as an allowance and
not a bonus. It would appear however that complainants do not dispute respondent's
stand that transportation allowance is being paid only every March of each year as
distinguished from other allowances that are being paid on a monthly basis or on a
bimonthly basis; that the amount of transportation allowance to be paid is dependent on
the length of service of the employee concerned (i.e. 50% basic in the first year and
additional 5% for each succeeding years, etc.); that the said method of computing the
amount of the transportation allowance to be paid the complainants is Identical to that
used in determining Christmas bonus (respondent's exhibit 8) that the reason behind
said transportation allowance is to financially assist employees in meeting their tax
obligations as the same become due on or about the month of March of each year.
xxx xxx xxx
We are inclined to believe and so hold that by the manner by which said transportation
allowance is being paid (only once a year) as well as the method in determining the
amount to be paid (similar to Christmas bonus) and considering further the reason
behind said payment (easing the burden of taxpayer-employee), the said transportation
allowance given out by respondent while designating as such, partakes the nature of a
mid-year bonus. It bears to note in passing that in providing for transportation
allowance, respondent was not compelled by law nor by the CBA (Annex "A" of
respondent's Appeal) as nowhere in the CBA nor in the Labor Code can be found any
provision on transportation allowance. It was therefore a benefit that stemmed out
purely from the voluntary act and generosity of the respondent FEU. Moreover, said
transportation allowance is only being paid once a year. On the other hand, regular
allowances not considered as 13th month pay equivalent under P.D. 851, to our mind,
refer to those paid on regular intervals and catering for specific employees' needs and
requirements that recur on a regular basis. Verily, if the intendment behind the disputed
transportation allowance is to answer for the daily recurring transportation expenses of
the employees, the same should have been paid to employees on regular periodic
intervals. All indications, as we see it, point out to conclusion that the disputed
transportation allowance, while dominated as such apparently for lack of better term, is
in fact a form of bonus doled out by the respondent during the month of March every
year.
Hence, we hold that it is one of those that can very well be considered as equivalent to
the 13th month pay (Rollo, pp. 73, 74, 75, 76).
This Court sustains the aforequoted view of public respondent. The benefit herein designated as
"transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where
this does not amount to 1/12 of the employees basic salary, the employer shall pay the difference.
The evident intention of the law was to grant an additional income in the form of a 13th month pay to
employees not already receiving the same. This Court ruled in National Federation of Sugar Workers
(NFSW) v. Ovejera[G.R. No. 59743, May 31, 1982, 114 SCRA 354].
Otherwise put, the intention was to grant some relief not to all workers but only to
the unfortunate ones not actually paid a 13th month salary or what amounts to it, by
whatever name called: but it was not envisioned that a double burden would be
imposed on the employer already paying his employees a 13th month pay or its
equivalent whether out of pure generosity or on the basis of a binding agreement
and, in the latter case, regardless of the conditional character of the grant (such as
making the payment dependent on profit), so long as there is actual payment.
Otherwise, what was conceived to be a 13th month salary would in effect become a
14th or possibly 15th month pay.
xxx xxx xxx
Pragmatic considerations also weigh heavily in favor of crediting both voluntary and
contractual bonuses for the purpose of determining liability for the 13th month pay. To
require employers (already giving their employees a 13th month salary or its equivalent)
to give a second 13th month pay would be unfair and productive of undesirable results.
To the employer who had acceded and is already bound to give bonuses to his
employees, the additional burden of a 13th month pay would amount to a penalty for his
munificence or liberality. The probable reaction of one so circumstanced would be to
withdraw the bonuses or resist further voluntary grants for fear that if and when a law is
passed giving the same benefits, his prior concessions might not be given due credit;
and this negative attitude would have an adverse impact on the employees
(pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938
(1982)], citing the ruling in the above case also pointed out that:
To hold otherwise would be to impose an unreasonable and undue burden upon those employers
who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary
stance would indeed create an absurd situation whereby an employer who started giving his
employees the 13th month pay only because of the unmistakable force of the law would be in a far
better position than another who, by his own magnanimity or by mutual agreement, had long been
extending his employees the benefits contemplated under PD No. 851, by whatever nomenclature
these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its purpose,
never intended to bring about such oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of
Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which took
effect six months thereafter). Section 28 thereof provides that:
Section 28. A new provision is hereby substituted in lieu of the original provision of
Article 258 of the same Code to read as follows:
Art. 258. Right to holiday pay-
(a) Every worker shall be paid his regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The term "holiday" as used in this Chapter, shall include: New Year's day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth
of July, the thirtieth of November, the twenty fifth and thirtieth of December and the day
designated by law for holding a general election.
(c) When employer may require work on holidays. The employer may require an
employee to work on any holiday but such employee shall be paid a compensation
equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres.
Dec. No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the Rules
and Regulations Implementing the Labor Code, as amended, was released the pertinent portion of
which states that:
Section 2. Status of employees paid by the month. Employees who are uniformly
paid by the month, irrespective of the number of working days therein, with a salary of
not less than the statutory or established minimum wage shall be presumed to be paid
for all days in the month whether worked or not.
For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve.
(e) Section 3. Holiday Pay. Every employer shall pay his employees their regular
daily wage for any unworked regular holiday.
As used in the Rule, the term 'holiday' shall exclusively refer to: New Year's Day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June,
the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of December
and the day designated by law for a general election or national referendum or
plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976).
After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to clarify
further the right to holiday pay, thus:
The Rules Implementing PD 850 have clarified the policy in the implementation of the
ten (10) paid legal holidays. Before PD 850. the number of working days a year in a firm
was considered important in determining entitlement to the benefit. Thus, where an
employee was working for at least 313 days, he was definitely already paid. If he was
working for less than 313, there was no certainty whether the ten (10) paid legal
holidays were already paid to him or not.
The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
employees. In the case of monthly, only those whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are entitled to the benefit.
Under the rules implementing PD 850, this policy has been fully clarified to eliminate
controversies on the entitlement of monthly paid employees. The new determining rule
is this: If the monthly paid employee is receiving not less than P 240, the maximum
monthly minimum wage, and his monthly pay is uniform from January to December, he
is presumed to be already paid the ten (10) paid legal holidays. However, if deductions
are made from his monthly salary on account of holidays in months where they occur,
then he is entitled to the ten (10) legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees holiday pay for the following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4
Jan. 14, 1976 or the previous Nov. 30, Dec. 25
and 30 and Jan. 1
After January 14, 1976, however, the University ceased paying the holiday pay allegedly by reason of
Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of its employees
was, as of 1976, more than P 240.00 without deductions from their monthly salary on account of
holidays in months where they occurred and that therefore, by virtue of Policy Instruction No. 9, they
were no longer entitled to the ten paid legal holidays.
Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly been
the reason that prompted the University to withdraw such benefits from its faculty and employees
because said implementing rule was issued only on April 23, 1976 or four months later.
The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment of the
10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an employer
practice that can no longer be withdrawn." [Decision; Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC held
that:
Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the
legal holiday pay preceded the effectivity of the Rules and Regulations Implementing
P.D. 850 and which rules took effect on February 16, 1976. Hence, his conclusion that
the payment of the legal holiday pay stemmed out from company practice and not from
law. Tracing back, however, the payments made by respondent of said holiday pay will
show that, if ever, the same was made pursuant to P.D. 570-A which took effect on
November 1, 1974. Noteworthy is the undisputed fact that respondent first paid its
employees legal holiday pay in June 1975 corresponding to nine (9) legal holidays. It
bears to note that from the time of the effectivity of P.D. 570-A which was in November
of 1974 up to June of 1975, the time respondent first paid legal holiday pay for nine (9)
legal holidays, there, were indeed more or less nine legal holidays that transpired to wit:
November 30, 1974, December 25, 1974, December 30, 1974, January 1, 1975,
February 27, 1975 (Referendum Day), Maundy Thursday of 1975, Good Friday of 1975,
April 9, 1975 and finally, May 1st of 1975. We are therefore inclined to lend credence to
respondent's claim that the payment of legal holiday pay was in fact made pursuant to
law, P.D. 570-A in particular, it is not one that arose out of company practice or policy.
Finding that said payment was made based on an honest although erroneous
interpretation of law, which interpretation was later on corrected by the issuance (sic) of
Policy Instruction No. 9 and which issuance prompted respondent to withdraw the
holiday pay benefits extended to the employees who were paid on a regular monthly
basis, and finding further that under Policy Instructions No. 9, said subject employees
are deemed paid their holiday pay as they were paid on a monthly basis at a wage rate
presumably above the statutory minimum, we believe and so hold that the withdrawal of
said holiday pay benefit was valid and justifiable under the circumstances (Rollo, pp. 33-
4).
This Court cannot sustain the foregoing decision of public respondent. Said decision relied on Section
2, Rule IV, Book Ill of the implementing rules and on Policy Instruction No. 9 which were declared by
this Court to be null and void in Insular Bank of Asia and America Employee's Union (IBAAEU) v.
Inciong (G.R. No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of the issue at hand, this
Court reiterates the ruling in that case, to wit:
WE agree with the petitioner's contention that Section 2, Rule IV, Book Ill of the
implementing rules and Policy Instruction No. 9 issued by the then Secretary of Labor
are nun and void since in the guise of clarifying the Labor Code's provision on holiday
pay, they in fact amended them by enlarging the scope of their exclusion.
xxx xxx xxx
It is elementary in the rules of statutory construction that when the language of the law
is clear and unequivocal the law must be taken to mean exactly what it says. In the case
at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay
are clear and explicit it provides for both the coverage of and exclusion from the
benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to
categorically state that the benefit is principally intended for daily paid employees, when
the law clearly states that every worker shall be paid their regular holiday pay. This is a
flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states
that "All doubts in the implementation and interpretation of the provisions of this
Code, including its implementing rules and regulations, shall be resolved in favor of
labor. " Moreover, it shall always be presumed that the legislature intended to enact a
valid and permanent statute which would have the most beneficial effect that its
language permits (Orlosky vs. Haskell, 155 A. 112). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be subjected to attorney's
fees, negotiation fees, agency fees and the like.
The Court notes the fact that there are two classes of employees among the petitioners: (1) those
who are members of the bargaining unit and (2) those who are not members of the bargaining unit.
The first class may be further subdivided into two: those who are members of the collective
bargaining agent and those who are not.
It is clear that the questioned Order of the respondent Minister applies only to members of the
bargaining unit. The CBA prepared pursuant to said Order, however, covered employees who are not
members of the bargaining unit, although said CBA had not yet been signed at the time this petition
was filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of employees
outside the bargaining unit should be nullified as this does not conform to said order which directed
private respondents to execute a CBA covering only members of the bargaining unit.
Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic
package involved therein, employees who are non- members of the bargaining unit should not be
assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the
resulting collective bargaining agreement does not apply to them. It should be clear, however, that
while non-members of the bargaining unit are not entitled to the economic package provided by said
order, they are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of
increases in tuition or other school fees or charges.
As far as assessment of fees against employees of the collective bargaining unit who are not
members of the collective bargaining agent is concerned, Article 249 of the Labor Code, as amended
by B.P. Blg. 70, provides the rule:
Art. 249. Unfair labor practices of employers.-
xxx xxx xxx
(e) ... Employees of an appropriate collective bargaining unit who are not members of
the recognized collective bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members of the recognized collective
bargaining agent, if such non- union members accept the benefits under the collective
agreement . . .
Employees of the collective bargaining unit who are not members of the collective bargaining agent
have to pay the foregoing fees if they accept the benefits under the collective bargaining agreement
and if such fees are not unreasonable. Petitioners who are members of the bargaining unit failed to
show that the equivalent of ten (10%) percent of their backwages sought to be deducted is
unreasonable.
WHEREFORE, the Court rules:
CEBU INSTITUTE OF TECHNOLOGY CASE
In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September 29,
1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its teaching
staff the following:
(1) Cost of living allowance under Pres. Dec.Nos.525 and 1123 from February 1978 up
to 1981;
(2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED and
SET ASIDE. No costs.
DIVINE WORD COLLEGE CASE
The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent
Deputy Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984
are SUSTAINED insofar as said Orders denied the payment of the emergency cost of living
allowances of private respondents faculty teachers of the Divine Word College of Legazpi out of the
sixty (60%) incremental proceeds of tuition and other school fee increases collected during the
effectivity of Pres. Dec. No. 451. The Rules and Regulations implementing Pres. Dec. No. 451 are
hereby declared invalid for being ultra vires No costs.
FAR EASTERN UNIVERSITY CASE
The Decision of public respondent National Labor Relations Commission dated September 18, 1984
isREVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern University Employee
Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of holiday pay. Private
respondent Far Eastern University is therefore ordered to pay its employees the following:
(1) Their sixty (60) percent share in the increases in tuition and other school fees or
charges which shall be allocated exclusively for increase in salaries or wages if the
tuition or other school fee increase was collected during the effectivity of Pres. Dec. No.
451;
(2) Their claim for holiday pay which was withdrawn since January 14, 1976 up to the
present.
The Decision of respondent National Labor Relations Commission, however, is SUSTAINED insofar
as it denied petitioner's claim for thirteenth (1 3th month pay. No costs.
FABROS CASE
In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS Order No. 25. s.
1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of sixty
(60%) percent of the increases in tuition and other school fees or charges, having been issued
pursuant to B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID. The
Temporary Restraining Order issued by this Court dated May 29, 1985 is LIFTED and SET ASIDE.
No costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated April 14, 1986 are
AFFIRMED. The collective bargaining agreement prepared pursuant thereto should, however, be
MODIFIED to cover only members of the bargaining unit. Only petitioners who are members of the
collective bargaining unit, if they accept the benefits under the resulting collective bargaining
agreement, shall be charged ten (10%) percent of the payable backwages as negotiation fees. The
Temporary Restraining Order dated November 25, 1986 is LIFTEDand SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the proceeds from increases in tuition fees
and other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as implemented
by the Rules and Regulations issued by the then Ministry, now Department of Education, Culture and
Sports. SO ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and
Sarmiento, JJ., concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION


C. PLANAS COMMERCIAL G.R. No. 144619
and/or MARCIAL COHU,
Petitioners, Present:



- versus - *PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
NATIONAL LABOR RELATIONS TINGA, and
COMMISSION (Second Division), **CHICO-NAZARIO, JJ.
ALFREDO OFIALDA,
DIOLETO MORENTE Promulgated:
and RUDY ALLAUIGAN,
Respondents. November 11, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


AUSTRIA-MARTINEZ, J.:


Before us is a petition for review on certiorari filed by C. Planas Commercial and/or
Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA) dated January
19, 2000
[1]
which affirmed in toto the decision of the National Labor Relations Commission
(NLRC) and the Resolution dated August 15, 2000
[2]
denying petitioners motion for
reconsideration.
On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private
respondents) together with 5 others
[3]
filed a complaint for underpayment of wages, nonpayment
of overtime pay, holiday pay, service incentive leave pay and premium pay for holiday and rest
day and night shift differential against petitioners with the Arbitration Branch of the NLRC.
The case was docketed as NLRC Case No. 00-09-05804-93.
[4]


In their position paper, private respondents alleged that petitioner Cohu, owner of C.
Planas Commercial, is engaged in wholesale of plastic products and fruits of different kinds
with more than 24 employees; that private respondents were hired by petitioners on January 14,
1990, May 14, 1990 and July 1, 1991, respectively, as helpers/laborers; that they were paid
below the minimum wage law for the past 3 years; that they were required to work for more
than 8 hours a day without overtime pay; that they never enjoyed holiday pay and did not have a
rest day as they worked for 7 days a week; and they were not paid service incentive leave pay
although they had been working for more than one year. Private respondent Ofialda asked for
night shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more than
one year.

Petitioners filed their comment admitting that private respondents were their helpers who
used to accompany the delivery trucks and helped in the loading and unloading of merchandise
being distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that
private respondents stopped working with petitioners sometime in September 1993 as they were
already working in other establishments/stalls in Divisoria; that they only worked for 6 days a
week; that they were not entitled to holiday and service incentive leave pays for they were
employed in a retail and service establishment regularly employing less than ten workers.
On December 6, 1994, a decision
[5]
was rendered by the Labor Arbiter dismissing private
respondents money claims for lack of factual and legal basis. He made the following findings:

The basic issue raised before us is whether or not complainants are entitled to
the money claims.

The rule in this jurisdiction is that employers who are regularly employing not
more than ten workers in retail establishments are exempt from the coverage of the
minimum wage law.

In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules
of Court, it is incumbent upon the party to support affirmative allegation that an
employer regularly employs more than ten (10) workers.

In the case at bar, complainants failed to substantiate their claim that the
respondent establishment regularly employs twenty (sic) (24) workers.

Accordingly, we have no factual basis to grant salary differentials to
complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of
the Implementing Rules of the Labor Code, complainants are not entitled to legal
holiday pay and service incentive leave pay.

We also do not have sufficient factual basis to award overtime pay and
premium pay for holiday and rest day because complainants failed to substantiate that
they rendered overtime and during rest days.
[6]



Private respondents filed their appeal with the NLRC which was opposed by petitioners.
However, pending the appeal, private respondents Morente
[7]
and Allauigan
[8]
filed their
respective motions to dismiss with release and quitclaim before the NLRC.

On September 30, 1997, the NLRC rendered its decision,
[9]
the dispostive portion of
which reads:

WHEREFORE, in view of all the foregoing considerations, the decision
appealed from should be, as it is hereby, MODIFIED by directing the respondent to
pay Alfredo Ofialda, Diolito Morente and Rudy Allauigan the total amount of
Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00) representing
their combined salary differentials, holiday pay, and service incentive leave pay.


The NLRC made the following ratiocinations:

On claims for underpayment/non-payment of legally mandated wages and
fringe benefits where exemption from coverage of the minimum wage law is put up as
a defense, he who invokes such an exemption (usually the employer) has the burden
of showing the basis for the exemption like for instance the fact of employing
regularly less than ten workers.

In the instant case, complainants alleged that despite employing more than
twenty-four (24) workers in his establishment, hence covered by the minimum wage
law, nevertheless the individual respondent did not pay his workers the legal rates and
benefits due them since their employment. By way of answer, respondents countered
that they employ less than ten (10) persons, hence the money claims of complainants
lack factual and legal basis.

Stated differently, against complainants charge of underpayment in wages and
non-payment of fringe benefits legally granted to them, the respondents raised the
defense of exemption from coverage of the minimum wage law and in support thereof
alleged that they regularly employed less than ten (10) workers to serve as basis for
their exemption under the law, they (respondents) must prove that they employed less
than ten workers, instead of more than twenty-four (24) workers as alleged by the
complainants.

However, apart from their allegation, respondents presented no evidence to
show the number of workers they employed regularly. This failure is fatal to
respondents defense. This in turn brings us to the question of whether the
complainants were underpaid and unpaid of legal holiday pay and service incentive
leave pay due them.

Stated earlier are the different amounts that each complainant was receiving by
way of salary on certain periods of their employment with respondents, which
amounts according to complainants are way below the minimum wage then
prevailing. Considering that respondents failed to present the payrolls or vouchers
which could prove otherwise, the money claims deserve favorable consideration.

Taking note of the 3 year prescription, the period covered is from September
14, 1990 to September 14, 1993 when the instant case was filed, and based on a 6-day
work per week, the underpayment (salary differential), legal holiday pay, and service
incentive leave pay due to complainants, as computed, are as follows:



Salary Diff. Holiday Pay SILP
1. A.
OFIALDA
P14,934.00 P2,362.00 P1,180.00
2. D.
MORENTE
23,964.00 3,258.00 1,730.00
3. R. ALLAUIGAN 22,609.00 3,258.00 1,730.00

With respect to the other claims, i.e., overtime pay and premium pay for
holiday and rest day, We find no reason to disturb the Labor Arbiters ruling thereon,
that there is no sufficient factual basis to award the claims because complainants
failed to substantiate that they rendered overtime and during rest days. These claims,
unlike claims for underpayment and non-payment of fringe benefits mandated by law,
need to be proven by the claimants.
[10]



Petitioners filed a petition for certiorari
[11]
with prayer for temporary restraining order
and preliminary injunction before this Court on November 26, 1997. Respondents were
required to file their Comment but only public respondent NLRC, through the Solicitor General,
complied therewith. In a Resolution dated June 28, 1999,
[12]
the petition was referred to the CA
pursuant to our ruling in St. Martin Funeral Homes vs. NLRC.

On January 19, 2000,
[13]
the CA denied the petition for lack of merit and affirmed in
toto the NLRC decision. It said:

Having claimed exemption from the coverage of the minimum wage laws or
order, it was incumbent upon petitioner to prove such claim. Apart from simply
denying private respondents allegation that it employs more than 24 workers in its
business, petitioner failed to adduce evidence to prove that it is, indeed, a retail
establishment which employs less than ten (10) employees. Its failure to present
records of its workers and their respective wages gives rise to the presumption that
these are adverse to its claims. Indeed, it is hard to believe that petitioner does not
keep such records. More so, considering private respondents claim that petitioner
employs more than twenty four (24) employees and engaged in both wholesale and
retail business of fruits by volume on CONTAINER BASIS, not by price of fruit, but
by container size retail, involving millions of pesos capital, fruits coming from China,
Australia and the United States (p. 170, Rollo).

Needless to say, the inclusion of respondents Morente and Allauigan in the
NLRC award is in order. In its decision, public respondent awarded P75,125.00,
representing the combined salary differentials, holiday pay and service incentive leave
pay of all three (3) private respondents. Of this, P28,952.00 is earmarked for
respondent Morente, and P27,597.00 for respondent Allauigan, both of whom
executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from
petitioner.

On this score, the Court quotes with approval the arguments advanced by the
Solicitor General thus:

While a compromise agreement or amicable settlement is not
against public policy per se it must be shown however that it was
voluntarily entered into and represents a reasonable settlement, and the
consideration for the quitclaim is credible and reasonable (Santiago v.
NLRC, 198 SCRA 111 [1991]). For the law usually looks with disfavor
upon quitclaims and releases executed by employees usually resulting
from a compromise with their employers. (Velasco v. DOLE, 200
SCRA 201 [1991]). This is so because the employers and the employees
obviously do not stand on equal footing. Driven against the wall by the
employer, the employee is in no position to resist the money offered.
(Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).

Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:

In the absence of any showing that the compromise settlement and
the quitclaims and releases entered into and made by the employees were
free, fair and reasonable- especially as to the amount or consideration
given by the employer in exchange therefore, the fact that they executed
the same and received their monetary benefits thereunder does not
militate against them. The Law does not consider as valid any
agreement to receive less compensation than what a worker is entitled to
receive.

In the case at bar, it will be noticed that the vouchers dated
September 13, 1995 and September 20, 1996 (pp. 194 and 197, NLRC
Record), submitted by petitioners (pp. 191-192, Record), show that
private respondent Allauigan was only paid P6,000.00 and
Morente, P3,000.00 --- when they are legally entitled to
receiveP28,952.00 and P27,597.00, respectively. Under the
circumstances, subject compromise settlements cannot be considered
valid and binding upon the NLRC as they do not represent fair and
reasonable settlements, nor do they demonstrate voluntariness on the part
of private respondents Morente and Allauigan. These employees should
still be paid the full amounts of their salary differentials, holiday pay and
service incentive leave pay less the amounts they had already received
under the compromise settlements with petitioners (pp. 174-175,
Rollo).
Parenthetically, the Court notes that petitioner availed itself of this remedy
without first seeking a reconsideration of the assailed decision. As a general rule,
certiorari will not lie unless an inferior court, has through a motion for
reconsideration, a chance to correct the errors imputed to it. While the rule admits of
exceptions, petitioner has not shown any reason for this Court not to apply said rule,
which would have justified outright dismissal of the petition were it not for the
Courts desire to resolve the case not on a technicality but on the merits.
[14]



Petitioners motion for reconsideration was denied in a Resolution dated August 15,
2000.
[15]


Hence, the instant petition for review on certiorari filed by petitioners.

Petitioners insist that C. Planas Commercial is a retail establishment principally engaged
in the sale of plastic products and fruits to the customers for personal use, thus exempted from
the application of the minimum wage law; that it merely leases and occupies a stall in the
Divisoria Market and the level of its business activity requires and sustains only less than ten
employees at a time. Petitioners contend that private respondents were paid over and above the
minimum wage required for a retail establishment, thus the Labor Arbiter is correct in ruling
that private respondents claim for underpayment has no factual and legal basis. Petitioners
claim that since private respondents alleged that petitioners employed 24 workers, it was
incumbent upon them to prove such allegation which private respondents failed to do.

Petitioners also contend that the CA erred in applying strictly the rules of evidence
against them by holding that it was incumbent upon them to prove that their company is
exempted from the minimum wage law. They contend that they could not present records of
their workers and their respective wages because by the very nature of their business, the
system of management is very loose and informal, thus salaries and wages are paid by merely
handing the money to the worker without the latter being required to sign anything as proof of
receipt. Thus, it would be unreasonable to insist upon petitioner to present documents that they
do not possess or keep in the first place.

We are not persuaded.

R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory
minimum wage rate of all workers and employees in the private sector. Section 4 of the Act
provides for exemption from the coverage, thus:

Sec. 4.
. . .
(c) Exempted from the provisions of this Act are household or domestic helpers
and persons employed in the personal service of another, including family drivers.

Retail/service establishments regularly employing not more than ten (10)
workers may be exempted from the applicability of this Act upon application with and
as determined by the appropriate Regional Board in accordance with the applicable
rules and regulations issued by the Commission. Whenever an application for
exemption has been duly filed with the appropriate Regional Board, action on any
complaint for alleged non-compliance with this Act shall be deferred pending
resolution of the application for exemption by the appropriate Regional Board.

In the event that applications for exemptions are not granted, employees shall
receive the appropriate compensation due them as provided for by this Act plus
interest of one percent (1%) per month retroactive to the effectivity of this Act.


Clearly, for a retail/service establishment to be exempted from the coverage of the
minimum wage law, it must be shown that the establishment is regularly employing not more
than ten (10) workers and had applied for exemptions with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations issued by the
Commission. Petitioners main defense in controverting private respondents claim for
underpayment of wages is that they are exempted from the application of the minimum wage
law, thus the burden of proving
[16]
such exemption rests on petitioners. Petitioners had not
shown any evidence to show that they had applied for such exemption and if they had applied,
the same was granted.

In Murillo vs. Sun Valley Realty, Inc.
[17]
where the respondents claim that petitioners
therein are not entitled to service incentive leave pay inasmuch as establishment employing less
than ten (10) employees are exempted by the Labor Code and the Implementing Rules from
paying service incentive leave pay, we held:

..the clear policy of the Labor Code is to include all establishments, except a
few classes, under the coverage of the provision granting service incentive leave to
workers. Private respondents' claim is that they fell within the exception. Hence, it
was incumbent upon them to prove that they belonged to a class excepted by law from
the general rule. Specifically, it was the duty of respondents, not of petitioners, to
prove that there were less than ten (10) employees in the company. Having failed to
discharge its task, private respondents must be deemed to be covered by the general
rule, notwithstanding the failure of petitioners to allege the exact number of
employees of the corporation. In other words, petitioners must be deemed entitled to
service incentive leave.
[18]



Moreover, in C. Planas Commercial vs. NLRC,
[19]
where herein petitioners are also
involved in a case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for retail establishments
which employ not more than ten (10) workers to justify their non-liability for the
salary differentials in question. They insist that PLANAS is a retail establishment
leasing a very small and cramped stall in the Divisoria market which cannot
accommodate more than ten (10) workers in the conduct of its business.
We are unconvinced. The records disclose de los Reyes' clear entitlement to
salary differentials. Well-settled is the rule that factual findings of labor officials who
are deemed to have acquired expertise in matters within their jurisdiction are generally
accorded not only respect but even finality and bind this Court when supported by
substantial evidence or that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. Thus, as long as their decisions are
devoid of any unfairness or arbitratriness in the process of their deduction from the
evidence proferred by the parties before them, all that is left is our stamp of finality by
affirming the factual findings made by them. In this case, the award of salary
differentials by the NLRC in favor of de los Reyes was made pursuant to RA 6727
otherwise known as the Wage Rationalization Act, and the Rules Implementing Wage
Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.

Petitioners claim exemption under the aforestated law. However, the best proof
that they could have adduced was their approved application for exemption in
accordance with applicable guidelines issued by the Commission. Section 4, subpar.
(c) of RA 6727 categorically provides:

Retail/service establishments regularly employing not more than ten (10) workers
may be exempted from the applicability of this Act upon application with and as
determined by the appropriate Regional Board in accordance with the applicable rules
and regulations issued by the Commission. Whenever an application for exemption has
been duly filed with the appropriate Regional Board, action on any complaint for alleged
non-compliance with this Act shall be deferred pending resolution of the application for
exemption by the appropriate Regional Board. In the event that applications for
exemptions are not granted, employees shall receive the appropriate compensation due
them as provided for by this Act plus interest of one percent (1%) per month retroactive
to the effectivity of this Act (emphasis supplied).

Extant in the records is the fact that petitioners had persistently raised the
matter of their exemption from any liability for underpayment without substantiating
it by showing compliance with the aforecited provision of law. It bears stressing that
the NLRC affirmed the Labor Arbiters award of salary differentials due to
underpayment on the ground that de los Reyes' claim therefor was not even denied or
rebutted by petitioners.

More importantly, NLRC correctly upheld the Labor Arbiter's finding
that PLANAS employed around thirty (30) workers. We have every reason to believe
that petitioners need at least thirty (30) persons to conduct their business considering
that Manager Cohu did not submit any employment record to prove otherwise. As
employer, Manager Cohu ought to be the keeper of the employment records of all his
workers. Thus, it was well within his means to refute any monetary claim alleged to
be unpaid. His inability to produce the payrolls from their files without any
satisfactory explanation can be interpreted no less as suppression of vital evidence
adverse to PLANAS.
Petitioners aver that the CA erred in ruling that private respondents Morente and
Allauigan are still entitled to monetary awards despite the latters execution of release and
quitclaims because the settlement was not voluntarily entered into by private respondents.
Petitioners insist that both private respondents Morente and Allauigan voluntarily entered into
an amicable settlement with them on September 17 and 18, 1995, respectively; that they were
the ones who initiated the talks for settlement and who pegged the amount; that they both
voluntarily appeared before the Labor Arbiter to move for the dismissal of their case insofar as
their claims are concerned as well as submitted to the Labor Arbiter their respective quitclaims
and releases which were duly subscribed before the Labor Arbiter and duly notarized.

We find merit in petitioners argument.

It has been held that not all quitclaims are per se invalid or against public policy, except
(1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or (2) where the terms of settlement are unconscionable on their face. In these cases,
the law will step in to annul the questionable transactions.
[20]
Such quitclaim and release
agreements are regarded as ineffective to bar the workers from claiming the full measure of
their legal rights.
[21]


We find these two instances not present in private respondents Allauigan and Morentes
case. They failed to refute petitioners allegation that the settlement was voluntarily made as
they had not filed any pleadings before the CA. Notably, we have required private respondents
to file their comment on the instant petition, however, they failed to do so. They were then
required to show cause why they should not be disciplinarily dealt with or held in contempt.
[22]

However, they still failed to file their comment, thus, they were imposed a fine
of P1,000.00
[23]
which was subsequently increased to P2,000.00 as there was still no
compliance. In a Resolution dated July 22, 2002, the Court ordered the National Bureau of
Investigation to arrest and detain private respondents and the private respondents to file their
comment.
[24]
As private respondents could not be located at their given address and they are not
known in their locality, the order of arrest and commitment was returned unserved,
[25]
thus the
Court required the Office of the Solicitor General to file the comment in behalf of all the
respondents.
[26]
The Court finds such inaction on the part of private respondents Allauigan and
Morente an indication that they already relented in their claims and gives credence to
petitioners claim that they had voluntarily executed the release and quitclaim and the motion to
dismiss.

The CA found that the subject compromise agreements are not valid considering that
they did not represent the fair and reasonable settlements, i.e., that private respondent Allauigan
was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to
receive P28,952.00 and P27,597.00, respectively.

We do not agree. It bears stressing that at the time of the execution of the release and
quitclaim, the case filed by private respondents against petitioners was already dismissed by the
Labor Arbiter and it was pending appeal before the NLRC. Private respondents could have
executed the release and quitclaim because of a possibility that their appeal with the NLRC may
not be successful. Since there was yet no decision rendered by the NLRC when the quitclaims
were executed, it could not be said that the amount of the settlement is unconscionable. In any
event, no deception has been established that would justify the annulment of private
respondents quitclaims.
[27]
In Mercer vs. NLRC,
[28]
we held that:

In Samaniego v. NLRC, we ruled that: A quitclaim executed in favor of a
company by an employee amounts to a valid and binding compromise agreement
between them."

Recently, we held that in the absence of any showing that petitioner was
"coerced or tricked" into signing the above-quoted Quitclaim and Release or that the
consideration thereof was very low, she is bound by the conditions thereof.


As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment
of P14,934.00 as salary differential, P2,362.00 as legal holiday pay andP1,180.00 as service
incentive leave pay, all in the total amount of P18,476.00.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of
Appeals dated January 19, 2000 and its Resolution dated August 15, 2000
are AFFIRMED with MODIFICATION that petitioners are ordered to pay private respondent
Alfredo Ofialda the total amount of P18,476.00 and the monetary awards in favor of private
respondents Rudy Allauigan and Dioleto Morente are hereby DELETED.

SO ORDERED.


Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12444 February 28, 1963
STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,
vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
Pedro B. Uy Calderon for petitioners.
Gaudioso C. Villagonzalo for respondent.
PAREDES, J .:
Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine
coastwise transportation, employing therein several steamships of Philippine registry. They had
a collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September
12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No.
740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay;
that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other
shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and
officers were not required to pay their meals and that because Captain Carlos Asensi had refused to
yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00,
monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of the men and
officers in their employ were members of the respondent union; that the work on board a vessel is
one of comparative ease; that petitioners have suffered financial losses in the operation of their
vessels and that there is no law which provides for the payment of sick leave or vacation leave to
employees or workers of private firms; that as regards the claim for overtime pay, the petitioners have
always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the
fact that it does not apply to those who provide means of transportation; that the shipowners and
operators in Cebu were paying the salaries of their officers and men, depending upon the margin of
profits they could realize and other factors or circumstances of the business; that in enacting Rep. Act
No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished
the employees should be deducted from the daily wages; that Captain Asensi was not dismissed for
alleged union activities, but with the expiration of the terms of the contract between said officer and
the petitioners, his services were terminated.
A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for
reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to
resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual
findings of the Court of Industrial Relations should not be disturbed, if supported by substantial
evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.
1. First assignment of error. The respondent court erred in holding that it had jurisdiction
over case No. 740-V, notwithstanding the fact that those who had dispute with the petitioners,
were less than thirty (30) in number.
The CIR made a finding that at the time of the filing of the petition in case No. 740-V,
respondent Union had more than thirty members actually working with the companies,
and the court declared itself with jurisdiction to take cognizance of the case. Against this
order, the herein petitioners did not file a motion for reconsideration or a petition for
certiorari. The finding of fact made by the CIR became final and conclusive, which We
are not now authorized to alter or modify. It is axiomatic that once the CIR had acquired
jurisdiction over a case, it continues to have that jurisdiction, until the case is terminated
(Manila Hotel Emp. Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p.
3027). It was abundantly shown that there were 56 members who signed Exhibits A, A-I
to A-8, and that 103 members of the Union are listed in Exhibits B, B-1 to B-35, F, F-1
and K-2 to K-3. So that at the time of the filing of the petition, the respondent union had
a total membership of 159, working with the herein petitioners, who were presumed
interested in or would be benefited by the outcome of the case (NAMARCO v. CIR, L-
17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954), likewise belies
the contention of herein petitioner in this regard. The fact that only 7 claimed for
overtime pay and only 7 witnesses testified, does not warrant the conclusion that the
employees who had some dispute with the present petitioners were less than 30. The
ruling of the CIR, with respect to the question of jurisdiction is, therefore, correct.
2. Second assignment of error. The CIR erred in holding, that inasmuch as in the shipping
articles, the herein petitioners have bound themselves to supply the crew with provisions and
with such "daily subsistence as shall be mutually agreed upon" between the master and the
crew, no deductions for meals could be made by the aforesaid petitioners from their wages or
salaries.
3. Third assignment of error. The CIR erred in holding that inasmuch as with regard to
meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule,
which section 19 thereof is the exception, the cost of said meals may not be legally deducted
from the wages or salaries of the aforesaid crew members by the herein petitioners.
4. Fourth assignment of error. The CIR erred in declaring that the deduction for costs of
meals from the wages or salaries after August 4, 1951, is illegal and same should be
reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning of the operation of the petitioner's
business, all the crew of their vessels have been signing "shipping articles" in which are stated
opposite their names, the salaries or wages they would receive. All seamen, whether members of the
crew or deck officers or engineers, have been furnished free meals by the ship owners or operators.
All the shipping articles signed by the master and the crew members, contained, among others, a
stipulation, that "in consideration of which services to be duly performed, the said master hereby
agrees to pay to the said crew, as wages, the sums against their names respectively expressed in the
contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b], shipping articles),
and during the duration of the contract "the master of the vessel will provide each member of the
crewsuch daily subsistence as shall be mutually agreed daily upon between said master and crew; or,
in lieu of such subsistence the crew may reserve the right to demand at the time of execution of these
articles that adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping
articles). It is, therefore, apparent that, aside from the payment of the respective salaries or wages,
set opposite the names of the crew members, the petitioners bound themselves to supply the crew
with ship's provisions, daily subsistence or daily rations, which include food.
This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After
this date, however, the companies began deducting the cost of meals from the wages or salaries of
crew members; but no such deductions were made from the salaries of the deck officers and
engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges
on the legality of such deductions. While the petitioners herein contend that the deductions are legal
and should not be reimbursed to the respondent union, the latter, however, claims that same are
illegal and reimbursement should be made.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts. 1wph 1. t
We hold that such deductions are not authorized. In the coastwise business of transportation of
passengers and freight, the men who compose the complement of a vessel are provided with free
meals by the shipowners, operators or agents, because they hold on to their work and duties,
regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk
ahead in the midst of the high seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows
(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of
any interested party result in a different determination of the fair and reasonable value,
the furnishing of meals shall be valued at not more than thirty centavos per meal for
agricultural employees and not more than fortycentavos for any other employees covered by
this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other employees covered by
this Act.
Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in fixing the rate of forty
centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the
daily wage, otherwise, no rate for meals should have been provided.
However, section 19, same law, states
SEC. 19. Relations to other labor laws and practices. Nothing in this Act shall deprive an
employee of the right to seek fair wages, shorter working hours and better working conditions
nor justify an employer in violating any other labor law applicable to his employees, in reducing
the wage now paid to any of his employees in excess of the minimum wage established under
this Act, or in reducing supplements furnished on the date of enactment.
At first blush, it would appear that there exists a contradiction between the provisions of section 3(f)
and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that
Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are
no supplements given, within the meaning and contemplation of section 19, but merely facilities,
section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized.
And even if there is such a conflict, the respondent CIR should resolve the same in favor of the safety
and decent living laborers (Art. 1702, new Civil Code)..
It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew
members in question, were mere "facilities" which should be deducted from wages, and not
"supplements" which, according to said section 19, should not be deducted from such wages,
because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair
wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big
Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined
as follows
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given
to or received by the laborers over and above their ordinary earnings or wages. "Facilities", on
the other hand, are items of expense necessary for the laborer's and his family's existence and
subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and
when furnished by the employer are deductible therefrom, since if they are not so furnished,
the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is
part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind of the
benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering, therefore, as
definitely found by the respondent court that the meals were freely given to crew members prior to
August 4, 1951, while they were on the high seas "not as part of their wages but as a necessary
matter in the maintenance of the health and efficiency of the crew personnel during the voyage", the
deductions therein made for the meals given after August 4, 1951, should be returned to them, and
the operator of the coastwise vessels affected should continue giving the same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27,
1955, the company used to pay to its drivers and conductors, who were assigned outside of the City
limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the company.
The order CIR to the company to continue granting this privilege, was upheld by this Court.
The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep.
Act No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily
furnished by the employer to the employees. If We are to follow the theory of the herein petitioners,
then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with
no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost
of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum
wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will
adversely affect said crew member. Such interpretation does not conform with the avowed intention
of Congress in enacting the said law.
One should not overlook a fact fully established, that only unlicensed crew members were made to
pay for their meals or food, while the deck officers and marine engineers receiving higher pay and
provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust
discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-
7177, May 31, 1955).
Fifth, Sixth and Seventh assignments of error. The CIR erred in holding that Severino Pepito, a
boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444;
in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito;
and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have
worked overtime and had not been paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the early hours of the day when the boat
docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the
vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This
statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V
Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa),
are incompetent and unreliable. And considering the established fact that the work of Severino Pepito
was continuous, and during the time he was not working, he could not leave and could not completely
rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444,
which states "When the work is not continuous, the time during which the laborer is not working and
can leave his working place and can rest completely shall not be counted", find no application in his
case.
8. Eighth assignment of error. The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi
to his former position, considering the fact that said officer had been employed since January 9, 1953,
as captain of a vessel belonging to another shipping firm in the City of Cebu.
The CIR held
Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged
lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby
dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and
that his failure to report for work is not sufficient cause for his absolute dismissal, respondents
are hereby ordered to reinstate him to his former job without back salary but under the same
terms and conditions of employment existing prior to his lay-off, without loss of seniority and
other benefits already acquired by him prior to March 20, 1952. This Court is empowered to
reduce the punishment meted out to an erring employee (Standard Vacuum Oil Co., Inc. v.
Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in consonance
with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.
Ninth and Tenth assignments of error. The CIR erred in denying a duly verified motion for new trial,
and in overruling petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that the movants have a good and valid
defense and the same is based on three orders of the WAS (Wage Administration Service), dated
November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The
motion for new trial is without merit. Having the said wage Orders in their possession, while the case
was pending decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation
of meals and facilities, are irrelevant to the present issue, it having been found and held that the
meals or food in question are not facilities but supplements. The original petition in the CIR having
been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to
express its views on the matter. At any rate, the admission of the three wage orders have not altered
the decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.

Wages
Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION


C. PLANAS COMMERCIAL G.R. No. 144619
and/or MARCIAL COHU,
Petitioners, Present:



- versus - *PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
NATIONAL LABOR RELATIONS TINGA, and
COMMISSION (Second Division), **CHICO-NAZARIO, JJ.
ALFREDO OFIALDA,
DIOLETO MORENTE Promulgated:
and RUDY ALLAUIGAN,
Respondents. November 11, 2005
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


AUSTRIA-MARTINEZ, J.:


Before us is a petition for review on certiorari filed by C. Planas Commercial and/or
Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA) dated January
19, 2000
[1]
which affirmed in toto the decision of the National Labor Relations Commission
(NLRC) and the Resolution dated August 15, 2000
[2]
denying petitioners motion for
reconsideration.
On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private
respondents) together with 5 others
[3]
filed a complaint for underpayment of wages, nonpayment
of overtime pay, holiday pay, service incentive leave pay and premium pay for holiday and rest
day and night shift differential against petitioners with the Arbitration Branch of the NLRC.
The case was docketed as NLRC Case No. 00-09-05804-93.
[4]


In their position paper, private respondents alleged that petitioner Cohu, owner of C.
Planas Commercial, is engaged in wholesale of plastic products and fruits of different kinds
with more than 24 employees; that private respondents were hired by petitioners on January 14,
1990, May 14, 1990 and July 1, 1991, respectively, as helpers/laborers; that they were paid
below the minimum wage law for the past 3 years; that they were required to work for more
than 8 hours a day without overtime pay; that they never enjoyed holiday pay and did not have a
rest day as they worked for 7 days a week; and they were not paid service incentive leave pay
although they had been working for more than one year. Private respondent Ofialda asked for
night shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more than
one year.

Petitioners filed their comment admitting that private respondents were their helpers who
used to accompany the delivery trucks and helped in the loading and unloading of merchandise
being distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that
private respondents stopped working with petitioners sometime in September 1993 as they were
already working in other establishments/stalls in Divisoria; that they only worked for 6 days a
week; that they were not entitled to holiday and service incentive leave pays for they were
employed in a retail and service establishment regularly employing less than ten workers.
On December 6, 1994, a decision
[5]
was rendered by the Labor Arbiter dismissing private
respondents money claims for lack of factual and legal basis. He made the following findings:

The basic issue raised before us is whether or not complainants are entitled to
the money claims.

The rule in this jurisdiction is that employers who are regularly employing not
more than ten workers in retail establishments are exempt from the coverage of the
minimum wage law.

In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules
of Court, it is incumbent upon the party to support affirmative allegation that an
employer regularly employs more than ten (10) workers.

In the case at bar, complainants failed to substantiate their claim that the
respondent establishment regularly employs twenty (sic) (24) workers.

Accordingly, we have no factual basis to grant salary differentials to
complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of
the Implementing Rules of the Labor Code, complainants are not entitled to legal
holiday pay and service incentive leave pay.

We also do not have sufficient factual basis to award overtime pay and
premium pay for holiday and rest day because complainants failed to substantiate that
they rendered overtime and during rest days.
[6]



Private respondents filed their appeal with the NLRC which was opposed by petitioners.
However, pending the appeal, private respondents Morente
[7]
and Allauigan
[8]
filed their
respective motions to dismiss with release and quitclaim before the NLRC.

On September 30, 1997, the NLRC rendered its decision,
[9]
the dispostive portion of
which reads:

WHEREFORE, in view of all the foregoing considerations, the decision
appealed from should be, as it is hereby, MODIFIED by directing the respondent to
pay Alfredo Ofialda, Diolito Morente and Rudy Allauigan the total amount of
Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00) representing
their combined salary differentials, holiday pay, and service incentive leave pay.


The NLRC made the following ratiocinations:

On claims for underpayment/non-payment of legally mandated wages and
fringe benefits where exemption from coverage of the minimum wage law is put up as
a defense, he who invokes such an exemption (usually the employer) has the burden
of showing the basis for the exemption like for instance the fact of employing
regularly less than ten workers.

In the instant case, complainants alleged that despite employing more than
twenty-four (24) workers in his establishment, hence covered by the minimum wage
law, nevertheless the individual respondent did not pay his workers the legal rates and
benefits due them since their employment. By way of answer, respondents countered
that they employ less than ten (10) persons, hence the money claims of complainants
lack factual and legal basis.

Stated differently, against complainants charge of underpayment in wages and
non-payment of fringe benefits legally granted to them, the respondents raised the
defense of exemption from coverage of the minimum wage law and in support thereof
alleged that they regularly employed less than ten (10) workers to serve as basis for
their exemption under the law, they (respondents) must prove that they employed less
than ten workers, instead of more than twenty-four (24) workers as alleged by the
complainants.

However, apart from their allegation, respondents presented no evidence to
show the number of workers they employed regularly. This failure is fatal to
respondents defense. This in turn brings us to the question of whether the
complainants were underpaid and unpaid of legal holiday pay and service incentive
leave pay due them.

Stated earlier are the different amounts that each complainant was receiving by
way of salary on certain periods of their employment with respondents, which
amounts according to complainants are way below the minimum wage then
prevailing. Considering that respondents failed to present the payrolls or vouchers
which could prove otherwise, the money claims deserve favorable consideration.

Taking note of the 3 year prescription, the period covered is from September
14, 1990 to September 14, 1993 when the instant case was filed, and based on a 6-day
work per week, the underpayment (salary differential), legal holiday pay, and service
incentive leave pay due to complainants, as computed, are as follows:



Salary Diff. Holiday Pay SILP
1. A.
OFIALDA
P14,934.00 P2,362.00 P1,180.00
2. D.
MORENTE
23,964.00 3,258.00 1,730.00
3. R. ALLAUIGAN 22,609.00 3,258.00 1,730.00

With respect to the other claims, i.e., overtime pay and premium pay for
holiday and rest day, We find no reason to disturb the Labor Arbiters ruling thereon,
that there is no sufficient factual basis to award the claims because complainants
failed to substantiate that they rendered overtime and during rest days. These claims,
unlike claims for underpayment and non-payment of fringe benefits mandated by law,
need to be proven by the claimants.
[10]



Petitioners filed a petition for certiorari
[11]
with prayer for temporary restraining order
and preliminary injunction before this Court on November 26, 1997. Respondents were
required to file their Comment but only public respondent NLRC, through the Solicitor General,
complied therewith. In a Resolution dated June 28, 1999,
[12]
the petition was referred to the CA
pursuant to our ruling in St. Martin Funeral Homes vs. NLRC.

On January 19, 2000,
[13]
the CA denied the petition for lack of merit and affirmed in
toto the NLRC decision. It said:

Having claimed exemption from the coverage of the minimum wage laws or
order, it was incumbent upon petitioner to prove such claim. Apart from simply
denying private respondents allegation that it employs more than 24 workers in its
business, petitioner failed to adduce evidence to prove that it is, indeed, a retail
establishment which employs less than ten (10) employees. Its failure to present
records of its workers and their respective wages gives rise to the presumption that
these are adverse to its claims. Indeed, it is hard to believe that petitioner does not
keep such records. More so, considering private respondents claim that petitioner
employs more than twenty four (24) employees and engaged in both wholesale and
retail business of fruits by volume on CONTAINER BASIS, not by price of fruit, but
by container size retail, involving millions of pesos capital, fruits coming from China,
Australia and the United States (p. 170, Rollo).

Needless to say, the inclusion of respondents Morente and Allauigan in the
NLRC award is in order. In its decision, public respondent awarded P75,125.00,
representing the combined salary differentials, holiday pay and service incentive leave
pay of all three (3) private respondents. Of this, P28,952.00 is earmarked for
respondent Morente, and P27,597.00 for respondent Allauigan, both of whom
executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from
petitioner.

On this score, the Court quotes with approval the arguments advanced by the
Solicitor General thus:

While a compromise agreement or amicable settlement is not
against public policy per se it must be shown however that it was
voluntarily entered into and represents a reasonable settlement, and the
consideration for the quitclaim is credible and reasonable (Santiago v.
NLRC, 198 SCRA 111 [1991]). For the law usually looks with disfavor
upon quitclaims and releases executed by employees usually resulting
from a compromise with their employers. (Velasco v. DOLE, 200
SCRA 201 [1991]). This is so because the employers and the employees
obviously do not stand on equal footing. Driven against the wall by the
employer, the employee is in no position to resist the money offered.
(Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).

Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:

In the absence of any showing that the compromise settlement and
the quitclaims and releases entered into and made by the employees were
free, fair and reasonable- especially as to the amount or consideration
given by the employer in exchange therefore, the fact that they executed
the same and received their monetary benefits thereunder does not
militate against them. The Law does not consider as valid any
agreement to receive less compensation than what a worker is entitled to
receive.

In the case at bar, it will be noticed that the vouchers dated
September 13, 1995 and September 20, 1996 (pp. 194 and 197, NLRC
Record), submitted by petitioners (pp. 191-192, Record), show that
private respondent Allauigan was only paid P6,000.00 and
Morente, P3,000.00 --- when they are legally entitled to
receiveP28,952.00 and P27,597.00, respectively. Under the
circumstances, subject compromise settlements cannot be considered
valid and binding upon the NLRC as they do not represent fair and
reasonable settlements, nor do they demonstrate voluntariness on the part
of private respondents Morente and Allauigan. These employees should
still be paid the full amounts of their salary differentials, holiday pay and
service incentive leave pay less the amounts they had already received
under the compromise settlements with petitioners (pp. 174-175,
Rollo).
Parenthetically, the Court notes that petitioner availed itself of this remedy
without first seeking a reconsideration of the assailed decision. As a general rule,
certiorari will not lie unless an inferior court, has through a motion for
reconsideration, a chance to correct the errors imputed to it. While the rule admits of
exceptions, petitioner has not shown any reason for this Court not to apply said rule,
which would have justified outright dismissal of the petition were it not for the
Courts desire to resolve the case not on a technicality but on the merits.
[14]



Petitioners motion for reconsideration was denied in a Resolution dated August 15,
2000.
[15]


Hence, the instant petition for review on certiorari filed by petitioners.

Petitioners insist that C. Planas Commercial is a retail establishment principally engaged
in the sale of plastic products and fruits to the customers for personal use, thus exempted from
the application of the minimum wage law; that it merely leases and occupies a stall in the
Divisoria Market and the level of its business activity requires and sustains only less than ten
employees at a time. Petitioners contend that private respondents were paid over and above the
minimum wage required for a retail establishment, thus the Labor Arbiter is correct in ruling
that private respondents claim for underpayment has no factual and legal basis. Petitioners
claim that since private respondents alleged that petitioners employed 24 workers, it was
incumbent upon them to prove such allegation which private respondents failed to do.

Petitioners also contend that the CA erred in applying strictly the rules of evidence
against them by holding that it was incumbent upon them to prove that their company is
exempted from the minimum wage law. They contend that they could not present records of
their workers and their respective wages because by the very nature of their business, the
system of management is very loose and informal, thus salaries and wages are paid by merely
handing the money to the worker without the latter being required to sign anything as proof of
receipt. Thus, it would be unreasonable to insist upon petitioner to present documents that they
do not possess or keep in the first place.

We are not persuaded.

R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory
minimum wage rate of all workers and employees in the private sector. Section 4 of the Act
provides for exemption from the coverage, thus:

Sec. 4.
. . .
(c) Exempted from the provisions of this Act are household or domestic helpers
and persons employed in the personal service of another, including family drivers.

Retail/service establishments regularly employing not more than ten (10)
workers may be exempted from the applicability of this Act upon application with and
as determined by the appropriate Regional Board in accordance with the applicable
rules and regulations issued by the Commission. Whenever an application for
exemption has been duly filed with the appropriate Regional Board, action on any
complaint for alleged non-compliance with this Act shall be deferred pending
resolution of the application for exemption by the appropriate Regional Board.

In the event that applications for exemptions are not granted, employees shall
receive the appropriate compensation due them as provided for by this Act plus
interest of one percent (1%) per month retroactive to the effectivity of this Act.


Clearly, for a retail/service establishment to be exempted from the coverage of the
minimum wage law, it must be shown that the establishment is regularly employing not more
than ten (10) workers and had applied for exemptions with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations issued by the
Commission. Petitioners main defense in controverting private respondents claim for
underpayment of wages is that they are exempted from the application of the minimum wage
law, thus the burden of proving
[16]
such exemption rests on petitioners. Petitioners had not
shown any evidence to show that they had applied for such exemption and if they had applied,
the same was granted.

In Murillo vs. Sun Valley Realty, Inc.
[17]
where the respondents claim that petitioners
therein are not entitled to service incentive leave pay inasmuch as establishment employing less
than ten (10) employees are exempted by the Labor Code and the Implementing Rules from
paying service incentive leave pay, we held:

..the clear policy of the Labor Code is to include all establishments, except a
few classes, under the coverage of the provision granting service incentive leave to
workers. Private respondents' claim is that they fell within the exception. Hence, it
was incumbent upon them to prove that they belonged to a class excepted by law from
the general rule. Specifically, it was the duty of respondents, not of petitioners, to
prove that there were less than ten (10) employees in the company. Having failed to
discharge its task, private respondents must be deemed to be covered by the general
rule, notwithstanding the failure of petitioners to allege the exact number of
employees of the corporation. In other words, petitioners must be deemed entitled to
service incentive leave.
[18]



Moreover, in C. Planas Commercial vs. NLRC,
[19]
where herein petitioners are also
involved in a case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for retail establishments
which employ not more than ten (10) workers to justify their non-liability for the
salary differentials in question. They insist that PLANAS is a retail establishment
leasing a very small and cramped stall in the Divisoria market which cannot
accommodate more than ten (10) workers in the conduct of its business.
We are unconvinced. The records disclose de los Reyes' clear entitlement to
salary differentials. Well-settled is the rule that factual findings of labor officials who
are deemed to have acquired expertise in matters within their jurisdiction are generally
accorded not only respect but even finality and bind this Court when supported by
substantial evidence or that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. Thus, as long as their decisions are
devoid of any unfairness or arbitratriness in the process of their deduction from the
evidence proferred by the parties before them, all that is left is our stamp of finality by
affirming the factual findings made by them. In this case, the award of salary
differentials by the NLRC in favor of de los Reyes was made pursuant to RA 6727
otherwise known as the Wage Rationalization Act, and the Rules Implementing Wage
Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.

Petitioners claim exemption under the aforestated law. However, the best proof
that they could have adduced was their approved application for exemption in
accordance with applicable guidelines issued by the Commission. Section 4, subpar.
(c) of RA 6727 categorically provides:

Retail/service establishments regularly employing not more than ten (10) workers
may be exempted from the applicability of this Act upon application with and as
determined by the appropriate Regional Board in accordance with the applicable rules
and regulations issued by the Commission. Whenever an application for exemption has
been duly filed with the appropriate Regional Board, action on any complaint for alleged
non-compliance with this Act shall be deferred pending resolution of the application for
exemption by the appropriate Regional Board. In the event that applications for
exemptions are not granted, employees shall receive the appropriate compensation due
them as provided for by this Act plus interest of one percent (1%) per month retroactive
to the effectivity of this Act (emphasis supplied).

Extant in the records is the fact that petitioners had persistently raised the
matter of their exemption from any liability for underpayment without substantiating
it by showing compliance with the aforecited provision of law. It bears stressing that
the NLRC affirmed the Labor Arbiters award of salary differentials due to
underpayment on the ground that de los Reyes' claim therefor was not even denied or
rebutted by petitioners.

More importantly, NLRC correctly upheld the Labor Arbiter's finding
that PLANAS employed around thirty (30) workers. We have every reason to believe
that petitioners need at least thirty (30) persons to conduct their business considering
that Manager Cohu did not submit any employment record to prove otherwise. As
employer, Manager Cohu ought to be the keeper of the employment records of all his
workers. Thus, it was well within his means to refute any monetary claim alleged to
be unpaid. His inability to produce the payrolls from their files without any
satisfactory explanation can be interpreted no less as suppression of vital evidence
adverse to PLANAS.
Petitioners aver that the CA erred in ruling that private respondents Morente and
Allauigan are still entitled to monetary awards despite the latters execution of release and
quitclaims because the settlement was not voluntarily entered into by private respondents.
Petitioners insist that both private respondents Morente and Allauigan voluntarily entered into
an amicable settlement with them on September 17 and 18, 1995, respectively; that they were
the ones who initiated the talks for settlement and who pegged the amount; that they both
voluntarily appeared before the Labor Arbiter to move for the dismissal of their case insofar as
their claims are concerned as well as submitted to the Labor Arbiter their respective quitclaims
and releases which were duly subscribed before the Labor Arbiter and duly notarized.

We find merit in petitioners argument.

It has been held that not all quitclaims are per se invalid or against public policy, except
(1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or (2) where the terms of settlement are unconscionable on their face. In these cases,
the law will step in to annul the questionable transactions.
[20]
Such quitclaim and release
agreements are regarded as ineffective to bar the workers from claiming the full measure of
their legal rights.
[21]


We find these two instances not present in private respondents Allauigan and Morentes
case. They failed to refute petitioners allegation that the settlement was voluntarily made as
they had not filed any pleadings before the CA. Notably, we have required private respondents
to file their comment on the instant petition, however, they failed to do so. They were then
required to show cause why they should not be disciplinarily dealt with or held in contempt.
[22]

However, they still failed to file their comment, thus, they were imposed a fine
of P1,000.00
[23]
which was subsequently increased to P2,000.00 as there was still no
compliance. In a Resolution dated July 22, 2002, the Court ordered the National Bureau of
Investigation to arrest and detain private respondents and the private respondents to file their
comment.
[24]
As private respondents could not be located at their given address and they are not
known in their locality, the order of arrest and commitment was returned unserved,
[25]
thus the
Court required the Office of the Solicitor General to file the comment in behalf of all the
respondents.
[26]
The Court finds such inaction on the part of private respondents Allauigan and
Morente an indication that they already relented in their claims and gives credence to
petitioners claim that they had voluntarily executed the release and quitclaim and the motion to
dismiss.

The CA found that the subject compromise agreements are not valid considering that
they did not represent the fair and reasonable settlements, i.e., that private respondent Allauigan
was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to
receive P28,952.00 and P27,597.00, respectively.

We do not agree. It bears stressing that at the time of the execution of the release and
quitclaim, the case filed by private respondents against petitioners was already dismissed by the
Labor Arbiter and it was pending appeal before the NLRC. Private respondents could have
executed the release and quitclaim because of a possibility that their appeal with the NLRC may
not be successful. Since there was yet no decision rendered by the NLRC when the quitclaims
were executed, it could not be said that the amount of the settlement is unconscionable. In any
event, no deception has been established that would justify the annulment of private
respondents quitclaims.
[27]
In Mercer vs. NLRC,
[28]
we held that:

In Samaniego v. NLRC, we ruled that: A quitclaim executed in favor of a
company by an employee amounts to a valid and binding compromise agreement
between them."

Recently, we held that in the absence of any showing that petitioner was
"coerced or tricked" into signing the above-quoted Quitclaim and Release or that the
consideration thereof was very low, she is bound by the conditions thereof.


As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment
of P14,934.00 as salary differential, P2,362.00 as legal holiday pay andP1,180.00 as service
incentive leave pay, all in the total amount of P18,476.00.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of
Appeals dated January 19, 2000 and its Resolution dated August 15, 2000
are AFFIRMED with MODIFICATION that petitioners are ordered to pay private respondent
Alfredo Ofialda the total amount of P18,476.00 and the monetary awards in favor of private
respondents Rudy Allauigan and Dioleto Morente are hereby DELETED.

SO ORDERED.

DEDUCTIBILITY OF FACILITIES OR SUPPLEMENTS FROM WAGES
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12444 February 28, 1963
STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,
vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
Pedro B. Uy Calderon for petitioners.
Gaudioso C. Villagonzalo for respondent.
PAREDES, J .:
Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine
coastwise transportation, employing therein several steamships of Philippine registry. They had a
collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September
12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No.
740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay;
that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other
shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and
officers were not required to pay their meals and that because Captain Carlos Asensi had refused to
yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00,
monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of the men and
officers in their employ were members of the respondent union; that the work on board a vessel is
one of comparative ease; that petitioners have suffered financial losses in the operation of their
vessels and that there is no law which provides for the payment of sick leave or vacation leave to
employees or workers of private firms; that as regards the claim for overtime pay, the petitioners have
always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the
fact that it does not apply to those who provide means of transportation; that the shipowners and
operators in Cebu were paying the salaries of their officers and men, depending upon the margin of
profits they could realize and other factors or circumstances of the business; that in enacting Rep. Act
No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished
the employees should be deducted from the daily wages; that Captain Asensi was not dismissed for
alleged union activities, but with the expiration of the terms of the contract between said officer and
the petitioners, his services were terminated.
A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for
reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to
resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual
findings of the Court of Industrial Relations should not be disturbed, if supported by substantial
evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.
1. First assignment of error. The respondent court erred in holding that it had jurisdiction
over case No. 740-V, notwithstanding the fact that those who had dispute with the petitioners,
were less than thirty (30) in number.
The CIR made a finding that at the time of the filing of the petition in case No. 740-V,
respondent Union had more than thirty members actually working with the companies,
and the court declared itself with jurisdiction to take cognizance of the case. Against this
order, the herein petitioners did not file a motion for reconsideration or a petition for
certiorari. The finding of fact made by the CIR became final and conclusive, which We
are not now authorized to alter or modify. It is axiomatic that once the CIR had acquired
jurisdiction over a case, it continues to have that jurisdiction, until the case is terminated
(Manila Hotel Emp. Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p.
3027). It was abundantly shown that there were 56 members who signed Exhibits A, A-I
to A-8, and that 103 members of the Union are listed in Exhibits B, B-1 to B-35, F, F-1
and K-2 to K-3. So that at the time of the filing of the petition, the respondent union had
a total membership of 159, working with the herein petitioners, who were presumed
interested in or would be benefited by the outcome of the case (NAMARCO v. CIR, L-
17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954), likewise belies
the contention of herein petitioner in this regard. The fact that only 7 claimed for
overtime pay and only 7 witnesses testified, does not warrant the conclusion that the
employees who had some dispute with the present petitioners were less than 30. The
ruling of the CIR, with respect to the question of jurisdiction is, therefore, correct.
2. Second assignment of error. The CIR erred in holding, that inasmuch as in the shipping
articles, the herein petitioners have bound themselves to supply the crew with provisions and
with such "daily subsistence as shall be mutually agreed upon" between the master and the
crew, no deductions for meals could be made by the aforesaid petitioners from their wages or
salaries.
3. Third assignment of error. The CIR erred in holding that inasmuch as with regard to
meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule,
which section 19 thereof is the exception, the cost of said meals may not be legally deducted
from the wages or salaries of the aforesaid crew members by the herein petitioners.
4. Fourth assignment of error. The CIR erred in declaring that the deduction for costs of
meals from the wages or salaries after August 4, 1951, is illegal and same should be
reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning of the operation of the petitioner's
business, all the crew of their vessels have been signing "shipping articles" in which are stated
opposite their names, the salaries or wages they would receive. All seamen, whether members of the
crew or deck officers or engineers, have been furnished free meals by the ship owners or operators.
All the shipping articles signed by the master and the crew members, contained, among others, a
stipulation, that "in consideration of which services to be duly performed, the said master hereby
agrees to pay to the said crew, as wages, the sums against their names respectively expressed in the
contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b], shipping articles),
and during the duration of the contract "the master of the vessel will provide each member of the
crewsuch daily subsistence as shall be mutually agreed daily upon between said master and crew; or,
in lieu of such subsistence the crew may reserve the right to demand at the time of execution of these
articles that adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping
articles). It is, therefore, apparent that, aside from the payment of the respective salaries or wages,
set opposite the names of the crew members, the petitioners bound themselves to supply the crew
with ship's provisions, daily subsistence or daily rations, which include food.
This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After
this date, however, the companies began deducting the cost of meals from the wages or salaries of
crew members; but no such deductions were made from the salaries of the deck officers and
engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges
on the legality of such deductions. While the petitioners herein contend that the deductions are legal
and should not be reimbursed to the respondent union, the latter, however, claims that same are
illegal and reimbursement should be made.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts. 1wph 1. t
We hold that such deductions are not authorized. In the coastwise business of transportation of
passengers and freight, the men who compose the complement of a vessel are provided with free
meals by the shipowners, operators or agents, because they hold on to their work and duties,
regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk
ahead in the midst of the high seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows
(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of
any interested party result in a different determination of the fair and reasonable value,
the furnishing of meals shall be valued at not more than thirty centavos per meal for
agricultural employees and not more than fortycentavos for any other employees covered by
this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other employees covered by
this Act.
Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in fixing the rate of forty
centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the
daily wage, otherwise, no rate for meals should have been provided.
However, section 19, same law, states
SEC. 19. Relations to other labor laws and practices. Nothing in this Act shall deprive an
employee of the right to seek fair wages, shorter working hours and better working conditions
nor justify an employer in violating any other labor law applicable to his employees, in reducing
the wage now paid to any of his employees in excess of the minimum wage established under
this Act, or in reducing supplements furnished on the date of enactment.
At first blush, it would appear that there exists a contradiction between the provisions of section 3(f)
and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that
Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are
no supplements given, within the meaning and contemplation of section 19, but merely facilities,
section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized.
And even if there is such a conflict, the respondent CIR should resolve the same in favor of the safety
and decent living laborers (Art. 1702, new Civil Code)..
It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew
members in question, were mere "facilities" which should be deducted from wages, and not
"supplements" which, according to said section 19, should not be deducted from such wages,
because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair
wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big
Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined
as follows
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given
to or received by the laborers over and above their ordinary earnings or wages. "Facilities", on
the other hand, are items of expense necessary for the laborer's and his family's existence and
subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and
when furnished by the employer are deductible therefrom, since if they are not so furnished,
the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is
part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind of the
benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering, therefore, as
definitely found by the respondent court that the meals were freely given to crew members prior to
August 4, 1951, while they were on the high seas "not as part of their wages but as a necessary
matter in the maintenance of the health and efficiency of the crew personnel during the voyage", the
deductions therein made for the meals given after August 4, 1951, should be returned to them, and
the operator of the coastwise vessels affected should continue giving the same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27,
1955, the company used to pay to its drivers and conductors, who were assigned outside of the City
limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the company.
The order CIR to the company to continue granting this privilege, was upheld by this Court.
The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep.
Act No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily
furnished by the employer to the employees. If We are to follow the theory of the herein petitioners,
then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with
no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost
of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum
wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will
adversely affect said crew member. Such interpretation does not conform with the avowed intention
of Congress in enacting the said law.
One should not overlook a fact fully established, that only unlicensed crew members were made to
pay for their meals or food, while the deck officers and marine engineers receiving higher pay and
provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust
discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-
7177, May 31, 1955).
Fifth, Sixth and Seventh assignments of error. The CIR erred in holding that Severino Pepito, a
boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444;
in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito;
and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have
worked overtime and had not been paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the early hours of the day when the boat
docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the
vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This
statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V
Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa),
are incompetent and unreliable. And considering the established fact that the work of Severino Pepito
was continuous, and during the time he was not working, he could not leave and could not completely
rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444,
which states "When the work is not continuous, the time during which the laborer is not working and
can leave his working place and can rest completely shall not be counted", find no application in his
case.
8. Eighth assignment of error. The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi
to his former position, considering the fact that said officer had been employed since January 9, 1953,
as captain of a vessel belonging to another shipping firm in the City of Cebu.
The CIR held
Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged
lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby
dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and
that his failure to report for work is not sufficient cause for his absolute dismissal, respondents
are hereby ordered to reinstate him to his former job without back salary but under the same
terms and conditions of employment existing prior to his lay-off, without loss of seniority and
other benefits already acquired by him prior to March 20, 1952. This Court is empowered to
reduce the punishment meted out to an erring employee (Standard Vacuum Oil Co., Inc. v.
Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in consonance
with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.
Ninth and Tenth assignments of error. The CIR erred in denying a duly verified motion for new trial,
and in overruling petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that the movants have a good and valid
defense and the same is based on three orders of the WAS (Wage Administration Service), dated
November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The
motion for new trial is without merit. Having the said wage Orders in their possession, while the case
was pending decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation
of meals and facilities, are irrelevant to the present issue, it having been found and held that the
meals or food in question are not facilities but supplements. The original petition in the CIR having
been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to
express its views on the matter. At any rate, the admission of the three wage orders have not altered
the decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
[G.R. No. 157634. May 16, 2005]
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO
LAM, petitioners, vs. ROLANDO ADANA, CHONA BUMALAY, ROGER
BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA,
WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO
LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL
TORREFRANCA, and SANTOS BROOLA, respondents.
D E C I S I O N
PUNO, J .:
This is a petition for certiorari to reverse and set aside the Decision issued by the
Court of Appeals (CA)
[1]
in CA-G.R. SP No. 68642, entitled Rolando Adana, Wenefredo
Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel &
Restaurant/Pacita O. Po, et al., and the Resolution
[2]
denying petitioners motion for
reconsideration. The assailed CA decision reversed the NLRC Decision which had
dismissed all of respondents complaints,
[3]
and reinstated the Joint Decision of the Labor
Arbiter
[4]
which ruled that respondents were illegally dismissed and entitled to their money
claims.
The facts, culled from the records, are as follows:
[5]

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po,
[6]
whose mother, petitioner Josefa Po Lam, manages the
establishment.
[7]
The hotel and restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant
hired the following people, all respondents in this case, with the following jobs:
[8]

1. Wenefredo Loveres Accountant and Officer-in-charge
2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. Santos Broola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. Lourdes Camigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
16. Edgardo Torrefranca Cook
Due to the expiration and non-renewal of the lease contract for the rented space
occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the
business were suspended on March 31, 1997.
[9]
The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City, while waiting for the
construction of a new Mayon Hotel & Restaurant at Pearanda Street, Legazpi City.
[10]
Only
nine (9) of the sixteen (16) employees continued working in the Mayon Restaurant at its
new site.
[11]

On various dates of April and May 1997, the 16 employees filed complaints for
underpayment of wages and other money claims against petitioners, as follows:
[12]

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay
(SILP) and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages;
nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and
rest day; SILP; nightshift differential pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages;
nonpayment of holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of
COLA, overtime, holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and
night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday
pay, SILP, and damages;
[13]
and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay;
premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint
Decision in favor of the employees. The Labor Arbiter awarded substantially all of
respondents money claims, and held that respondents Loveres, Macandog and Llarena
were entitled to separation pay, while respondents Guades, Nicerio and Alamares were
entitled to their retirement pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the
proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the
complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was
denied, they filed a petition for certiorari with the CA which rendered the now assailed
decision.
After their motion for reconsideration was denied, petitioners now come to this Court,
seeking the reversal of the CA decision on the following grounds:
I. THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) BY HOLDING THAT THE
FINDINGS OF FACT OF THE NLRC WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE
DESPITE AMPLE AND SUFFICIENT EVIDENCE SHOWING THAT THE NLRC DECISION IS
INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE;
II. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE JOINT DECISION OF
THE LABOR ARBITER WHICH RULED THAT PRIVATE RESPONDENTS WERE ILLEGALLY
DISMISSED FROM THEIR EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY
PRIVATE RESPONDENTS WERE OUT OF WORK WAS NOT DUE TO THE FAULT OF
PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF PETITIONERS.
III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE AWARD OF
MONETARY BENEFITS BY THE LABOR ARBITER IN HIS JOINT DECISION IN FAVOR OF THE
PRIVATE RESPONDENTS, INCLUDING THE AWARD OF DAMAGES TO SIX (6) OF THE
PRIVATE RESPONDENTS, DESPITE THE FACT THAT THE PRIVATE RESPONDENTS HAVE
NOT PROVEN BY SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO AND
ESPECIALLY THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE
PETITIONERS.
IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PACITA ONG PO IS THE
OWNER OF THE BUSINESS ESTABLISHMENT, PETITIONER MAYON HOTEL AND
RESTAURANT, THUS DISREGARDING THE CERTIFICATE OF REGISTRATION OF THE
BUSINESS ESTABLISHMENT ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A PUBLIC
DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF COMPLAINANTS-PRIVATE
RESPONDENTS.
[14]

In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner
Mayon Hotel & Restaurant, and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio
illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages, and
nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night
shift differential pay?
It is petitioners contention that the above issues have already been threshed out
sufficiently and definitively by the NLRC. They therefore assail the CAs reversal of the
NLRC decision, claiming that based on the ruling in Castillo v. NLRC,
[15]
it is non
sequitur that the CA should re-examine the factual findings of both the NLRC and the
Labor Arbiter, especially as in this case the NLRCs findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRCs competence, as an appellate agency
reviewing decisions of Labor Arbiters, to disagree with and set aside the latters
findings.
[16]
But it stands to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.
[17]
And when the factual findings of the Labor Arbiter and the
NLRC are diametrically opposed and this disparity of findings is called into question, there
is, necessarily, a re-examination of the factual findings to ascertain which opinion should
be sustained.
[18]
As ruled inAsuncion v. NLRC,
[19]

Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight
and respect, we are constrained to take a second look at the facts before us because of the diversity
in the opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of
the Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court.
[20]

The CA, therefore, did not err in reviewing the records to determine which opinion was
supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC
[21]
that factual findings of administrative
bodies like the NLRC are affirmed only if they are supported by substantial evidence
that is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a
Labor Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter
does not automatically call for a full review of the facts by this Court. The NLRCs decision, so
long as it is not bereft of substantial support from the records, deserves respect from this Court. As
a rule, the original and exclusive jurisdiction to review a decision or resolution of respondent
NLRC in a petition for certiorari under Rule 65 of the Rules of Court does not include a correction
of its evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of
discretion. Thus, the NLRCs factual findings, if supported by substantial evidence, are entitled to
great respect and even finality, unless petitioner is able to show that it simply and arbitrarily
disregarded the evidence before it or had misappreciated the evidence to such an extent as to
compel a contrary conclusion if such evidence had been properly appreciated. (citations omitted)
[22]

After careful review, we find that the reversal of the NLRCs decision was in order
precisely because it was not supported by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa
Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed
this decision, the CA, on review, agreed with the Labor Arbiter that notwithstanding the
certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the
complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault
the labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There
were conflicting documents submitted by Josefa herself. She was ordered to submit additional
documents to clearly establish ownership of the hotel and restaurant, considering the testimonies
given by the [respondents] and the non-appearance and failure to submit her own position paper by
Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter. The ruling of the
Supreme Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po
Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a liability on a party, and he has it
in his power to produce evidence which from its very nature must overthrow the case made against
him if it is not founded on fact, and he refuses to produce such evidence, the presumption arises
that the evidence[,] if produced, would operate to his prejudice, and support the case of his
adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor
arbiter relied also on the testimonies of the witnesses, during the hearing of the instant case. When
the conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same
should be respected by appellate tribunals, since he is in a better position to assess and evaluate the
credibility of the contending parties.
[23]
(citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that
petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the
documents they submitted to the Labor Arbiter sufficiently and clearly establish the fact of
ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lams participation was limited to merely (a) being the
overseer; (b) receiving the month-to-month and/or year-to-year financial reports prepared
and submitted by respondent Loveres; and (c) visitation of the premises.
[24]
They also put
emphasis on the admission of the respondents in their position paper submitted to the
Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the
owner.
[25]
This, they claim, is a judicial admission and is binding on respondents. They
protest the reliance the Labor Arbiter and the CA placed on their failure to submit
additional documents to clearly establish ownership of the hotel and restaurant, claiming
that there was no need for petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and primary evidence of
ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that
petitioner Josefa Po Lam is merely the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the
Labor Arbiter. Despite receipt of the Labor Arbiters notice and summons, other notices
and Orders, petitioner Pacita Po failed to appear in any of the proceedings with the Labor
Arbiter in these cases, nor file her position paper.
[26]
It was only on appeal with the NLRC
that Pacita Po signed the pleadings.
[27]
The apathy shown by petitioner Pacita Po is
contrary to human experience as one would think that the owner of an establishment
would naturally be concerned when ALL her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lams claim that she is
merely an overseer. The findings of the Labor Arbiter on this question were based on
credible, competent and substantial evidence. We again quote the Joint Decision on this
matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po
Lam claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter
purchased the same from one Palanos in 1981, Josefa failed to submit the document of sale from
said Palanos to Pacita as allegedly the sale was only verbal although the license to operate said
hotel and restaurant is in the name of Pacita which, despite our Order to Josefa to present the same,
she failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences were
submitted by Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64,
65, 67 to 69; vol. I, rollo)[,] there were documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained
her participation and interest in the business as merely to help and assist her daughter as the hotel
and restaurant was near the formers store, the testimonies of [respondents] and Josefa as well as
her demeanor during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and
Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and manifestation
of ownership of the hotel and restaurant like transferring employees from the Greatwall Palace
Restaurant which she and her husband Roy Po Lam previously owned; it is Josefa to whom the
employees submits (sic) reports, draws money for payment of payables and for marketing,
attending (sic) to Labor Inspectors during ocular inspections. Except for documents whereby
Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the record shows any
circumstance or manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant. The
least that can be said is that it is absurd for a person to purchase a hotel and restaurant in the very
heart of the City of Legazpi verbally. Assuming this to be true, when [petitioners], particularly
Josefa, was directed to submit evidence as to the ownership of Pacita of the hotel and restaurant,
considering the testimonies of [respondents], the former should [have] submitted the lease contract
between the owner of the building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of said enterprise. Josefa
failed. We are not surprised why some employers employ schemes to mislead Us in order to evade
liabilities. We therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel
and Restaurant and the proper respondent in these cases.
[28]

Petitioners reliance on the rules of evidence, i.e., the certificate of registration being
the best proof of ownership, is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po Lams involvement in the
enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore
within his jurisdiction to require the additional documents to ascertain who was the real
owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve the
demand of substantial justice.
[29]
The rule of evidence prevailing in court of law or equity
shall not be controlling in labor cases and it is the spirit and intention of the Labor Code
that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process.
[30]
Labor laws mandate the speedy
administration of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.
[31]

Similarly, the fact that the respondents complaints contained no allegation that
petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of judicial
admissions to respondents who are but lowly employees - would be to exact
compliance with technicalities of law that is contrary to the demands of substantial justice.
Moreover, the issue of ownership was an issue that arose only during the course of the
proceedings with the Labor Arbiter, as an incident of determining respondents claims, and
was well within his jurisdiction.
[32]

Petitioners were also not denied due process, as they were given sufficient opportunity
to be heard on the issue of ownership.
[33]
The essence of due process in administrative
proceedings is simply an opportunity to explain ones side or an opportunity to seek
reconsideration of the action or ruling complained of.
[34]
And there is nothing in the records
which would suggest that petitioners had absolute lack of opportunity to be
heard.
[35]
Obviously, the choice not to present evidence was made by petitioners
themselves.
[36]

But more significantly, we sustain the Labor Arbiter and the CA because even when
the case was on appeal with the NLRC, nothing was submitted to negate the Labor
Arbiters finding that Pacita Po is not the real owner of the subject hotel and restaurant.
Indeed, no such evidence was submitted in the proceedings with the CA nor with this
Court. Considering that petitioners vehemently deny ownership by petitioner Josefa Po
Lam, it is most telling that they continue to withhold evidence which would shed more light
on this issue. We therefore agree with the CA that the failure to submit could only mean
that if produced, it would have been adverse to petitioners case.
[37]

Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is
the owner of petitioner Mayon Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broola.
[38]

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to
respondents Loveres, Macandog and Llarena. As respondents Guades, Nicerio and
Alamares were already 79, 66 and 65 years old respectively at the time of the dismissal,
the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code as
amended.
[39]
The Labor Arbiter ruled that respondent Atractivo was not entitled to
separation pay because he had been transferred to work in the restaurant operations
in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio,
Macandog and Guades were also awarded damages.
[40]

The NLRC reversed the Labor Arbiter, finding that no clear act of termination is
attendant in the case at bar and that respondents did not submit any evidence to that
effect, but the finding and conclusion of the Labor Arbiter [are] merely based on his own
surmises and conjectures.
[41]
In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that
none of the above-named respondents were illegally dismissed, or entitled to separation
or retirement pay. According to petitioners, even the Labor Arbiter and the CA admit that
when the illegal dismissal case was filed by respondents on April 1997, they had as yet no
cause of action. Petitioners therefore conclude that the filing by respondents of the illegal
dismissal case was premature and should have been dismissed outright by the Labor
Arbiter.
[42]
Petitioners also claim that since the validity of respondents dismissal is a factual
question, it is not for the reviewing court to weigh the conflicting evidence.
[43]

We do not agree. Whether respondents are still working for petitioners IS a factual
question. And the records are unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and transferred its restaurant
operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and
Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the
other hand, was also laid-off when the Elizondo Street operations closed, as were all the
other respondents. Since then, respondents have not been permitted to work nor
recalled, even after the construction of the new premises at Pearanda Street and the
reopening of the hotel operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the
complaint was filed:
[44]

[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation
of the hotel. After more than one year from the temporary closure of Mayon Hotel and the
temporary transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa
allege[d] w[h]ere the hotel and restaurant will be transferred has been finally constructed and the
same is operated as a hotel with bar and restaurant nevertheless, none of [respondents] herein who
were employed at Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were
recalled by [petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents
as they had not filed an amended complaint to question the cessation of their employment
after the closure of Mayon Hotel & Restaurant on March 31, 1997.
[45]

The above factual finding of the Labor Arbiter was never refuted by petitioners in their
appeal with the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly
treated this uncontroverted factual finding by ruling that respondents have not introduced
any evidence to show that they were illegally dismissed, and that the Labor Arbiters
finding was based on conjecture.
[46]
It was a serious error that the NLRC did not inquire as
to the legality of the cessation of employment. Article 286 of the Labor Code is clear
there is termination of employment when an otherwise bona fide suspension of work
exceeds six (6) months.
[47]
The cessation of employment for more than six months was
patent and the employer has the burden of proving that the termination was for a just or
authorized cause.
[48]

Moreover, we are not impressed by any of petitioners attempts to exculpate
themselves from the charges. First, in the proceedings with the Labor Arbiter, they
claimed that it could not be illegal dismissal because the lay-off was merely temporary
(and due to the expiration of the lease contract over the old premises of the hotel).
They specifically invoked Article 286 of the Labor Code to argue that the claim for
separation pay was premature and without legal and factual basis.
[49]
Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had
exceeded the six-month period provided for in Article 286, petitioners raise this novel
argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code
is misplaced, considering that the reason why private respondents were out of work was not due to
the fault of petitioners. The failure of petitioners to reinstate the private respondents to their former
positions should not likewise be attributable to said petitioners as the private respondents did not
submit any evidence to prove their alleged illegal dismissal. The petitioners cannot discern why
they should be made liable to the private respondents for their failure to be reinstated considering
that the fact that they were out of work was not due to the fault of petitioners but due to
circumstances beyond the control of petitioners, which are the termination and non-renewal of the
lease contract over the subject premises. Private respondents, however, argue in their Comment
that petitioners themselves sought the application of Article 286 of the Labor Code in their case in
their Position Paper filed before the Labor Arbiter. In refutation, petitioners humbly submit that
even if they invoke Article 286 of the Labor Code, still the fact remains, and this bears stress and
emphasis, that the temporary suspension of the operations of the establishment arising from the
non-renewal of the lease contract did not result in the termination of employment of private
respondents and, therefore, the petitioners cannot be faulted if said private respondents were out of
work, and consequently, they are not entitled to their money claims against the petitioners.
[50]

It is confounding how petitioners have fashioned their arguments. After having
admitted, in effect, that respondents have been laid-off since April 1997, they would have
this Court excuse their refusal to reinstate respondents or grant them separation pay
because these same respondents purportedly have not proven the illegality of their
dismissal.
Petitioners arguments reflect their lack of candor and the blatant attempt to use
technicalities to muddle the issues and defeat the lawful claims of their employees. First,
petitioners admit that since April 1997, when hotel operations were suspended due to the
termination of the lease of the old premises, respondents Loveres, Macandog, Llarena,
Nicerio and Guades have not been permitted to work. Second, even after six
months of what should have been just a temporary lay-off, the same respondents
were still not recalled to work. As a matter of fact, the Labor Arbiter even found that as
of the time when he rendered his Joint Decision on July 2000 or more than three (3)
years after the supposed temporary lay-off, the employment of all of the respondents
with petitioners had ceased, notwithstanding that the new premises had been
completed and the same operated as a hotel with bar and restaurant. This is
clearly dismissal or the permanent severance or complete separation of the worker
from the service on the initiative of the employer regardless of the reasons therefor.
[51]

On this point, we note that the Labor Arbiter and the CA are in accord that at the time
of the filing of the complaint, respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the lay-off of the respondents was
merely temporary, pending construction of the new building at Pearanda Street.
[52]

While the closure of the hotel operations in April of 1997 may have been temporary,
we hold that the evidence on record belie any claim of petitioners that the lay-off of
respondents on that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be permanent. First,
respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the
complaint for illegal dismissal immediately after the closure of the hotel operations
in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel
operations, and petitioners allegations that the employees assigned to the hotel
operations knew about this beforehand. Second, in their position paper submitted to the
Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the
employer-employee relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis.
[53]
But they made no
mention of any intent to recall these respondents to work upon completion of the
new premises. Third, the various pleadings on record show that petitioners held
respondents, particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner Josefa Po Lams affidavit
on July 21, 1998, for example, squarely blamed respondents, specifically Loveres,
Bumalay and Camigla, for abusing her leniency and causing petitioner Mayon Hotel &
Restaurant to sustain continuous losses until it is closed. She then asserts that
respondents are not entitled to separation pay for they were not terminated and if ever
the business ceased to operate it was because of losses.
[54]
Again, petitioners make the
same allegation in their memorandum on appeal with the NLRC, where they alleged that
three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had
been sustaining consistent losses, and these were solely attributed to respondents, but
most especially due to Loveress mismanagement and abuse of petitioners trust and
confidence.
[55]
Even the petition filed in this court made reference to the separation of the
respondents due to severe financial losses and reverses, again imputing it to
respondents mismanagement.
[56]
The vehemence of petitioners accusation of
mismanagement against respondents, especially against Loveres, is inconsistent with the
desire to recall them to work. Fourth, petitioners memorandum on appeal also averred
that the case was filed not because of the business being operated by them or that they
were supposedly not receiving benefits from the Labor Code which is true, but because of
the fact that the source of their livelihood, whether legal or immoral, was stopped on
March 31, 1997, when the owner of the building terminated the Lease Contract.
[57]
Fifth,
petitioners had inconsistencies in their pleadings (with the NLRC, CA and with this Court)
in referring to the closure,
[58]
i.e., in the petition filed with this court, they assert that there is
no illegal dismissal because there was only a temporary cessation or suspension of
operations of the hotel and restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease contract...
[59]
And yet, in the same
petition, they also assert that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the business; and
(b) petitioner Pacita Po had to close shop and was bankrupt and has no liquidity to put
up her own building to house Mayon Hotel & Restaurant.
[60]
Sixth, and finally, the
uncontroverted finding of the Labor Arbiter that petitioners terminated all the other
respondents, by not employing them when the Hotel and Restaurant transferred to its new
site on Pearanda Street.
[61]
Indeed, in this same memorandum, petitioners referred to all
respondents as former employees of Mayon Hotel & Restaurant.
[62]

These factors may be inconclusive individually, but when taken together, they lead us
to conclude that petitioners really intended to dismiss all respondents and merely used the
termination of the lease (on Rizal Street premises) as a means by which they could
terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997
was merely temporary, it became dismissal by operation of law when petitioners failed to
reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the
Labor Code.
We are not impressed by petitioners claim that severe business losses justified their
failure to reinstate respondents. The evidence to prove this fact is inconclusive. But more
important, serious business losses do not excuse the employer from complying with the
clearance or report required under Article 283 of the Labor Code and its implementing
rules before terminating the employment of its workers.
[63]
In the absence of justifying
circumstances, the failure of petitioners to observe the procedural requirements set out
under Article 284, taints their actuations with bad faith, especially since they claimed that
they have been experiencing losses in the three years before 1997. To say the least, if it
were true that the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating the giving of notices
was intended not only to enable the employees to look for another employment and
therefore ease the impact of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the opportunity to
ascertain the verity of the alleged authorized cause of termination.
[64]

And even assuming that the closure was due to a reason beyond the control of the
employer, it still has to accord its employees some relief in the form of severance pay.
[65]

While we recognize the right of the employer to terminate the services of an employee
for a just or authorized cause, the dismissal of employees must be made within the
parameters of law and pursuant to the tenets of fair play.
[66]
And in termination disputes, the
burden of proof is always on the employer to prove that the dismissal was for a just or
authorized cause.
[67]
Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal dismissal.
[68]

Under these circumstances, the award of damages was proper. As a rule, moral
damages are recoverable where the dismissal of the employee was attended by bad faith
or fraud or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.
[69]
We believe that the dismissal of the respondents
was attended with bad faith and meant to evade the lawful obligations imposed upon an
employer.
To rule otherwise would lead to the anomaly of respondents being terminated from
employment in 1997 as a matter of fact, but without legal redress. This runs counter to
notions of fair play, substantial justice and the constitutional mandate that labor rights
should be respected. If doubts exist between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter the employer
must affirmatively show rationally adequate evidence that the dismissal was for a
justifiable cause.
[70]
It is a time-honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the formers favor.
[71]
The policy is to extend
the doctrine to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and
protection of labor.
[72]

We therefore reinstate the Labor Arbiters decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and
Llarena; (Santos Broola cannot be granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of
dismissal were entitled to their retirement benefits pursuant to Article 287 of the Labor
Code as amended;
[73]
and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo,
and Broola.
3. Money claims
The CA held that contrary to the NLRCs ruling, petitioners had not discharged the
burden of proving that the monetary claims of the respondents have been paid.
[74]
The CA
thus reinstated the Labor Arbiters grant of respondents monetary claims, including
damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as
there was no illegal dismissal, then respondents are not entitled to their monetary claims
or separation pay and damages. Petitioners arguments are not only tiring, repetitive and
unconvincing, but confusing and confused entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising from illegal
dismissal, and are governed by different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with
particularity in their complaint, position paper, affidavits and other documents the labor
standard benefits they are entitled to, and which they alleged that petitioners have failed to
pay them. It was therefore petitioners burden to prove that they have paid these money
claims. One who pleads payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the burden rests on the
defendant to prove nonpayment, rather than on the plaintiff to prove non payment.
[75]
This
petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners
submitted, i.e., affidavits executed by some of respondents during an ocular inspection
conducted by an inspector of the DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient to prove payment.
[76]
Despite
repeated orders from the Labor Arbiter,
[77]
petitioners failed to submit the pertinent
employee files, payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for overtime work, night
shift differential, premium pay for work on holidays and rest day, and payment of these as
well as the COLA and the SILP documents which are not in respondents possession
but in the custody and absolute control of petitioners.
[78]
By choosing not to fully and
completely disclose information and present the necessary documents to prove payment
of labor standard benefits due to respondents, petitioners failed to discharge the burden of
proof.
[79]
Indeed, petitioners failure to submit the necessary documents which as employers
are in their possession, inspite of orders to do so, gives rise to the presumption that their
presentation is prejudicial to its cause.
[80]
As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has
it in his power to produce evidence which from its very nature must overthrow the case made
against him if it is not founded on fact, and he refuses to produce such evidence, the presumption
arises that the evidence, if produced, would operate to his prejudice, and support the case of his
adversary.
[81]

Petitioners next claim that the cost of the food and snacks provided to respondents as
facilities should have been included in reckoning the payment of respondents wages.
They state that although on the surface respondents appeared to receive minimal wages,
petitioners had granted respondents other benefits which are considered part and parcel
of their wages and are allowed under existing laws.
[82]
They claim that these benefits make
up for whatever inadequacies there may be in compensation.
[83]
Specifically, they invoked
Sections 5 and 6, Rule VII-A, which allow the deduction of facilities provided by the
employer through an appropriate Facility Evaluation Order issued by the Regional Director
of the DOLE.
[84]
Petitioners also aver that they give five (5) percent of the gross income
each month as incentives. As proof of compliance of payment of minimum wages,
petitioners submitted the Notice of Inspection Results issued in 1995 and 1997 by the
DOLE Regional Office.
[85]

The cost of meals and snacks purportedly provided to respondents cannot be
deducted as part of respondents minimum wage. As stated in the Labor Arbiters
decision:
[86]

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the
DOLE Regional Office whereby the cost of meals given by [petitioners] to [respondents] were
specified for purposes of considering the same as part of their wages, We cannot consider the cost
of meals in the Orders as applicable to [respondents]. [Respondents] were not interviewed by the
DOLE as to the quality and quantity of food appearing in the applications of [petitioners] for
facility evaluation prior to its approval to determine whether or not [respondents] were indeed
given such kind and quantity of food. Also, there was no evidence that the quality and quantity of
food in the Orders were voluntarily accepted by [respondents]. On the contrary; while some [of the
respondents] admitted that they were given meals and merienda, the quality of food serve[d] to
them were not what were provided for in the Orders and that it was only when they filed these
cases that they came to know about said Facility Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p.
40, tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for evaluation of the facility
(food) given to [respondents], testified that she did not inform [respondents] concerning said
Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities,
such facilities could not be deducted without compliance with certain legal requirements.
As stated in Mabeza v. NLRC,
[87]
the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily
accepted in writing by the employee; and (c) the facilities are charged at fair and
reasonable value. The records are clear that petitioners failed to comply with these
requirements. There was no proof of respondents written authorization. Indeed, the
Labor Arbiter found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was provided for in the
Facility Evaluation Orders and it was only when they filed the cases that they came to
know of this supposed Facility Evaluation Orders.
[88]
Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities she had applied
for.
[89]

Considering the failure to comply with the above-mentioned legal requirements, the
Labor Arbiter therefore erred when he ruled that the cost of the meals actually provided to
respondents should be deducted as part of their salaries, on the ground that respondents
have availed themselves of the food given by petitioners.
[90]
The law is clear that mere
availment is not sufficient to allow deductions from employees wages.
More important, we note the uncontroverted testimony of respondents on record that
they were required to eat in the hotel and restaurant so that they will not go home and
there is no interruption in the services of Mayon Hotel & Restaurant. As ruled in Mabeza,
food or snacks or other convenience provided by the employers are deemed as
supplements if they are granted for the convenience of the employer. The criterion in
making a distinction between a supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose.
[91]
Considering, therefore, that hotel workers are required to
work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as petitioners
business.
[92]
The deduction of the cost of meals from respondents wages, therefore, should
be removed.
We also do not agree with petitioners that the five (5) percent of the gross income of
the establishment can be considered as part of the respondents wages. We quote with
approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts as profit share,
the same cannot be considered as part of their wages in determining their claims for violation of
labor standard benefits. Although called profit share[,] such is in the nature of share from service
charges charged by the hotel. This is more explained by [respondents] when they testified that
what they received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93,
94, 103, 104; vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts received
by [respondents] as profit share are to be considered part of their wages and had been agreed by
them prior to their employment. Further, how can the amounts receive[d] by [respondents] be
considered as profit share when the same [are] based on the gross receipt of the hotel[?] No profit
can as yet be determined out of the gross receipt of an enterprise. Profits are realized after
expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we sustain the
Labor Arbiter. We note that petitioners themselves have admitted that the establishment
employs more or less sixteen (16) employees,
[93]
therefore they are estopped from
claiming that the applicable minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that
this is not a defense to payment of labor standard benefits. The employer cannot exempt
himself from liability to pay minimum wages because of poor financial condition of the
company. The payment of minimum wages is not dependent on the employers ability to
pay.
[94]

Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents employment in an underhanded
manner, and have used and abused the quasi-judicial and judicial processes to resist
payment of their employees rightful claims, thereby protracting this case and causing the
unnecessary clogging of dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the circumstances of this case
would have called for exemplary damages, as the dismissal was effected in a wanton,
oppressive or malevolent manner,
[95]
and public policy requires that these acts must be
suppressed and discouraged.
[96]

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages
of P10,000.00 each to all respondents. While it is true that other forms of damages under
the Civil Code may be awarded to illegally dismissed employees,
[97]
any award of moral
damages by the Labor Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.
[98]
And the law is clear that exemplary damages can only be
awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory
damages.
[99]

As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and
Broola specifically claimed damages from petitioners, then only they are entitled to
exemplary damages.[sjgs1]
Finally, we rule that attorneys fees in the amount to P10,000.00 should be granted to
each respondent. It is settled that in actions for recovery of wages or where an employee
was forced to litigate and incur expenses to protect his rights and interest, he is entitled to
an award of attorney's fees.
[100]
This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17,
2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision
of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97
is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to respondents
Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all respondents;
(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog,
Llarena, Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except
Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola; and
(6) Granting attorneys fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total
monetary benefits awarded and due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty
(30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.

GRATUITY, ALLOWANCES AND BONUS
SECOND DIVISION


LEPANTO CERAMICS, INC.,
Petitioner,




- versus -





LEPANTO CERAMICS
EMPLOYEES ASSOCIATION,
Respondent.

G.R. No. 180866


Present:

CARPIO, J.,
Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.


Promulgated:

March 2, 2010
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D E C I S I O N


PEREZ, J .:


Before this Court is a Petition for Review on Certiorari under Rule 45
[1]
of the 1997
Rules of Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the:
(1) Decision
[2]
of the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which
affirmed in toto the decision of the Voluntary Arbitrator
[3]
granting the members of the
respondent association a Christmas Bonus in the amount of Three Thousand Pesos (P3,000.00),
or the balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year 2002, and the (2)
Resolution
[4]
of the same court dated 13 December 2007 denying Petitioners Motion for
Reconsideration.

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and
operating by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and
sell, on wholesale basis, among others, tiles, marbles, mosaics and other similar products.
[5]


Respondent Lepanto Ceramics Employees Association (respondent Association) is a
legitimate labor organization duly registered with the Department of Labor and Employment. It
is the sole and exclusive bargaining agent in the establishment of petitioner.
[6]


In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the
respondent Association.
[7]


Subsequently, in September 1999, petitioner and respondent Association entered into a
Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a
Christmas gift package/bonus to the members of the respondent Association.
[8]
The Christmas
bonus was one of the enumerated existing benefit, practice of traditional rights which shall
remain in full force and effect.

The text reads:
Section 8. All other existing benefits, practice of traditional rights
consisting of Christmas Gift package/bonus, reimbursement of transportation
expenses in case of breakdown of service vehicle and medical services and safety
devices by virtue of company policies by the UNION and employees shall remain
in full force and effect.

Section 1. EFFECTIVITY

This agreement shall become effective on September 1, 1999 and shall
remain in full force and effect without change for a period of four (4) years or up
to August 31, 2004 except as to the representation aspect which shall be effective
for a period of five (5) years. It shall bind each and every employee in the
bargaining unit including the present and future officers of the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead,
petitioner gave each of the members of respondent Association Tile Redemption Certificates
equivalent to P3,000.00.
[9]
The bonus for the year 2002 is the root of the present
dispute. Petitioner gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a
cash advance to interested employees equivalent to one (1) month salary payable in one
year.
[10]
The respondent Association objected to the P600.00 cash benefit and argued that this
was in violation of the CBA it executed with the petitioner.

The parties failed to amicably settle the dispute. The respondent Association filed a
Notice of Strike with the National Conciliation Mediation Board, Regional Branch No. IV,
alleging the violation of the CBA. The case was placed under preventive mediation. The
efforts to conciliate failed. The case was then referred to the Voluntary Arbitrator for resolution
where the Complaint was docketed as Case No. LAG-PM-12-095-02.

In support of its claim, respondent Association insisted that it has been the traditional
practice of the company to grant its members Christmas bonuses during the end of the calendar
year, each in the amount of P3,000.00 as an expression of gratitude to the employees for their
participation in the companys continued existence in the market. The bonus was either in cash
or in the form of company tiles. In 2002, in a speech during the Christmas celebration, one of
the companys top executives assured the employees of said bonus. However, the Human
Resources Development Manager informed them that the traditional bonus would not be given
as the companys earnings were intended for the payment of its bank loans. Respondent
Association argued that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus
had no basis as the same was not a demandable and enforceable obligation. It argued that the
giving of extra compensation was based on the companys available resources for a given year
and the workers are not entitled to a bonus if the company does not make profits. Petitioner
adverted to the fact that it was debt-ridden having incurred net losses for the years 2001 and
2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the companys
accumulated losses amounted to over P2.7 billion. Petitioner further argued that the grant of a
one (1) month salary cash advance was not meant to take the place of a bonus but was meant to
show the companys sincere desire to help its employees despite its precarious financial
condition. Petitioner also averred that the CBA provision on a Christmas gift/bonus refers to
alternative benefits. Finally, petitioner emphasized that even if the CBA contained an
unconditional obligation to grant the bonus to the respondent Association, the present difficult
economic times had already legally released it therefrom pursuant to Article 1267 of the Civil
Code.
[11]


The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner
is bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the
bonus was given prior to the effectivity of the CBA between the parties and that the financial
losses of the company is not a sufficient reason to exempt it from granting the same. It stressed
that the CBA is a binding contract and constitutes the law between the parties. The Voluntary
Arbitrator further expounded that since the employees had already been given P600.00 cash
bonus, the same should be deducted from the claimed amount of P3,000.00, thus leaving a
balance of P2,400.00. The dispositive portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay
the members of the complainant union LCEA their respective Christmas bonus in the
amount of three thousand (P3,000.00) pesos for the year 2002 less the P600.00
already given or a balance of P2,400.00.
[12]



Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in
an Order dated 27 June 2003, in this wise:

The Motion for Reconsideration filed by the respondent in the above-entitled
case which was received by the Undersigned on June 26, 2003 is hereby denied
pursuant to Section 7 Rule XIX on Grievance Machinery and Voluntary Arbitration;
Amending The Implementing Rules of Book V of the Labor Code of the Philippines;
to wit:

Section 7. Finality of Award/Decision The decision, order,
resolution or award of the voluntary arbitrator or panel of voluntary
arbitrators shall be final and executory after ten (10) calendar days from
receipt of the copy of the award or decision by the parties and it shall not
be subject of a motion for reconsideration.
[13]



Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under
Rule 65 of the Rules of Court docketed as CA-G.R. SP No. 78334.
[14]
As adverted to earlier, the
Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court
also denied petitioners motion for reconsideration.

In affirming respondent Associations right to the Christmas bonus, the Court of Appeals
held:

In the case at bar, it is indubitable that petitioner offered private respondent a
Christmas bonus/gift in 1998 or before the execution of the 1999 CBA which
incorporated the said benefit as a traditional right of the employees. Hence, the grant
of said bonus to private respondent can be deemed a practice as the same has not been
given only in the 1999 CBA. Apparently, this is the reason why petitioner specifically
recognized the grant of a Christmas bonus/gift as a practice or tradition as stated in the
CBA. x x x.

x x x x

Evidently, the argument of petitioner that the giving of a Christmas bonus is a
management prerogative holds no water. There were no conditions specified in the
CBA for the grant of said benefit contrary to the claim of petitioner that the same is
justified only when there are profits earned by the company. As can be gleaned from
the CBA, the payment of Christmas bonus was not contingent upon the realization of
profits. It does not state that if the company derives no profits, there are no bonuses to
be given to the employees. In fine, the payment thereof was not related to the
profitability of business operations.

Moreover, it is undisputed that petitioner, aside from giving the mandated
13
th
month pay, has further been giving its employees an additional Christmas bonus
at the end of the year since 1998 or before the effectivity of the CBA in September
1999. Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought
about the filing of the complaint for alleged non-payment of the 2002 Christmas
bonus does not involve the exercise of management prerogative as the same was given
continuously on or about Christmas time pursuant to the CBA. Consequently, the
giving of said bonus can no longer be withdrawn by the petitioner as this would
amount to a diminution of the employees existing benefits.
[15]



Not to be dissuaded, petitioner is now before this Court. The only issue before us is
whether or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that
the petitioner is obliged to give the members of the respondent Association a Christmas bonus
in the amount of P3,000.00 in 2002.
[16]


We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of
labor officials, who are deemed to have acquired expertise in matters within their respective
jurisdictions, are generally accorded not only respect but even finality, and bind us when
supported by substantial evidence. This is the rule particularly where the findings of both the
arbitrator and the Court of Appeals coincide.
[17]


As a general proposition, an arbitrator is confined to the interpretation and application of
the CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate
only in so far as it draws its essence from the CBA.
[18]
That was done in this case.

By definition, a bonus is a gratuity or act of liberality of the giver. It is something given
in addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and
paid to an employee for his industry and loyalty which contributed to the success of the
employers business and made possible the realization of profits.
[19]


A bonus is also granted by an enlightened employer to spur the employee to greater
efforts for the success of the business and realization of bigger profits.
[20]


Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable, it must have been promised by the employer and expressly agreed upon by the
parties.
[21]
Given that the bonus in this case is integrated in the CBA, the same partakes the
nature of a demandable obligation. Verily, by virtue of its incorporation in the CBA, the
Christmas bonus due to respondent Association has become more than just an act of generosity
on the part of the petitioner but a contractual obligation it has undertaken.
[22]


A CBA refers to a negotiated contract between a legitimate labor organization and the
employer, concerning wages, hours of work and all other terms and conditions of employment
in a bargaining unit. As in all other contracts, the parties to a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided these are not
contrary to law, morals, good customs, public order or public policy.
[23]


It is a familiar and fundamental doctrine in labor law that the CBA is the law between the
parties and they are obliged to comply with its provisions.
[24]
This principle stands strong and
true in the case at bar.

A reading of the provision of the CBA reveals that the same provides for the giving of a
Christmas gift package/bonus without qualification. Terse and clear, the said provision did
not state that the Christmas package shall be made to depend on the petitioners financial
standing. The records are also bereft of any showing that the petitioner made it clear during
CBA negotiations that the bonus was dependent on any condition. Indeed, if the petitioner and
respondent Association intended that the P3,000.00 bonus would be dependent on the company
earnings, such intention should have been expressed in the CBA.

It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that
the 1997 financial crisis in the Asian region adversely affected the Philippine economy.
[25]


From the foregoing, petitioner cannot insist on business losses as a basis for disregarding
its undertaking. It is manifestly clear that petitioner was very much aware of the imminence
and possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered
a net loss of P14,347,548.00.
[26]
Yet it gave aP3,000.00 bonus to the members of the respondent
Association. In 1999, when petitioners very own financial statement reflected that the positive
developments in the economy have yet to favorably affect the operations of the
company,
[27]
and reported a loss of P346,025,733.00,
[28]
it entered into the CBA with the
respondent Association whereby it contracted to grant a Christmas gift package/bonus to the
latter. Petitioner supposedly continued to incur losses in the years 2000
[29]
and 2001. Still and
all, this did not deter it from honoring the CBA provision on Christmas bonus as it continued to
give P3,000.00 each to the members of the respondent Association in the years 1999, 2000 and
2001.

All given, business losses are a feeble ground for petitioner to repudiate its obligation
under the CBA. The rule is settled that any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the employer. The
principle of non-diminution of benefits is founded on the constitutional mandate to protect the
rights of workers and to promote their welfare and to afford labor full protection.
[30]


Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or
duress, it is presumed that it entered into the CBA voluntarily and had full knowledge of the
contents thereof and was aware of its commitments under the contract.

The Court is fully aware that implementation to the letter of the subject CBA provision
may further deplete petitioners resources. Petitioners remedy though lies not in the Courts
invalidation of the provision but in the parties clarification of the same in subsequent CBA
negotiations. Article 253 of the Labor Code is relevant:
Art. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. - When there is a collective bargaining agreement, the
duty to bargain collectively shall also mean that neither party shall terminate nor
modify such agreement during its lifetime. However, either party can serve a
written notice to terminate or modify the agreement at least sixty (60) days prior
to its expiration date. It shall be the duty of both parties to keep the status quo
and to continue in full force and effect the terms and conditions of the existing
agreement during the sixty (60)-day period and/or until a new agreement is
reached by the parties.

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The
Decision of the Court of Appeals dated 5 April 2006 and the Resolution of the same court
dated 13 December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.

SO ORDERED.
ECOND DIVISION


DEPARTMENT OF BUDGET AND G.R. No. 169726
MANAGEMENT, represented by
Sec. Emilia T. Boncodin, Present:
Petitioner,
CARPIO, J., Chairperson,
CARPIO MORALES,
*

BRION,
- versus - ABAD, and
PEREZ, JJ.


OLIVIA D. LEONES, Promulgated:
Respondent. March 18, 2010
x --------------------------------------------------------------------------------------- x


D E C I S I O N


CARPIO, J .:


The Case

This resolves the petition for review
[1]
of the Decision
[2]
of the Court of Appeals finding
respondent Olivia D. Leones entitled to representation and transportation allowance.





The Facts


Before 1996, respondent Olivia D. Leones (respondent) was the Municipal Treasurer
of Bacnotan, La Union. In December 1996, respondent was reassigned to the Office of the
Provincial Treasurer, La Union, pending resolution of administrative cases filed against
her.
[3]
As Municipal Treasurer, respondent received, on top of her salary, representation and
transportation allowance (RATA). The Municipality of Bacnotan stopped paying RATA to
respondent upon her reassignment to the Provincial Government.

After unsuccessfully obtaining administrative relief,
[4]
respondent filed a mandamus suit
with the Regional Trial Court of San Fernando City, La Union (trial court) against petitioner
Department of Budget and Management (DBM) and then mayor of Bacnotan,
Ma. Minda Fontanilla (Fontanilla), to compel payment of RATA. The trial court dismissed the
petition for non-exhaustion of administrative remedies. On appeal by respondent,
[5]
the Court of
Appeals affirmed the dismissal. As respondent no longer pursued the case, the trial courts
ruling became final on 30 June 2003.

However, respondent again sought an opinion, this time from the DBM Secretary, on her
entitlement to RATA. In its reply dated 3 September 2003 (Opinion), the DBM found
respondent entitled to RATA only for 1999 under the General Appropriation Act (GAA) for
that year which, unlike previous and succeeding years, did not require actual performance of
x x x functions as condition for receipt of RATA.


Assailing the Opinion, respondent filed a petition for certiorari with the Court of
Appeals. Respondent contended that her non-receipt of RATA violates the rule on non-
dimunition of salary in reassignments.

The Ruling of the Court of Appeals

In its Decision dated 24 May 2005, the Court of Appeals granted respondents petition
and ordered the DBM and Fontanilla to pay respondent RATA for the duration of her
reassignment. Sustaining respondents theory, the Court of Appeals characterized RATA as part
of salary, thus subject to the rule on non-dimunition of salary in reassignments.
[6]
The Court of
Appeals found erroneous the DBMs reliance on the GAAs requiring actual performance of
functions as precondition for payment of RATA because respondents salary was charged
against the local budget of Bacnotan and not against the national budget.
[7]

The DBMs motion for reconsideration equally proved unsuccessful.
[8]


HENCE, THIS PETITION.

The DBM argues that RATA is not part of salary and does not attach to the position but is
paid based on the actual performance of functions. Hence, respondent, not having been in the
actual performance of her functions as treasurer of Bacnotan during her reassignment to the La
Union treasurers office, is not entitled to receive RATA except for 1999 because the GAA for
that year did not require actual performance of functions as condition for payment of RATA.

THE ISSUE

The question is whether, after her reassignment to the La Union treasurers office,
respondent, the treasurer of Bacnotan, was entitled to receive RATA.

The Ruling of the Court

We hold that respondent was entitled to receive RATA after her reassignment, not
because the allowance forms part of her salary, but because the discontinuance of payment lacks
legal basis.

RATA Distinct from Salary


The DBM correctly characterizes RATA as allowance distinct from salary. Statutory
law,
[9]
as implemented by administrative issuances
[10]
and interpreted in decisions,
[11]
has
consistently treated RATA as distinct from salary. Unlike salary which is paid for services
rendered, RATA belongs to a basket of allowances
[12]
to defray expenses deemed unavoidable in
the discharge of office.
[13]
Hence, RATA is paid only to certain officials who, by the nature of
their offices, incur representation and transportation expenses.

However, the foregoing does not inexorably lead to the conclusion that under all
circumstances and despite lack of legal basis, RATA is paid only if the RATA-entitled officer
actually discharges his office. First, it became necessary to distinguish allowances (such as
RATA) from salary mainly because under Section 12 of the Compensation and Position
Classification Act of 1989 (RA 6758)
[14]
(applicable to all public sector employees), all forms of
financial assistance and allowances
[15]
were integrated to the standardized salaries except
for certain allowances specified by RA 6758 (such as RATA) and as determined by
regulation.
[16]
Second, non-performance of duties may result from compliance with orders
devoid of the employees volition such as suspension, termination resulting in reinstatement, or,
as here, reassignment. At any rate, the denial of RATA must be grounded on relevant and
specific provision of law.

No Law J ustifies Denial of RATA for
REASSI GNED LOCAL GOVERNMENT OFFI CI ALS

The DBM concedes that as Municipal Treasurer, respondent was entitled to receive (and
did receive) RATA because such position is equivalent to a head of a municipal government
department.
[17]
However, the DBM contends that respondents reassignment to La Union
treasurers office cut off this entitlement. As bases for this claim, the DBM invokes
the GAAs from 1996 to 2005 (except in 1999
[18]
) uniformly providing (in different sections
[19]
)
thus:

[T]he following officials and those of equivalent rank as may be determined by
the Department of Budget and Management while in the actual performance of their
respective functions are hereby granted monthly commutable representation and
transportation allowances payable from the programmed appropriations provided for
their respective offices not exceeding the rates indicated below x x x. (Emphasis
supplied)

As secondary basis, the DBM calls the Courts attention to Section 3.3.1 of the National
Compensation Circular No. 67 (Section 3.3.1), dated 1 January 1992, which provides:

3.3. The officials and employees referred to in Sections 2.1, 2.2 and 2.3 hereof
shall no longer be authorized to continue to collect RATA in the following
instances:


3.3.1 When on full-time detail with another organizational unit of the same
agency, another agency, or special project for one (1) full calendar month
or more, except when the duties and responsibilities they perform are
comparable with those of their regular positions, in which case, they may
be authorized to continue to collect RATA on a reimbursable basis,
subject to the availability of funds[.] (Emphasis supplied)

and contends that respondent falls under the general rule thus justifying the cessation of her
RATA payment.

None of these rules supports the DBMs case.

On the relevance of the GAAs, the Court of Appeals correctly pointed out that they find
no application to a local government official like respondent whose compensation and
allowances are funded by local appropriation laws passed by
the Sangguniang Bayan of Bacnotan. It is the municipal ordinances of Bacnotan, providing for
the annual budget for its operation, which govern respondents receipt of RATA. Although the
records do not contain copies of the relevant Bacnotanbudget ordinances, we find
significant Fontanillas referral to the DBM of respondents April 2002 letter requesting RATA
payment.
[20]
Evidently, Bacnotans annual budgetary appropriations for 1996 to 2005 contained
no provision similar to the provisions in the GAAs the DBM now cites;
otherwise, Fontanilla would have readily invoked them to deny respondents request.

The DBM tries to go around this insuperable obstacle by distinguishing payment from
the conditions for the payment and theorizes that although respondents salary and allowances
were charged against Bacnotans annual budget, they were subject to the condition contained in
the GAAs for 1996-2005 linking the payment of RATA to the actual performance of
duties.
[21]
The Court cannot subscribe to this theory without ignoring the wall dividing the
vertical structure of government in this country and a foundational doctrine animating local
governance.

Although the Philippines is a unitary State, the present Constitution (as in the past)
accommodates within the system the operation of local government units with
enhanced administrative autonomy and autonomous regions with
limited political autonomy.
[22]
Subject to the Presidents power of general supervision
[23]
and
exercising delegated powers, these units and regions operate much like the national
government, with their own executive and legislative branches, financed by locally generated
and nationally allocated funds disbursed through budgetary ordinances passed by their local
legislative councils. The DBMs submission tinkers with this design by making provisions in
national budgetary laws automatically incorporated in local budgetary ordinances, thus reducing
local legislative councils from the provinces down to the barangays and the legislative
assembly of the Autonomous Region in Muslim Mindanao, to mere extensions of
Congress. Although novel, the theory is anathema to the present vertical structure of Philippine
government and to any notion of local autonomy which the Constitution mandates.

Nor can the DBM anchor its case on Section 3.3.1. The National Compensation Circular
No. 67, which the DBM issued, is entitled Representation and Transportation Allowances
of National Government Officials and Employees, thus excluding local government officials
like respondent from its ambit. At any rate, respondent falls under the exception clause in
Section 3.3.1, having been reassigned to another unit of the same agency with duties and
responsibilities comparable to her previous position.

Respondent was reassigned to La Union treasurers office within the same
agency,
[24]
namely, the Department of Finance, because local treasuries remain under the
control of the Secretary of Finance
[25]
(unlike some offices which were devolved to the local
governments
[26]
). Paragraphs (d) and (e) of Section 470 ofRepublic Act No. 7160 (RA 7160),
the Local Government Code of 1991, provide the functions of The treasurer:

(d) The treasurer shall take charge of the treasury office, perform the duties
provided for under Book II of this Code, and shall:

(1) Advise the governor or mayor, as the case may be,
the sanggunian, and other local government and
national officials concerned regarding disposition of local government
funds, and on such other matters relative to public finance;

(2) Take custody of and exercise proper management of the funds of the local government
unit concerned;

(3) Take charge of the disbursement of all local government funds and such other funds the
custody of which may be entrusted to him by law or other competent authority;

(4) Inspect private commercial and industrial establishments within the jurisdiction of the local
government unit concerned in relation to the implementation of tax ordinances, pursuant to the
provisions under Book II of this Code;

(5) Maintain and update the tax information system of the local government unit;

(6) In the case of the provincial treasurer, exercise technical supervision over all treasury
offices of component cities and municipalities; and

(e) Exercise such other powers and perform such other duties and functions as may be prescribed
by law or ordinance. (Emphasis supplied)


Thus, irrespective of the level of the local government unit involved, no distinction exists
in the functions of local treasurers except in the technical supervision by the provincial treasurer
over subordinate treasury offices. Logically, the employees in all local treasuries perform
comparable functions within the framework of Section 70 (d) and (e). Hence, the DBMs casual
claim that the facts at hand do not reflect that the functions performed by respondent during
the period of her reassignment were comparable to those she performed prior to her
reassignment
[27]
finds no basis in fact or in law. In terms of performing comparative functions,
the reassignment here is no different from that of a RATA-entitled officer of the Department of
Science and Technology who, as Chief of the Finance and Management Division, was
reassigned to the Directors Office, Finance and Management Service Office. We considered
the officer entitled to RATA despite the reassignment for lack of basis for the non-
payment.
[28]
Indeed, for an employee not to fall under the exception in Section 3.3.1, the
functions attached to the new office must be so alien to the functions pertaining to the former
office as to make the two absolutely unrelated or non-comparable.

Before disposing of this matter, we highlight the element of
inequity undergirding the DBMs case. By insisting that, as requisite for her receipt of RATA,
respondent must discharge her office as Bacnotans treasurer while on reassignment at the La
Union treasurers office, the DBM effectively punishes respondent for acceding to her
reassignment. Surely, the law could not have intended to place local government officials like
respondent in the difficult position of having to choose between disobeying a reassignment
order or keeping an allowance. As we observed in a parallel case:

[O]n petitioners contention that RATA should be allowed only if private respondent
is performing the duties of her former office, the CSC correctly explained that private
respondent was reassigned to another office and thus her inability to perform the
functions of her position as Division Chief is beyond her control and not of her own
volition.[] x x x
[29]



The DBM itself acknowledged the harshness of its position by carving in Section 3.3.1 an
exception for national government officials performing comparable duties while on
reassignment, cushioning the deleterious financial effects reassignments bring to the employee
with due regard to the state of the governments coffers.


WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 24 May 2005
and the Resolution dated 15 September 2005 of the Court of Appeals.

SO ORDERED.

PAYMENT BY RESULTS
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 111042 October 26, 1999
AVELINO LAMBO and VICENTE BELOCURA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and J.C. TAILOR SHOP and/or JOHNNY
CO, respondents.
MENDOZA, J .:
This is a petition for certiorari to set aside the decision
1
of the National Labor Relations Commission (NLRC)
which reversed the awards made by the Labor Arbiter in favor of petitioners, except one for P4,992.00 to each,
representing 13th month pay.
The facts are as follows.
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents
J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3, 1985, respectively. They
worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the case of the other
100 employees of private respondents, petitioners were paid on a piece-work basis, according to the
style of suits they made. Regardless of the number of pieces they finished in a day, they were each
given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal
and sought recovery of overtime pay, holiday pay, premium pay on holiday and rest day, service
incentive leave pay, separation pay, 13th month pay, and attorneys fees.1wphi1. nt
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty of illegal dismissal and
accordingly ordered them to pay petitioners claims. The dispositive portion of the Labor Arbiters
decision reads:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered
declaring the complainants to have been illegally dismissed and ordering the
respondents to pay the complainants the following monetary awards:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

TOTAL P94,719.20 P96,383.20 = P191,102.40
Add: 10% Attorney's Fees 19,110.24

GRAND TOTAL P210,212.64
=========
or a total aggregate amount of TWO HUNDRED TEN THOUSAND TWO
HUNDRED TWELVE AND 64/100 (P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED.
2

On appeal by private respondents, the NLRC reversed the decision of the Labor Arbiter. It found that
petitioners had not been dismissed from employment but merely threatened with a closure of the
business if they insisted on their demand for a "straight payment of their minimum wage," after
petitioners, on January 17, 1989, walked out of a meeting with private respondents and other
employees. According to the NLRC, during that meeting, the employees voted to maintain the
company policy of paying them according to the volume of work finished at the rate of P18.00 per
dozen of tailored clothing materials. Only petitioners allegedly insisted that they be paid the minimum
wage and other benefits. The NLRC held petitioners guilty of abandonment of work and accordingly
dismissed their claims except that for 13th month pay. The dispositive portion of its decision reads:
WHEREFORE, in view of the foregoing, the appealed decision is hereby vacated and a
new one entered ordering respondents to pay each of the complainants their 13th
month pay in the amount of P4,992.00. All other monetary awards are hereby deleted.
SO ORDERED.
3

Petitioners allege that they were dismissed by private respondents as they were about to file a
petition with the Department of Labor and Employment (DOLE) for the payment of benefits such as
Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they
abandoned their work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of private respondents although they were
paid not on the basis of time spent on the job but according to the quantity and the quality of work
produced by them. There are two categories of employees paid by results: (1) those whose time and
performance are supervised by the employer. (Here, there is an element of control and supervision
over the manner as to how the work is to be performed. A piece-rate worker belongs to this category
especially if he performs his work in the company premises.); and (2) those whose time and
performance are unsupervised. (Here, the employers control is over the result of the work. Workers
on pakyao and takay basis belong to this group.) Both classes of workers are paid per unit
accomplished. Piece-rate payment is generally practiced in garment factories where work is done in
the company premises, while payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is performed in bulk or in volumes
difficult to quantify.
4
Petitioners belong to the first category, i.e., supervised employees.
In determining the existence of an employer-employee relationship, the following elements must be
considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct.
5
Of these elements, the most
important criterion is whether the employer controls or has reserved the right to control the employee not only as to the
result of the work but also as to the means and methods by which the result is to be accomplished.
6

In this case, private respondents exercised control over the work of petitioners. As tailors, petitioners
worked in the companys premises from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays.
The mere fact that they were paid on a piece-rate basis does not negate their status as regular
employees of private respondents. The term "wage" is broadly defined in Art. 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations.
7
Nor does the fact that petitioners are not
covered by the SSS affect the employer-employee relationship.
Indeed, the following factors show that petitioners, although piece-rate workers, were regular
employees of private respondents: (1) within the contemplation of Art. 280 of the Labor Code, their
work as tailors was necessary or desirable in the usual business of private respondents, which is
engaged in the tailoring business; (2) petitioners worked for private respondents throughout the year,
their employment not being dependent on a specific project or season; and, (3) petitioners worked for
private respondents for more than one year.
8

Second. Private respondents contend, however, that petitioners refused to report for work after
learning that the J.C. Tailoring and Dress Shop Employees Union had demanded their (petitioners)
dismissal for conduct unbecoming of employees. In support of their claim, private respondents
presented the affidavits
9
of Emmanuel Y. Caballero, president of the union, and Amado Cabaero, member, that
petitioners had not been dismissed by private respondents but that practically all employees of the company, including the
members of the union had asked management to terminate the services of petitioners. The employees allegedly said they
were against petitioners request for change of the mode of payment of their wages, and that when a meeting was called
to discuss this issue, a petition for the dismissal of petitioners was presented, prompting the latter to walk out of their jobs
and instead file a complaint for illegal dismissal against private respondents on January 17, 1989, even before all
employees could sign the petition and management could act upon the same.1wphi1.nt
To justify a finding of abandonment of work, there must be proof of a deliberate and unjustified refusal
on the part of an employee to resume his employment. The burden of proof is on the employer to
show an unequivocal intent on the part of the employee to discontinue employment.
10
Mere absence is
not sufficient. It must be accompanied by manifest acts unerringly pointing to the fact that the employee simply does not
want to work anymore.
11

Private respondents failed to discharge this burden. Other than the self-serving declarations in the
affidavits of their two employees, private respondents did not adduce proof of overt acts of petitioners
showing their intention to abandon their work. On the contrary, the evidence shows that petitioners
lost no time in filing the case for illegal dismissal against private respondent. This fact negates any
intention on their part to sever their employment relationship.
12
Abandonment is a matter of intention; it
cannot be inferred or presumed from equivocal acts.
13

Third. Private respondents invoke the compromise agreement,
14
dated March 2, 1993, between them and
petitioner Avelino Lambo, whereby in consideration of the sum of P10,000.00, petitioner absolved private respondents
from liability for money claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy. But those (1) where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person or (2) where the
terms of settlement are unconscionable on their face are invalid. In these cases, the law will step in to
annul the questionable transaction.
15
However, considering that the Labor Arbiter had given petitioner Lambo a
total award of P94,719.20, the amount of P10,000.00 to cover any and all monetary claims is clearly unconscionable. As
we have held in another case,
16
the subordinate position of the individual employee vis-a-vis management renders him
especially vulnerable to its blandishments, importunings, and even intimidations, and results in his improvidently waiving
benefits to which he is clearly entitled. Thus, quitclaims, waivers or releases are looked upon with disfavor for being
contrary to public policy and are ineffective to bar claims for the full measure of the workers legal rights.
17
An employee
who is merely constrained to accept the wages paid to him is not precluded from recovering the difference between the
amount he actually received and that amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th month pay,
separation pay and attorneys fees, corresponding to 10% of the total monetary awards, in favor of
petitioners.
As petitioners were illegally dismissed, they are entitled to reinstatement with backwages.
Considering that petitioners were dismissed from the service on January 17, 1989, i.e., prior to March
21, 1989,
18
the Labor Arbiter correctly applied the rule in the Mercury Drug case,
19
according to which the recovery of
backwages should be limited to three years without qualifications or deductions. Any award in excess of three years is null
and void as to the excess.
20

The Labor Arbiter correctly ordered private respondents to give separation pay. Considerable time
has lapsed since petitioners dismissal, so that reinstatement would now be impractical and hardly in
the best interest of the parties. In lieu of reinstatement, separation pay should be awarded to
petitioners at the rate of one month salary for every year of service, with a fraction of at least six (6)
months of service being considered as one (1) year.
21

The awards for overtime pay, holiday pay and 13th month pay are in accordance with our finding that
petitioners are regular employees, although paid on a piece-rate basis.
22
These awards are based on the
following computation of the Labor Arbiter:
AVELINO LAMBO
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
P 64.00/day x 26 days =
1,664.00/mo. x 36 mos. = P59,904.00
13th Mo. Pay:
P1,664.00/yr. x 3 yrs. = 4,992.00 P64,896.00

II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
Jan. 17/86 - April 30/87 = 15 mos. & 12 day =
(15 mos. x 26 days + 12 days) = 402 days
*2 hours = 25%
402 days x 2 hrs./days = 804 hrs.
P 32.00/day 8 hrs. =
4.00/hr. x 25% =
1.00/hr. + P4.00/hr. =
5.00/hr. x 804 hrs. = 4,020.00
May 1/87 - Sept. 30/87 = 4 mos. & 26 days =
(4 mos. x 26 days + 26 days) = 130 days
130 days x 2 hrs./day = 260 hrs.
P 41.00/day 8 hrs. =
5.12/hr. x 25% =
1.28/hr. + P5.12/hr. =
6.40/hr. x 260 hrs. = P1,664.00
Oct. 1/87 - Dec. 13/87 = 2 mos. & 11 days =
(2 mos. x 26 days + 11 days) = 63 days
63 days x 2 hrs./day = 126 hrs.
P 49.00/day 8 hrs. =
6.12/hr. x 25% =
1.53/hr. + P6.12/hr. =
7.65/hr. x 126 hrs. = P963.90
Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days =
(13 mos. x 26 days + 2 days) = 340 days
340 days x 2 hrs./day = 680 hrs.
P 64.00/day 8 hrs. =
8.00/hr. x 25% =
2.00/hr. + P8.00/hr =
10.00/hr. x 680 hrs. = P6,800.00 P13,447.90
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs
P 32.00/day x 200% =
64.00/day x 12 days = 768.00
32.00/day x 12 days = (384.00) P384.00
32.00/day x 30% =
9.60/day x 8 days = 76.80 460.80

May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs
P 41.00/day x 200% =
82.00/day 3 days = 246.00
41.00/day x 3 days = (123.00) P123.00
41.00/day x 30% =
12.30/day x 3 days = 36.90 159.90

Oct. 1/87 - Dec. 13/87 = 1 RH
P 49.00/day x 200% =
98.00/day x 1 day = P98.00
49.00/day x 1 day = (49.00) 49.00

Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs
P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
64.00/day x 9 days = (576.00) P576.00
64.00/day x 30% =
19.20/day x 8 days = 153.60 729.60 1,399.30

IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.
P 64.00/day x 26 days =
1,664.00/yr. x 3 yrs. = 4,992.00
V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6 yrs.
P1,664.00/mo. x 6 yrs. = 9,984.00

TOTAL AWARD OF AVELINO LAMBO P94,719.20
========
VICENTE BELOCURA
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
Same computation as A. Lambo P64,896.00
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo 13,447.90
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo 1,399.30
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo 4,992.00
V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7 yrs.
P1,664.00/mo. x 7 yrs. = 11,648.00

TOTAL AWARD OF VICENTE BELOCURA P96,383.20
=========
SUMMARY
AVELINO LAMBO VICENTE BELOCURA

I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MO. PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorney's Fees 19,110.24

GRAND TOTAL P210,212.64
=========
Except for the award of attorneys fees in the amount of P19,110.24, the above computation is
affirmed. The award of attorneys fees should be disallowed, it appearing that petitioners were
represented by the Public Attorneys Office. With regard to petitioner Avelino Lambo, the amount of
P10,000.00 paid to him under the compromise agreement should be deducted from the total award of
P94,719.20. Consequently, the award to each petitioner should be as follows:
AVELINO LAMBO VICENTE BELOCURA

I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

P 94,719.20
Less 10,000.00

TOTAL P84,719.20 P96,383.20
GRAND TOTAL P181,102.40
=========
WHEREFORE, the decision of the National Labor Relations Commission is SET ASIDE and another
one is RENDERED ordering private respondents to pay petitioners the total amount of One Hundred
Eighty-One Thousand One Hundred Two Pesos and 40/100 (P181,102.40), as computed above.1wphi 1. nt
SO ORDERED.
SEVILLA TRADING COMPANY, petitioner, vs. A.V.A. TOMAS E. SEMANA,
SEVILLA TRADING WORKERS UNIONSUPER, respondents.
D E C I S I O N
PUNO, J .:
On appeal is the Decision
[1]
of the Court of Appeals in CA-G.R. SP No. 63086 dated 27
November 2001 sustaining the Decision
[2]
of Accredited Voluntary Arbitrator Tomas E.
Semana dated 13 November 2000, as well as its subsequent Resolution
[3]
dated 06 March
2002 denying petitioners Motion for Reconsideration.
The facts of the case are as follows:
For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla
Trading, for short), a domestic corporation engaged in trading business, organized and
existing under Philippine laws, added to the base figure, in its computation of the 13
th
-
month pay of its employees, the amount of other benefits received by the employees
which are beyond the basic pay. These benefits included:
(a) Overtime premium for regular overtime, legal and special holidays;
(b) Legal holiday pay, premium pay for special holidays;
(c) Night premium;
(d) Bereavement leave pay;
(e) Union leave pay;
(f) Maternity leave pay;
(g) Paternity leave pay;
(h) Company vacation and sick leave pay; and
(i) Cash conversion of unused company vacation and sick leave.
Petitioner claimed that it entrusted the preparation of the payroll to its office staff,
including the computation and payment of the 13
th
-month pay and other benefits. When it
changed its person in charge of the payroll in the process of computerizing its payroll, and
after audit was conducted, it allegedly discovered the error of including non-basic pay or
other benefits in the base figure used in the computation of the 13
th
-month pay of its
employees. It cited the Rules and Regulations Implementing P.D. No. 851 (13
th
-Month
Pay Law), effective December 22, 1975, Sec. 2(b) which stated that:
Basic salary shall include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to P.D. No. 525
or Letter of Instruction No. 174, profit-sharing payments, and all allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary of the employee at the
time of the promulgation of the Decree on December 16, 1975.
Petitioner then effected a change in the computation of the thirteenth month pay, as
follows:
13
th
-month pay = net basic pay
12 months
where:
net basic pay = gross pay (non-basic pay or other benefits)
Now excluded from the base figure used in the computation of the thirteenth month pay
are the following:
a) Overtime premium for regular overtime, legal and special holidays;
b) Legal holiday pay, premium pay for special holidays;
c) Night premium;
d) Bereavement leave pay;
e) Union leave pay;
f) Maternity leave pay;
g) Paternity leave pay;
h) Company vacation and sick leave pay; and
i) Cash conversion of unused vacation/sick leave.
Hence, the new computation reduced the employees thirteenth month pay. The daily
piece-rate workers represented by private respondent Sevilla Trading Workers Union
SUPER (Union, for short), a duly organized and registered union, through the Grievance
Machinery in their Collective Bargaining Agreement, contested the new computation and
reduction of their thirteenth month pay. The parties failed to resolve the issue.
On March 24, 2000, the parties submitted the issue of whether or not the exclusion of
leaves and other related benefits in the computation of 13
th
-month pay is valid to
respondent Accredited Voluntary Arbitrator Tomas E. Semana (A.V.A. Semana, for short)
of the National Conciliation and Mediation Board, for consideration and resolution.
The Union alleged that petitioner violated the rule prohibiting the elimination or
diminution of employees benefits as provided for in Art. 100 of the Labor Code, as
amended. They claimed that paid leaves, like sick leave, vacation leave, paternity leave,
union leave, bereavement leave, holiday pay and other leaves with pay in the CBA should
be included in the base figure in the computation of their 13
th
-month pay.
On the other hand, petitioner insisted that the computation of the 13
th
-month pay is
based on basic salary, excluding benefits such as leaves with pay, as per P.D. No. 851,
as amended. It maintained that, in adjusting its computation of the 13
th
-month pay, it
merely rectified the mistake its personnel committed in the previous years.
A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision
reads as follows:
WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:
1. The company is hereby ordered to include sick leave and vacation leave, paternity leave,
union leave, bereavement leave and other leave with pay in the CBA, premium for work done on
rest days and special holidays, and pay for regular holidays in the computation of the 13
th
-month
pay to all covered and entitled employees;
2. The company is hereby ordered to pay corresponding backwages to all covered and entitled
employees arising from the exclusion of said benefits in the computation of 13
th
-month pay for the
year 1999.
Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It
filed before the Court of Appeals, a Manifestation and Motion for Time to File Petition for
Certiorari on January 19, 2001. A month later, on February 19, 2001, it filed its Petition
for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure for the nullification of the
Decision of the Arbitrator. In addition to its earlier allegations, petitioner claimed that
assuming the old computation will be upheld, the reversal to the old computation can only
be made to the extent of including non-basic benefits actually included by petitioner in the
base figure in the computation of their 13
th
-month pay in the prior years. It must exclude
those non-basic benefits which, in the first place, were not included in the original
computation. The appellate court denied due course to, and dismissed the petition.
Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal,
as follows:
1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD COMPUTATION OF
THE 13
TH
-MONTH PAY ON THE BASIS THAT THE OLD COMPUTATION HAD RIPENED INTO
PRACTICE IS WITHOUT LEGAL BASIS.
2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN
COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLE DAMAGE TO
EMPLOYERS.
[4]

First, we uphold the Court of Appeals in ruling that the proper remedy from the
adverse decision of the arbitrator is a petition for review under Rule 43 of the 1997 Rules
of Civil Procedure, not a petition for certiorari under Rule 65. Section 1 of Rule 43 states:
RULE 43
Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of Appeals
SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by
any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are
the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange
Commission, Office of the President, Land Registration Authority, Social Security Commission,
Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National
Electrification Administration, Energy Regulatory Board, National Telecommunications
Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service
Insurance System, Employees Compensation Commission, Agricultural Inventions Board,
Insurance Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law.
[Emphasis supplied.]
It is elementary that the special civil action of certiorari under Rule 65 is not, and
cannot be a substitute for an appeal, where the latter remedy is available, as it was in this
case. Petitioner Sevilla Trading failed to file an appeal within the fifteen-day reglementary
period from its notice of the adverse decision of A.V.A. Semana. It received a copy of the
decision of A.V.A. Semana on December 20, 2000, and should have filed its appeal under
Rule 43 of the 1997 Rules of Civil Procedure on or before January 4, 2001. Instead,
petitioner filed on January 19, 2001 a Manifestation and Motion for Time to File Petition
for Certiorari, and on February 19, 2001, it filed a petition for certiorari under Rule 65 of
the 1997 Rules of Civil Procedure. Clearly, petitioner Sevilla Trading had a remedy of
appeal but failed to use it.
A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to
timely file a petition for review on certiorari under Rule 45 (Rule 43, in the case at bar) of
the Rules of Court. Rule 65 is an independent action that cannot be availed of as a
substitute for the lost remedy of an ordinary appeal, including that under Rule 45 (Rule 43,
in the case at bar), especially if such loss or lapse was occasioned by ones own neglect
or error in the choice of remedies.
[5]

Thus, the decision of A.V.A. Semana had become final and executory when petitioner
Sevilla Trading filed its petition for certiorari on February 19, 2001. More particularly, the
decision of A.V.A. Semana became final and executory upon the lapse of the fifteen-day
reglementary period to appeal, or on January 5, 2001. Hence, the Court of Appeals is
correct in holding that it no longer had appellate jurisdiction to alter, or much less, nullify
the decision of A.V.A. Semana.
Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules
of Civil Procedure is a proper action, we still find no grave abuse of discretion amounting
to lack or excess of jurisdiction committed by A.V.A. Semana. Grave abuse of discretion
has been interpreted to mean such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or, in other words where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and it must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law.
[6]
We find nothing of that
sort in the case at bar.
On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in
accord with law and jurisprudence. A.V.A. Semana is correct in holding that petitioners
stance of mistake or error in the computation of the thirteenth month pay is
unmeritorious. Petitioners submission of financial statements every year requires the
services of a certified public accountant to audit its finances. It is quite impossible to
suggest that they have discovered the alleged error in the payroll only in 1999. This
implies that in previous years it does not know its cost of labor and operations. This is
merely basic cost accounting. Also, petitioner failed to adduce any other relevant
evidence to support its contention. Aside from its bare claim of mistake or error in the
computation of the thirteenth month pay, petitioner merely appended to its petition a copy
of the 1997-2002 Collective Bargaining Agreement and an alleged corrected
computation of the thirteenth month pay. There was no explanation whatsoever why its
inclusion of non-basic benefits in the base figure in the computation of their 13
th
-month
pay in the prior years was made by mistake, despite the clarity of statute and
jurisprudence at that time.
The instant case needs to be distinguished from Globe Mackay Cable and Radio
Corp. vs. NLRC,
[7]
which petitioner Sevilla Trading invokes. In that case, this Court
decided on the proper computation of the cost-of-living allowance (COLA) for monthly-paid
employees. Petitioner Corporation, pursuant to Wage Order No. 6 (effective 30 October
1984), increased the COLA of its monthly-paid employees by multiplying the P3.00 daily
COLA by 22 days, which is the number of working days in the
company. The Union disagreed with the computation, claiming that the daily COLA rate
of P3.00 should be multiplied by 30 days, which has been the practice of the company for
several years. We upheld the contention of the petitioner corporation. To answer
the Unions contention of company practice, we ruled that:
Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982
and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be
construed as constitutive of voluntary employer practice, which cannot now be unilaterally
withdrawn by petitioner. To be considered as such, it should have been practiced over a long
period of time, and must be shown to have been consistent and deliberate . . . The test of long
practice has been enunciated thus:
. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said
employees are not covered by the law requiring payment of holiday pay. (Oceanic Pharmacal
Employees Union [FFW] vs. Inciong, 94 SCRA 270 [1979])
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage Order No. 4
were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly
equivalent was laid down.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law . . .
In the above quoted case, the grant by the employer of benefits through an erroneous
application of the law due to absence of clear administrative guidelines is not considered a
voluntary act which cannot be unilaterally discontinued. Such is not the case now. In the
case at bar, the Court of Appeals is correct when it pointed out that as early as 1981, this
Court has held in San Miguel Corporation vs. Inciong
[8]
that:
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used
as the basis in the determination of his 13
th
-month pay. Any compensations or remunerations
which are deemed not part of the basic pay is excluded as basis in the computation of the
mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction
No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the Decree on December 16,
1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13
th
-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction
No. 174 and profit sharing payments indicate the intention to strip basic salary of other payments
which are properly considered as fringe benefits. Likewise, the catch-all exclusionary phrase all
allowances and monetary benefits which are not considered or integrated as part of the basic
salary shows also the intention to strip basic salary of any and all additions which may be in the
form of allowances or fringe benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more empathic in declaring that earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13
th
-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an
employer to an employee, this cloud is dissipated in the later and more controlling Supplementary
Rules and Regulations which categorically, exclude from the definition of basic salary earnings and
other remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former
rules to include all remunerations and earnings within the definition of basic salary.
The all-embracing phrase earnings and other remunerations which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium
for works performed on rest days and special holidays, pay for regular holidays and night
differentials. As such they are deemed not part of the basic salary and shall not be considered in
the computation of the 13
th
-month pay. If they were not so excluded, it is hard to find any
earnings and other remunerations expressly excluded in the computation of the 13
th
-month
pay. Then the exclusionary provision would prove to be idle and with no purpose.
In the light of the clear ruling of this Court, there is, thus no reason for any mistake in
the construction or application of the law. When petitioner Sevilla Trading still included
over the years non-basic benefits of its employees, such as maternity leave pay, cash
equivalent of unused vacation and sick leave, among others in the computation of the
13
th
-month pay, this may only be construed as a voluntary act on its part. Putting the
blame on the petitioners payroll personnel is inexcusable.
In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:
[9]

The Supplementary Rules and Regulations Implementing P.D. No. 851 which put to rest all
doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor as
early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its
Implementing Rules. And yet, petitioner computed and paid the thirteenth month pay, without
excluding the subject items therein until 1981. Petitioner continued its practice in December 1981,
after promulgation of the aforequoted San Miguel decision on February 24, 1981, when petitioner
purportedly discovered its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation
of its employees thirteenth month pay, without the payments for sick, vacation and maternity
leave, premium for work done on rest days and special holidays, and pay for regular holidays. The
considerable length of time the questioned items had been included by petitioner indicates a
unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the
employer, by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No. 851, and Art.
100 of the Labor Code of the Philippines which prohibit the diminution or elimination by the
employer of the employees existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267 (1983)]
With regard to the length of time the company practice should have been exercised to
constitute voluntary employer practice which cannot be unilaterally withdrawn by the
employer, we hold that jurisprudence has not laid down any rule requiring a specific
minimum number of years. In the above quoted case of Davao Fruits Corporation vs.
Associated Labor Unions,
[10]
the company practice lasted for six (6) years. In another
case, Davao Integrated Port Stevedoring Services vs. Abarquez,
[11]
the employer, for
three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed
portion of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs.
Leogardo, Jr.,
[12]
the employer carried on the practice of giving a fixed monthly emergency
allowance from November 1976 to February 1980, or three (3) years and four (4)
months. In all these cases, this Court held that the grant of these benefits has ripened into
company practice or policy which cannot be peremptorily withdrawn. In the case at bar,
petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid
leaves for unused sick leave and vacation leave in the computation of their 13
th
-month pay
for at least two (2) years. This, we rule likewise constitutes voluntary employer practice
which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the
Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.
IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 63086 dated 27 November 2001 and its Resolution dated 06 March
2002 are hereby AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163419 February 13, 2008
TSPIC CORPORATION, petitioner,
vs.
TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY
DURIAS,
1
CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER
JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE
CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ,
JULIETA ROSETE, JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA
ERNI,
2
MARIO SALMORIN, LOIDA COMULLO,
3
MARIE ANN DELOS SANTOS,
4
JUANITA YANA,
and SUZETTE DULAY, respondents.
D E C I S I O N
VELASCO, JR., J .:
The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor
should always govern dealings between labor and management. Seemingly conflicting provisions
should be harmonized to arrive at an interpretation that is within the parameters of the law,
compassionate to labor, yet, fair to management.
In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to
annul and set aside the October 22, 2003 Decision
5
and April 23, 2004 Resolution
6
of the Court of
Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001 Decision
7
of
Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board
Case No. JBJ-AVA-2001-07-57.
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to
serve the communication, automotive, data processing, and aerospace industries. Respondent
TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of the
rank-and-file employees of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias,
Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas,
Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon,
Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario
Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all
members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)
8
for the years
2000 to 2004. The CBA included a provision on yearly salary increases starting January 2000 until
January 2002. Section 1, Article X of the CBA provides, as follows:
Section 1. Salary/ Wage Increases.Employees covered by this Agreement shall be granted
salary/wage increases as follows:
a) Effective January 1, 2000, all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary increase equivalent to ten percent
(10%) of their basic monthly salary as of December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary increase equivalent to twelve (12%)
of their basic monthly salary as of December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary increase equivalent to eleven
percent (11%) of their basic monthly salary as of December 31, 2001.
The wage salary increase of the first year of this Agreement shall be over and above the
wage/salary increase, including the wage distortion adjustment, granted by the COMPANY on
November 1, 1999 as per Wage Order No. NCR-07.
The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the
mandated minimum wage increases under future Wage Orders, that may be issued after
Wage Order No. NCR-07, and shall be considered as correction of any wage distortion that
may have been brought about by the said future Wage Orders. Thus the wage/salary
increases in 2001 and 2002 shall be deemed as compliance to future wage orders after Wage
Order No. NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10%
increase in their salary. Accordingly, the following nine (9) respondents (first group) who were already
regular employees received the said increase in their salary: Maria Fe Flores, Fe Capistrano, Amy
Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and
Rachel Novillas.
9

The CBA also provided that employees who acquire regular employment status within the year but
after the effectivity of a particular salary increase shall receive a proportionate part of the increase
upon attainment of their regular status. Sec. 2 of the CBA provides:
SECTION 2. Regularization Increase.A covered daily paid employee who acquires regular
status within the year subsequent to the effectivity of a particular salary/wage increase
mentioned in Section 1 above shall be granted a salary/wage increase in proportionate basis
as follows:
Regularization Period Equivalent
Increase
- 1
st
Quarter 100%
- 2
nd
Quarter 75%
- 3
rd
Quarter 50%
- 4
th
Quarter 25%
Thus, a daily paid employee who becomes a regular employee covered by this Agreement
only on May 1, 2000, i.e., during the second quarter and subsequent to the January 1, 2000
wage increase under this Agreement, will be entitled to a wage increase equivalent to seventy-
five percent (75%) of ten percent (10%) of his basic pay. In the same manner, an employee
who acquires regular status on December 1, 2000 will be entitled to a salary increase
equivalent to twenty-five percent (25%) of ten percent (10%) of his last basic pay.
On the other hand, any monthly-paid employee who acquires regular status within the term of
the Agreement shall be granted regularization increase equivalent to 10% of his regular basic
salary.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital
Region, issued Wage Order No. NCR-08
10
(WO No. 8) which raised the daily minimum wage from
PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary
employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire,
Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba,
Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette
Dulay (second group), were increased to PhP 250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular
employment
11
and received 25% of 10% of their salaries as granted under the provision on
regularization increase under Article X, Sec. 2 of the CBA.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the
nine employees (first group), who were senior to the above-listed recently regularized employees,
received less wages.
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective,
TSPICs Human Resources Department notified 24 employees,
12
namely: Maria Fe Flores, Janice
Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez,
Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris
Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine
Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an
error in the automated payroll system, they were overpaid and the overpayment would be deducted
from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction
of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged
overpayment from employees constituted diminution of pay. The issue was brought to the grievance
machinery, but TSPIC and the Union failed to reach an agreement.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of
whether or not the acts of the management in making deductions from the salaries of the affected
employees constituted diminution of pay.
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction
made by TSPIC violated Art. 100
13
of the Labor Code. The fallo reads:
WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence,
judgment is hereby rendered in favor of the Union and the named individual employees and
against the company, thereby ordering the [TSPIC] to pay as follows:
1) to the sixteen (16) newly regularized employees named above, the amount of
P12,642.24 a month or a total of P113,780.16 for nine (9) months or P7,111.26 for each
of them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every
month after 30 September 2001, until full payment, with legal interests for every month
of delay;
2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their
respective amount of entitlements, according to the Unions correct computation,
ranging from P110.22 per month (or P991.98 for nine months) to P450.58 a month (or
P4,055.22 for nine months), as well as corresponding monthly entitlements after 30
September 2001, plus legal interests until full payment,
3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as
corresponding monthly entitlements after 30 September 2001, plus legal interest until
full payment,
4) Attorneys fees equal to 10% of all the above monetary awards.
The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by this
Award and thus, submit to this Office jointly, a written proof of voluntary compliance with this
DECISION within ten (10) days after the finality hereof.
SO ORDERED.
14

TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21,
2001.
Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP
No. 68616. The appellate court, through its October 22, 2003 Decision, dismissed the petition and
affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPICs computation
allowing PhP 287 as daily wages to the newly regularized employees to be correct, noting that the
computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC
failed to convince the appellate court that the deduction was a result of a system error in the
automated payroll system. The CA explained that when WO No. 8 took effect on November 1, 2000,
the concerned employees were still probationary employees who were receiving the minimum wage
of PhP 223.50. The CA said that effective November 1, 2000, said employees should have received
the minimum wage of PhP 250. The CA held that when respondents became regular employees on
November 29, 2000, they should be allowed the salary increase granted them under the CBA at the
rate of 25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year
2001 and the 10% increase for the year 2002 should also be made applicable to them.
15

TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004
Resolution.
TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPICs
decision to deduct the alleged overpayment from the salaries of the affected members of the Union
constitute diminution of benefits in violation of the Labor Code?
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by
the CA, was flawed, inasmuch as it completely disregarded the "crediting provision" contained in the
last paragraph of Sec. 1, Art. X of the CBA.
We find TSPICs contention meritorious.
A Collective Bargaining Agreement is the law between the parties
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and
they are obliged to comply with its provisions.
16
We said so in Honda Phils., Inc. v. Samahan ng
Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all other
terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a
CBA may establish such stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals, good customs, public order or
public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the
parties and compliance therewith is mandated by the express policy of the law.
17

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of their stipulations shall control.
18
However, sometimes, as
in this case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes
arrive at conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to
the increase granted under the CBA. According to TSPIC, it is specifically provided in the CBA that
"the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum
wage increases under future wage orders that may be issued after Wage Order No. 7." The Union, on
the other hand, insists that the "crediting" provision of the CBA finds no application in the present
case, since at the time WO No. 8 was issued, the probationary employees (second group) were not
yet covered by the CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be
pursued.
19
Littera necat spiritus vivificat. An instrument must be interpreted according to the intention
of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving
due consideration to the context in which it is negotiated and the purpose which it is intended to
serve.
20
Absurd and illogical interpretations should also be avoided. Considering that the parties have
unequivocally agreed to substitute the benefits granted under the CBA with those granted under
wage orders, the agreement must prevail and be given full effect.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective
January 1, 2001, all employees on regular status and within the bargaining unit on or before said date
shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of
December 31, 2000. The 12% salary increase is granted to all employees who (1) are regular
employees and (2) are within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the
increase in salary granted under WO No. 7 and the correction of the wage distortion for November
1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for
the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under
future wage orders, that may be issued after WO No. 7, and shall be considered as correction of the
wage distortions that may be brought about by the said future wage orders. Thus, the wage/salary
increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.
Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It,
however, clashes with the last paragraph which specifically states that the salary increases for the
years 2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted
under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting provisions should be
harmonized to give effect to all.
21
Likewise, when general and specific provisions are inconsistent, the
specific provision shall be paramount to and govern the general provision.
22
Thus, it may be
reasonably concluded that TSPIC granted the salary increases under the condition that any wage
order that may be subsequently issued shall be credited against the previously granted increase. The
intention of the parties is clear: As long as an employee is qualified to receive the 12% increase in
salary, the employee shall be granted the increase; and as long as an employee is granted the 12%
increase, the amount shall be credited against any wage order issued after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart
crediting provision. They have received their regularization increases under Art. X, Sec. 2 of the CBA
and the yearly increase for the year 2001. They should not then be allowed to avoid the crediting
provision which is an accompanying condition.
Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the
minimum wage, was issued after WO No. 7. Thus, respondents rightfully received the 12% salary
increase for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited that 12%
increase against the increase granted by WO No. 8.
Proper formula for computing the salaries for the year 2001
Thus, the proper computation of the salaries of individual respondents is as follows:
(1) With regard to the first group of respondents who attained regular employment status before the
effectivity of WO No. 8, the computation is as follows:
For respondents Jerico Alipit and Glen Batula:
23

Wage rate before WO No.
8 PhP 234.67
Increase due to WO No. 8
setting the minimum wage at PhP
250.... 15.33
Total Salary upon effectivity of WO No.
8. PhP 250.00
Increase for 2001 (12% of 2000
salary)...... PhP 30.00
Less the wage increase under WO No.
8. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO
No. 8.. PhP 14.67
Wage rate by December
2000. PhP 250.00
Plus total difference between the wage increase
for 2001 and the increase granted under WO
No. 8.. 14.67
Total (Wage rate range beginning January 1,
2001) PhP 264.67
For respondents Ser John Hernandez and Rachel Novillas:
24

Wage rate range before WO No.
8.. PhP 234.68
Increase due to WO No. 8
setting the minimum wage at PhP
250 15.32
Total Salary upon effectivity of WO No.
8. PhP 250.00
Increase for 2001 (12% of 2000
salary).. PhP 30.00
Less the wage increase under WO No.
8 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO
No. 8 PhP 14.68
Wage rate by December
2000. PhP 250.00
Plus total difference between the wage increase
for 2001 and the increase granted under WO
No. 8 14.68
Total (Wage rate range beginning January 1,
2001) PhP 264.68
For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:
25

Wage rate range before WO No. 8.. PhP 240.26
Increase due to WO No. 8
setting the minimum wage at PhP 250 9.74
Total Salary upon effectivity of WO No. 8. PhP 250.00
Increase for 2001 (12% of 2000
salary) PhP 30.00
Less the wage increase under WO No.
8 9.74
Total difference between the wage increase for
2001
and the increase granted under WO No.
8 PhP 20.26
Wage rate by December
2000 PhP 250.00
Plus total difference between the wage increase
for 2001 and the increase granted under WO
No. 8 20.26
Total (Wage rate range beginning January 1,
2001) PhP 270.26
For respondents Ma. Fe Flores and Fe Capistrano:
26

Wage rate range before WO No. 8 PhP 245.85
Increase due to WO No. 8
setting the minimum wage at PhP 250.. 4.15
Total Salary upon effectivity of WO No. 8... PhP 250.00
Increase for 2001 (12% of 2000
salary) PhP 30.00
Less the wage increase under WO No.
8......... 4.15
Total difference between the wage increase for
2001
and the increase granted under WO No.
8 PhP 25.85
Wage rate by December
2000 PhP 250.00
Plus total difference between the wage increase
for 2001 and the increase granted under WO
No. 8 25.85
Total (Wage rate range beginning January 1,
2001) PhP 275.85
(2) With regard to the second group of employees, who attained regular employment status after the
implementation of WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso,
Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade,
Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita
Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance
with the CBA, is as follows:
Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum
wage before WO No. 8 from the minimum wage per the wage order to arrive at the wage increase,
thus:
Minimum Wage per Wage
Order..
PhP
250.00
Wage rate before Wage 223.50
Order..
Wage
Increase. PhP 26.50
Upon attainment of regular employment status, the employees salaries were increased by 25% of
10% of their basic salaries, as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further
increase of PhP 6.25, for a total of PhP 256.25, computed as follows:
Wage rate after WO No.
8. PhP 250.00
Regularization increase (25 % of 10% of basic
salary) 6.25
Total (Salary for the end of year
2000). PhP 256.25
To compute for the increase in wage rates for the year 2001, get the increase of 12% of the
employees salaries as of December 31, 2000; then subtract from that amount, the amount increased
in salaries as granted under WO No. 8 in accordance with the crediting provision of the CBA, to arrive
at the increase in salaries for the year 2001 of the recently regularized employees. Add the result to
their salaries as of December 31, 2000 to get the proper salary beginning January 1, 2001, thus:
Increase for 2001 (12% of 2000
salary)... PhP 30.75
Less the wage increase under WO No.
8. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No.
8 PhP 4.25
Wage rate after regularization
increase... PhP 256.25
Plus total difference between the wage increase
and
the increase granted under WO No.
8. 4.25
Total (Wage rate beginning January 1,
2001). PhP 260.50
With these computations, the crediting provision of the CBA is put in effect, and the wage distortion
between the first and second group of employees is cured. The first group of employees who attained
regular employment status before the implementation of WO No. 8 is entitled to receive, starting
January 1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending on their
wage rate before the implementation of WO No. 8. The second group that attained regular
employment status after the implementation of WO No. 8 is entitled to receive a daily wage rate of
PhP 260.50 starting January 1, 2001.
Diminution of benefits
TSPIC also maintains that charging the overpayments made to the 16 respondents through
staggered deductions from their salaries does not constitute diminution of benefits.
We agree with TSPIC.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded
on a policy or has ripened into a practice over a long period; (2) the practice is consistent and
deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult
question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.
27

As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This
error was immediately rectified by TSPIC upon its discovery. We have ruled before that an
erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution
of benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law". (Article 2155, in relation to
Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right
may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code
may be said to have resulted by virtue of the correction.
28

Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting
the salary increase for the year 2001 against the salary increase granted under WO No. 8, all in
accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed
above, may be legally deducted by TSPIC from the employees salaries. It was also compassionate
and fair that TSPIC deducted the overpayment in installments over a period of 12 months starting
from the date of the initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn,
must refund to individual respondents any amount deducted from their salaries which was in excess
of what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in
this Decision.
As a last word, it should be reiterated that though it is the states responsibility to afford protection to
labor, this policy should not be used as an instrument to oppress management and capital.
29
In
resolving disputes between labor and capital, fairness and justice should always prevail. We ruled
in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have always been guided
by the State policy enshrined in the Constitution: social justice and protection of the working class.
Social justice does not, however, mandate that every dispute should be automatically decided in
favor of labor. In any case, justice is to be granted to the deserving and dispensed in the light of the
established facts and the applicable law and doctrine.
30

WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in
National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003
CA Decision in CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is
hereby ORDERED to pay respondents their salary increases in accordance with this Decision, as
follows:
Name of Employee Daily Wage
Rate
No. of
Working Days
in a Month
No. of
Months in a
Year
Total Salary
for 2001
Nimfa Anilao 260.5 26 12 81,276.00
Rose Subardiaga 260.5 26 12 81,276.00
Valerie Carbon 260.5 26 12 81,276.00
Olivia Edroso 260.5 26 12 81,276.00
Maricris Donaire 260.5 26 12 81,276.00
Analyn Azarcon 260.5 26 12 81,276.00
Rosalie Ramirez 260.5 26 12 81,276.00
Julieta Rosete 260.5 26 12 81,276.00
Janice Nebre 260.5 26 12 81,276.00
Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Diomedisa Erni 260.5 26 12 81,276.00
Mario Salmorin 260.5 26 12 81,276.00
Loida Camullo 260.5 26 12 81,276.00
Marie Ann Delos
Santos
260.5 26 12 81,276.00
Juanita Yana 260.5 26 12 81,276.00
Suzette Dulay 260.5 26 12 81,276.00
Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Ser John Hernandez 264.68 26 12 82,580.16
Rachel Novillas 264.68 26 12 82,580.16
Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Janice Olaguir 270.26 26 12 84,321.12
Maria Fe Flores 275.85 26 12 86,065.20
Fe Capistrano 275.85 26 12 86,065.20
The award for attorneys fees of ten percent (10%) of the total award is MAINTAINED.
SO ORDERED.