LABREL_1ST BATCH_CASES

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION
CARPIO, J.:

The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by
Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the National Labor
Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.

The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an
Agreement (Agreement) with the Mel and Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by
SONZA, as President and General Manager, and Carmela Tiangco (TIANGCO), as EVP and
Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide SONZAs services
exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first
year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which
reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of
Labor and Employment, National Capital Region in Quezon City. SONZA complained that ABSCBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employeremployee relationship existed between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account
at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him
under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient
enough as to confer jurisdiction over the instant case in this Office. And as to whether or not
such claim would entitle complainant to recover upon the causes of action asserted is a matter

to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack of
employer-employee relationship may be pleaded only as a matter of defense. It behooves upon
it the duty to prove that there really is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted
their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to
Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of
ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their
affidavits that the prevailing practice in the television and broadcast industry is to treat talents
like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack
of jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the
contract of a talent, it stands to reason that a talent as above-described cannot be considered
as an employee by reason of the peculiar circumstances surrounding the engagement of his
services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills
and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to
perform the services he undertook to render in accordance with his own style. The benefits
conferred to complainant under the May 1994 Agreement are certainly very much higher than
those generally given to employees. For one, complainant Sonzas monthly talent fees amount
to a staggering P317,000. Moreover, his engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked
only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally
given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employer-employee relationship. As
correctly put by the respondent, All these benefits are merely talent fees and other contractual
benefits and should not be deemed as salaries, wages and/or other remuneration accorded to
an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is
the rule that the term or nomenclature given to a stipulated benefit is not controlling, but the
intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations, likewise,
does not detract from the absence of employer-employee relationship. As held by the
Supreme Court, The line should be drawn between rules that merely serve as guidelines

towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and bind
or restrict the party hired to the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the second, which address both the
result and the means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No.
84484, November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision
affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC
denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of
Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of
Appeals rendered a Decision dismissing the case. [8]
Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship
existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted
the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely
as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act
of the agent is the act of the principal itself. This fact is made particularly true in this case, as
admittedly MJMDC is a management company devoted exclusively to managing the careers of
Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to
Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and
MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May
1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which
issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his
capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically,
the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that
MJMDC figured in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such
that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the
contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the
regular courts, the same being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely apparent from complainantappellants Position Paper, his claims for compensation for services, 13th month pay, signing
bonus and travel allowance against respondent-appellee are not based on the Labor Code but
rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock
Purchase Agreement are based on the latter. A portion of the Position Paper of complainantappellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13 th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable
travel benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his
contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor
Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the
latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996,
which asserted that instead of referring to unpaid employee benefits, he is waiving and
renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or
the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his
complaint.Complainant-appellants claims being anchored on the alleged breach of contract on
the part of respondent-appellee, the same can be resolved by reference to civil law and not to
labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular
courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil
dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship

between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to
resolve.[10] A special civil action for certiorari extends only to issues of want or excess of
jurisdiction of the NLRC.[11] Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRCs conclusion. [12] The Court of
Appeals added that it could not re-examine the parties evidence and substitute the factual
findings of the NLRC with its own.[13]

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING
TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABSCBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.[14]

The Courts Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals
affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship between a television and radio
station and one of its talents. There is no case law stating that a radio and television program
host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts

accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality
when supported by substantial evidence.[15] Substantial evidence means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion. [16] A party cannot
prove the absence of substantial evidence by simply pointing out that there is contrary
evidence on record, direct or circumstantial. The Court does not substitute its own judgment
for that of the tribunal in determining where the weight of evidence lies or what evidence is
credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are
present in this case. Case law has consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employers power to control the employee on the means
and methods by which the work is accomplished. [18] The last element, the so-called control test,
is the most important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of
SONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondents claim of independent
contractorship.
Independent contractors often present themselves to possess unique skills, expertise or
talent to distinguish them from ordinary employees. The specific selection and hiring of
SONZA,because of his unique skills, talent and celebrity status not possessed by ordinary
employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN
would not have entered into the Agreement with SONZA but would have hired him through its
personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship, with the
control test being the most important element.

B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABSCBN. SONZA also points out that ABS-CBN granted him benefits and privileges which he would
not have enjoyed if he were truly the subject of a valid job contract.

All the talent fees and benefits paid to SONZA were the result of negotiations that led to
the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and 13th month pay[20] which the law
automatically incorporates into every employer-employee contract.[21] Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so
huge and out of the ordinary that they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge
talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed
by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to
demand and receive such huge talent fees for his services. The power to bargain talent fees
way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the
status of SONZA as an independent contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have
to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other
than breach of contract, such as retrenchment to prevent losses as provided under labor
laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still
paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN
cancelled SONZAs programs through no fault of SONZA. [25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true
that complainant was really an employee, he would merely resign, instead. SONZA did actually
resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement.SONZAs
letter clearly bears this out.[26] However, the manner by which SONZA terminated his

relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned
from work does not determine his status as employee or independent contractor.

D. Power of Control
Since there is no local precedent on whether a radio and television program host is an
employee or an independent contractor, we refer to foreign case law in analyzing the present
case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v.
Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) [27] that a television program host is an
independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress
is a skilled position requiring talent and training not available on-the-job. x x x In this regard,
Alberty possesses a masters degree in public communications and journalism; is trained in
dance, singing, and modeling; taught with the drama department at the University of Puerto
Rico; and acted in several theater and television productions prior to her affiliation with Desde
Mi Pueblo. Second, Alberty provided the tools and instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry,
and other image-related supplies and services necessary for her appearance. Alberty disputes
that this factor favors independent contractor status because WIPR provided the equipment
necessary to tape the show. Albertys argument is misplaced. The equipment necessary for
Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on the
show.Others provided equipment for filming and producing the show, but these were not the
primary tools that Alberty used to perform her particular function. If we accepted this
argument, independent contractors could never work on collaborative projects because other
individuals often provide the equipment required for different aspects of the collaboration. x x
x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys
contracts with WIPR specifically provided that WIPR hired her professional services as Hostess
for the Program Desde Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in
addition to work related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but
an independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor. [29] This test is based on the extent
of control the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true as well
the less control the hirer exercises, the more likely the worker is considered an independent
contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host

the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his
work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render
eight hours of work per day. The Agreement required SONZA to attend only rehearsals and
tapings of the shows, as well as pre- and post-production staff meetings.[31] ABS-CBN could not
dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its
interests.
We find that ABS-CBN was not involved in the actual performance that produced the
finished product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his
job.ABS-CBN merely reserved the right to modify the program format and airtime schedule for
more effective programming.[34] ABS-CBNs sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods
of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power
over the means and methods of the performance of his work. Although ABS-CBN did have the
option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent
fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods of
SONZAs performance of his work, or even with the quality or product of his work, ABS-CBN
could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast
SONZAs show but ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over the
means and methods of the performance of SONZAs work. ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his work - how he delivered
his lines and appeared on television - did not meet ABS-CBNs approval. This proves that ABSCBNs control was limited only to the result of SONZAs work, whether to broadcast the final
product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry
of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have
control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features. [37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the Mel & Jay programs. However, the equipment, crew and airtime are not the tools
and instrumentalities SONZA needed to perform his job. What SONZA principally needed were
his talent or skills and the costumes necessary for his appearance. [38] Even though ABS-CBN

provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs. [39]
A radio broadcast specialist who works under minimal supervision is an independent
contractor.[40] SONZAs work as television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised
any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this indicates ABSCBNs control not only [over] his manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents[41] of ABS-CBN. The Agreement does not require SONZA to
comply with the rules and standards of performance prescribed for employees of ABS-CBN. The
code of conduct imposed on SONZA under the Agreement refers to the Television and Radio
Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the
COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not necessarily employees of radio
and television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former.[43] In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating television and radio programs
that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other
party in relation to the services being rendered may be accorded the effect of establishing an
employer-employee relationship. The facts of this case fall squarely with the case of Insular Life
Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the
means used to achieve it.[44]
The Vaughan case also held that one could still be an independent contractor although the
hirer reserved certain supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services according to his own
initiative.[45]

Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form
of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same
as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.[46] This practice is not designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast station. The broadcast station
normally spends substantial amounts of money, time and effort in building up its talents as well
as the programs they appear in and thus expects that said talents remain exclusive with the
station for a commensurate period of time. [47] Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or television station. In short, the huge
talent fees partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted
out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his
employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2)
the employee who is ostensibly under the employ of the labor-only contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the labor-only contractor is the
agent of the principal. The law makes the principal responsible to the employees of the laboronly contractor as if the principal itself directly hired or employed the employees. [48] These
circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and
ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC
acted as the AGENT of SONZA. The records do not show that MJMDC acted as ABS-CBNs
agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager
of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled,
headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the
careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting

as agent of SONZA or TIANGCO to promote their careers in the broadcast and television
industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy,
the types of employees in the broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and
effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs
status. A mere executive issuance cannot exclude independent contractors from the class of
service providers to the broadcast industry. The classification of workers in the broadcast
industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and
Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses.SONZA brands these witnesses as incompetent to attest on the prevailing practice in
the radio and television industry. SONZA views the affidavits of these witnesses as misleading
and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion
whether to conduct a formal (trial-type) hearing after the submission of the position papers of
the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by
all supporting documents including the affidavits of their respective witnesses which shall take
the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the
parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and
for the purpose of making such determination, ask clarificatory questions to further elicit facts

or information, including but not limited to the subpoena of relevant documentary evidence, if
any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial.[51] The holding of a formal hearing or trial is something that
the parties cannot demand as a matter of right.[52] If the Labor Arbiter is confident that he can
rely on the documents before him, he cannot be faulted for not conducting a formal trial,
unless under the particular circumstances of the case, the documents alone are insufficient. The
proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of
due process, the technicalities of law and the rules obtaining in the courts of law do not strictly
apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution[53] arises only if
there is an employer-employee relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship. To hold that every person who
renders services to another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services
as independent contractors. The right to life and livelihood guarantees this freedom to contract
as independent contractors. The right of labor to security of tenure cannot operate to deprive
an individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services
without any one controlling the means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to compel artists and talents to
render their services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716, [55] as
amended by Republic Act No. 8241,[56] treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to the 10% value-added tax (VAT)
on services they render. Exempted from the VAT are those under an employer-employee
relationship.[57] This different tax treatment accorded to talents and broadcasters bolters our

conclusion that they are independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals
that SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not
on the Labor Code. Clearly, the present case does not call for an application of the Labor Code
provisions but an interpretation and implementation of the May 1994 Agreement. In effect,
SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable
by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26
March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

RAUL G. LOCSIN and G.R. No. 185251

EDDIE B. TOMAQUIN,
Petitioners,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE LONG DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------x

DECISION
VELASCO, JR., J.:
The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6,
2008 Decision[1] and November 4, 2008 Resolution [2] of the Court of Appeals (CA) in CA-G.R. SP
No. 97398, entitled Philippine Long Distance Telephone Company v. National Labor Relations
Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the
Resolutions of the National Labor Relations Commission (NLRC) dated October 28,
2005 and August 28, 2006 which in turn affirmed the Decision datedFebruary 13, 2004 of the
Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for
reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and
the Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services
Agreement[3] (Agreement) whereby SSCP would provide armed security guards to PLDT to be
assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the
Agreement effective October 1, 2001.[4]
Despite the termination of the Agreement, however, petitioners continued to secure the
premises of their assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided the Labor
Arbiter with copies of petitioner Locsins pay slips for the period of January to September
2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of
money claims such as overtime pay, holiday pay, premium pay for holiday and rest day, service
incentive leave pay, Emergency Cost of Living Allowance, and moral and exemplary damages
against PLDT.

The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained
in the Decision that petitioners were found to be employees of PLDT and not of SSCP. Such
conclusion was arrived at with the factual finding that petitioners continued to serve as guards
of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural
due process before termination of employment. The Labor Arbiter held that respondent failed
to observe such due process requirements. The dispositive portion of the Labor Arbiters
Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondent Philippine Long Distance and Telephone Company (PLDT) to pay
complainants Raul E. Locsin and Eddie Tomaquin their separation pay and back
wages computed as follows:

1.
2.

NAME SEPARATION PAY BACKWAGES

Raul E. Locsin P127,500.00 P240,954.67
Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34

All other claims are DISMISSED for want of factual basis.

Let the computation made by the Computation and Examination Unit
form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in
toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the
Resolution issued by the NLRC as well as the Labor Arbiters Decision. The CA rendered the
assailed decision granting PLDTs petition and dismissing petitioners complaint. The dispositive
portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions
dated October 28, 2005 and August 28, 2006 of the National Labor Relations
Commission are ANNULLED and SET ASIDE. Private respondents complaint
against Philippine Long Distance Telephone Company is DISMISSED.

SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employeremployee relationship between the parties but did not find such relationship. It determined
that SSCP was not a labor-only contractor and was an independent contractor having
substantial capital to operate and conduct its own business. The CA further bolstered its
decision by citing the Agreement whereby it was stipulated that there shall be no employeremployee relationship between the security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were
issued by SSCP and not PLDT; hence, SSCP continued to pay the salaries of petitioners after the
Agreement. This fact allegedly proved that petitioners continued to be employees of
SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was
denied in the assailed resolution.
Hence, we have this petition.
The Issues
1.

Whether or not; complainants extended services to the respondent for one

(1) year from October 1, 2001, the effectivity of the termination of the
contract of complainants agency SSCP, up to September 30, 2002, without a
renewed contract, constitutes an employer-employee relationship between
respondent and the complainants.

2.

Whether or not; in accordance to the provision of the Article 280 of the

Labor Code, complainants extended services to the respondent for another
one (1) year without a contract be considered as contractual employment.

3.

Whether or not; in accordance to the provision of the Article 280 of the

Labor Code, does complainants thirteen (13) years of service to the
respondent with manifestation to the respondent thirteen (13) years renewal
of its security contract with the complainant agency SSCP, can be considered
only as seasonal in nature or fixed as [specific projects] or undertakings and
its completion or termination can be dictated as [controlled] by the
respondent anytime they wanted to.

4.

Whether or not; complainants from being an alleged contractual employees

of the respondent for thirteen (13) years as they were then covered by a
contract, becomes regular employees of the respondent as the one (1) year
extended services of the complainants were not covered by a contract, and
can be considered as direct employment pursuant to the provision of the
Article 280 of the Labor Code.

5.

Whether or not; the Court of Appeals committed grave abuse of discretion

when it set aside and [annulled] the labor [arbiters] decision and of the
NLRCs resolution declaring the dismissal of the complainant as illegal. [6]
The Courts Ruling

This petition is hereby granted.

An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the
parties from the time of petitioners first assignment to respondent by SSCP in 1988 until the
alleged termination of the Agreement between respondent and SSCP. In fact, this was the
conclusion that was reached by this Court in Abella v. Philippine Long Distance Telephone
Company,[7] where we ruled that petitioners therein, including herein petitioners, cannot be
considered as employees of PLDT. It bears pointing out that petitioners were among those
declared to be employees of their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after
the Agreement between SSCP and respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of
their offices even after the Agreement was terminated. And it is this fact that must be
explained.

To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1)
petitioners failed to prove that SSCP was a labor-only contractor; and (2) petitioners are
employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement,
wherein SSCP undertook to supply PLDT with the required security guards, while furnishing
PLDT with a performance bond in the amount of PhP 707,000. Moreover, the CA gave weight to
the provision in the Agreement that SSCP warranted that it carry on an independent business
and has substantial capital or investment in the form of equipment, work premises, and other
materials which are necessary in the conduct of its business.
Further, in determining that no employer-employee relationship existed between the
parties, the CA quoted the express provision of the Agreement, stating that no employeremployee relationship existed between the parties herein. The CA disregarded the pay slips of
Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at
their post after the termination of the Agreement. Notably, in its Comment datedMarch 10,
2009,[8] respondent never denied that petitioners remained at their post until September 30,
2002. While respondent denies the alleged circumstances stated by petitioners, that they were
told to remain at their post by respondents Security Department and that they were informed
by SSCP Operations Officer Eduardo Juliano that their salaries would be coursed through SSCP
as per arrangement with PLDT, it does not state why they were not made to vacate their posts.
Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are
satisfactory if uncontradicted, but may be contradicted and overcome by other
evidence:
xxxx
(y) That things have happened according to the ordinary course of nature
and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not
allow security guards of an agency with whom the owners or managers have severed ties with

to continue to stay within the business premises. This is because upon the termination of the
owners or managers agreement with the security agency, the agencys undertaking of liability
for any damage that the security guard would cause has already been terminated. Thus, in the
event of an accident or otherwise damage caused by such security guards, it would be the
business owners and/or managers who would be liable and not the agency. The business
owners or managers would, therefore, be opening themselves up to liability for acts of security
guards over whom the owners or managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why
such security guards were remaining at their posts, and would have a clear understanding of
the circumstances of the guards stay. It is but logical that responsible business owners or
managers would be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying
petitioners salaries while securing respondents premises despite the termination of their
Agreement. Obviously, it would only be respondent that would benefit from such a situation.
And it is seriously doubtful that a security agency that was established for profit would allow its
security guards to secure respondents premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners
remained at their post under the instructions of respondent. We can further conclude that
respondent dictated upon petitioners that the latter perform their regular duties to secure the
premises during operating hours. This, to our mind and under the circumstances, is sufficient to
establish the existence of an employer-employee relationship. Certainly, the facts as narrated
by petitioners are more believable than the irrational denials made by respondent. Thus, we
ruled in Lee Eng Hong v. Court of Appeals:[9]
Evidence, to be believed, must not only proceed from the mouth of a credible
witness, but it must be credible in itself such as the common experience and
observation of mankind can approve as probable under the circumstances. We
have no test of the truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant to these belongs
to the miraculous and is outside judicial cognizance (Castaares v. Court of
Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the
termination of the Agreement, petitioners remained at their post securing the premises of
respondent while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes

no sense, and the denials proffered by respondent do not shed any light to the situation. It is
but reasonable to conclude that, with the behest and, presumably, directive of respondent,
petitioners continued with their services. Evidently, such are indiciaof control that respondent
exercised over petitioners.
Such power of control has been explained as the right to control not only the end to be
achieved but also the means to be used in reaching such end. [10] With the conclusion that
respondent directed petitioners to remain at their posts and continue with their duties, it is
clear that respondent exercised the power of control over them; thus, the existence of an
employer-employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft
repeated rule that control is the most important element in the determination of the existence
of an employer-employee relationship:
In the determination of whether an employer-employee relationship
exists between two parties, this Court applies the four-fold test to determine the
existence of the elements of such relationship. In Pacific Consultants
International Asia, Inc. v. Schonfeld, the Court set out the elements of an
employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an
employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employees conduct. It is the so-called control test
which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls
or has reserved the right to control the employee not only as to the result
of the work to be done but also as to the means and methods by which
the same is to be accomplished. Stated otherwise, an employeremployee relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be achieved
but also the means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into
a contract with another person for the performance of the formers work, the

employees of the contractor and of the latters subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate
regulations, restrict or prohibit the contracting-out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting,
he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer
for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is labor-only contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter
were directly employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002,
implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for
a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial
capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or

(ii) the contractor does not exercise the right to control over the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248 (C) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service
contracted out.
The right to control shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to determine not
only the end to be achieved, but also the manner and means to be used in
reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such
labor-only contracting:
Section 7. Existence of an employer-employee relationship.The
contractor or subcontractor shall be considered the employer of the contractual
employee for purposes of enforcing the provisions of the Labor Code and other
social legislation. The principal, however, shall be solidarily liable with the
contractor in the event of any violation of any provision of the Labor Code,
including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee
in any of the following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions
provided in Section 6 (Prohibitions) hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered
as petitioners employerfrom the termination of the Agreement onwardsas this was the only
time that any evidence of control was exhibited by respondent over petitioners and in light of
our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the
rights and benefits of employees of respondent, including due process requirements in the
termination of their services.

Both the Labor Arbiter and NLRC found that respondent did not observe such due
process requirements. Having failed to do so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4,
2008 Resolution in CA-G.R. SP No. 97398. We hereby REINSTATE the Labor Arbiters Decision
dated February 13, 2004 and the NLRCs Resolutions dated October 28, 2005 and August 28,
2006.
No costs.
SO ORDERED.

NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN AND MA. CRISTINA
SUMAYAO,Petitioners,
vs.
ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING CORPORATION) AND AMALIA
VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:
The existence of an employer-employee relationship is at the heart of this Petition for Review
on Certiorari filed pursuant to Rule 45 of the Rules of Court, primarily assailing the 29 June 2011
Decision1 rendered by the Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928
which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television
and radio broadcasting corporation which, for its Regional Network Group in Naga City,
employed respondent Amalia Villafuerte (Villafuerte) as Manager. There is no dispute regarding
the fact that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson Begino
(Begino) and Gener Del Valle (Del Valle) sometime in 1996 as Cameramen/Editors for TV
Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and Monina Avila-Llorin (Llorin)
were likewise similarly engaged as reporters sometime in 1996 and 2002, respectively. With
their services engaged by respondents thru Talent Contracts which, though regularly renewed

over the years, provided terms ranging from three (3) months to one (1) year, petitioners were
given Project Assignment Forms which detailed, among other matters, the duration of a
particular project as well as the budget and the daily technical requirements thereof. In the
aforesaid capacities, petitioners were tasked with coverage of news items for subsequent daily
airings in respondents TV Patrol Bicol Program.2
While specifically providing that nothing therein shall be deemed or construed to establish an
employer-employee relationship between the parties, the aforesaid Talent Contracts included,
among other matters, provisions on the following matters: (a) the Talents creation and
performance of work in accordance with the ABS-CBNs professional standards and compliance
with its policies and guidelines covering intellectual property creators, industry codes as well as
the rules and regulations of the Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and other
regulatory agencies; (b) the Talents non-engagement in similar work for a person or entity
directly or indirectly in competition with or adverse to the interests of ABS-CBN and nonpromotion of any product or service without prior written consent; and (c) the results-oriented
nature of the talents work which did not require them to observe normal or fixed working
hours.3 Subjected to contractors tax, petitioners remunerations were denominated as Talent
Fees which, as of last renewal, were admitted to be pegged per airing day at P273.35 for
Begino, P 302.92 for Del Valle, P 323.08 for Sumayao and P 315.39 for Llorin. 4
Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents
the complaint5docketed as Sub-RAB 05-04- 00041-07 before the National Labor Relations
Commissions (NLRC) Sub-Regional Arbitration Branch No. 5, Naga City. In support of their
claims for regularization, underpayment of overtime pay, holiday pay, 13th month pay, service
incentive leave pay, damages and attorney's fees, petitioners alleged that they performed
functions necessary and desirable in ABS-CBN's business. Mandated to wear company IDs and
provided all the equipment they needed, petitioners averred that they worked under the direct
control and supervision of Villafuerte and, at the end of each day, were informed about the
news to be covered the following day, the routes they were to take and, whenever the subject
of their news coverage is quite distant, even the start of their workday. Due to the importance
of the news items they covered and the necessity of their completion for the success of the
program, petitioners claimed that, under pain of immediate termination, they were bound by
the companys policy on, among others, attendance and punctuality. 6
Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an
annual competency assessment alongside other ABS-CBN employees, as condition for their
continued employment. Although their work involved dealing with emergency situations at any
time of the day or night, petitioners claimed that they were not paid the labor standard
benefits the law extends to regular employees. To avoid paying what is due them, however,
respondents purportedly resorted to the simple expedient of using said Talent Contracts and/or
Project Assignment Forms which denominated petitioners as talents, despite the fact that they
are not actors or TV hosts of special skills. As a result of this iniquitous situation, petitioners
asseverated that they merely earned an average of P7,000.00 to P8,000.00 per month, or
decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-and-file

employees. Considering their repeated re-hiring by respondents for ostensible fixed periods,
this situation had gone on for years since TV Patrol Bicol has continuously aired from 1996
onwards.7
In refutation of the foregoing assertions, on the other hand, respondents argued that, although
it occasionally engages in production and generates programs thru various means, ABS-CBN is
primarily engaged in the business of broadcasting television and radio content. Not having the
full manpower complement to produce its own program, the company had allegedly resorted
to engaging independent contractors like actors, directors, artists, anchormen, reporters,
scriptwriters and various production and technical staff, who offered their services in relation
to a particular program. Known in the industry as talents, such independent contractors inform
ABSCBN of their availability and were required to accomplish Talent Information Forms to
facilitate their engagement for and appearance on designated project days. Given the
unpredictability of viewer preferences, respondents argued that the company cannot afford to
provide regular work for talents with whom it negotiates specific or determinable professional
fees on a per project, weekly or daily basis, usually depending on the budget allocation for a
project.8
Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms,
petitioners were hired as talents, to act as reporters and/or cameramen for TV Patrol Bicol for
designated periods and rates. Fully aware that they were not considered or to consider
themselves as employees of a particular production or film outfit, petitioners were supposedly
engaged on the basis of the skills, knowledge or expertise they already possessed and, for said
reason, required no further training from ABS-CBN. Although petitioners were inevitably
subjected to some degree of control, the same was allegedly limited to the imposition of
general guidelines on conduct and performance, simply for the purpose of upholding the
standards of the company and the strictures of the industry. Never subjected to any control or
restrictions over the means and methods by which they performed or discharged the tasks for
which their services were engaged, petitioners were, at most, briefed whenever necessary
regarding the general requirements of the project to be executed. 9
Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a
second complaint against respondents, for regularization, payment of labor standard benefits,
illegal dismissal and unfair labor practice, which was docketed as Sub-RAB 05-08-00107-07.
Upon respondents motion, this complaint was dismissed for violation of the rules against
forum shopping in view of the fact that the determination of the issues in the second case
hinged on the resolution of those raised in the first.10 On 19 December 2007, however, Labor
Arbiter Jesus Orlando Quiones (Labor Arbiter Quiones) resolved Sub-RAB 05-04-00041-07 in
favor of petitioners who, having rendered services necessary and related to ABS-CBNs business
for more than a year, were determined to be its regular employees. With said conclusion found
to be buttressed by, among others, the exclusivity clause and prohibitions under petitioners
Talent Contracts and/or Project Assignment Forms which evinced respondents control over
them,11 Labor Arbiter Quiones disposed of the case in the following wise:

WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is
hereby rendered declaring complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON
V. BEGINO and MA. CRISTINA V. SUMAYAO, as regular employees of respondent company, ABSCBN BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay
complainants, subject to the prescriptive period provided under Article 291 of the Labor Code,
however applicable, the total amount of Php2,440,908.36, representing salaries/wage
differentials, holiday pay, service incentive leave pay and 13th month pay, to include 10% of the
judgment award as attorneys fees of the judgment award (computation of the monetary
awards are attached hereto as integral part of this decision).
Moreover, respondents are directed to admit back complainants to work under the same terms
and conditions prevailing prior to their separation or, at respondents' option, merely reinstated
in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED for lack of merit. 12
Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC,
during the pendency of which petitioners filed a third complaint against the former, for illegal
dismissal, regularization, nonpayment of salaries and 13th month pay, unfair labor practice,
damages and attorneys fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08,
the complaint was raffled to Labor Arbiter Quiones who issued an Order dated 30 April 2008,
inhibiting himself from the case and denying respondents motion to dismiss on the grounds of
res judicata and forum shopping.13 Finding that respondents control over petitioners was
indeed manifest from the exclusivity clause and prohibitions in the Talent Contracts and/or
Project Assignment Forms, on the other hand, the NLRC rendered a Decision dated 31 March
2010, affirming said Labor Arbiters appealed decision. 14 Undeterred by the NLRCs 31 August
2010 denial of their motion for reconsideration, 15 respondents filed the Rule 65 petition for
certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to taking
exceptions to the findings of the assailed decision, faulted petitioners for violating the rule
against forum shopping.16
On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the
Labor Arbiter and the NLRC. Ruling out the existence of forum shopping on the ground that
petitioners' second and third complaints were primarily anchored on their termination from
employment after the filing of their first complaint, the CA nevertheless discounted the
existence of an employer-employee relation between the parties upon the following findings
and conclusions: (a) petitioners, were engaged by respondents as talents for periods, work and
the program specified in the Talent Contracts and/or Project Assignment Forms concluded
between them; (b) instead of fixed salaries, petitioners were paid talent fees depending on the
budget allocated for the program to which they were assigned; (c) being mainly concerned with
the result, respondents did not exercise control over the manner and method by which
petitioner accomplished their work and, at most, ensured that they complied with the

standards of the company, the KBP and the industry; and, (d) the existence of an employeremployee relationship is not necessarily established by the exclusivity clause and prohibitions
which are but terms and conditions on which the parties are allowed to freely stipulate.17
Petitioners motion for reconsideration of the foregoing decision was denied in the CA's 3
October 2011 Resolution,18 hence, this petition.
The Issues
Petitioners seek the reversal of the CAs assailed Decision and Resolution on the affirmative of
the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing respondents petition
for certiorari in view of the fact that they did file a Notice of Appeal at the NLRC level and did
not, by themselves or through their duly authorized representative, verify and certify the
Memorandum of Appeal they filed thereat, in accordance with the NLRC Rules of Procedure;
and 2. Whether or not the CA seriously and reversibly erred in brushing aside the determination
made by both the Labor Arbiter and the NLRC of the existence of an employer-employee
relationship between the parties, despite established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents Rule 65 petition for
certiorari in view of the fact that the latter failed to file a Notice of Appeal from the Labor
Arbiters decision and to verify and certify the Memorandum of Appeal they filed before the
NLRC. While concededly required under the NLRC Rules of Procedure, however, these matters
should have been properly raised during and addressed at the appellate stage before the NLRC.
Instead, the record shows that the NLRC took cognizance of respondents appeal and
proceeded to resolve the same in favor of petitioners by affirming the Labor Arbiters decision.
Not having filed their own petition for certiorari to take exception to the liberal attitude the
NLRC appears to have adopted towards its own rules of procedure, petitioners were hardly in
the proper position to raise the same before the CA or, for that matter, before this Court at this
late stage. Aside from the settled rule that a party who has not appealed is not entitled to
affirmative relief other than the ones granted in the decision 19 rendered, liberal interpretation
of procedural rules on appeal had, on occasion, been favored in the interest of substantive
justice.20
Although the existence of an employer-employee relationship is, on the other hand, a question
of fact21 which is ordinarily not the proper subject of a Rule 45 petition for review on certiorari
like the one at bar, the conflicting findings between the labor tribunals and the CA justify a
further consideration of the matter.22 To determine the existence of said relation, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of the

employee; (b) the payment of wages;(c) the power of dismissal; and (d) the employer's power
to control the employee on the means and methods by which the work is accomplished. 23 Of
these criteria, the so-called "control test" is generally regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee relationship.
Under this test, an employer-employee relationship is said to exist where the person for whom
the services are performed reserves the right to control not only the end result but also the
manner and means utilized to achieve the same. 24
In discounting the existence of said relationship between the parties, the CA ruled that
Petitioners' services were, first and foremost, engaged thru their Talent Contracts and/or
Project Assignment Forms which specified the work to be performed by them, the project to
which they were assigned, the duration thereof and their rates of pay according to the budget
therefor allocated. Because they are imbued with public interest, it cannot be gainsaid,
however, that labor contracts are subject to the police power of the state and are placed on a
higher plane than ordinary contracts. The recognized supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is aimed at bringing life to
the policy enshrined in the Constitution to afford protection to labor.25 Insofar as the nature of
ones employment is concerned, Article 280 of the Labor Code of the Philippines also provides
as follows:
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 service 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 actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely:
(a) regular employees or those who have been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; (b) project employees or
those whose 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;
(c) seasonal employees or those who work or perform services which are seasonal in nature,
and the employment is for the duration of the season; and (d) casual employees or those who
are not regular, project, or seasonal employees. 26 To the foregoing classification of employee,
jurisprudence has added that of contractual or fixed term employee which, if not for the fixed
term, would fall under the category of regular employment in view of the nature of the

employees engagement, which is to perform activity usually necessary or desirable in the

employers business.27
The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or
Project Assignment Forms and the terms and condition embodied therein, petitioners are
regular employees of ABS-CBN. Time and again, it has been ruled that the test to determine
whether employment is regular or not is the reasonable connection between the activity
performed by the employee in relation to the business or trade of the employer. 28 As
cameramen/editors and reporters, petitioners were undoubtedly performing functions
necessary and essential to ABS-CBNs business of broadcasting television and radio content. It
matters little that petitioners services were engaged for specified periods for TV Patrol Bicol
and that they were paid according to the budget allocated therefor. Aside from the fact that
said program is a regular weekday fare of the ABS-CBNs Regional Network Group in Naga City,
the record shows that, from their initial engagement in the aforesaid capacities, petitioners
were continuously re-hired by respondents over the years. To the mind of the Court,
respondents repeated hiring of petitioners for its long-running news program positively
indicates that the latter were ABS-CBNs regular employees.
If the employee has been performing the job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems the repeated or continuing performance
as sufficient evidence of the necessity, if not indispensability of that activity in the
business.29 Indeed, an employment stops being co-terminous with specific projects where the
employee is continuously re-hired due to the demands of the employers business.30When
circumstances show, moreover, that contractually stipulated periods of employment have been
imposed to preclude the acquisition of tenurial security by the employee, this Court has not
hesitated in striking down such arrangements as contrary to public policy, morals, good
customs or public order.31 The nature of the employment depends, after all, on the nature of
the activities to be performed by the employee, considering the nature of the employers
business, the duration and scope to be done, and, in some cases, even the length of time of the
performance and its continued existence.32 In the same manner that the practice of having
fixed-term contracts in the industry does not automatically make all talent contracts valid and
compliant with labor law, it has, consequently, been ruled that the assertion that a talent
contract exists does not necessarily prevent a regular employment status. 33
As cameramen/editors and reporters, it also appears that petitioners were subject to the
control and supervision of respondents which, first and foremost, provided them with the
equipments essential for the discharge of their functions. Prepared at the instance of
respondents, petitioners Talent Contracts tellingly provided that ABS-CBN retained "all
creative, administrative, financial and legal control" of the program to which they were
assigned. Aside from having the right to require petitioners "to attend and participate in all
promotional or merchandising campaigns, activities or events for the Program," ABS-CBN
required the former to perform their functions "at such locations and Performance/Exhibition
Schedules" it provided or, subject to prior notice, as it chose determine, modify or change. Even
if they were unable to comply with said schedule, petitioners were required to give advance

notice, subject to respondents approval.34 However obliquely worded, the Court finds the
foregoing terms and conditions demonstrative of the control respondents exercised not only
over the results of petitioners work but also the means employed to achieve the same.
In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity
clause and prohibitions in their Talent Contracts and/or Project Assignment Forms were
likewise indicative of respondents control over them. Brushing aside said finding, however, the
CA applied the ruling in Sonza v. ABS-CBN Broadcasting Corporation35 where similar restrictions
were considered not necessarily determinative of the existence of an employer-employee
relationship. Recognizing that independent contractors can validly provide his exclusive services
to the hiring party, said case enunciated that guidelines for the achievement of mutually
desired results are not tantamount to control. As correctly pointed out by petitioners, however,
parallels cannot be expediently drawn between this case and that of Sonza case which involved
a well-known television and radio personality who was legitimately considered a talent and
amply compensated as such. While possessed of skills for which they were modestly
recompensed by respondents, petitioners lay no claim to fame and/or unique talents for which
talents like actors and personalities are hired and generally compensated in the broadcast
industry.
Later echoed in Dumpit-Murillo v. Court of Appeals,36 this Court has rejected the application of
the ruling in the Sonza case to employees similarly situated as petitioners in ABS-CBN
Broadcasting Corporation v. Nazareno.37The following distinctions were significantly observed
between employees like petitioners and television or radio personalities like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or
celebrity status was required from them because they were merely hired through petitioners
personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an
employer-employee relationship.1wphi1 Respondents did not have the power to bargain for
huge talent fees, a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory,
and respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through
its supervisors negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent
business or professional service, such work is a regular employment of such employee and not
an independent contractor. The Court will peruse beyond any such agreement to examine the
facts that typify the parties actual relationship. 38 (Emphasis omitted)

Rather than the project and/or independent contractors respondents claim them to be, it is
evident from the foregoing disquisition that petitioners are regular employees of ABS-CBN. This
conclusion is borne out by the ineluctable showing that petitioners perform functions necessary
and essential to the business of ABS-CBN which repeatedly employed them for a long-running
news program of its Regional Network Group in Naga City. In the course of said employment,
petitioners were provided the equipments they needed, were required to comply with the
Company's policies which entailed prior approval and evaluation of their performance. Viewed
from the prism of these considerations, we find and so hold that the CA reversibly erred when it
overturned the NLRC's affirmance of the Labor Arbiter's finding that an employer-employee
relationship existed between the parties. Given the fact, however, that Sub-RAB-V-05-0300039-08 had not been consolidated with this case and appears, for all intents and purposes, to
be pending still, the Court finds that the reinstatement of petitioners ordered by said labor
officer and tribunal should, as a relief provided in case of illegal dismissal, be left for
determination in said case.
WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated
3 October 2011 in CA-G.R. SP No. 116928 are REVERSED and SET ASIDE. Except for the
reinstatement of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina
Sumayao, the National Labor and Relations Commission's 31 March 2010 Decision is,
accordingly, REINSTATED.
SO ORDERED.

G.R. No. 126297

January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
x-----------------------x
G.R. No. 126467

January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA
AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.
x- - - - - - - - - - - - - - - - - - - -- - - - x
G.R. No. 127590

January 31, 2007

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Hospitals, having undertaken one of mankinds most important and delicate endeavors, must
assume the grave responsibility of pursuing it with appropriate care. The care and service
dispensed through this high trust, however technical, complex and esoteric its character may
be, must meet standards of responsibility commensurate with the undertaking to preserve and
protect the health, and indeed, the very lives of those placed in the hospitals keeping. 1
Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals
Decision2 dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming
with modification the Decision3 dated March 17, 1993 of the Regional Trial Court (RTC), Branch
96, Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September 21, 1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical
City Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series
of medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be
suffering from "cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff 4 of the Medical City Hospital,
performed an anterior resection surgery on Natividad. He found that the malignancy in her
sigmoid area had spread on her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Natividads husband, Enrique Agana, to permit Dr. Juan
Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the
operation and closed the incision.
However, the operation appeared to be flawed. In the corresponding Record of Operation
dated April 11, 1984, the attending nurses entered these remarks:
"sponge count lacking 2
"announced to surgeon searched (sic) done but to no avail continue for closure."
On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills,
including the doctors fees, amounted to P60,000.00.

After a couple of days, Natividad complained of excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural
consequence of the surgery. Dr. Ampil then recommended that she consult an oncologist to
examine the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek
further treatment. After four months of consultations and laboratory examinations, Natividad
was told she was free of cancer. Hence, she was advised to return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two
weeks thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being
informed about it, Dr. Ampil proceeded to her house where he managed to extract by hand a
piece of gauze measuring 1.5 inches in width. He then assured her that the pains would soon
vanish.
Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting Natividad to
seek treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez
detected the presence of another foreign object in her vagina -- a foul-smelling gauze
measuring 1.5 inches in width which badly infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organs which forced stool to excrete through the vagina. Another
surgical operation was needed to remedy the damage. Thus, in October 1984, Natividad
underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a
complaint for damages against the Professional Services, Inc. (PSI), owner of the Medical City
Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-43322. They alleged that the
latter are liable for negligence for leaving two pieces of gauze inside Natividads body and
malpractice for concealing their acts of negligence.
Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an
administrative complaint for gross negligence and malpractice against Dr. Ampil and Dr.
Fuentes, docketed as Administrative Case No. 1690. The PRC Board of Medicine heard the case
only with respect to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was
then in the United States.
On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly
substituted by her above-named children (the Aganas).
On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil
and Dr. Fuentes liable for negligence and malpractice, the decretal part of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants
PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN FUENTES to pay to the
plaintiffs, jointly and severally, except in respect of the award for exemplary damages and the

interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, as
follows:
1. As actual damages, the following amounts:
a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate
of P21.60-US$1.00, as reimbursement of actual expenses incurred in the United
States of America;
b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;
c. The total sum of P45,802.50, representing the cost of hospitalization at
Polymedic Hospital, medical fees, and cost of the saline solution;
2. As moral damages, the sum of P2,000,000.00;
3. As exemplary damages, the sum of P300,000.00;
4. As attorneys fees, the sum of P250,000.00;
5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of
the complaint until full payment; and
6. Costs of suit.
SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals,
docketed as CA-G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of
its Decision, which was granted in an Order dated May 11, 1993. Thereafter, the sheriff levied
upon certain properties of Dr. Ampil and sold them for P451,275.00 and delivered the amount
to the Aganas.
Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr.
Fuentes to indefinitely suspend any further execution of the RTC Decision. However, not long
thereafter, the Aganas again filed a motion for an alias writ of execution against the properties
of PSI and Dr. Fuentes. On September 21, 1993, the RTC granted the motion and issued the
corresponding writ, prompting Dr. Fuentes to file with the Court of Appeals a petition for
certiorari and prohibition, with prayer for preliminary injunction, docketed as CA-G.R. SP No.
32198. During its pendency, the Court of Appeals issued a Resolution 5 dated October 29, 1993
granting Dr. Fuentes prayer for injunctive relief.

On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision 6 in
Administrative Case No. 1690 dismissing the case against Dr. Fuentes. The Board held that the
prosecution failed to show that Dr. Fuentes was the one who left the two pieces of gauze inside
Natividads body; and that he concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R.
CV No. 42062 and CA-G.R. SP No. 32198, thus:
WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan
Fuentes is hereby DISMISSED, and with the pronouncement that defendant-appellant Dr.
Miguel Ampil is liable to reimburse defendant-appellant Professional Services, Inc., whatever
amount the latter will pay or had paid to the plaintiffs-appellees, the decision appealed from is
hereby AFFIRMED and the instant appeal DISMISSED.
Concomitant with the above, the petition for certiorari and prohibition filed by herein
defendant-appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby GRANTED and the
challenged order of the respondent judge dated September 21, 1993, as well as the alias writ of
execution issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by
the petitioner in connection with the writ of preliminary injunction issued by this Court on
November 29, 1993 is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.
SO ORDERED.
Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution7 dated
December 19, 1996.
Hence, the instant consolidated petitions.
In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1)
it is estopped from raising the defense that Dr. Ampil is not its employee; (2) it is solidarily liable
with Dr. Ampil; and (3) it is not entitled to its counterclaim against the Aganas. PSI contends
that Dr. Ampil is not its employee, but a mere consultant or independent contractor. As such,
he alone should answer for his negligence.
In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr.
Fuentes is not guilty of negligence or medical malpractice, invoking the doctrine of res ipsa
loquitur. They contend that the pieces of gauze are prima facie proofs that the operating
surgeons have been negligent.

Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him
liable for negligence and malpractice sans evidence that he left the two pieces of gauze in
Natividads vagina. He pointed to other probable causes, such as: (1) it was Dr. Fuentes who
used gauzes in performing the hysterectomy; (2) the attending nurses failure to properly count
the gauzes used during surgery; and (3) the medical intervention of the American doctors who
examined Natividad in the United States of America.
For our resolution are these three vital issues: first, whether the Court of Appeals erred in
holding Dr. Ampil liable for negligence and malpractice; second, whether the Court of Appeals
erred in absolving Dr. Fuentes of any liability; and third, whether PSI may be held solidarily
liable for the negligence of Dr. Ampil.
I - G.R. No. 127590
Whether the Court of Appeals Erred in Holding Dr. Ampil
Liable for Negligence and Malpractice.
Dr. Ampil, in an attempt to absolve himself, gears the Courts attention to other possible causes
of Natividads detriment. He argues that the Court should not discount either of the following
possibilities: first, Dr. Fuentes left the gauzes in Natividads body after performing
hysterectomy; second, the attending nurses erred in counting the gauzes; and third, the
American doctors were the ones who placed the gauzes in Natividads body.
Dr. Ampils arguments are purely conjectural and without basis. Records show that he did not
present any evidence to prove that the American doctors were the ones who put or left the
gauzes in Natividads body. Neither did he submit evidence to rebut the correctness of the
record of operation, particularly the number of gauzes used. As to the alleged negligence of Dr.
Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes) work and found it in order.
The glaring truth is that all the major circumstances, taken together, as specified by the Court of
Appeals, directly point to Dr. Ampil as the negligent party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding
of the patient during the surgical operation.
Second, immediately after the operation, the nurses who assisted in the surgery noted
in their report that the sponge count (was) lacking 2; that such anomaly was
announced to surgeon and that a search was done but to no avail prompting Dr.
Ampil to continue for closure x x x.
Third, after the operation, two (2) gauzes were extracted from the same spot of the
body of Mrs. Agana where the surgery was performed.

An operation requiring the placing of sponges in the incision is not complete until the sponges
are properly removed, and it is settled that the leaving of sponges or other foreign substances
in the wound after the incision has been closed is at least prima facie negligence by the
operating surgeon.8 To put it simply, such act is considered so inconsistent with due care as to
raise an inference of negligence. There are even legions of authorities to the effect that such
act is negligence per se.9
Of course, the Court is not blind to the reality that there are times when danger to a patients
life precludes a surgeon from further searching missing sponges or foreign objects left in the
body. But this does not leave him free from any obligation. Even if it has been shown that a
surgeon was required by the urgent necessities of the case to leave a sponge in his patients
abdomen, because of the dangers attendant upon delay, still, it is his legal duty to so inform his
patient within a reasonable time thereafter by advising her of what he had been compelled to
do. This is in order that she might seek relief from the effects of the foreign object left in her
body as her condition might permit. The ruling in Smith v. Zeagler 10 is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when a physician or surgeon
fails to remove a sponge he has placed in his patients body that should be removed as part of
the operation, he thereby leaves his operation uncompleted and creates a new condition which
imposes upon him the legal duty of calling the new condition to his patients attention, and
endeavoring with the means he has at hand to minimize and avoid untoward results likely to
ensue therefrom.
Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even
misled her that the pain she was experiencing was the ordinary consequence of her operation.
Had he been more candid, Natividad could have taken the immediate and appropriate medical
remedy to remove the gauzes from her body. To our mind, what was initially an act of
negligence by Dr. Ampil has ripened into a deliberate wrongful act of deceiving his patient.
This is a clear case of medical malpractice or more appropriately, medical negligence. To
successfully pursue this kind of case, a patient must only prove that a health care provider
either failed to do something which a reasonably prudent health care provider would have
done, or that he did something that a reasonably prudent provider would not have done; and
that failure or action caused injury to the patient.11 Simply put, the elements are duty, breach,
injury and proximate causation. Dr, Ampil, as the lead surgeon, had the duty to remove all
foreign objects, such as gauzes, from Natividads body before closure of the incision. When he
failed to do so, it was his duty to inform Natividad about it. Dr. Ampil breached both duties.
Such breach caused injury to Natividad, necessitating her further examination by American
doctors and another surgery. That Dr. Ampils negligence is the proximate cause 12 of
Natividads injury could be traced from his act of closing the incision despite the information
given by the attending nurses that two pieces of gauze were still missing. That they were later
on extracted from Natividads vagina established the causal link between Dr. Ampils negligence
and the injury. And what further aggravated such injury was his deliberate concealment of the
missing gauzes from the knowledge of Natividad and her family.

II - G.R. No. 126467

Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the
ground that it is contrary to the doctrine of res ipsa loquitur. According to them, the fact that
the two pieces of gauze were left inside Natividads body is a prima facie evidence of Dr.
Fuentes negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the
occurrence of an injury, taken with the surrounding circumstances, may permit an inference or
raise a presumption of negligence, or make out a plaintiffs prima facie case, and present a
question of fact for defendant to meet with an explanation. 13 Stated differently, where the
thing which caused the injury, without the fault of the injured, is under the exclusive control of
the defendant and the injury is such that it should not have occurred if he, having such control
used proper care, it affords reasonable evidence, in the absence of explanation that the injury
arose from the defendants want of care, and the burden of proof is shifted to him to establish
that he has observed due care and diligence.14
From the foregoing statements of the rule, the requisites for the applicability of the doctrine of
res ipsa loquitur are: (1) the occurrence of an injury; (2) the thing which caused the injury was
under the control and management of the defendant; (3) the occurrence was such that in the
ordinary course of things, would not have happened if those who had control or management
used proper care; and (4) the absence of explanation by the defendant. Of the foregoing
requisites, the most instrumental is the "control and management of the thing which caused
the injury."15
We find the element of "control and management of the thing which caused the injury" to be
wanting. Hence, the doctrine of res ipsa loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad.
He requested the assistance of Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil)
found that the malignancy in her sigmoid area had spread to her left ovary. Dr. Fuentes
performed the surgery and thereafter reported and showed his work to Dr. Ampil. The latter
examined it and finding everything to be in order, allowed Dr. Fuentes to leave the operating
room. Dr. Ampil then resumed operating on Natividad. He was about to finish the procedure
when the attending nurses informed him that two pieces of gauze were missing. A "diligent
search" was conducted, but the misplaced gauzes were not found. Dr. Ampil then directed that
the incision be closed. During this entire period, Dr. Fuentes was no longer in the operating
room and had, in fact, left the hospital.

Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of
the surgery room and all personnel connected with the operation. Their duty is to obey his
orders.16 As stated before, Dr. Ampil was the lead surgeon. In other words, he was the "Captain
of the Ship." That he discharged such role is evident from his following conduct: (1) calling Dr.
Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in
order; (3) granting Dr. Fuentes permission to leave; and (4) ordering the closure of the incision.
To our mind, it was this act of ordering the closure of the incision notwithstanding that two
pieces of gauze remained unaccounted for, that caused injury to Natividads body. Clearly, the
control and management of the thing which caused the injury was in the hands of Dr. Ampil,
not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se
create or constitute an independent or separate ground of liability, being a mere evidentiary
rule.17 In other words, mere invocation and application of the doctrine does not dispense with
the requirement of proof of negligence. Here, the negligence was proven to have been
committed by Dr. Ampil and not by Dr. Fuentes.
III - G.R. No. 126297
Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of hospitals and the
resulting theories concerning their liability for the negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable institutions, providing
medical services to the lowest classes of society, without regard for a patients ability to
pay.18 Those who could afford medical treatment were usually treated at home by their
doctors.19 However, the days of house calls and philanthropic health care are over. The modern
health care industry continues to distance itself from its charitable past and has experienced a
significant conversion from a not-for-profit health care to for-profit hospital businesses.
Consequently, significant changes in health law have accompanied the business-related
changes in the hospital industry. One important legal change is an increase in hospital liability
for medical malpractice. Many courts now allow claims for hospital vicarious liability under the
theories of respondeat superior, apparent authority, ostensible authority, or agency by
estoppel. 20
In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil
Code, which reads:
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 preexisting contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

A derivative of this provision is Article 2180, the rule governing vicarious liability under the
doctrine of respondeat superior, thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.
x x x

x x x

The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
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.
x x x

x x x

The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.
A prominent civilist commented that professionals engaged by an employer, such as physicians,
dentists, and pharmacists, are not "employees" under this article because the manner in which
they perform their work is not within the control of the latter (employer). In other words,
professionals are considered personally liable for the fault or negligence they commit in the
discharge of their duties, and their employer cannot be held liable for such fault or negligence.
In the context of the present case, "a hospital cannot be held liable for the fault or negligence
of a physician or surgeon in the treatment or operation of patients." 21
The foregoing view is grounded on the traditional notion that the professional status and the
very nature of the physicians calling preclude him from being classed as an agent or employee
of a hospital, whenever he acts in a professional capacity.22 It has been said that medical
practice strictly involves highly developed and specialized knowledge, 23 such that physicians are
generally free to exercise their own skill and judgment in rendering medical services sans
interference.24 Hence, when a doctor practices medicine in a hospital setting, the hospital and
its employees are deemed to subserve him in his ministrations to the patient and his actions
are of his own responsibility.25
The case of Schloendorff v. Society of New York Hospital 26 was then considered an authority for
this view. The "Schloendorff doctrine" regards a physician, even if employed by a hospital, as an
independent contractor because of the skill he exercises and the lack of control exerted over his
work. Under this doctrine, hospitals are exempt from the application of the respondeat
superior principle for fault or negligence committed by physicians in the discharge of their
profession.

However, the efficacy of the foregoing doctrine has weakened with the significant
developments in medical care. Courts came to realize that modern hospitals are increasingly
taking active role in supplying and regulating medical care to patients. No longer were a
hospitals functions limited to furnishing room, food, facilities for treatment and operation, and
attendants for its patients. Thus, in Bing v. Thunig, 27 the New York Court of Appeals deviated
from the Schloendorff doctrine, noting that modern hospitals actually do far more than provide
facilities for treatment. Rather, they regularly employ, on a salaried basis, a large staff of
physicians, interns, nurses, administrative and manual workers. They charge patients for
medical care and treatment, even collecting for such services through legal action, if necessary.
The court then concluded that there is no reason to exempt hospitals from the universal rule of
respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians is
rendered inconsequential in view of our categorical pronouncement in Ramos v. Court of
Appeals28 that for purposes of apportioning responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their attending and
visiting physicians. This Court held:
"We now discuss the responsibility of the hospital in this particular incident. The unique
practice (among private hospitals) of filling up specialist staff with attending and visiting
"consultants," who are allegedly not hospital employees, presents problems in apportioning
responsibility for negligence in medical malpractice cases. However, the difficulty is more
apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and
in the conduct of their work within the hospital premises. Doctors who apply for consultant
slots, visiting or attending, are required to submit proof of completion of residency, their
educational qualifications, generally, evidence of accreditation by the appropriate board
(diplomate), evidence of fellowship in most cases, and references. These requirements are
carefully scrutinized by members of the hospital administration or by a review committee set
up by the hospital who either accept or reject the application. x x x.
After a physician is accepted, either as a visiting or attending consultant, he is normally
required to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns
and residents, moderate grand rounds and patient audits and perform other tasks and
responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the
privilege of admitting patients into the hospital. In addition to these, the physicians
performance as a specialist is generally evaluated by a peer review committee on the basis of
mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A
consultant remiss in his duties, or a consultant who regularly falls short of the minimum
standards acceptable to the hospital or its peer review committee, is normally politely
terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting consultant staff. While consultants are not, technically employees, x x x, the control
exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of
an employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the
basis of the foregoing, we rule that for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between hospitals and
their attending and visiting physicians. "
But the Ramos pronouncement is not our only basis in sustaining PSIs liability. Its liability is also
anchored upon the agency principle of apparent authority or agency by estoppel and the
doctrine of corporate negligence which have gained acceptance in the determination of a
hospitals liability for negligent acts of health professionals. The present case serves as a perfect
platform to test the applicability of these doctrines, thus, enriching our jurisprudence.
Apparent authority, or what is sometimes referred to as the "holding
out" theory, or doctrine of ostensible agency or agency by estoppel,29 has its origin from the
law of agency. It imposes liability, not as the result of the reality of a contractual relationship,
but rather because of the actions of a principal or an employer in somehow misleading the
public into believing that the relationship or the authority exists. 30 The concept is essentially
one of estoppel and has been explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority which he knowingly
permits the agent to assume, or which he holds the agent out to the public as possessing. The
question in every case is whether the principal has by his voluntary act placed the agent in such
a situation that a person of ordinary prudence, conversant with business usages and the nature
of the particular business, is justified in presuming that such agent has authority to perform the
particular act in question.31
The applicability of apparent authority in the field of hospital liability was upheld long time ago
in Irving v. Doctor Hospital of Lake Worth, Inc. 32 There, it was explicitly stated that "there does
not appear to be any rational basis for excluding the concept of apparent authority from the
field of hospital liability." Thus, in cases where it can be shown that a hospital, by its actions,
has held out a particular physician as its agent and/or employee and that a patient has
accepted treatment from that physician in the reasonable belief that it is being rendered in
behalf of the hospital, then the hospital will be liable for the physicians negligence.
Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of
the Civil Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.

In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and
specializations of the physicians associated or accredited by it, including those of Dr. Ampil and
Dr. Fuentes. We concur with the Court of Appeals conclusion that it "is now estopped from
passing all the blame to the physicians whose names it proudly paraded in the public directory
leading the public to believe that it vouched for their skill and competence." Indeed, PSIs act is
tantamount to holding out to the public that Medical City Hospital, through its accredited
physicians, offers quality health care services. By accrediting Dr. Ampil and Dr. Fuentes and
publicly advertising their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients. As expected, these
patients, Natividad being one of them, accepted the services on the reasonable belief that such
were being rendered by the hospital or its employees, agents, or servants. The trial court
correctly pointed out:
x x x regardless of the education and status in life of the patient, he ought not be burdened with
the defense of absence of employer-employee relationship between the hospital and the
independent physician whose name and competence are certainly certified to the general
public by the hospitals act of listing him and his specialty in its lobby directory, as in the case
herein. The high costs of todays medical and health care should at least exact on the hospital
greater, if not broader, legal responsibility for the conduct of treatment and surgery within its
facility by its accredited physician or surgeon, regardless of whether he is independent or
employed."33
The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are
capable of acting only through other individuals, such as physicians. If these accredited
physicians do their job well, the hospital succeeds in its mission of offering quality medical
services and thus profits financially. Logically, where negligence mars the quality of its services,
the hospital should not be allowed to escape liability for the acts of its ostensible agents.
We now proceed to the doctrine of corporate negligence or corporate responsibility.
One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that
PSI as owner, operator and manager of Medical City Hospital, "did not perform the necessary
supervision nor exercise diligent efforts in the supervision of Drs. Ampil and Fuentes and its
nursing staff, resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in the
performance of their duties as surgeons."34 Premised on the doctrine of corporate negligence,
the trial court held that PSI is directly liable for such breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial answer to the
problem of allocating hospitals liability for the negligent acts of health practitioners, absent
facts to support the application of respondeat superior or apparent authority. Its formulation
proceeds from the judiciarys acknowledgment that in these modern times, the duty of
providing quality medical service is no longer the sole prerogative and responsibility of the

physician. The modern hospitals have changed structure. Hospitals now tend to organize a
highly professional medical staff whose competence and performance need to be monitored by
the hospitals commensurate with their inherent responsibility to provide quality medical care. 35
The doctrine has its genesis in Darling v. Charleston Community Hospital. 36 There, the Supreme
Court of Illinois held that "the jury could have found a hospital negligent, inter alia, in failing to
have a sufficient number of trained nurses attending the patient; failing to require a
consultation with or examination by members of the hospital staff; and failing to review the
treatment rendered to the patient." On the basis of Darling, other jurisdictions held that a
hospitals corporate negligence extends to permitting a physician known to be incompetent to
practice at the hospital.37 With the passage of time, more duties were expected from hospitals,
among them: (1) the use of reasonable care in the maintenance of safe and adequate facilities
and equipment; (2) the selection and retention of competent physicians; (3) the overseeing or
supervision of all persons who practice medicine within its walls; and (4) the formulation,
adoption and enforcement of adequate rules and policies that ensure quality care for its
patients.38 Thus, in Tucson Medical Center, Inc. v. Misevich, 39 it was held that a hospital,
following the doctrine of corporate responsibility, has the duty to see that it meets the
standards of responsibilities for the care of patients. Such duty includes the proper supervision
of the members of its medical staff. And in Bost v. Riley,40 the court concluded that a patient
who enters a hospital does so with the reasonable expectation that it will attempt to cure him.
The hospital accordingly has the duty to make a reasonable effort to monitor and oversee the
treatment prescribed and administered by the physicians practicing in its premises.
In the present case, it was duly established that PSI operates the Medical City Hospital for the
purpose and under the concept of providing comprehensive medical services to the public.
Accordingly, it has the duty to exercise reasonable care to protect from harm all patients
admitted into its facility for medical treatment. Unfortunately, PSI failed to perform such duty.
The findings of the trial court are convincing, thus:
x x x PSIs liability is traceable to its failure to conduct an investigation of the matter reported in
the nota bene of the count nurse. Such failure established PSIs part in the dark conspiracy of
silence and concealment about the gauzes. Ethical considerations, if not also legal, dictated the
holding of an immediate inquiry into the events, if not for the benefit of the patient to whom
the duty is primarily owed, then in the interest of arriving at the truth. The Court cannot accept
that the medical and the healing professions, through their members like defendant surgeons,
and their institutions like PSIs hospital facility, can callously turn their backs on and disregard
even a mere probability of mistake or negligence by refusing or failing to investigate a report of
such seriousness as the one in Natividads case.
It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of
the Medical City Hospitals staff, composed of resident doctors, nurses, and interns. As such, it
is reasonable to conclude that PSI, as the operator of the hospital, has actual or constructive
knowledge of the procedures carried out, particularly the report of the attending nurses that
the two pieces of gauze were missing. In Fridena v. Evans, 41 it was held that a corporation is

bound by the knowledge acquired by or notice given to its agents or officers within the scope of
their authority and in reference to a matter to which their authority extends. This means that
the knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI. Now,
the failure of PSI, despite the attending nurses report, to investigate and inform Natividad
regarding the missing gauzes amounts to callous negligence. Not only did PSI breach its duties
to oversee or supervise all persons who practice medicine within its walls, it also failed to take
an active step in fixing the negligence committed. This renders PSI, not only vicariously liable for
the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its
own negligence under Article 2176. In Fridena, the Supreme Court of Arizona held:
x x x In recent years, however, the duty of care owed to the patient by the hospital has
expanded. The emerging trend is to hold the hospital responsible where the hospital has failed
to monitor and review medical services being provided within its walls. See Kahn Hospital
Malpractice Prevention, 27 De Paul . Rev. 23 (1977).
Among the cases indicative of the emerging trend is Purcell v. Zimbelman, 18 Ariz. App. 75,500
P. 2d 335 (1972). In Purcell, the hospital argued that it could not be held liable for the
malpractice of a medical practitioner because he was an independent contractor within the
hospital. The Court of Appeals pointed out that the hospital had created a professional staff
whose competence and performance was to be monitored and reviewed by the governing body
of the hospital, and the court held that a hospital would be negligent where it had knowledge
or reason to believe that a doctor using the facilities was employing a method of treatment or
care which fell below the recognized standard of care.
Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain
inherent responsibilities regarding the quality of medical care furnished to patients within its
walls and it must meet the standards of responsibility commensurate with this undertaking.
Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has
confirmed the rulings of the Court of Appeals that a hospital has the duty of supervising the
competence of the doctors on its staff. x x x.
x

x x

In the amended complaint, the plaintiffs did plead that the operation was performed at the
hospital with its knowledge, aid, and assistance, and that the negligence of the defendants was
the proximate cause of the patients injuries. We find that such general allegations of
negligence, along with the evidence produced at the trial of this case, are sufficient to support
the hospitals liability based on the theory of negligent supervision."
Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be
emphasized that PSI, apart from a general denial of its responsibility, failed to adduce evidence
showing that it exercised the diligence of a good father of a family in the accreditation and
supervision of the latter. In neglecting to offer such proof, PSI failed to discharge its burden
under the last paragraph of Article 2180 cited earlier, and, therefore, must be adjudged

solidarily liable with Dr. Ampil. Moreover, as we have discussed, PSI is also directly liable to the
Aganas.
One final word. Once a physician undertakes the treatment and care of a patient, the law
imposes on him certain obligations. In order to escape liability, he must possess that reasonable
degree of learning, skill and experience required by his profession. At the same time, he must
apply reasonable care and diligence in the exercise of his skill and the application of his
knowledge, and exert his best judgment.
WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of
Appeals in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED.

G.R. No. 186621

March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO 1 AGBAY, Petitioners,

vs.
JESUS J. COMING, Respondent.
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the
Decision2 dated February 21, 2008 and Resolution3 dated February 9, 2009 of the Court of
Appeals (CA) in CA-GR. CEB-SP No. 02113.
Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the
business of manufacturing and exporting furniture to various countries with principal place of
business at Paknaan, Mandaue City, while petitioner Estanislao Agbay, as per records, is the
President and General Manager of SEIRI.4
On November 3, 2003, respondent Jesus J. Coming filed a complaint 5 for illegal dismissal,
underpayment of wages, non-payment of holiday pay, 13th month pay and service incentive
leave pay, with prayer for reinstatement, back wages, damages and attorneys fees.

Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17,
1984. His work schedule is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on
"pakiao" basis but sometime in June 1984, it was fixed at P150.00 per day which was paid
weekly. In 1990, without any apparent reason, his employment was interrupted as he was told
by petitioners to resume work in two months time. Being an uneducated person, respondent
was persuaded by the management as well as his brother not to complain, as otherwise
petitioners might decide not to call him back for work. Fearing such consequence, respondent
accepted his fate. Nonetheless, after two months he reported back to work upon order of
management.6
Despite being an employee for many years with his work performance never questioned by
petitioners, respondent was dismissed on January 1, 2002 without lawful cause. He was told
that he will be terminated because the company is not doing well financially and that he would
be called back to work only if they need his services again. Respondent waited for almost a year
but petitioners did not call him back to work. When he finally filed the complaint before the
regional arbitration branch, his brother Vicente was used by management to persuade him to
withdraw the case.7
On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated
only in 1986, and that respondent actually worked for SEIRIs furniture suppliers because when
the company started in 1987 it was engaged purely in buying and exporting furniture and its
business operations were suspended from the last quarter of 1989 to August 1992. They
stressed that respondent was not included in the list of employees submitted to the Social
Security System (SSS). Moreover, respondents brother, Vicente Coming, executed an
affidavit8 in support of petitioners position while Allan Mayol and Faustino Apondar issued
notarized certifications9that respondent worked for them instead.10
With the denial of petitioners that respondent was their employee, the latter submitted an
affidavit11 signed by five former co-workers stating that respondent was one of the pioneer
employees who worked in SEIRI for almost twenty years.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is
a regular employee of SEIRI and that the termination of his employment was illegal. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent
South East (Intl.) Rattan, Inc. to pay complainant Jesus J. Coming the following:
1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for lack of
merit.
SO ORDERED.13
Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where they
submitted the following additional evidence: (1) copies of SEIRIs payrolls and individual pay
records of employees;14 (2) affidavit15 of SEIRIs Treasurer, Angelina Agbay; and (3) second
affidavit16 of Vicente Coming.
On July 28, 2005, the NLRCs Fourth Division rendered its Decision,17 the dispositive portion of
which states:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and
VACATED and a new one entered DISMISSING the complaint.
SO ORDERED.18
The NLRC likewise denied respondents motion for reconsideration. 19
Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an
employer-employee relationship between petitioners and respondent who was dismissed
without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision
dated July 28, 2005 issued by the National Labor Relations Commission (NLRC), Fourth Division,
Cebu City in NLRC Case No. V-000625-2004 is REVERSED and SET ASIDE. The Decision of the
Labor Arbiter dated April 30, 2004 is REINSTATED with MODIFICATION on the computation of
backwages which should be computed from the time of illegal termination until the finality of
this decision.

Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the
award of separation pay as well as the monetary awards of wage differential, 13th month pay,
holiday pay and service incentive leave pay.
SO ORDERED.20
Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated
February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PETITIONERS AND RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS
HONORABLE COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN ACCORDANCE
WITH APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF RESPONDENT IS
IN ACCORD WITH APPLICABLE LAW AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF
APPEALS THAT THE BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE
TIME OF ILLEGAL TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY
PREVAILING JURISPRUDENCE.21
Resolution of the first issue is paramount in view of petitioners denial of the existence of
employer-employee relationship.
The issue of whether or not an employer-employee relationship exists in a given case is
essentially a question of fact. As a rule, this Court is not a trier of facts and this applies with
greater force in labor cases.22 Only errors of law are generally reviewed by this Court.23 This rule
is not absolute, however, and admits of exceptions. For one, the Court may look into factual
issues in labor cases when the factual findings of the Labor Arbiter, the NLRC, and the CA are

conflicting.24 Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA,
which compels the Courts exercise of its authority to review and pass upon the evidence
presented and to draw its own conclusions therefrom. 25
To ascertain the existence of an employer-employee relationship jurisprudence has invariably
adhered to the four-fold test, to wit: (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, or the so-called "control test."26 In resolving the issue of whether such relationship
exists in a given case, substantial evidence that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion is sufficient. Although no
particular form of evidence is required to prove the existence of the relationship, and any
competent and relevant evidence to prove the relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial evidence. 27
In support of their claim that respondent was not their employee, petitioners presented
Employment Reports to the SSS from 1987 to 2002, the Certifications issued by Mayol and
Apondar, two affidavits of Vicente Coming, payroll sheets (1999-2000), individual pay envelopes
and employee earnings records (1999-2000) and affidavit of Angelina Agbay (Treasurer and
Human Resources Officer). The payroll and pay records did not include the name of
respondent. The affidavit of Ms. Agbay stated that after SEIRI started its business in 1986 purely
on export trading, it ceased operations in 1989 as evidenced by Certification dated January 18,
1994 from the Securities and Exchange Commission (SEC); that when business resumed in 1992,
SEIRI undertook only a little of manufacturing; that the company never hired any workers for
varnishing and pole sizing because it bought the same from various suppliers, including
Faustino Apondar; respondent was never hired by SEIRI; and while it is true that Mr. Estanislao
Agbay is the company President, he never dispensed the salaries of workers.28
In his first affidavit, Vicente Coming averred that:
6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with
Ben Mayol as round core maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan
trader with business address near Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined
Eleuterio Agbay in Labogon, Cebu in 1989. In 1991, we went back to Okay Okay located
near the residence of Atty. Vicente de la Serna in Mandaue City. We were on a "pakiao"
basis. We stayed put until 1993 when we resigned and joined Dodoy Luna in Labogon,
Mandaue City as classifier until 1995. In 1996[,] Jesus rested. It was only in 1997 that he
worked back. He replaced me, as a classifier in Rattan Traders owned by Allan Mayol.
But then, towards the end of the year, he left the factory and relaxed in our place of
birth, in Sogod, Cebu.

9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as
sizing machine operator. However, the work was off and on basis. Not regular in nature,
he was harping a side line job with me knowing that I am now working with Faustino
Apondar that supplies rattan furnitures *sic+ to South East (Intl) Rattan, Inc. As a
brother, I allowed Jesus to work with me and collect the proceeds of his services as part
of my collectibles from Faustino Apondar since I was on a "pakiao" basis. He was
working at his pleasure. Which means, he works if he likes to? That will be until 10:00
oclock in the evening.
x x x x29
The Certification dated January 20, 2004 of Allan Mayol reads:
This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus is a
rattan factory worker and he was working with me as rattan pole sizing/classifier of my
business from 1997 up to part of 1998 when he left my factory at will. I took him back towards
the end of 1999, this time as a sizing machine operator. In all these years, his services are not
regular. He works only if he likes to.30
Faustino Apondar likewise issued a Certification which states:
This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several
rattan furniture workers under me, one of whom is Vicente Coming, the brother of Jesus
Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was
already connected with Allan Mayol. Having vouched for the integrity of his brother and
knowing that the job is temporary in character, I allowed Jesus to work with his brother
Vicente. However, the proceeds will be collected together with his brother Vicente since it was
the latter who was working with me. He renders services to his brother work only after the
regular working hours but off and on basis.31
On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro
Brigoli, Napoleon Coming, Efren Coming and Gil Coming who all attested that respondent was
their co-worker at SEIRI.
Their affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly
sworn to in accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;

That we personally know JESUS COMING considering that we worked together in one company
SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY
considering that the latter is the one directly paying us and holds the absolute control of all
aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN
ESLAO AGBAY OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been
employed therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any
contrary allegation made by the company against his employment with SOUTH EAST RATTAN. 32
In his decision, Labor Arbiter Carreon found that respondents work as sizing machine operator
is usually necessary and desirable to the rattan furniture business of petitioners and their
failure to include respondent in the employment report to SSS is not conclusive proof that
respondent is not their employee. As to the affidavit of Vicente Coming, Labor Arbiter Carreon
did not give weight to his statement that respondent is not petitioners employee but that of
one Faustino Apondar. Labor Arbiter Carreon was not convinced that Faustino Apondar is an
independent contractor who has a contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January 21,
2002.1wphi1 Records reveal however that South East (Intl.) Rattan, Inc. was incorporated
only last July 18, 1986 (p. 55 records)[.] Moreover, when they started to actually operate in
1987, the company was engaged purely on "buying and exporting rattan furniture" hence no
manufacturing employees were hired. Furthermore, from the last quarter of 1989 up to August
of 1992, the company suspended operations due to economic reverses as per Certification
issued by the Securities and Exchange Commission (p. 56 records)[.]
Second, for all his insistence that he was a regular employee, complainant failed to present a
single payslip, voucher or a copy of a company payroll showing that he rendered service during
the period indicated therein. x x x
From the above established facts we are inclined to give weight and credence to the
Certifications of Allan Mayol and Faustino Apondar, both suppliers of finished Rattan Furniture
(pp. 442-43, records). It appears that complainant first worked with Allan Mayol and later with
Faustino Apondar upon the proddings of his brother Vicente. Vicentes affidavit as to
complainants employment history was more detailed and forthright. x x x

xxxx
In the case at bar, there is likewise substantial evidence to support our findings that
complainant was not an employee of respondents. Thus:
1. Complainants name does not appear in the list of employees reported to the SSS.
2. His name does not also appear in the sample payrolls of respondents employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan
products[,] that complainant had at one time or another worked with them.
4. The Affidavit of Vicente Coming, complainants full brother*,+ attesting that
complainant had never been an employee of respondent. The only connection was that
their employer Faustino Apondar supplies finished rattan products to respondents. 33
On the other hand, the CA gave more credence to the declarations of the five former
employees of petitioners that respondent was their co-worker in SEIRI. One of said affiants is
Vicente Comings own son, Gil Coming. Vicente averred in his second affidavit that when he
confronted his son, the latter explained that he was merely told by their Pastor to sign the
affidavit as it will put an end to the controversy. Vicente insisted that his son did not know the
contents and implications of the document he signed. As to the absence of respondents name
in the payroll and SSS employment report, the CA observed that the payrolls submitted were
only from January 1, 1999 to December 29, 2000 and not the entire period of eighteen years
when respondent claimed he worked for SEIRI. It further noted that the names of the five
affiants, whom petitioners admitted to be their former employees, likewise do not appear in
the aforesaid documents. According to the CA, it is apparent that petitioners maintained a
separate payroll for certain employees or willfully retained a portion of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded
control over the work performance of petitioner, to wit: (1) they required him to work within
the company premises; (2) they obliged petitioner to report every day of the week and tasked
him to usually perform the same job; (3) they enforced the observance of definite hours of
work from 8 oclock in the morning to 5 oclock in the afternoon; (4) the mode of payment of
petitioners salary was under their discretion, at first paying him on pakiao basis and thereafter,
on daily basis; (5) they implemented company rules and regulations; (6) [Estanislao] Agbay
directly paid petitioners salaries and controlled all aspects of his employment and (7)
petitioner rendered work necessary and desirable in the business of the respondent company. 34
We affirm the CA.
In Tan v. Lagrama,35 the Court held that the fact that a worker was not reported as an employee
to the SSS is not conclusive proof of the absence of employer-employee relationship.

Otherwise, an employer would be rewarded for his failure or even neglect to perform his
obligation.36
Nor does the fact that respondents name does not appear in the payrolls and pay envelope
records submitted by petitioners negate the existence of employer-employee relationship. For
a payroll to be utilized to disprove the employment of a person, it must contain a true and
complete list of the employee.37 In this case, the exhibits offered by petitioners before the
NLRC consisting of copies of payrolls and pay earnings records are only for the years 1999 and
2000; they do not cover the entire 18-year period during which respondent supposedly worked
for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized that in
the certifications issued by Mayol and Apondar, it was shown that respondent was employed
and working for them in those years he claimed to be working for SEIRI. However, a reading of
the certification by Mayol would show that while the latter claims to have respondent under his
employ in 1997, 1998 and 1999, respondents services were not regular and that he works only
if he wants to. Apondars certification likewise stated that respondent worked for him since
1999 through his brother Vicente as "sideline" but only after regular working hours and "off and
on" basis. Even assuming the truth of the foregoing statements, these do not foreclose
respondents regular or full-time employment with SEIRI. In effect, petitioners suggest that
respondent was employed by SEIRIs suppliers, Mayol and Apondar but no competent proof
was presented as to the latters status as independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to
respondents employment with SEIRI are its former workers whom they describe as
"disgruntled workers of SEIRI" with an axe to grind against petitioners, and that their execution
of affidavit in support of respondents claim is "their very way of hitting back the management
of SEIRI after disciplinary measures were meted against them." 38 This allegation though was not
substantiated by petitioners. Instead, after the CA rendered its decision reversing the NLRCs
ruling, petitioners subsequently changed their theory by denying the employment relationship
with the five affiants in their motion for reconsideration, thus:
x x x Since the five workers were occupying and working on a leased premises of the private
respondent, they were called workers of SEIRI (private respondent). Such admission however,
does not connote employment. For the truth of the matter, all of the five employees of the
supplier assigned at the leased premises of the private respondent. Because of the
recommendation of the private respondent with regards to the disciplinary measures meted on
the five workers, they wanted to hit back against the private respondent. Their motive to
implicate private respondent was to vindicate. Definitely, they have an axe to grind against the
private respondent. Mention has to be made that despite the dismissal of these five (5)
witnesses from their service, none of them ever went to the National Labor [Relations]
Commission and invoked their rights, if any, against their employer or at the very least against
the respondent. The reason is obvious, since they knew pretty well that they were not

employees of SEIRI but rather under the employ of Allan Mayol and Faustino Apondar, working
on a leased premise of respondent. x x x39
Petitioners admission that the five affiants were their former employees is binding upon them.
While they claim that respondent was the employee of their suppliers Mayol and Apondar, they
did not submit proof that the latter were indeed independent contractors; clearly, petitioners
failed to discharge their burden of proving their own affirmative allegation. 40 There is thus no
showing that the five former employees of SEIRI were motivated by malice, bad faith or any illmotive in executing their affidavit supporting the claims of respondent.
In any controversy between a laborer and his master, doubts reasonably arising from the
evidence are resolved in favor of the laborer.41
As a regular employee, respondent enjoys the right to security of tenure under Article 279 42 of
the Labor Code and may only be dismissed for a just 43 or authorized44 cause, otherwise the
dismissal becomes illegal.
Respondent, whose employment was terminated without valid cause by petitioners, is entitled
to reinstatement without loss of seniority rights and other privileges and to his full back wages,
inclusive of allowances and other benefits or their monetary equivalent, computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
Where reinstatement is no longer viable as an option, back wages shall be computed from the
time of the illegal termination up to the finality of the decision. Separation pay equivalent to
one month salary for every year of service should likewise be awarded as an alternative in case
reinstatement in not possible.45
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February 21,
2008 and Resolution dated February 9, 2009 of the Court of Appeals in CA-G.R. No. CEB-SP No.
02113 are hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.

G.R. No. L-69870 November 29, 1988

NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRY OF
LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.

G.R. No. 70295 November 29,1988

EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION AND
ARTURO L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the decision * of the Third
Division, National Labor Relations Commission in Case No. 11-4944-83 dated 28 November
1984 and its resolution dated 16 January 1985 denying motions for reconsideration of said
decision.
Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic
corporation which provides security guards as well as messengerial, janitorial and other similar
manpower services to the Philippine National Bank (PNB) and its agencies. She was first
employed with NASECO as a lady guard on 18 July 1975. Through the years, she was promoted
to Clerk Typist, then Personnel Clerk until she became Chief of Property and Records, on 10
March 1980. 1
Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren,
Manager of Finance and Special Project and Evaluation Department of NASECO, stemming from
her non-compliance with Lloren's memorandum, dated 11 October 1983, regarding certain
entry procedures in the company's Statement of Billings Adjustment. Said charges alleged that
Credo "did not comply with Lloren's instructions to place some corrections/additional remarks
in the Statement of Billings Adjustment; and when [Credo] was called by Lloren to his office to
explain further the said instructions, [Credo] showed resentment and behaved in a scandalous
manner by shouting and uttering remarks of disrespect in the presence of her co-employees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager
of NASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in
connection with the administrative charges filed against her. After said meeting, on the same
date, Credo was placed on "Forced Leave" status for 1 5 days, effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint,
docketed as Case No. 114944-83, with the Arbitration Branch, National Capital Region, Ministry

of Labor and Employment, Manila, against NASECO for placing her on forced leave, without due
process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on
Personnel Affairs deliberated and evaluated a number of past acts of misconduct or infractions
attributed to her. 5 As a result of this deliberation, said committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code of
Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and employee of client
company or officer of the Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use of
profane or insulting language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a superior
officer.
2. That, Management has already given due consideration to respondent's
[Credo] scandalous actuations for several times in the past. Records also show
that she was reprimanded for some offense and did not question it.
Management at this juncture, has already met its maximum tolerance point so it
has decided to put an end to respondent's [Credo] being an undesirable
employee. 6
The committee recommended Credo's termination, with forfeiture of benefits. 7
On 1 December 1983, Credo was called age to the office of Perez to be informed that she was
being charged with certain offenses. Notably, these offenses were those which NASECO's
Committee on Personnel Affairs already resolved, on 22 November 1983 to have been
committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was
made to explain her side in connection with the charges filed against her; however, due to her
failure to do so, 8 she was handed a Notice of Termination, dated 24 November 1983, and made
effective 1 December 1983. 9 Hence, on 6 December 1983, Credo filed a supplemental

complaint for illegal dismissal in Case No. 11-4944-83, alleging absence of just or authorized
cause for her dismissal and lack of opportunity to be heard. 10
After both parties had submitted their respective position papers, affidavits and other
documentary evidence in support of their claims and defenses, on 9 May 1984, the labor arbiter
rendered a decision: 1) dismissing Credo's complaint, and 2) directing NASECO to pay Credo
separation pay equivalent to one half month's pay for every year of service. 11
Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28
November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former
position, or substantially equivalent position, with six (6) months' backwages and without loss
of seniority rights and other privileges appertaining thereto, and 2) dismissing Credo's claim for
attorney's fees, moral and exemplary damages. As a consequence, both parties filed their
respective motions for reconsideration, 12 which the NLRC denied in a resolution of 16 January
1985. 13
Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave
abuse of discretion the dispositive portion of the 28 November 1984 decision which ordered
Credo's reinstatement with backwages. 14 Petitioners contend that in arriving at said
questioned order, the NLRC acted with grave abuse of discretion in finding that: 1) petitioners
violated the requirements mandated by law on termination, 2) petitioners failed in the burden
of proving that the termination of Credo was for a valid or authorized cause, 3) the alleged
infractions committed by Credo were not proven or, even if proved, could be considered to
have been condoned by petitioners, and 4) the termination of Credo was not for a valid or
authorized cause. 15
On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion
the dispositive portion of the 28 November 1984 decision which dismissed her claim for
attorney's fees, moral and exemplary damages and limited her right to backwages to only six (6)
months. 16
As guidelines for employers in the exercise of their power to dismiss employees for just causes,
the law provides that:
Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker
shall furnish him a written notice stating the particular acts or omission
constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may answer the allegations stated
against him in the notice of dismissal within a reasonable period from receipt of
such notice. The employer shall afford the worker ample opportunity to be heard
and to defend himself with the assistance of his representative, if he so desires.

Section 6. Decision to dismiss. The employer shall immediately notify a worker

in writing of a decision to dismiss him stating clearly the reasons therefor. 17
These guidelines mandate that the employer furnish an employee sought to be dismissed two
(2) written notices of dismissal before a termination of employment can be legally effected.
These are the notice which apprises the employee of the particular acts or omissions for which
his dismissal is sought and the subsequent notice which informs the employee of the
employer's decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express provisions of law on
protection to labor 18(which encompasses the right to security of tenure) and the broader
dictates of procedural due process necessarily mandate that notice of the employer's decision
to dismiss an employee, with reasons therefor, can only be issued after the employer has
afforded the employee concerned ample opportunity to be heard and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal.
Although she was apprised and "given the chance to explain her side" of the charges filed
against her, this chance was given so perfunctorily, thus rendering illusory Credo's right to
security of tenure. That Credo was not given ample opportunity to be heard and to defend
herself is evident from the fact that the compliance with the injunction to apprise her of the
charges filed against her and to afford her a chance to prepare for her defense was dispensed in
only a day. This is not effective compliance with the legal requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss
her) was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO
was already bent on terminating her services when she was informed on 1 December 1983 of
the charges against her, and that any hearing which NASECO thought of affording her after 24
November 1983 would merely be pro forma or an exercise in futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry
procedures in the company's Statement of Billings Adjustment did not warrant the severe
penalty of dismissal of the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated 22
November 1983 that, "In the process of her testimony/explanations she again
exhibited a conduct unbecoming in front of NASECO Officers and argued to Mr.
S. S. Lloren in a sarcastic and discourteous manner, notwithstanding, the fact
that she was inside the office of the Acctg. General Manager." Let it be noted,
however, that the Report did not even describe how the so called "conduct
unbecoming" or "discourteous manner" was done by complainant. Anent the
"sarcastic" argument of complainant, the purported transcript 19 of the meeting
held on 7 November 1983 does not indicate any sarcasm on the part of
complainant. At the most, complainant may have sounded insistent or emphatic

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

"absent the reason which gave rise to [the employee's] separation from employment, there is
no intention on the part of the employer to dismiss the employee concerned." 29 And, as a
result of having been wrongfully dismissed, Credo is entitled to three (3) years of backwages
without deduction and qualification. 30
However, while Credo's dismissal was effected without procedural fairness, an award of
exemplary damages in her favor can only be justified if her dismissal was effected in a wanton,
fraudulent, oppressive or malevolent manner. 31 A judicious examination of the record
manifests no such conduct on the part of management. However, in view of the attendant
circumstances in the case, i.e., lack of due process in effecting her dismissal, it is reasonable to
award her moral damages. And, for having been compelled to litigate because of the unlawful
actuations of NASECO, a reasonable award for attorney's fees in her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no
jurisdiction to order Credo's reinstatement. NASECO claims that, as a government corporation
(by virtue of its being a subsidiary of the National Investment and Development Corporation
(NIDC), a subsidiary wholly owned by the Philippine National Bank (PNB), which in turn is a
government owned corporation), the terms and conditions of employment of its employees are
governed by the Civil Service Law, rules and regulations. In support of this argument, NASECO
cites National Housing Corporation vs. JUCO, 33 where this Court held that "There should no
longer be any question at this time that employees of government-owned or controlled
corporations are governed by the civil service law and civil service rifles and regulations."
It would appear that, in the interest of justice, the holding in said case should not be given
retroactive effect, that is, to cases that arose before its promulgation on 17 January 1985. To do
otherwise would be oppressive to Credo and other employees similarly situated, because under
the same 1973 Constitution ,but prior to the ruling in National Housing Corporation vs. Juco,
this Court had recognized the applicability of the Labor Code to, and the authority of the NLRC
to exercise jurisdiction over, disputes involving terms and conditions of employment in
government owned or controlled corporations, among them, the National Service Corporation
(NASECO).<re||an1w> 34
Furthermore, in the matter of coverage by the civil service of government-owned or controlled
corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon
which National Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was
provided that:
The civil service embraces every branch, agency, subdivision, and instrumentality
of the Government, including every government-owned or controlled
corporation. ... 35
On the other hand, the 1987 Constitution provides that:

The civil service embraces all branches, subdivisions, instrumentalities, and

agencies of the Government, including government-owned or controlled
corporations with original charter. 36(Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court
in the National Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a circumvention
or emasculation of Section 1, Article XII-B of the constitution. It would be
possible for a regular ministry of government to create a host of subsidiary
corporations under the Corporation Code funded by a willing legislature. A
government-owned corporation could create several subsidiary corporations.
These subsidiary corporations would enjoy the best of two worlds. Their officials
and employees would be privileged individuals, free from the strict
accountability required by the Civil Service Decree and the regulations of the
Commission on Audit. Their incomes would not be subject to the competitive
restrains of the open market nor to the terms and conditions of civil service
employment. Conceivably, all government-owned or controlled corporations
could be created, no longer by special charters, but through incorporations
under the general law. The Constitutional amendment including such
corporations in the embrace of the civil service would cease to have application.
Certainly, such a situation cannot be allowed to exist. 37
appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil
Service embraces government-owned or controlled corporations with original charter; and,
therefore, by clear implication, the Civil Service does not include government-owned or
controlled corporations which are organized as subsidiaries of government-owned or controlled
corporations under the general corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional
intent and meaning in the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was
reading the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned or controlled
corporations.

My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the
Commissioner please state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1,
under the Civil Service Commission, says: "including governmentowned or controlled corporations.' Does that include a
corporation, like the Philippine Airlines which is governmentowned or controlled?
MR. FOZ. I would like to throw a question to the Commissioner. Is
the Philippine Airlines controlled by the government in the sense
that the majority of stocks are owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is what we might
call a tertiary corporation. The GSIS is owned by the government.
Would this be covered because the provision says "including
government-owned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as a private
corporation. Later on, the government, through the GSIS,
acquired the controlling stocks. Is that not the correct situation?
MR. ROMULO. That is true as Commissioner Ople is about to
explain. There was apparently a Supreme Court decision that
destroyed that distinction between a government-owned
corporation created under the Corporation Law and a
government-owned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case of
NHA vs. Juco to the effect that all government corporations
irrespective of the manner of creation, whether by special charter
or by the private Corporation Law, are deemed to be covered by
the civil service because of the wide-embracing definition made in
this section of the existing 1973 Constitution. But we recall the
response to the question of Commissioner Ople that our
intendment in this provision is just to give a general description of
the civil service. We are not here to make any declaration as to
whether employees of government-owned or controlled
corporations are barred from the operation of laws, such as the
Labor Code of the Philippines.
MR. ROMULO. Yes.

MR. OPLE. May I be recognized, Mr. Presiding Officer, since my

name has been mentioned by both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is
recognized.
MR. OPLE. In connection with the coverage of the Civil Service
Law in Section 1 (1), may I volunteer some information that may
be helpful both to the interpellator and to the Committee.
Following the proclamation of martial law on September 21, 1972,
this issue of the coverage of the Labor Code of the Philippines and
of the Civil Service Law almost immediately arose. I am, in
particular, referring to the period following the coming into force
and effect of the Constitution of 1973, where the Article on the
Civil Service was supposed to take immediate force and effect. In
the case of LUZTEVECO, there was a strike at the time. This was a
government-controlled and government-owned corporation. I
think it was owned by the PNOC with just the minuscule private
shares left. So, the Secretary of Justice at that time, Secretary
Abad Santos, and myself sat down, and the result of that meeting
was an opinion of the Secretary of Justice which 9 became binding
immediately on the government that government corporations
with original charters, such as the GSIS, were covered by the Civil
Service Law and corporations spun off from the GSIS, which we
called second generation corporations functioning as private
subsidiaries, were covered by the Labor Code. Samples of such
second generation corporations were the Philippine Airlines, the
Manila
Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these
companies I have mentioned as examples, except for the Manila Hotel, had
collective bargaining agreements. In the Philippine Airlines, there were, in fact,
three collective bargaining agreements; one, for the ground people or the PALIA
one, for the flight attendants or the PASAC and one for the pilots of the ALPAC
How then could a corporation like that be covered by the Civil Service law? But,
as the Chairman of the Committee pointed out, the Supreme Court decision in
the case of NHA vs. Juco unrobed the whole thing. Accordingly, the Philippine
Airlines, the Manila Hotel and the Hyatt are now considered under that decision
covered by the Civil Service Law. I also recall that in the emergency meeting of
the Cabinet convened for this purpose at the initiative of the Chairman of the
Reorganization Commission, Armand Fabella, they agreed to allow the CBA's to
lapse before applying the full force and effect of the Supreme Court decision. So,

we were in the awkward situation when the new government took over. I can
agree with Commissioner Romulo when he said that this is a problem which I am
not exactly sure we should address in the deliberations on the Civil Service Law
or whether we should be content with what the Chairman said that Section 1 (1)
of the Article on the Civil Service is just a general description of the coverage of
the Civil Service and no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the moment, I would be
satisfied if the Committee puts on records that it is not their
intent by this provision and the phrase "including governmentowned or controlled corporations" to cover such companies as
the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when
this draft was made, my proposal was really to eliminate, to drop
from the provision, the phrase "including government- owned or
controlled corporations."
MR. ROMULO. Would the Committee indicate that is the intent of
this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the Committee
can make such a statement in the face of an absolute exclusion of
government-owned or controlled corporations. However, this
does not preclude the Civil Service Law to prescribe different rules
and procedures, including emoluments for employees of
proprietary corporations, taking into consideration the nature of
their operations. So, it is a general coverage but it does not
preclude a distinction of the rules between the two types of
enterprises.
MR. FOZ. In other words, it is something that should be left to the
legislature to decide. As I said before, this is just a general
description and we are not making any declaration whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a
definitive understanding of the coverage and the Gentleman
wants to exclude government-owned or controlled corporations
like Philippine Airlines, then the recourse is to offer an
amendment as to the coverage, if the Commissioner does not
accept the explanation that there could be a distinction of the
rules, including salaries and emoluments.

MR. ROMULO. So as not to delay the proceedings, I will reserve

my right to submit such an amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. On page 2, line 5, I suggest the following
amendment after "corporations": Add a comma (,) and the phrase
EXCEPT THOSE EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee
say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed
amendment to now read as follows: "including government-owned or controlled
corporations WITH ORIGINAL CHARTERS." The purpose of this amendment is to
indicate that government corporations such as the GSIS and SSS, which have
original charters, fall within the ambit of the civil service. However, corporations
which are subsidiaries of these chartered agencies such as the Philippine Airlines,
Manila Hotel and Hyatt are excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee
say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term
"original charters," what exactly do we mean?

MR. ROMULO. We mean that they were created by law, by an act

of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification, the
Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those created by the
general corporation law are out.
MR. ROMULO. That is correct: 38
On the premise that it is the 1987 Constitution that governs the instant case because it is the
Constitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief
to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the
NASECO is a government-owned or controlled corporation without original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion
in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687,
2694; also published in 78 Phil. 221) on the effectivity of the principle of social justice embodied
in the 1935 Constitution, said:
Certainly, this principle of social justice in our Constitution as generously
conceived and so tersely phrased, was not included in the fundamental law as a
mere popular gesture. It was meant to (be) a vital, articulate, compelling
principle of public policy. It should be observed in the interpretation not only of
future legislation, but also of all laws already existing on November 15, 1935. It
was intended to change the spirit of our laws, present and future. Thus, all the
laws which on the great historic event when the Commonwealth of the
Philippines was born, were susceptible of two interpretations strict or liberal,
against or in favor of social justice, now have to be construed broadly in order to
promote and achieve social justice. This may seem novel to our friends, the
advocates of legalism but it is the only way to give life and significance to the
above-quoted principle of the Constitution. If it was not designed to apply to
these existing laws, then it would be necessary to wait for generations until all
our codes and all our statutes shall have been completely charred by removing
every provision inimical to social justice, before the policy of social justice can
become really effective. That would be an absurd conclusion. It is more
reasonable to hold that this constitutional principle applies to all legislation in
force on November 15, 1935, and all laws thereafter passed.

WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with
modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No.
70295, are ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her
termination, or if such reinstatement is not possible, to place her in a substantially equivalent
position, with three (3) years backwages, from 1 December 1983, without qualification or
deduction, and without loss of seniority rights and other privileges appertaining thereto, and 2)
pay Eugenia C. Credo P5,000.00 for moral damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events, petitioners in
G.R. No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia
C. Credo, in addition to her backwages and damages as above described, separation pay
equivalent to one-half month's salary for every year of service, to be computed on her monthly
salary at the time of her termination on 1 December 1983.
SO ORDERED.
Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, GrioAquino, Medialdea and Regalado, JJ., concur.
Narvasa, J., is on leave.
Gutierrez, Jr., J., in the result.

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

NATIONAL HOUSING CORPORATION, respondents.
DECISION
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
Corporate 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.
(underscoring 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 x x x 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 x x x.
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, subdivision, 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 stature and a subsidiary of the National Investment Development
Corporation, which in turn was a subsidiary of the Philippine National Bank, is excluded 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 Peoples 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 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 employees 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 petitioners 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 dilemma 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.

UNIVERSAL ROBINA SUGAR MILLING CORPORATION and RENE CABATI, Petitioners,

vs.
FERDINAND ACIBO, ROBERTO AGUILAR, EDDIE BALDOZA, RENE ABELLAR, DIOMEDES ALICOS,
MIGUEL ALICOS, ROGELIO AMAHIT, LARRY AMASCO, FELIPE BALANSAG, ROMEO BALANSAG,
MANUEL BANGOT, ANDY BANJAO, DIONISIO BENDIJO, JR., JOVENTINO BROCE, ENRICO
LITERAL, RODGER RAMIREZ, BIENVENIDO RODRIGUEZ, DIOCITO PALAGTIW, ERNIE SABLAN,
RICHARD PANCHO, RODRIGO ESTRABELA, DANNY KADUSALE and ALLYROBYL
OLPUS, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari 1 the challenge to the November 29, 2007
decision2 and the January 22, 2009 resolution 3 of the Court of Appeals (CA) in CA-G.R. CEB-SP
No. 02028. This CA decision affirmed with modification the July 22, 2005 decision 4 and the April
28, 2006 resolution5 of the National Labor Relations Commission (NLRC) in NLRC Case No. V00006-03 which, in turn, reversed the October 9, 2002 decision 6 of the Labor Arbiter (LA). The
LAs decision dismissed the complaint filed by complainants Ferdinand Acibo, et al. 7 against
petitioners Universal Robina Sugar Milling Corporation (URSUMCO) and Rene Cabati.
The Factual Antecedents
URSUMCO is a domestic corporation engaged in the sugar cane milling business; Cabati is
URSUMCOs Business Unit General Manager.

The complainants were employees of URSUMCO. They were hired on various dates (between
February 1988 and April 1996) and on different capacities, 8 i.e., drivers, crane operators, bucket
hookers, welders, mechanics, laboratory attendants and aides, steel workers, laborers,
carpenters and masons, among others. At the start of their respective engagements, the
complainants signed contracts of employment for a period of one (1) month or for a given
season. URSUMCO repeatedly hired the complainants to perform the same duties and, for
every engagement, required the latter to sign new employment contracts for the same
duration of one month or a given season.
On August 23, 2002,9 the complainants filed before the LA complaints for regularization,
entitlement to the benefits under the existing Collective Bargaining Agreement (CBA),and
attorneys fees.
In the decision10 dated October 9, 2002, the LA dismissed the complaint for lack of merit. The
LA held that the complainants were seasonal or project workers and not regular employees of
URSUMCO. The LA pointed out that the complainants were required to perform, for a definite
period, phases of URSUMCOs several projects that were not at all directly related to the
latters main operations. As the complainants were project employees, they could not be
regularized since their respective employments were coterminous with the phase of the work
or special project to which they were assigned and which employments end upon the
completion of each project. Accordingly, the complainants were not entitled to the benefits
granted under the CBA that, as provided, covered only the regular employees of URSUMCO.
Of the twenty-two original complainants before the LA, seven appealed the LAs ruling before
the NLRC, namely: respondents Ferdinand Acibo, Eddie Baldoza, Andy Banjao, Dionisio Bendijo,
Jr., Rodger Ramirez, Diocito Palagtiw, Danny Kadusale and Allyrobyl Olpus.
The Ruling of the NLRC
In its decision11 of July 22, 2005, the NLRC reversed the LAs ruling; it declared the complainants
as regular URSUMCO employees and granted their monetary claims under the CBA. The NLRC
pointed out that the complainants performed activities which were usually necessary and
desirable in the usual trade or business of URSUMCO, and had been repeatedly hired for the
same undertaking every season. Thus, pursuant to Article 280 of the Labor Code, the NLRC
declared that the complainants were regular employees. As regular employees, the NLRC held
that the complainants were entitled to the benefits granted, under the CBA, to the regular
URSUMCO employees.
The petitioners moved to reconsider this NLRC ruling which the NLRC denied in its April 28,
2006 resolution.12The petitioners elevated the case to the CA via a petition for certiorari. 13
The Ruling of the CA

In its November 29, 2007 decision,14 the CA granted in part the petition; it affirmed the NLRCs
ruling finding the complainants to be regular employees of URSUMCO, but deleted the grant of
monetary benefits under the CBA.
The CA pointed out that the primary standard for determining regular employment is the
reasonable connection between a particular activity performed by the employee vis--vis the
usual trade or business of the employer. This connection, in turn, can be determined by
considering the nature of the work performed and the relation of this work to the business or
trade of the employer in its entirety.
In this regard, the CA held that the various activities that the complainants were tasked to do
were necessary, if not indispensable, to the nature of URSUMCOs business. As the
complainants had been performing their respective tasks for at least one year, the CA held that
this repeated and continuing need for the complainants performance of these same tasks,
regardless of whether the performance was continuous or intermittent, constitutes sufficient
evidence of the necessity, if not indispensability, of the activity to URSUMCOs business.
Further, the CA noted that the petitioners failed to prove that they gave the complainants
opportunity to work elsewhere during the off-season, which opportunity could have qualified
the latter as seasonal workers. Still, the CA pointed out that even during this off-season period,
seasonal workers are not separated from the service but are simply considered on leave until
they are re-employed. Thus, the CA concluded that the complainants were regular employees
with respect to the activity that they had been performing and while the activity continued.
On the claim for CBA benefits, the CA, however, ruled that the complainants were not entitled
to receive them. The CA pointed out that while the complainants were considered regular,
albeit seasonal, workers, the CBA-covered regular employees of URSUMCO were performing
tasks needed by the latter for the entire year with no regard to the changing sugar milling
season. Hence, the complainants did not belong to and could not be grouped together with the
regular employees of URSUMCO, for collective bargaining purposes; they constitute a
bargaining unit separate and distinct from the regular employees. Consequently, the CA
declared that the complainants could not be covered by the CBA.
The petitioners filed the present petition after the CA denied their motion for partial
reconsideration15 in the CAs January 22, 2009 resolution.16
The Issues
The petition essentially presents the following issues for the Courts resolution: (1) whether the
respondents are regular employees of URSUMCO; and (2) whether affirmative relief can be
given to the fifteen (15) of the complainants who did not appeal the LAs decision. 17
The Courts Ruling

We resolve to partially GRANT the petition.

On the issue of the status of the respondents employment
The petitioners maintain that the respondents are contractual or project/seasonal workers and
not regular employees of URSUMCO. They thus argue that the CA erred in applying the legal
parameters and guidelines for regular employment to the respondents case. They contend that
the legal standards length of the employees engagement and the desirability or necessity of
the employees work in the usual trade or business of the employer apply only to regular
employees under paragraph 1, Article 280 of the Labor Code, and, under paragraph 2 of the
same article, to casual employees who are deemed regular by their length of service.
The respondents, the petitioners point out, were specifically engaged for a fixed and
predetermined duration of, on the average, one (1) month at a time that coincides with a
particular phase of the companys business operations or sugar milling season. By the nature of
their engagement, the respondents employment legally ends upon the end of the
predetermined period; thus, URSUMCO was under no legal obligation to rehire the
respondents.
In their comment,18 the respondents maintain that they are regular employees of URSUMCO.
Relying on the NLRC and the CA rulings, they point out that they have been continuously
working for URSUMCO for more than one year, performing tasks which were necessary and
desirable to URSUMCOs business. Hence, under the above-stated legal parameters, they are
regular employees.
We disagree with the petitioners position.1wphi1 We find the respondents to be regular
seasonal employees of URSUMCO.
As the CA has explained in its challenged decision, Article 280 of the Labor Code provides for
three kinds of employment arrangements, namely: regular, project/seasonal and casual.
Regular employment refers to that arrangement whereby the employee "has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer[.]"19 Under the definition, the primary standard that determines regular employment
is the reasonable connection between the particular activity performed by the employee and
the usual business or trade of the employer; 20 the emphasis is on the necessity or desirability of
the employees activity. Thus, when the employee performs activities considered necessary and
desirable to the overall business scheme of the employer, the law regards the employee as
regular.
By way of an exception, paragraph 2, Article 280 of the Labor Code also considers regular a
casual employment arrangement when the casual employees engagement has lasted for at
least one year, regardless of the engagements continuity. The controlling test in this
arrangement is the length of time during which the employee is engaged.

A project employment, on the other hand, contemplates on arrangement whereby "the

employment has been fixed for a specific project or undertaking whose completion or
termination has been determined at the time of the engagement of the employee[.]" 21 Two
requirements, therefore, clearly need to be satisfied to remove the engagement from the
presumption of regularity of employment, namely: (1) designation of a specific project or
undertaking for which the employee is hired; and (2) clear determination of the completion or
termination of the project at the time of the employees engagement. 22 The services of the
project employees are legally and automatically terminated upon the end or completion of the
project as the employees services are coterminous with the project.
Unlike in a regular employment under Article 280 of the Labor Code, however, the length of
time of the asserted "project" employees engagement is not controlling as the employment
may, in fact, last for more than a year, depending on the needs or circumstances of the project.
Nevertheless, this length of time (or the continuous rehiring of the employee even after the
cessation of the project) may serve as a badge of regular employment when the activities
performed by the purported "project" employee are necessary and indispensable to the usual
business or trade of the employer.23 In this latter case, the law will regard the arrangement as
regular employment.24
Seasonal employment operates much in the same way as project employment, albeit it involves
work or service that is seasonal in nature or lasting for the duration of the season. 25 As with
project employment, although the seasonal employment arrangement involves work that is
seasonal or periodic in nature, the employment itself is not automatically considered seasonal
so as to prevent the employee from attaining regular status. To exclude the asserted "seasonal"
employee from those classified as regular employees, the employer must show that: (1) the
employee must be performing work or services that are seasonal in nature; and (2) he had been
employed for the duration of the season.26 Hence, when the "seasonal" workers are
continuously and repeatedly hired to perform the same tasks or activities for several seasons or
even after the cessation of the season, this length of time may likewise serve as badge of
regular employment.27 In fact, even though denominated as "seasonal workers," if these
workers are called to work from time to time and are only temporarily laid off during the offseason, the law does not consider them separated from the service during the off-season
period. The law simply considers these seasonal workers on leave until re-employed.28
Casual employment, the third kind of employment arrangement, refers to any other
employment arrangement that does not fall under any of the first two categories, i.e., regular
or project/seasonal.
Interestingly, the Labor Code does not mention another employment arrangement
contractual or fixed term employment (or employment for a term) which, if not for the fixed
term, should fall under the category of regular employment in view of the nature of the
employees engagement, which is to perform an activity usually necessary or desirable in the
employers business.

In Brent School, Inc. v. Zamora,29 the Court, for the first time, recognized and resolved the
anomaly created by a narrow and literal interpretation of Article 280 of the Labor Code that
appears to restrict the employees right to freely stipulate with his employer on the duration of
his engagement. In this case, the Court upheld the validity of the fixed-term employment
agreed upon by the employer, Brent School, Inc., and the employee, Dorotio Alegre, declaring
that the restrictive clause in Article 280 "should be construed to refer to the substantive evil
that the Code itself x x x singled out: agreements entered into precisely to circumvent security
of tenure. It should have no application to instances where [the] fixed period of employment
was agreed upon knowingly and voluntarily by the parties x x x absent any x x x circumstances
vitiating *the employees+ consent, or where *the facts satisfactorily show+ that the employer
and [the] employee dealt with each other on more or less equal terms[.]" 30 The indispensability
or desirability of the activity performed by the employee will not preclude the parties from
entering into an otherwise valid fixed term employment agreement; a definite period of
employment does not essentially contradict the nature of the employees duties 31 as necessary
and desirable to the usual business or trade of the employer.
Nevertheless, "where the circumstances evidently show that the employer imposed the period
precisely to preclude the employee from acquiring tenurial security, the law and this Court will
not hesitate to strike down or disregard the period as contrary to public policy, morals,
etc."32 In such a case, the general restrictive rule under Article 280 of the Labor Code will apply
and the employee shall be deemed regular.
Clearly, therefore, the nature of the employment does not depend solely on the will or word of
the employer or on the procedure for hiring and the manner of designating the employee.
Rather, the nature of the employment depends on the nature of the activities to be performed
by the employee, considering the nature of the employers business, the duration and scope to
be done,33 and, in some cases, even the length of time of the performance and its continued
existence.
In light of the above legal parameters laid down by the law and applicable jurisprudence, the
respondents are neither project, seasonal nor fixed-term employees, but regular seasonal
workers of URSUMCO. The following factual considerations from the records support this
conclusion:
First, the respondents were made to perform various tasks that did not at all pertain to any
specific phase of URSUMCOs strict milling operations that would ultimately cease upon
completion of a particular phase in the milling of sugar; rather, they were tasked to perform
duties regularly and habitually needed in URSUMCOs operations during the milling season. The
respondents duties as loader operators, hookers, crane operators and drivers were necessary
to haul and transport the sugarcane from the plantation to the mill; laboratory attendants,
workers and laborers to mill the sugar; and welders, carpenters and utility workers to ensure
the smooth and continuous operation of the mill for the duration of the milling season, as
distinguished from the production of the sugarcane which involves the planting and raising of
the sugarcane until it ripens for milling. The production of sugarcane, it must be emphasized,

requires a different set of workers who are experienced in farm or agricultural work. Needless
to say, they perform the activities that are necessary and desirable in sugarcane production. As
in the milling of sugarcane, the plantation workers perform their duties only during the planting
season.
Second, the respondents were regularly and repeatedly hired to perform the same tasks year
after year. This regular and repeated hiring of the same workers (two different sets) for two
separate seasons has put in place, principally through jurisprudence, the system of regular
seasonal employment in the sugar industry and other industries with a similar nature of
operations.
Under the system, the plantation workers or the mill employees do not work continuously for
one whole year but only for the duration of the growing of the sugarcane or the milling season.
Their seasonal work, however, does not detract from considering them in regular employment
since in a litany of cases, this Court has already settled that seasonal workers who are called to
work from time to time and are temporarily laid off during the off-season are not separated
from the service in said period, but are merely considered on leave until re-employment.34 Be
this as it may, regular seasonal employees, like the respondents in this case, should not be
confused with the regular employees of the sugar mill such as the administrative or office
personnel who perform their tasks for the entire year regardless of the season. The NLRC,
therefore, gravely erred when it declared the respondents regular employees of URSUMCO
without qualification and that they were entitled to the benefits granted, under the CBA, to
URSUMCOS regular employees.
Third, while the petitioners assert that the respondents were free to work elsewhere during the
off-season, the records do not support this assertion. There is no evidence on record showing
that after the completion of their tasks at URSUMCO, the respondents sought and obtained
employment elsewhere.
Contrary to the petitioners position, Mercado, Sr. v. NLRC, 3rd Div. 35 is not applicable to the
respondents as this case was resolved based on different factual considerations. In Mercado,
the workers were hired to perform phases of the agricultural work in their employers farm for
a definite period of time; afterwards, they were free to offer their services to any other farm
owner. The workers were not hired regularly and repeatedly for the same phase(s) of
agricultural work, but only intermittently for any single phase. And, more importantly, the
employer in Mercado sufficiently proved these factual circumstances. The Court reiterated
these same observations in Hda. Fatima v. Natl Fed. of Sugarcane Workers-Food and Gen.
Trade36 and Hacienda Bino/Hortencia Starke, Inc. v. Cuenca. 37
At this point, we reiterate the settled rule that in this jurisdiction, only questions of law are
allowed in a petition for review on certiorari. 38 This Courts power of review in a Rule 45
petition is limited to resolving matters pertaining to any perceived legal errors, which the CA
may have committed in issuing the assailed decision. 39 In reviewing the legal correctness of the
CAs Rule 65 decision in a labor case, we examine the CA decision in the context that it

determined, i.e., the presence or absence of grave abuse of discretion in the NLRC decision
before it and not on the basis of whether the NLRC decision on the merits of the case was
correct.40 In other words, we have to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged before it. 41
Viewed in this light, we find the need to place the CAs affirmation, albeit with modification, of
the NLRC decision of July 22, 2005 in perspective. To recall, the NLRC declared the respondents
as regular employees of URSUMCO.42 With such a declaration, the NLRC in effect granted the
respondents prayer for regularization and, concomitantly, their prayer for the grant of
monetary benefits under the CBA for URSUMCOs regular employees. In its challenged ruling,
the CA concurred with the NLRC finding, but with the respondents characterized as regular
seasonal employees of URSUMCO.
The CA misappreciated the real import of the NLRC ruling. The labor agency did not declare the
respondents as regular seasonal employees, but as regular employees. This is the only
conclusion that can be drawn from the NLRC decisions dispositive portion, thus:
WHEREFORE, premises considered, the appeal is hereby GRANTED. Complainants are declared
regular employees of respondent.1wphi1 As such, they are entitled to the monetary benefits
granted to regular employees of respondent company based on the CBA, reckoned three (3)
years back from the filing of the above-entitled case on 23 August 2002 up to the present or to
their entire service with respondent after the date of filing of the said complaint if they are no
longer connected with respondent company.43
It is, therefore, clear that the issue brought to the CA for resolution is whether the NLRC gravely
abused its discretion in declaring the respondents regular employees of URSUMCO and, as
such, entitled to the benefits under the CBA for the regular employees.
Based on the established facts, we find that the CA grossly misread the NLRC ruling and missed
the implications of the respondents regularization. To reiterate, the respondents are regular
seasonal employees, as the CA itself opined when it declared that "private respondents who are
regular workers with respect to their seasonal tasks or activities and while such activities exist,
cannot automatically be governed by the CBA between petitioner URSUMCO and the
authorized bargaining representative of the regular and permanent employees." 44 Citing
jurisprudential standards,45 it then proceeded to explain that the respondents cannot be
lumped with the regular employees due to the differences in the nature of their duties and the
duration of their work vis-a-vis the operations of the company.
The NLRC was well aware of these distinctions as it acknowledged that the respondents worked
only during the milling season, yet it ignored the distinctions and declared them regular
employees, a marked departure from existing jurisprudence. This, to us, is grave abuse of
discretion, as it gave no reason for disturbing the system of regular seasonal employment
already in place in the sugar industry and other industries with similar seasonal operations. For

upholding the NLRCs flawed decision on the respondents employment status, the CA
committed a reversible error of judgment.
In sum, we find the complaint to be devoid of merit. The issue of granting affirmative relief to
the complainants who did not appeal the CA ruling has become academic.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. Except for the denial of
the respondents' claim for CBA benefits, the November 29, 2007 decision and the January 22,
2009 resolution of the Court of Appeals are SET ASIDE. The complaint is DISMISSED for lack of
merit.
SO ORDERED.
G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010
decision2 and the January 31, 2011 resolution 3 of the Court of Appeals (CA) in CA-G.R. SP No.
116003. The CA decision annulled and set aside the May 26, 2010 decision4 of the National
Labor Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision 6 of the
Labor Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint 7 against petitioner Ariel L. David,
doing business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay,
holiday pay and 13th month pay. He also claimed payment for moral and exemplary damages
and attorneys fees. Macasio also claimed payment for service incentive leave (SIL). 8
Macasio alleged9 before the LA that he had been working as a butcher for David since January
6, 1995. Macasio claimed that David exercised effective control and supervision over his work,
pointing out that David: (1) set the work day, reporting time and hogs to be chopped, as well as
the manner by which he was to perform his work; (2) daily paid his salary of P700.00, which was
increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and
disapproved his leaves. Macasio added that David owned the hogs delivered for chopping, as
well as the work tools and implements; the latter also rented the workplace. Macasio further
claimed that David employs about twenty-five (25) butchers and delivery drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only
has ten employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or
task basis who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay
pursuant to the provisions of the Implementing Rules and Regulations (IRR) of the Labor Code.
David pointed out that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m.
of the following day or earlier, depending on the volume of the delivered hogs; (2) received the
fixed amount of P700.00 per engagement, regardless of the actual number of hours that he
spent chopping the delivered hogs; and (3) was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business
only in 2005. He pointed to the Certificate of Employment 12 that David issued in his favor which
placed the date of his employment, albeit erroneously, in January 2000. Second, he reported
for work every day which the payroll or time record could have easily proved had David
submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired
the latter on "pakyaw" or task basis. He also claimed that he issued the Certificate of
Employment, upon Macasios request, only for overseas employment purposes. He pointed to
the "Pinagsamang Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher
(Antonio Macasios co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA
gave credence to Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA
noted the following facts to support this finding: (1) Macasio received the fixed amount
of P700.00 for every work done, regardless of the number of hours that he spent in completing
the task and of the volume or number of hogs that he had to chop per engagement; (2)
Macasio usually worked for only four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the
following day; and (3) the P700.00 fixed wage far exceeds the then prevailing daily minimum
wage of P382.00. The LA added that the nature of Davids business as hog dealer supports this
"pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David
did not require Macasio to observe an eight hour work schedule to earn the fixed P700.00
wage; and that Macasio had been performing a non-time work, pointing out that Macasio was
paid a fixed amount for the completion of the assigned task, irrespective of the time consumed
in its performance. Since Macasio was paid by result and not in terms of the time that he spent
in the workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and

holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th
month pay law.18
Macasio moved for reconsideration 19 but the NLRC denied his motion in its August 11, 2010
resolution,20prompting Macasio to elevate his case to the CA via a petition for certiorari. 21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and
reversed the NLRCs ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down in
Serrano v. Severino Santos Transit.23The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who performs the work
away from the office or place of work and whose regular work hours cannot be determined
with reasonable certainty. In Macasios case, the elements that characterize a "field personnel"
are evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer" business
in Sta. Mesa, Manila under Davids supervision and control, and for a fixed working schedule
that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three
years, with 10% attorneys fees on the total monetary award. The CA, however, denied
Macasios claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration 24 in the CAs
January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis.
Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay. David
reiterates his submissions before the lower tribunals27 and adds that he never had any control
over the manner by which Macasio performed his work and he simply looked on to the "endresult." He also contends that he never compelled Macasio to report for work and that under
their arrangement, Macasio was at liberty to choose whether to report for work or not as other
butchers could carry out his tasks. He points out that Solano and Antonio had, in fact, attested
to their (David and Macasios) established "pakyawan" arrangement that rendered a written
contract unnecessary. In as much as Macasio is a task basis employee who is paid the fixed
amount of P700.00 per engagement regardless of the time consumed in the performance
David argues that Macasio is not entitled to the benefits he claims. Also, he posits that because
he engaged Macasio on "pakyaw" or task basis then no employer-employee relationship exists
between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits
that the CA erred in reversing the labor tribunals findings and granting the prayed monetary
claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would
have this Court believe.28 He reiterates his arguments before the lower tribunals and adds that,
contrary to Davids position, theP700.00 fee that he was paid for each day that he reported for
work does not indicate a "pakyaw" or task basis employment as this amount was paid daily,
regardless of the number or pieces of hogs that he had to chop. Rather, it indicates a dailywage method of payment and affirms his regular employment status. He points out that David
did not allege or present any evidence as regards the quota or number of hogs that he had to
chop as basis for the "pakyaw" or task basis payment; neither did David present the time record
or payroll to prove that he worked for less than eight hours each day. Moreover, David did not
present any contract to prove that his employment was on task basis. As David failed to prove
the alleged task basis or "pakyawan" agreement, Macasio concludes that he was Davids
employee. Procedurally, Macasio points out that Davids submissions in the present petition
raise purely factual issues that are not proper for a petition for review on certiorari. These
issues whether he (Macasio) was paid by result or on "pakyaw" basis; whether he was a "field
personnel"; whether an employer-employee relationship existed between him and David; and
whether David exercised control and supervision over his work are all factual in nature and
are, therefore, proscribed in a Rule 45 petition. He argues that the CAs factual findings bind
this Court, absent a showing that such findings are not supported by the evidence or the CAs
judgment was based on a misapprehension of facts. He adds that the issue of whether an
employer-employee relationship existed between him and David had already been settled by
the LA29 and the NLRC30 (as well as by the CA per Macasios manifestation before this Court
dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions
on holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the
context of the Rule 65 petition before the CA, the issue is whether the CA correctly found the
NLRC in grave abuse of discretion in ruling that Macasio is entitled to these labor standards
benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65
proceeding, this Courts power of review is limited to resolving matters pertaining to any
perceived legal errors that the CA may have committed in issuing the assailed decision. This is in
contrast with the review for jurisdictional errors, which we undertake in an original certiorari
action. In reviewing the legal correctness of the CA decision, we examine the CA decision based
on how it determined the presence or absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision on the merits of the case
was correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65
review, not a review on appeal, of the NLRC decision challenged before it. 33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law
raised against the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL
and 13th month pay. This one is a question of law. The determination of this question of law
however is intertwined with the largely factual issue of whether Macasio falls within the rule on
entitlement to these claims or within the exception. In either case, the resolution of this factual
issue presupposes another factual matter, that is, the presence of an employer-employee
relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged
the latter on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw"
or task basis with the lack of employment relationship. Impliedly, David asserts that their
"pakyawan" or task basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis
does not characterize the relationship that may exist between the parties, i.e., whether one of
employment or independent contractorship. Article 97(6) of the Labor Code defines wages as
"xxx the remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services
rendered or to be rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code
speaks of workers paid by results or those whose pay is calculated in terms of the quantity or
quality of their work output which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task
basis negates employer-employee relationship, David would want the Court to engage on a
factual appellate review of the entire case to determine the presence or existence of that
relationship. This approach however is not authorized under a Rule 45 petition for review of the
CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employeremployee but because of its finding that since Macasio is paid on pakyaw or task basis, then he

is not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the
separate illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly
found the existence of an employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for
review of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether
the CA correctly determined the presence or absence of grave abuse of discretion on the part
of the NLRC. In concrete question form, "did the NLRC gravely abuse its discretion in denying
Macasios claims simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test, 38 we find that such a relationship exist
in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements generally
need to be considered, namely: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employees
conduct. These elements or indicators comprise the so-called "four-fold" test of employment
relationship. Macasios relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and
engagement of the employee." David categorically confirmed this fact when, in his
"Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na
chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang
Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang
butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin
siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their
respective pleadings before the lower tribunals and even before this Court that the former had
been paying the latter P700.00 each day after the latter had finished the days task. Solano and
Antonio also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang
Salaysay."41 This satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This
power to determine the work schedule obviously implies power of control. By having the power
to control Macasios work schedule, David could regulate Macasios work and could even refuse
to give him any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the
means and methods of performing it. In addition to setting the day and time when Macasio

should report for work, the established facts show that David rents the place where Macasio
had been performing his tasks. Moreover, Macasio would leave the workplace only after he had
finished chopping all of the hog meats given to him for the days task. Also, David would still
engage Macasios services and have him report for work even during the days when only few
hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be
expected to observe certain rules and requirements and David would necessarily exercise some
degree of control as the chopping of the hog meats would be subject to his specifications. Also,
since Macasio performed his tasks at Davids workplace, David could easily exercise control and
supervision over the former. Accordingly, whether or not David actually exercised this right or
power to control is beside the point as the law simply requires the existence of this power to
control 4243 or, as in this case, the existence of the right and opportunity to control and
supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to
an employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that
Macasio was engaged or paid on "pakyaw" or task basis. This factual finding binds the Court
under the rule that factual findings of labor tribunals when supported by the established facts
and in accord with the laws, especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straighthour wage payment, is the non-consideration of the time spent in working. In a task-basis work,
the emphasis is on the task itself, in the sense that payment is reckoned in terms of completion
of the work, not in terms of the number of time spent in the completion of work. 45 Once the
work or task is completed, the worker receives a fixed amount as wage, without regard to the
standard measurements of time generally used in pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number
of the hogs assigned to him for chopping, Macasio would receive the fixed amount of P700.00
once he had completed his task. Clearly, these circumstances show a "pakyaw" or task basis
engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by
applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine the
parties relationship as it is simply a method of pay computation. Accordingly, Macasio is
Davids employee, albeit engaged on "pakyaw" or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to
Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as
Presidential Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor
Code and the Rules and Regulations Implementing PD No. 851. Uniformly, these provisions
exempt workers paid on "pakyaw" or task basis from the coverage of holiday, SIL and 13th
month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino
Santos Transit.46 These labor law provisions, when read together with the Serrano ruling,
exempt those engaged on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude
that the worker is exempted or covered depends on the facts and in this sense, is a question of
fact: first, whether Macasio is a "field personnel"; and second, whether those engaged on
"pakyaw" or task basis, but who are not "field personnel," are exempted from the coverage of
holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA
correctly ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasios
monetary claims simply because he is paid on a non-time basis without determining whether he
is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the
Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] 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.
xxxx

"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. [emphases and
underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor
Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on
one hand and "workers who are paid by results" on the other hand, are not covered by the Title
I provisions. The wordings of Article82 of the Labor Code additionally categorize workers "paid
by results" and "field personnel" as separate and distinct types of employees who are
exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than (10)
workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis,
or those who are paid a fixed amount for performing work irrespective of the time consumed in
the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive. (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.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in
establishments regularly employing less than ten employees or in establishments exempted
from granting this benefit by the Secretary of Labor and Employment after considering the
viability or financial condition of such establishment. [emphases ours]
xxxx

Section 1. Coverage. This rule shall apply to all employees except:

xxxx
(e) 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 a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all
employees. To be excluded from their coverage, an employee must be one of those that these
provisions expressly exempt, strictly in accordance with the exemption. Under the IRR,
exemption from the coverage of holiday and SIL pay refer to "field personnel and other
employees whose time and performance is unsupervised by the employer including those who
are engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor Code, the IRR
on holiday and SIL pay do not exclude employees "engaged on task basis" as a separate and
distinct category from employees classified as "field personnel." Rather, these employees are
altogether merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean
that those who are engaged on task basis, per se, are excluded from the SIL and holiday
payment since this is what the Labor Code provisions, in contrast with the IRR, strongly suggest.
The arguable interpretation of this rule may be conceded to be within the discretion granted to
the LA and NLRC as the quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase
"those who are engaged on task or contract basis" in the rule has already been interpreted to
mean as follows:
[the phrase] 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 xxx 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.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude
one from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I
(including the holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore
validly qualifies and limits the general exclusion of "workers paid by results" found in Article 82
from the coverage of holiday and SIL pay. This is the only reasonable interpretation since the

determination of excluded workers who are paid by results from the coverage of Title I is
"determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems,
Inc., v. Bautista:
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."
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.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in
support of granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis 50 declared that "employees
engaged on task or contract basis xxx are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field personnel." 51 The Court
explained that the phrase "including those who are engaged on task or contract basis, purely
commission basis" found in Section 1(d), Rule V of Book III of the IRR should not be understood
as a separate classification of employees to which SIL shall not be granted. Rather, as with its
preceding phrase - "other employees whose performance is unsupervised by the employer" the phrase "including those who are engaged on task or contract basis" serves to amplify the
interpretation of the Labor Code definition of "field personnel" as those "whose actual hours of
work in the field cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted
the Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of
the Labor Code based simply and solely on the mode of payment of an employee. The NLRCs
utter disregard of this consistent jurisprudential ruling is a clear act of grave abuse of
discretion.52 In other words, by dismissing Macasios complaint without considering whether
Macasio was a "field personnel" or not, the NLRC proceeded based on a significantly
incomplete consideration of the case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only
taken counsel from Serrano and earlier cases, they would have correctly reached a similar
conclusion regarding the payment of holiday pay since the rule exempting "field personnel"
from the grant of holiday pay is identically worded with the rule exempting "field personnel"
from the grant of SIL pay. To be clear, the phrase "employees engaged on task or contract basis
"found in the IRR on both SIL pay and holiday pay should be read together with the exemption
of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to
holiday and SIL pay, the presence (or absence) of employer supervision as regards the workers
time and performance is the key: if the worker is simply engaged on pakyaw or task basis, then
the general rule is that he is entitled to a holiday pay and SIL pay unless exempted from the
exceptions specifically provided under Article 94 (holiday pay) and Article95 (SIL pay) of the
Labor Code. However, if the worker engaged on pakyaw or task basis also falls within the
meaning of "field personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio
does not fall under the definition of "field personnel." The CAs finding in this regard is
supported by the established facts of this case: first, Macasio regularly performed his duties at
Davids principal place of business; second, his actual hours of work could be determined with
reasonable certainty; and, third, David supervised his time and performance of duties. Since
Macasio cannot be considered a "field personnel," then he is not exempted from the grant of
holiday, SIL pay even as he was engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs
ruling dismissing Macasios complaint for holiday and SIL pay for having been rendered with
grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in
finding that the NLRC gravely abused its discretion in denying this benefit to Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an
employee must be one of those expressly enumerated to be exempted. Section 3 of the Rules
and Regulations Implementing P.D. No. 85154 enumerates the exemptions from the coverage of
13th month pay benefits. Under Section 3(e), "employers of those who are paid on xxx task
basis, and those who are paid a fixed amount for performing a specific work, irrespective of the
time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that insofar as payment of the 13th month
pay is concerned, the law did not intend to qualify the exemption from its coverage with the
requirement that the task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar
as the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM
the decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court
of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.
LABREL_2ND BATCH_CASES

PATRICIA HALAGUEA, MA. ANGELITA L. G.R. No. 172013

PULIDO, MA. TERESITA P. SANTIAGO,
MARIANNE V. KATINDIG,
Present:
BERNADETTE A. CABALQUINTO,
LORNA B. TUGAS, MARY CHRISTINE A.
YNARES-SANTIAGO, J.,
VILLARETE, CYNTHIA A. STEHMEIER, ROSE
Chairperson,
ANNA G. VICTA, NOEMI R. CRESENCIO, and
CHICO-NAZARIO,
other flight attendants of PHILIPPINE
VELASCO, JR.,
AIRLINES,
NACHURA, and
Petitioners,
PERALTA, JJ.
- versus -

PHILIPPINE AIRLINES INCORPORATED,

Respondent.
Promulgated:

October 2, 2009
x--------------------------------------------------x

DECISION

PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to annul and set aside the Decision [1] and the Resolution[2] of the Court of Appeals (CA)
in CA-G.R. SP. No. 86813.
Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL)
on different dates prior to November 22, 1996. They are members of the Flight Attendants and
Stewards Association of the Philippines (FASAP), a labor organization certified as the sole and
exclusive certified as the sole and exclusive bargaining representative of the flight attendants,
flight stewards and pursers of respondent.
On July 11, 2001, respondent and FASAP entered into a Collective Bargaining
Agreement[3] incorporating the terms and conditions of their agreement for the years 2000 to
2005, hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:
xxxx
3. Compulsory Retirement
Subject to the grooming standards provisions of this Agreement, compulsory
retirement shall be fifty-five (55) for females and sixty (60) for males. x x x.

In a letter dated July 22, 2003, [4] petitioners and several female cabin crews manifested that the
aforementioned CBA provision on compulsory retirement is discriminatory, and demanded for
an equal treatment with their male counterparts. This demand was reiterated in a letter[5] by
petitioners' counsel addressed to respondent demanding the removal of gender discrimination
provisions in the coming re-negotiations of the PAL-FASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA
proposals[6] and manifested their willingness to commence the collective bargaining
negotiations between the management and the association, at the soonest possible time.

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the
Issuance of Temporary Restraining Order and Writ of Preliminary Injunction [7] with the Regional
Trial Court (RTC) of Makati City, Branch 147, docketed as Civil Case No. 04-886, against
respondent for the invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing
on petitioners' application for a TRO and, thereafter, required the parties to submit their
respective memoranda.
On August 9, 2004, the RTC issued an Order [8] upholding its jurisdiction over the present case.
The RTC reasoned that:
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which
is allegedly discriminatory as it discriminates against female flight attendants, in
violation of the Constitution, the Labor Code, and the CEDAW. The allegations in
the Petition do not make out a labor dispute arising from employer-employee
relationship as none is shown to exist. This case is not directed specifically
against respondent arising from any act of the latter, nor does it involve a claim
against the respondent. Rather, this case seeks a declaration of the nullity of the
questioned provision of the CBA, which is within the Court's competence, with
the allegations in the Petition constituting the bases for such relief sought.

The RTC issued a TRO on August 10, 2004, [9] enjoining the respondent for implementing Section
144, Part A of the PAL-FASAP CBA.
The respondent filed an omnibus motion[10] seeking reconsideration of the order overruling its
objection to the jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1)
petitioners' application for the issuance of a writ of preliminary injunction be denied; and (2)
the petition be dismissed or the proceedings in this case be suspended.

On September 27, 2004, the RTC issued an Order [11] directing the issuance of a writ of
preliminary injunction enjoining the respondent or any of its agents and representatives from
further implementing Sec. 144, Part A of the PAL-FASAP CBA pending the resolution of the case.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with
Prayer for a Temporary Restraining Order and Writ of Preliminary Injunction [12]with the Court of
Appeals (CA) praying that the order of the RTC, which denied its objection to its jurisdiction, be
annuled and set aside for having been issued without and/or with grave abuse of discretion
amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and
ruled that:
WHEREFORE, the respondent court is by us declared to have NO JURISDICTION
OVER THE CASE BELOW and, consequently, all the proceedings, orders and
processes it has so far issued therein are ANNULED and SET ASIDE. Respondent
court is ordered to DISMISS its Civil Case No. 04-886.
SO ORDERED.

Petitioner filed a motion for reconsideration, [13] which was denied by the CA in its Resolution
dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR
DISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has jurisdiction over the petitioners' action
challenging the legality or constitutionality of the provisions on the compulsory retirement age
contained in the CBA between respondent PAL and FASAP.
Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of the
litigation is incapable of pecuniary estimation and in all cases not within the exclusive

jurisdiction of any court, tribunal, person or body exercising judicial or quasi-judicial functions.
The RTC has the power to adjudicate all controversies except those expressly witheld from the
plenary powers of the court. Accordingly, it has the power to decide issues of constitutionality
or legality of the provisions of Section 144, Part A of the PAL-FASAP CBA. As the issue involved is
constitutional in character, the labor arbiter or the National Labor Relations Commission (NLRC)
has no jurisdiction over the case and, thus, the petitioners pray that judgment be rendered on
the merits declaring Section 144, Part A of the PAL-FASAP CBA null and void.
Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the
present case, as the controversy partakes of a labor dispute. The dispute concerns the terms
and conditions of petitioners' employment in PAL, specifically their retirement age. The RTC has
no jurisdiction over the subject matter of petitioners' petition for declaratory relief because the
Voluntary Arbitrator or panel of Voluntary Arbitrators have original and exclusive jurisdiction to
hear and decide all unresolved grievances arising from the interpretation or implementation of
the CBA. Regular courts have no power to set and fix the terms and conditions of employment.
Finally, respondent alleged that petitioners' prayer before this Court to resolve their petition for
declaratory relief on the merits is procedurally improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the material allegations of the complaint
and the character of the relief prayed for irrespective of whether plaintiff is entitled to such
relief.[14]
In the case at bar, the allegations in the petition for declaratory relief plainly show that
petitioners' cause of action is the annulment of Section 144, Part A of the PAL-FASAP CBA. The
pertinent portion of the petition recites:
CAUSE OF ACTION
24. Petitioners have the constitutional right to fundamental equality with men
under Section 14, Article II, 1987 of the Constitution and, within the specific
context of this case, with the male cabin attendants of Philippine Airlines.

26. Petitioners have the statutory right to equal work and employment
opportunities with men under Article 3, Presidential Decree No. 442, The Labor
Code and, within the specific context of this case, with the male cabin
attendants of Philippine Airlines.
27. It is unlawful, even criminal, for an employer to discriminate against women
employees with respect to terms and conditions of employment solely on
account of their sex under Article 135 of the Labor Code as amended by
Republic Act No. 6725 or the Act Strengthening Prohibition on Discrimination
Against Women.
28. This discrimination against Petitioners is likewise against the Convention on
the Elimination of All Forms of Discrimination Against Women (hereafter,
CEDAW), a multilateral convention that the Philippines ratified in 1981. The
Government and its agents, including our courts, not only must condemn all
forms of discrimination against women, but must also implement measures
towards its elimination.
29. This case is a matter of public interest not only because of Philippine Airlines'
violation of the Constitution and existing laws, but also because it highlights the
fact that twenty-three years after the Philippine Senate ratified the CEDAW,
discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory
retirement from service is invidiously discriminatory against and manifestly
prejudicial to Petitioners because, they are compelled to retire at a lower age
(fifty-five (55) relative to their male counterparts (sixty (60).
33. There is no reasonable, much less lawful, basis for Philippine Airlines to
distinguish, differentiate or classify cabin attendants on the basis of sex and
thereby arbitrarily set a lower compulsory retirement age of 55 for Petitioners
for the sole reason that they are women.
37. For being patently unconstitutional and unlawful, Section 114, Part A of the
PAL-FASAP 2000-2005 CBA must be declared invalid and stricken down to the
extent that it discriminates against petitioner.
38. Accordingly, consistent with the constitutional and statutory guarantee of
equality between men and women, Petitioners should be adjudged and declared
entitled, like their male counterparts, to work until they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the Honorable Court:

c. after trial on the merits:

(I)

declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA

INVALID, NULL and VOID to the extent that it discriminates
against Petitioners; x x x x

From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue
raised is whether Section 144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional.
Here, the petitioners' primary relief in Civil Case No. 04-886 is the annulment of Section 144,
Part A of the PAL-FASAP CBA, which allegedly discriminates against them for being female flight
attendants. The subject of litigation is incapable of pecuniary estimation, exclusively cognizable
by the RTC, pursuant to Section 19 (1) of Batas Pambansa Blg. 129, as amended.[15] Being an
ordinary civil action, the same is beyond the jurisdiction of labor tribunals.
The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the
application of the Constitution, labor statutes, law on contracts and the Convention on the
Elimination of All Forms of Discrimination Against Women, [16] and the power to apply and
interpret the constitution and CEDAW is within the jurisdiction of trial courts, a court of general
jurisdiction. In Georg Grotjahn GMBH & Co. v. Isnani,[17] this Court held that not every dispute
between an employer and employee involves matters that only labor arbiters and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor
arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be resolved by reference to the Labor Code,
other labor statutes, or their collective bargaining agreement.

Not every controversy or money claim by an employee against the employer or vice-versa is
within the exclusive jurisdiction of the labor arbiter. Actions between employees and employer
where the employer-employee relationship is merely incidental and the cause of action
precedes from a different source of obligation is within the exclusive jurisdiction of the regular
court.[18] Here, the employer-employee relationship between the parties is merely incidental

and the cause of action ultimately arose from different sources of obligation, i.e., the
Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or
other labor relations statute or a collective bargaining agreement but by the general civil law,
the jurisdiction over the dispute belongs to the regular courts of justice and not to the labor
arbiter and the NLRC. In such situations, resolution of the dispute requires expertise, not in
labor management relations nor in wage structures and other terms and conditions of
employment, but rather in the application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed to labor arbiters and the NLRC
and the rationale for granting jurisdiction over such claims to these agencies disappears. [19]
If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall
determine the constitutionality or legality of the assailed CBA provision?

This Court holds that the grievance machinery and voluntary arbitrators do not have the power
to determine and settle the issues at hand. They have no jurisdiction and competence to decide
constitutional issues relative to the questioned compulsory retirement age. Their exercise of
jurisdiction is futile, as it is like vesting power to someone who cannot wield it.
In Gonzales v. Climax Mining Ltd.,[20] this Court affirmed the jurisdiction of courts over
questions on constitutionality of contracts, as the same involves the exercise of judicial power.
The Court said:
Whether the case involves void or voidable contracts is still a judicial question. It
may, in some instances, involve questions of fact especially with regard to the
determination of the circumstances of the execution of the contracts. But the
resolution of the validity or voidness of the contracts remains a legal or judicial
question as it requires the exercise of judicial function. It requires the
ascertainment of what laws are applicable to the dispute, the interpretation and
application of those laws, and the rendering of a judgment based
thereon. Clearly, the dispute is not a mining conflict. It is essentially

judicial. The complaint was not merely for the determination of rights under the
mining contracts since the very validity of those contracts is put in issue.
In Saura v. Saura, Jr.,[21] this Court emphasized the primacy of the regular court's judicial power
enshrined in the Constitution that is true that the trend is towards vesting administrative
bodies like the SEC with the power to adjudicate matters coming under their particular
specialization, to insure a more knowledgeable solution of the problems submitted to
them. This would also relieve the regular courts of a substantial number of cases that would
otherwise swell their already clogged dockets. But as expedient as this policy may be, it should
not deprive the courts of justice of their power to decide ordinary cases in accordance with
the general laws that do not require any particularexpertise or training to interpret and
apply. Otherwise, the creeping take-over by the administrative agencies of the judicial power
vested in the courts would render the judiciary virtually impotent in the discharge of the
duties assigned to it by the Constitution.
To be sure, in Rivera v. Espiritu,[22] after Philippine Airlines (PAL) and PAL Employees Association
(PALEA) entered into an agreement, which includes the provision to suspend the PAL-PALEA
CBA for 10 years, several employees questioned its validity via a petition for certiorari directly
to the Supreme Court. They said that the suspension was unconstitutional and contrary to
public policy. Petitioners submit that the suspension was inordinately long, way beyond the
maximum statutory life of 5 years for a CBA provided for in Article 253-A of the Labor Code. By
agreeing to a 10-year suspension, PALEA, in effect, abdicated the workers' constitutional right
to bargain for another CBA at the mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to
petitioners a plain, speedy, and adequate remedy in the ordinary course of law. The Court said
that while the petition was denominated as one for certiorari and prohibition, its object was
actually the nullification of the PAL-PALEA agreement. As such, petitioners' proper remedy is an
ordinary civil action for annulment of contract, an action which properly falls under the
jurisdiction of the regional trial courts.

The change in the terms and conditions of employment, should Section 144 of the CBA be held
invalid, is but a necessary and unavoidable consequence of the principal relief sought, i.e.,
nullification of the alleged discriminatory provision in the CBA. Thus, it does not necessarily
follow that a resolution of controversy that would bring about a change in the terms and
conditions of employment is a labor dispute, cognizable by labor tribunals. It is unfair to
preclude petitioners from invoking the trial court's jurisdiction merely because it may
eventually result into a change of the terms and conditions of employment. Along that line, the
trial court is not asked to set and fix the terms and conditions of employment, but is called
upon to determine whether CBA is consistent with the laws.

Although the CBA provides for a procedure for the adjustment of grievances, such referral to
the grievance machinery and thereafter to voluntary arbitration would be inappropriate to the
petitioners, because the union and the management have unanimously agreed to the terms of
the CBA and their interest is unified.
In Pantranco North Express, Inc., v. NLRC,[23] this Court held that:
x x x Hence, only disputes involving the union and the company shall be referred
to the grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to
an agreement regarding the dismissal of private respondents. No grievance
between them exists which could be brought to a grievance machinery. The
problem or dispute in the present case is between the union and the company
on the one hand and some union and non-union members who were dismissed,
on the other hand. The dispute has to be settled before an impartial body. The
grievance machinery with members designated by the union and the company
cannot be expected to be impartial against the dismissed employees. Due
process demands that the dismissed workers grievances be ventilated before an
impartial body. x x x .
Applying the same rationale to the case at bar, it cannot be said that the
"dispute" is between the union and petitioner company because both have
previously agreed upon the provision on "compulsory retirement" as embodied
in the CBA. Also, it was only private respondent on his own who questioned the
compulsory retirement. x x x.

In the same vein, the dispute in the case at bar is not between FASAP and respondent PAL, who
have both previously agreed upon the provision on the compulsory retirement of female flight
attendants as embodied in the CBA. The dispute is between respondent PAL and several female
flight attendants who questioned the provision on compulsory retirement of female flight
attendants. Thus, applying the principle in the aforementioned case cited, referral to the
grievance machinery and voluntary arbitration would not serve the interest of the petitioners.
Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under
the CBA would be futile because respondent already implemented Section 114, Part A of PALFASAP CBA when several of its female flight attendants reached the compulsory retirement age
of 55.
Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's
bargaining proposal for the remaining period of 2004-2005 of the PAL-FASAP CBA, which
includes the renegotiation of the subject Section 144. However, FASAP's attempt to change the
questioned provision was shallow and superficial, to say the least, because it exerted no further
efforts to pursue its proposal. When petitioners in their individual capacities questioned the
legality of the compulsory retirement in the CBA before the trial court, there was no showing
that FASAP, as their representative, endeavored to adjust, settle or negotiate with PAL for the
removal of the difference in compulsory age retirement between its female and male flight
attendants, particularly those employed before November 22, 1996. Without FASAP's active
participation on behalf of its female flight attendants, the utilization of the grievance machinery
or voluntary arbitration would be pointless.

The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA.
Interpretation, as defined in Black's Law Dictionary, is the art of or process of discovering and
ascertaining the meaning of a statute, will, contract, or other written document. [24] The
provision regarding the compulsory retirement of flight attendants is not ambiguous and does
not require interpretation. Neither is there any question regarding the implementation of the

subject CBA provision, because the manner of implementing the same is clear in itself. The only
controversy lies in its intrinsic validity.
Although it is a rule that a contract freely entered between the parties should be respected,
since a contract is the law between the parties, said rule is not absolute.
In Pakistan International Airlines Corporation v. Ople, [25] this Court held that:
The principle of party autonomy in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil Code is that the contracting parties
may establish such stipulations as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order or public policy. Thus,
counter-balancing the principle of autonomy of contracting parties is the equally
general rule that provisions of applicable law, especially provisions relating to
matters affected with public policy, are deemed written into the contract. Put a
little differently, the governing principle is that parties may not contract away
applicable provisions of law especially peremptory provisions dealing with
matters heavily impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and regulations
by simply contracting with each other.
Moreover, the relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.x x x[26] The
supremacy of the law over contracts is explained by the fact that labor contracts are not
ordinary contracts; these are imbued with public interest and therefore are subject to the
police power of the state.[27] It should not be taken to mean that retirement provisions agreed
upon in the CBA are absolutely beyond the ambit of judicial review and nullification. A CBA, as a
labor contract, is not merely contractual in nature but impressed with public interest. If the
retirement provisions in the CBA run contrary to law, public morals, or public policy, such
provisions may very well be voided.[28]
Finally, the issue in the petition for certiorari brought before the CA by the respondent was the
alleged exercise of grave abuse of discretion of the RTC in taking cognizance of the case for

declaratory relief. When the CA annuled and set aside the RTC's order, petitioners sought relief
before this Court through the instant petition for review under Rule 45. A perusal of the
petition before Us, petitioners pray for the declaration of the alleged discriminatory provision in
the CBA against its female flight attendants.

This Court is not persuaded. The rule is settled that pure questions of fact may not be the
proper subject of an appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode
of appeal is generally limited only to questions of law which must be distinctly set forth in the
petition. The Supreme Court is not a trier of facts.[29]

The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or
not is a question of fact. This would require the presentation and reception of evidence by the
parties in order for the trial court to ascertain the facts of the case and whether said provision
violates the Constitution, statutes and treaties. A full-blown trial is necessary, which jurisdiction
to hear the same is properly lodged with the the RTC. Therefore, a remand of this case to
the RTC for the proper determination of the merits of the petition for declaratory relief is just
and proper.
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of
Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813
are REVERSED and SET ASIDE. The Regional Trial Court of Makati City, Branch 147
is DIRECTED to continue the proceedings in Civil Case No. 04-886 with deliberate dispatch.
SO ORDERED.

LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION, petitioner, vs. THE HONORABLE

COURT OF APPEALS (Former Eighth Division) and COMMANDO SECURITY SERVICE AGENCY,
INC., respondents.
DECISION
GONZAGA-REYES, J.:

Before us is a Petition for Review on Certiorari of the decision[1] of the Court of Appeals[2] in CAG.R. CV No. 33893 entitled COMMANDO SECURITY SERVICE AGENCY, INCORPORATED vs.
LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION which affirmed the decision [3] of the
Regional Trial Court, 11th Judicial Region, Branch 9, Davao City in Civil Case No. 19203-88.
The pertinent facts as found by the Court of Appeals are as follows:
"The evidence shows that in June 1986, plaintiff Commando Security Service
Agency, Inc., and defendant Lapanday Agricultural Development Corporation
entered into a Guard Service Contract. Plaintiff provided security guards in
defendants banana plantation. The contract called for the payment to a guard of
P754.28 on a daily 8-hour basis and an additional P565.72 for a four hour
overtime while the shift-in-charge was to be paid P811.40 on a daily 8-hour basis
and P808.60 for the 4-hour overtime.
Wage Orders increasing the minimum wage in 1983 were complied with by the
defendant. On June 16, 1984, Wage Order No. 5 was promulgated directing an
increase of P3.00 per day on the minimum wage of workers in the private sector
and a P5.00 increase on the ECOLA. This was followed on November 1, 1984 by
Wage Order No. 6 which further increased said minimum wage by P3.00 on the
ECOLA. Both Wage Orders contain the following provision:
"In the case of contract for construction projects and for security,
janitorial and similar services, the increase in the minimum wage
and allowances rates of the workers shall be borne by the
principal or client of the construction/service contractor and the
contracts shall be deemed amended accordingly, subject to the
provisions of Sec. 3 (b) of this order" (Sec. 6 and Sec. 9, Wage
Orders No. 5 and 6, respectively)."
Plaintiff demanded that its Guard Service Contract with defendant be upgraded
in compliance with Wage Order Nos. 5 and 6. Defendant refused. Their Contract
expired on June 6, 1986 without the rate adjustment called for Wage Order Nos.
5 and 6 being implemented. By the time of the filing of plaintiffs Complaint, the
rate adjustment payable by defendant amounted to P462,346.25. Defendant
opposed the Complaint by raising the following defenses: (1) the rate adjustment
is the obligation of the plaintiff as employer of the security guards; (2) assuming
its liability, the sum it should pay is less in amount; and (3) the Wage Orders
violate the impairment clause of the Constitution.
The trial court decided in favor of the plaintiff. It held:
xxx

"However, in order for the security agency to pay the security

guards, the Wage Orders made specific provisions to amend
existing contracts for security services by allowing the adjustment
of the consideration paid by the principal to the security agency
concerned. (Eagle Security Agency, Inc. vs. NLRC, Phil.
Tuberculosis Society, Inc. vs. NLRC, et al., May 18, 1989).
The Wage Orders require the amendment of the contract as to
the consideration to cover the service contractors payment of the
increases mandated. However, in the case at bar, the contract for
security services had earlier been terminated without the
corresponding amendment. Plaintiff now demands adjustment in
the contract price as the same was deemed amended by Wage
Order Nos. 5 and 6.
Before the plaintiff could pay the minimum wage as mandated by
law, adjustments must be paid by the principal to the security
agency concerned.
"Given these circumstances, if PTS pays the
security guards, it cannot claim reimbursements
from Eagle. But if its Eagle that pays them, the
latter can claim reimbursement from PTS in lieu of
an adjustment, considering that the contract had
expired and had not been renewed. (Eagle Security
Agency vs. NLRC and Phil. Tuberculosis Society, Inc.
vs. NLRC, et al., 18 May 1989).
"As to the issue that Wage Orders Nos. 5 and 6 constitute
impairments of contracts in violation of constitutional guarantees,
the High Court ruled" The Supreme Court has rejected the
impairment of contract argument in sustaining the validity and
constitutionality of labor and social legislation like the Blue
Sunday Law, compulsory coverage of private sector employees in
the Social Security System, and the abolition of share tenancy
enacted pursuant to the police power of the state (Eagle Security
Agency, Inc. vs. National Labor Relation Commission and Phil.
Tuberculosis Society, Inc. vs. NLRC, et al., May 18, 1989)."
Petitioners motion for reconsideration was denied; [4] hence this petition where petitioner cites
the following grounds to support the instant petition for review:
"1. THE WAGE INCREASES PROVIDED FOR IN THE WAGE ORDERS WERE DUE TO
THE GUARDS AND NOT THE SECURITY AGENCY;

2. A SECURITY AGENCY WHO DID NOT PAY WAGE INCREASE TO ITS GUARDS IT
HAD ALREADY TERMINATED AND WITHOUT THEIR AUTHORIZATION CANNOT
INSTITUTE AN ACTION TO RECOVER SAID WAGE INCREASE FOR ITS BENEFIT;
3. IN THE ABSENCE OF BAD FAITH AND WITHOUT THE TRIAL COURT CORRECTLY
ESTABLISHING THE BASIS FOR ATTORNEYS FEES, THE SAME MAY NOT BE
AWARDED.
4. THE NATIONAL LABOR RELATIONS (SIC) IS THE PROPER FORUM THAT HAS
THE JURISDICTION TO RESOLVE THE ISSUE OF WHETHER OR NOT THE
PETITIONER IS LIABLE TO PAY THE PRIVATE RESPONDENT THE WAGE AND
ALLOWANCE INCREASES MANDATED UNDER WAGE ORDER NOS. 5 AND 6." [5]
Reiterating its position below, petitioner asserts that private respondent has no factual and
legal basis to collect the benefits under subject Wage Order Nos. 5 and 6 intended for the
security guards without the authorization of the security guards concerned. Inasmuch as the
services of the forty-two (42) security guards were already terminated at the time the
complaint was filed on August 15, 1988, private respondents complaint partakes of the nature
of an action for recovery of what was supposedly due the guards under said Wage Orders,
amounts that they claim were never paid by private respondent and therefore not collectible by
the latter from the petitioner. Petitioner also assails the award of attorneys fees in the amount
of P115,585.31 or 25% of the total adjustment claim of P462,341.25 for lack of basis and for
being unconscionable.
Moreover, petitioner submits that it is the National Labor Relations Commission (NLRC) and not
the civil courts that has jurisdiction to resolve the issue involved in this case for it refers to the
enforcement of wage adjustment and other benefits due to private respondents security
guards mandated under Wage Order Nos. 5 and 6. Considering that the RTC has no jurisdiction,
its decision is without force and effect.[6]
On the other hand, private respondent contends that the basis of its action against petitionerappellant is the enforcement of the Guard Service Contract entered into by them, which is
deemed amended by Section 6 of Wage Order No. 5 and Section 9 of Wage Order No. 6; that
pursuant to their amended Guard Service Contract, the increases/adjustments in wages and
ECOLA are due to private respondent and not to the security guards who are not parties to the
said contract. It is therefore immaterial whether or not private respondent paid its security
guards their wages as adjusted by said Wage Orders and that since the forty-two (42) security
guards are not parties to the Guard Service Contract, there is no need for them to authorize the
filing of, or be joined in, this suit.
As regards the award to private respondent of the amount of P115,585.31 as attorneys fees,
private respondent maintains that there is enough evidence and/or basis for the grant thereof,
considering that the adamant attitude of the petitioner (in implementing the questioned Wage
Orders) compelled the herein private respondent, to litigate in court. Furthermore, since the

legal fee payable by private respondent to its counsel is essentially on contingent basis, the
amount of P115,583.31 granted by the trial court which is 25% of the total claim is not
unconscionable.
As regards the jurisdiction of the RTC, private respondent alleges that the suit filed before the
trial court is for the purpose of securing the upgrading of the Guard Service Contract entered
into by herein petitioner and private respondent in June 1983. The enforcement of this written
contract does not fall under the jurisdiction of the NLRC because the money claims involved
therein did not arise from employer-employee relations between the parties and is intrinsically
a civil dispute. Thus, jurisdiction lies with the regular courts. Private respondent further
contends that petitioner is estopped or barred from raising the question of jurisdiction for the
first time before the Supreme Court after having voluntarily submitted to the jurisdiction of the
regular courts below and having lost its case therein.[7]
We resolve to grant the petition.
We resolve first the issue of jurisdiction. We agree with the respondent that the RTC has
jurisdiction over the subject matter of the present case. It is well settled in law and
jurisprudence that where no employer-employee relationship exists between the parties and
no issue is involved which may be resolved by reference to the Labor Code, other labor statutes
or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. [8] In its
complaint, private respondent is not seeking any relief under the Labor Code but seeks
payment of a sum of money and damages on account of petitioners alleged breach of its
obligation under their Guard Service Contract. The action is within the realm of civil law hence
jurisdiction over the case belongs to the regular courts.[9] While the resolution of the issue
involves the application of labor laws, reference to the labor code was only for the
determination of the solidary liability of the petitioner to the respondent where no employeremployee relation exists. Article 217 of the Labor Code as amended vests upon the labor
arbiters exclusive original jurisdiction only over the following:
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may
file involving wages, rates of pay, hours of work and other terms and conditions
of employment;
4. Claims for actual, moral exemplary and other forms of damages arising from
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable jurisdictional
requisite;[10] and there is none in this case.
On the merits, the core issue involved in the present petition is whether or not petitioner is
liable to the private respondent for the wage adjustments provided under Wage Order Nos. 5
and 6 and for attorneys fees.
Private respondent admits that there is no employer-employee relationship between it and the
petitioner. The private respondent is an independent/job contractor [11] who assigned security
guards at the petitioners premises for a stipulated amount per guard per month. The Contract
of Security Services expressly stipulated that the security guards are employees of the Agency
and not of the petitioner.[12]Articles 106 and 107 of the Labor Code provides the rule governing
the payment of wages of employees in the event that the contractor fails to pay such wages as
follows:
"Art. 106. Contractor or subcontractor. Whenever an employer enters into a
contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.
xxx
ART. 107. Indirect employer. The provisions of the immediately preceding Article
shall likewise apply to any person, partnership, association or corporation which,
not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project."
It will be seen from the above provisions that the principal (petitioner) and the contractor
(respondent) are jointly and severally liable to the employees for their wages. This Court held
in Eagle Security, Inc. vs. NLRC[13] and Spartan Security and Detective Agency, Inc. vs.
NLRC[14] that the joint and several liability of the contractor and the principal is mandated by
the Labor Code to assure compliance with the provisions therein including the minimum wage.

The contractor is made liable by virtue of his status as direct employer. The principal, on the
other hand, is made the indirect employer of the contractors employees to secure payment of
their wages should the contractor be unable to pay them.[15] Even in the absence of an
employer-employee relationship, the law itself establishes one between the principal and the
employees of the agency for a limited purpose i.e. in order to ensure that the employees are
paid the wages due them. In the above-mentioned cases, the solidary liability of the principal
and contractor was held to apply to the aforementioned Wage Order Nos. 5 and 6. [16] In ruling
that under the Wage Orders, existing security guard services contracts are amended to allow
adjustment of the consideration in order to cover payment of mandated increases, and that the
principal is ultimately liable for the said increases, this Court stated:
"The Wage Orders are explicit that payment of the increases are to be borne by
the principal or client. To be borne, however, does not mean that the principal,
PTSI in this case, would directly pay the security guards the wage and allowance
increases because there is no privity of contract between them. The security
guards contractual relationship is with their immediate employer, EAGLE. As an
employer, EAGLE is tasked, among others, with the payment of their wages [See
Article VII Sec. 3 of the Contract for Security Services, supra and Bautista vs.
Inciong, G. R. No. 52824, March 16, 1988, 158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI and
EAGLE wherein the former availed of the security services provided by the latter.
In return, the security agency collects from its client payment for its security
services. This payment covers the wages for the security guards and also
expenses for their supervision and training, the guards bonds, firearms with
ammunitions, uniforms and other equipments, accessories, tools, materials and
supplies necessary for the maintenance of a security force.
Premises considered, the security guards immediate recourse for the payment of
the increases is with their direct employer, EAGLE. However, in order for the
security agency to comply with the new wage and allowance rates it has to pay
the security guards, the Wage Orders made specific provision to amend existing
contracts for security services by allowing the adjustment of the consideration
paid by the principal to the security agency concerned. What the Wage Orders
require, therefore, is the amendment of the contracts as to the consideration to
cover the service contractors payment of the increases mandated. In the end,
therefore, ultimate liability for the payment of the increases rests with the
principal.
In view of the foregoing, the security guards should claim the amount of the
increases from EAGLE. Under the Labor Code, in case the agency fails to pay
them the amounts claimed, PTSI should be held solidarily liable with EAGLE
[Articles 106, 107 and 109]. Should EAGLE pay, it can claim an adjustment from

PTSI for an increase in consideration to cover the increases payable to the

security guards."[17]
It is clear also from the foregoing that it is only when contractor pays the increases mandated
that it can claim an adjustment from the principal to cover the increases payable to the security
guards. The conclusion that the right of the contractor (as principal debtor) to recover from the
principal as solidary co-debtor) arises only if he has paid the amounts for which both of them
are jointly and severally liable is in line with Article 1217 of the Civil Code which provides:
"Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may choose
which offer to accept.
He who made payment may claim from his codebtors only the share which
corresponds to each, with interest for the payment already made. If the payment
is made before the debt is due, no interest for the intervening period may be
demanded. xxx"
Pursuant to the above provision, the right of reimbursement from a co-debtor is recognized in
favor of the one who paid.
It will be seen that the liability of the petitioner to reimburse the respondent only arises if and
when respondent actually pays its employees the increases granted by Wage Order Nos. 5 and
6. Payment, which means not only the delivery of money but also the performance, in any
other manner, of the obligation,[18] is the operative fact which will entitle either of the solidary
debtors to seek reimbursement for the share which corresponds to each of the debtors.
The records show that judgment was rendered by Labor Arbiter Newton R. Sancho holding both
petitioner and private respondent jointly and solidarily liable to the security guards in a
Decision[19] dated October 17, 1986 (NLRC Case No. 2849-MC-XI-86).[20] However, it is not
disputed that the private respondent has not actually paid the security guards the wage
increases granted under the Wage Orders in question. Neither is it alleged that there is an
extant claim for such wage adjustments from the security guards concerned, whose services
have already been terminated by the contractor. Accordingly, private respondent has no cause
of action against petitioner to recover the wage increases. Needless to stress, the increases in
wages are intended for the benefit of the laborers and the contractor may not assert a claim
against the principal for salary wage adjustments that it has not actually paid. Otherwise, as
correctly put by the respondent, the contractor would be unduly enriching itself by recovering
wage increases, for its own benefit.
Finally, considering that the private respondent has no cause of action against the petitioner,
private respondent is not entitled to attorneys fees.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated May 24,
1993 is REVERSED and SET ASIDE. The complaint of private respondent COMMANDO SECURITY
SERVICE AGENCY, INC. is hereby DISMISSED.
SO ORDERED.

FIRST DIVISION
G.R. No. 182295, June 26, 2013
7K CORPORATION, Petitioner, v. EDDIE ALBARICO, Respondent.
DECISION
SERENO, C.J.:
This is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court,
asking the Court to determine whether a voluntary arbitrator in a labor dispute exceeded his
jurisdiction in deciding issues not specified in the submission agreement of the parties. It
assails the Decision1dated 18 September 2007 and the Resolution 2 dated 17 March 2008 of the
Court of Appeals (CA).3
FACTS
When he was dismissed on 5 April 1993, respondent Eddie Albarico (Albarico) was a regular
employee of petitioner 7K Corporation, a company selling water purifiers. He started working
for the company in 1990 as a salesman.4 Because of his good performance, his employment
was regularized. He was also promoted several times: from salesman, he was promoted to
senior sales representative and then to acting team field supervisor. In 1992, he was awarded
the Presidents Trophy for being one of the companys top water purifier specialist distributors.
In April of 1993, the chief operating officer of petitioner 7K Corporation terminated Albaricos
employment allegedly for his poor sales performance.5 Respondent had to stop reporting for
work, and he subsequently submitted his money claims against petitioner for arbitration before
the National Conciliation and Mediation Board (NCMB). The issue for voluntary arbitration
before the NCMB, according to the parties Submission Agreement dated 19 April 1993, was
whether respondent Albarico was entitled to the payment of separation pay and the sales
commission reserved for him by the corporation. 6
While the NCMB arbitration case was pending, respondent Albarico filed a Complaint against
petitioner corporation with the Arbitration Branch of the National Labor Relations Commission

(NLRC) for illegal dismissal with money claims for overtime pay, holiday compensation,
commission, and food and travelling allowances.7 The Complaint was decided by the labor
arbiter in favor of respondent Albarico, who was awarded separation pay in lieu of
reinstatement, backwages and attorneys fees.8
On appeal by petitioner, the labor arbiters Decision was vacated by the NLRC for forum
shopping on the part of respondent Albarico, because the NCMB arbitration case was still
pending.9 The NLRC Decision, which explicitly stated that the dismissal was without prejudice to
the pending NCMB arbitration case,10 became final after no appeal was taken.
On 17 September 1997, petitioner corporation filed its Position Paper in the NCMB arbitration
case.11It denied that respondent was terminated from work, much less illegally dismissed. The
corporation claimed that he had voluntarily stopped reporting for work after receiving a verbal
reprimand for his sales performance; hence, it was he who was guilty of abandonment of
employment. Respondent made an oral manifestation that he was adopting the position paper
he submitted to the labor arbiter, a position paper in which the former claimed that he had
been illegally dismissed.12
On 12 January 2005, almost 12 years after the filing of the NCMB case, both parties appeared in
a hearing before the NCMB.13 Respondent manifested that he was willing to settle the case
amicably with petitioner based on the decision of the labor arbiter ordering the payment of
separation pay in lieu of reinstatement, backwages and attorneys fees. On its part, petitioner
made a counter-manifestation that it was likewise amenable to settling the dispute. However, it
was willing to pay only the separation pay and the sales commission according to the
Submission Agreement dated 19 April 1993.14
The factual findings of the voluntary arbitrator, as well as of the CA, are not clear on what
happened afterwards. Even the records are bereft of sufficient information.
On 18 November 2005, the NCMB voluntary arbitrator rendered a Decision finding petitioner
corporation liable for illegal dismissal. 15 The termination of respondent Albarico, by reason of
alleged poor performance, was found invalid. 16 The arbitrator explained that the promotions,
increases in salary, and awards received by respondent belied the claim that the latter was
performing poorly.17 It was also found that Albarico could not have abandoned his job, as the
abandonment should have been clearly shown. Mere absence was not sufficient, according to
the arbitrator, but must have been accompanied by overt acts pointing to the fact that the
employee did not want to work anymore. It was noted that, in the present case, the immediate
filing of a complaint for illegal dismissal against the employer, with a prayer for reinstatement,
showed that the employee was not abandoning his work. The voluntary arbitrator also found
that Albarico was dismissed from his work without due process.
However, it was found that reinstatement was no longer possible because of the strained
relationship of the parties.18 Thus, in lieu of reinstatement, the voluntary arbitrator ordered the
corporation to pay separation pay for two years at P4,456 for each year, or a total amount of

P8,912.
Additionally, in view of the finding that Albarico had been illegally dismissed, the voluntary
arbitrator also ruled that the former was entitled to backwages in the amount of
P90,804.19 Finally, the arbitrator awarded attorneys fees in respondents favor, because he had
been compelled to file an action for illegal dismissal. 20
Petitioner corporation subsequently appealed to the CA, imputing to the voluntary arbitrator
grave abuse of discretion amounting to lack or excess of jurisdiction for awarding backwages
and attorneys fees to respondent Albarico based on the formers finding of illegal
dismissal.21 The arbitrator contended that the issue of the legality of dismissal was not explicitly
included in the Submission Agreement dated 19 April 1993 filed for voluntary arbitration and
resolution. It prayed that the said awards be set aside, and that only separation pay of
P8,912.00 and sales commission of P4,787.60 be awarded.
The CA affirmed the Decision of the voluntary arbitrator, but eliminated the award of attorneys
fees for having been made without factual, legal or equitable justification. 22 Petitioners Motion
for Partial Reconsideration was denied as well.23
Hence, this Petition.
ISSUE
The issue before the Court is whether the CA committed reversible error in finding that the
voluntary arbitrator properly assumed jurisdiction to decide the issue of the legality of the
dismissal of respondent as well as the latters entitlement to backwages, even if neither the
legality nor the entitlement was expressedly claimed in the Submission Agreement of the
parties.
The Petition is denied for being devoid of merit.
DISCUSSION
Preliminarily, we address petitioners claim that under Article 217 of the Labor Code, original
and exclusive jurisdiction over termination disputes, such as the present case, is lodged only
with the labor arbiter of the NLRC.24
Petitioner overlooks the proviso in the said article, thus:cralavvonlinelawlibrary
Art. 217. Jurisdiction of the Labor Arbiters and the Commission.
a. Except as otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission
of the case by the parties for decision without extension, even in the absence of stenographic
notes, the following cases involving all workers, whether agricultural or nonagricultural:cralavvonlinelawlibrary

xxxx
2. Termination disputes;
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for reinstatement. (Emphases
supplied)
Thus, although the general rule under the Labor Code gives the labor arbiter exclusive and
original jurisdiction over termination disputes, it also recognizes exceptions. One of the
exceptions is provided in Article 262 of the Labor Code. In San Jose v. NLRC,25 we
said:cralavvonlinelawlibrary
The phrase Except as otherwise provided under this Code refers to the following
exceptions:cralavvonlinelawlibrary
A. Art. 217. Jurisdiction of Labor Arbiters . . .
xxxx
(c) Cases arising from the interpretation or implementation of collective bargaining agreement
and those arising from the interpretation or enforcement of company procedure/policies shall
be disposed of by the Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitrator as may be provided in said agreement.
B. Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labor disputes including unfair labor practices and bargaining deadlocks. (Emphasis supplied)
We also said in the same case that *t+he labor disputes referred to in the same Article 262 [of
the Labor Code] can include all those disputes mentioned in Article 217 over which the Labor
Arbiter has original and exclusive jurisdiction. 26
From the above discussion, it is clear that voluntary arbitrators may, by agreement of the
parties, assume jurisdiction over a termination dispute such as the present case, contrary to the
assertion of petitioner that they may not.
We now resolve the main issue. Petitioner argues that, assuming that the voluntary arbitrator
has jurisdiction over the present termination dispute, the latter should have limited his decision
to the issue contained in the Submission Agreement of the parties the issue of whether
respondent Albarico was entitled to separation pay and to the sales commission the latter
earned before being terminated.27 Petitioner asserts that under Article 262 of the Labor Code,

the jurisdiction of a voluntary arbitrator is strictly limited to the issues that the parties agree to
submit. Thus, it contends that the voluntary arbitrator exceeded his jurisdiction when he
resolved the issues of the legality of the dismissal of respondent and the latters entitlement to
backwages on the basis of a finding of illegal dismissal.
According to petitioner, the CA wrongly concluded that the issue of respondents entitlement
to separation pay was necessarily based on his allegation of illegal dismissal, thereby making
the issue of the legality of his dismissal implicitly submitted to the voluntary arbitrator for
resolution.28Petitioner argues that this was an erroneous conclusion, because separation pay
may in fact be awarded even in circumstances in which there is no illegal dismissal.
We rule that although petitioner correctly contends that separation pay may in fact be awarded
for reasons other than illegal dismissal, the circumstances of the instant case lead to no other
conclusion than that the claim of respondent Albarico for separation pay was premised on his
allegation of illegal dismissal. Thus, the voluntary arbitrator properly assumed jurisdiction over
the issue of the legality of his dismissal.
True, under the Labor Code, separation pay may be given not only when there is illegal
dismissal. In fact, it is also given to employees who are terminated for authorized causes, such
as redundancy, retrenchment or installation of labor-saving devices under Article 28329 of the
Labor Code. Additionally, jurisprudence holds that separation pay may also be awarded for
considerations of social justice, even if an employee has been terminated for a just cause other
than serious misconduct or an act reflecting on moral character. 30 The Court has also ruled that
separation pay may be awarded if it has become an established practice of the company to pay
the said benefit to voluntarily resigning employees31 or to those validly dismissed for nonmembership in a union as required in a closed-shop agreement.32
The above circumstances, however, do not obtain in the present case. There is no claim that
the issue of entitlement to separation pay is being resolved in the context of any authorized
cause of termination undertaken by petitioner corporation. Neither is there any allegation that
a consideration of social justice is being resolved here. In fact, even in instances in which
separation pay is awarded in consideration of social justice, the issue of the validity of the
dismissal still needs to be resolved first. Only when there is already a finding of a valid dismissal
for a just cause does the court then award separation pay for reason of social justice. The other
circumstances when separation pay may be awarded are not present in this case.
The foregoing findings indisputably prove that the issue of separation pay emanates solely from
respondents allegation of illegal dismissal. In fact, petitioner itself acknowledged the issue of
illegal dismissal in its position paper submitted to the NCMB.
Moreover, we note that even the NLRC was of the understanding that the NCMB arbitration
case sought to resolve the issue of the legality of the dismissal of the respondent. In fact, the
identity of the issue of the legality of his dismissal, which was previously submitted to the
NCMB, and later submitted to the NLRC, was the basis of the latters finding of forum shopping

and the consequent dismissal of the case before it. In fact, petitioner also implicitly
acknowledged this when it filed before the NLRC its Motion to Dismiss respondents Complaint
on the ground of forum shopping. Thus, it is now estopped from claiming that the issue before
the NCMB does not include the issue of the legality of the dismissal of respondent. Besides,
there has to be a reason for deciding the issue of respondents entitlement to separation pay.
To think otherwise would lead to absurdity, because the voluntary arbitrator would then be
deciding that issue in a vacuum. The arbitrator would have no basis whatsoever for saying that
Albarico was entitled to separation pay or not if the issue of the legality of respondents
dismissal was not resolve first.
Hence, the voluntary arbitrator correctly assumed that the core issue behind the issue of
separation pay is the legality of the dismissal of respondent. Moreover, we have ruled in Sime
Darby Pilipinas, Inc. v. Deputy Administrator Magsalin 33 that a voluntary arbitrator has plenary
jurisdiction and authority to interpret an agreement to arbitrate and to determine the scope of
his own authority when the said agreement is vague subject only, in a proper case, to
the certiorari jurisdiction of this Court.
Having established that the issue of the legality of dismissal of Albarico was in fact necessarily
albeit not explicitly included in the Submission Agreement signed by the parties, this Court
rules that the voluntary arbitrator rightly assumed jurisdiction to decide the said issue.
Consequently, we also rule that the voluntary arbitrator may award backwages upon a finding
of illegal dismissal, even though the issue of entitlement thereto is not explicitly claimed in the
Submission Agreement. Backwages, in general, are awarded on the ground of equity as a form
of relief that restores the income lost by the terminated employee by reason of his illegal
dismissal.34
In Sime Darby we ruled that although the specific issue presented by the parties to the
voluntary arbitrator was only the issue of performance bonus, the latter had the authority to
determine not only the issue of whether or not a performance bonus was to be granted, but
also the related question of the amount of the bonus, were it to be granted. We explained that
there was no indication at all that the parties to the arbitration agreement had regarded the
issue of performance bonus as a two-tiered issue, of which only one aspect was being
submitted to arbitration. Thus, we held that the failure of the parties to limit the issues
specifically to that which was stated allowed the arbitrator to assume jurisdiction over the
related issue.
Similarly, in the present case, there is no indication that the issue of illegal dismissal should be
treated as a two-tiered issue whereupon entitlement to backwages must be determined
separately. Besides, since arbitration is a final resort for the adjudication of disputes, the
voluntary arbitrator in the present case can assume that he has the necessary power to make a
final settlement.35 Thus, we rule that the voluntary arbitrator correctly assumed jurisdiction
over the issue of entitlement of respondent Albarico to backwages on the basis of the formers
finding of illegal dismissal.

WHEREFORE, premises considered, the instant Petition is DENIED. The 18 September 2007
Decision and 17 March 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 92526, are
herebyAFFIRMED.
SO ORDERED.

PEOPLES BROADCASTING SERVICE

(BOMBO RADYO PHILS., INC.),
Petitioner,

G.R. No. 179652

Present:

- versus -

THE SECRETARY OF THE DEPARTMENT

OF LABOR AND EMPLOYMENT, THE
REGIONAL DIRECTOR, DOLE REGION
VII, and JANDELEON JUEZAN,
Respondents.

CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

Promulgated:
March 6, 2012
x-----------------------------------------------------------------------------------------x

RESOLUTION
VELASCO, JR., J.:

In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo
Radyo Phils., Inc.) questioned the Decision and Resolution of the Court of Appeals (CA) dated
October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner with the
Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for illegal
deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday
and rest day and illegal diminution of benefits, delayed payment of wages and noncoverage of
SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary investigations, and after the
parties submitted their position papers, the DOLE Regional Director found that private
respondent was an employee of petitioner, and was entitled to his money claims. [2] Petitioner
sought reconsideration of the Directors Order, but failed. The Acting DOLE Secretary dismissed
petitioners appeal on the ground that petitioner submitted a Deed of Assignment of Bank
Deposit instead of posting a cash or surety bond.When the matter was brought before the CA,
where petitioner claimed that it had been denied due process, it was held that petitioner was
accorded due process as it had been given the opportunity to be heard, and that the DOLE
Secretary had jurisdiction over the matter, as the jurisdictional limitation imposed by Article
129 of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had
been repealed by Republic Act No. (RA) 7730. [3]
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint
against petitioner was dismissed. The dispositive portion of the Decision reads as follows:
WHEREFORE, the petition is GRANTED. The Decision dated 26 October
2006 and the Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R.
CEB-SP No. 00855 areREVERSED and SET ASIDE. The Order of the then Acting
Secretary of the Department of Labor and Employment dated 27 January 2005
denying petitioners appeal, and the Orders of the Director, DOLE Regional Office
No. VII, dated 24 May 2004 and 27 February 2004, respectively,
are ANNULLED. The complaint against petitioner is DISMISSED.[4]
The Court found that there was no employer-employee relationship between petitioner
and private respondent. It was held that while the DOLE may make a determination of the
existence of an employer-employee relationship, this function could not be co-extensive with
the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as amended by
RA 7730. The National Labor Relations Commission (NLRC) was held to be the primary agency in
determining the existence of an employer-employee relationship. This was the interpretation of

the Court of the clause in cases where the relationship of employer-employee still exists in Art.
128(b).[5]
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of
Decision (with Leave of Court). The PAO sought to clarify as to when the visitorial and
enforcement power of the DOLE be not considered as co-extensive with the power to
determine the existence of an employer-employee relationship.[6] In its Comment,[7] the DOLE
sought clarification as well, as to the extent of its visitorial and enforcement power under the
Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for reconsideration,
granting said motion and reinstating the petition.[8] It is apparent that there is a need to
delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized
hearing officers to hear and decide any matter involving the recovery of wages and other
monetary claims and benefits was qualified by the proviso that the complaint not include a
claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or
an Act Further Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor,
did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and
enforcement power for claims beyond PhP 5,000. The only qualification to this expanded power
of the DOLE was only that there still be an existing employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been
terminated or it has not existed from the start, the DOLE has no jurisdiction. Under Art. 128(b)
of the Labor Code, as amended by RA 7730, the first sentence reads, Notwithstanding the
provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his
duly authorized representatives shall have the power to issue compliance orders to give effect
to the labor standards provisions of this Code and other labor legislation based on the findings
of labor employment and enforcement officers or industrial safety engineers made in the
course of inspection. It is clear and beyond debate that an employer-employee relationship
must exist for the exercise of the visitorial and enforcement power of the DOLE. The question
now arises, may the DOLE make a determination of whether or not an employer-employee
relationship exists, and if so, to what extent?

The first portion of the question must be answered in the affirmative.

The prior decision of this Court in the present case accepts such answer, but places a
limitation upon the power of the DOLE, that is, the determination of the existence of an
employer-employee relationship cannot be co-extensive with the visitorial and enforcement
power of the DOLE. But even in conceding the power of the DOLE to determine the existence of
an employer-employee relationship, the Court held that the determination of the existence of
an employer-employee relationship is still primarily within the power of the NLRC, that any
finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where the DOLE
would only make a preliminary finding, that the power was primarily held by the NLRC. The law
did not say that the DOLE would first seek the NLRCs determination of the existence of an
employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have
the power to determine whether or not an employer-employee relationship exists, and from
there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the
Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a
ready set of guidelines to follow, the same guide the courts themselves use. The elements to
determine the existence of an employment relationship are: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employers
power to control the employees conduct.[9] The use of this test is not solely limited to the NLRC.
The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course
of inspection, making use of the same evidence that would have been presented before the
NLRC.
The determination of the existence of an employer-employee relationship by the DOLE
must be respected. The expanded visitorial and enforcement power of the DOLE granted by RA
7730 would be rendered nugatory if the alleged employer could, by the simple expedient of
disputing the employer-employee relationship, force the referral of the matter to the NLRC. The
Court issued the declaration that at least a prima facie showing of the absence of an employeremployee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE

that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it
takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or it
appears, upon review, that no employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation
would eliminate the prospect of competing conclusions between the DOLE and the NLRC. The
prospect of competing conclusions could just as well have been eliminated by according respect
to the DOLE findings, to the exclusion of the NLRC, and this We believe is the more prudent
course of action to take.
This is not to say that the determination by the DOLE is beyond question or
review. Suffice it to say, there are judicial remedies such as a petition for certiorari under Rule
65 that may be availed of, should a party wish to dispute the findings of the DOLE.
It must also be remembered that the power of the DOLE to determine the existence of
an employer-employee relationship need not necessarily result in an affirmative finding. The
DOLE may well make the determination that no employer-employee relationship exists, thus
divesting itself of jurisdiction over the case. It must not be precluded from being able to reach
its own conclusions, not by the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee relationship
in the exercise of its visitorial and enforcement power, subject to judicial review, not review by
the NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730,
there is still a threshold amount set by Arts. 129 and 217 of the Labor Code when money claims
are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the regional
director of the DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the
jurisdiction is with the labor arbiter, under Art. 217. The view states that despite the wording of
Art. 128(b), this would only apply in the course of regular inspections undertaken by the DOLE,
as differentiated from cases under Arts. 129 and 217, which originate from complaints. There
are several cases, however, where the Court has ruled that Art. 128(b) has been amended to

expand the powers of the DOLE Secretary and his duly authorized representatives by RA
7730. In these cases, the Court resolved that the DOLE had the jurisdiction, despite the amount
of the money claims involved. Furthermore, in these cases, the inspection held by the DOLE
regional director was prompted specifically by a complaint. Therefore, the initiation of a case
through a complaint does not divest the DOLE Secretary or his duly authorized representative
of jurisdiction under Art. 128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor
standards provisions of the Labor Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship, the DOLE exercises jurisdiction
to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship,
the jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter,
under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other
terms and conditions of employment, if accompanied by a claim for reinstatement. If a
complaint is filed with the NLRC, and there is still an existing employer-employee relationship,
the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an
employer-employee relationship has been subjected to review by this Court, with the finding
being that there was no employer-employee relationship between petitioner and private
respondent, based on the evidence presented. Private respondent presented self-serving
allegations as well as self-defeating evidence.[10] The findings of the Regional Director were not
based on substantial evidence, and private respondent failed to prove the existence of an
employer-employee relationship. The DOLE had no jurisdiction over the case, as there was no
employer-employee relationship present. Thus, the dismissal of the complaint against
petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with
the MODIFICATION that in the exercise of the DOLEs visitorial and enforcement power, the
Labor Secretary or the latters authorized representative shall have the power to determine the
existence of an employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.

ANDREW JAMES MCBURNIE, Petitioner,

vs.
EULALIO GANZON, EGI-MANAGERS, INC. and E. GANZON, INC., Respondents.
RESOLUTION
REYES, J.:
For resolution are the
(1) third motion for reconsideration 1 filed by Eulalio Ganzon (Ganzon), EGI-Managers,
Inc. (EGI) and E. Ganzon, Inc. (respondents) on March 27, 2012, seeking a
reconsideration of the Courts Decision 2 dated September 18, 2009 that ordered the
dismissal of their appeal to the National Labor Relations Commission (NLRC) for failure
to post additional appeal bond in the amount of P54,083,910.00; and
(2) motion for reconsideration 3 filed by petitioner Andrew James McBurnie (McBurnie)
on September 26, 2012, assailing the Court en bancs Resolution 4 dated September 4,
2012 that (1) accepted the case from the Courts Third Division and (2) enjoined the
implementation of the Labor Arbiters (LA) decision finding him to be illegally dismissed
by the respondents.
Antecedent Facts
The Decision dated September 18, 2009 provides the following antecedent facts and
proceedings
On October 4, 2002, McBurnie, an Australian national, instituted a complaint for illegal
dismissal and other monetary claims against the respondents. McBurnie claimed that on May
11, 1999, he signed a five-year employment agreement5 with the company EGI as an Executive
Vice-President who shall oversee the management of the companys hotels and resorts within
the Philippines. He performed work for the company until sometime in November 1999, when
he figured in an accident that compelled him to go back to Australia while recuperating from his
injuries. While in Australia, he was informed by respondent Ganzon that his services were no
longer needed because their intended project would no longer push through.
The respondents opposed the complaint, contending that their agreement with McBurnie was
to jointly invest in and establish a company for the management of hotels. They did not intend
to create an employer-employee relationship, and the execution of the employment contract

that was being invoked by McBurnie was solely for the purpose of allowing McBurnie to obtain
an alien work permit in the Philippines. At the time McBurnie left for Australia for his medical
treatment, he had not yet obtained a work permit.
In a Decision6 dated September 30, 2004, the LA declared McBurnie as having been illegally
dismissed from employment, and thus entitled to receive from the respondents the following
amounts: (a) US$985,162.00 as salary and benefits for the unexpired term of their employment
contract, (b) P2,000,000.00 as moral and exemplary damages, and (c) attorneys fees equivalent
to 10% of the total monetary award.
Feeling aggrieved, the respondents appealed the LAs Decision to the NLRC. 7 On November 5,
2004, they filed their Memorandum of Appeal 8 and Motion to Reduce Bond9, and posted an
appeal bond in the amount ofP100,000.00. The respondents contended in their Motion to
Reduce Bond, inter alia, that the monetary awards of the LA were null and excessive, allegedly
with the intention of rendering them incapable of posting the necessary appeal bond. They
claimed that an award of "more than P60 Million Pesos to a single foreigner who had no work
permit and who left the country for good one month after the purported commencement of his
employment" was a patent nullity.10 Furthermore, they claimed that because of their business
losses that may be attributed to an economic crisis, they lacked the capacity to pay the bond of
almost P60 Million, or even the millions of pesos in premium required for such bond.
On March 31, 2005, the NLRC denied11 the motion to reduce bond, explaining that "in cases
involving monetary award, an employer seeking to appeal the *LAs+ decision to the
Commission is unconditionally required by Art. 223, Labor Code to post bond in the amount
equivalent to the monetary award x x x."12 Thus, the NLRC required from the respondents the
posting of an additional bond in the amount of P54,083,910.00.
When their motion for reconsideration was denied, 13 the respondents decided to elevate the
matter to the Court of Appeals (CA) via the Petition for Certiorari and Prohibition (With
Extremely Urgent Prayer for the Issuance of a Preliminary Injunction and/or Temporary
Restraining Order)14 docketed as CA-G.R. SP No. 90845.
In the meantime, in view of the respondents failure to post the required additional bond, the
NLRC dismissed their appeal in a Resolution 15 dated March 8, 2006. The respondents motion
for reconsideration was denied on June 30, 2006. 16 This prompted the respondents to file with
the CA the Petition for Certiorari (With Urgent Prayers for the Immediate Issuance of a
Temporary Restraining Order and a Writ of Preliminary Injunction) 17docketed as CA-G.R. SP No.
95916, which was later consolidated with CA-G.R. SP No. 90845.
CA-G.R. SP Nos. 90845 and 95916
On February 16, 2007, the CA issued a Resolution 18 granting the respondents application for a
writ of preliminary injunction. It directed the NLRC, McBurnie, and all persons acting for and
under their authority to refrain from causing the execution and enforcement of the LAs

decision in favor of McBurnie, conditioned upon the respondents posting of a bond in the
amount of P10,000,000.00. McBurnie sought reconsideration of the issuance of the writ of
preliminary injunction, but this was denied by the CA in its Resolution 19 dated May 29, 2007.
McBurnie then filed with the Court a Petition for Review on Certiorari 20 docketed as G.R. Nos.
178034 and 178117, assailing the CA Resolutions that granted the respondents application for
the injunctive writ. On July 4, 2007, the Court denied the petition on the ground of McBurnies
failure to comply with the 2004 Rules on Notarial Practice and to sufficiently show that the CA
committed any reversible error.21 A motion for reconsideration was denied with finality in a
Resolution22 dated October 8, 2007.
Unyielding, McBurnie filed a Motion for Leave (1) To File Supplemental Motion for
Reconsideration and (2) To Admit the Attached Supplemental Motion for
Reconsideration,23 which was treated by the Court as a second motion for reconsideration, a
prohibited pleading under Section 2, Rule 56 of the Rules of Court. Thus, the motion for leave
was denied by the Court in a Resolution 24 dated November 26, 2007. The Courts Resolution
dated July 4, 2007 then became final and executory on November 13, 2007; accordingly, entry
of judgment was made in G.R. Nos. 178034 and 178117. 25
In the meantime, the CA ruled on the merits of CA-G.R. SP No. 90845 and CA-G.R. SP No. 95916
and rendered its Decision26 dated October 27, 2008, allowing the respondents motion to
reduce appeal bond and directing the NLRC to give due course to their appeal. The dispositive
portion of the CA Decision reads:
WHEREFORE, in view of the foregoing, the petition for certiorari and prohibition docketed as CA
GR SP No. 90845 and the petition for certiorari docketed as CA GR SP No. 95916 are GRANTED.
Petitioners Motion to Reduce Appeal Bond is GRANTED. Petitioners are hereby DIRECTED to
post appeal bond in the amount ofP10,000,000.00. The NLRC is hereby DIRECTED to give due
course to petitioners appeal in CA GR SP No. 95916 which is ordered remanded to the NLRC for
further proceedings.
SO ORDERED.27
On the issue28 of the NLRCs denial of the respondents motion to reduce appeal bond, the CA
ruled that the NLRC committed grave abuse of discretion in immediately denying the motion
without fixing an appeal bond in an amount that was reasonable, as it denied the respondents
of their right to appeal from the decision of the LA. 29The CA explained that "(w)hile Art. 223 of
the Labor Code requiring bond equivalent to the monetary award is explicit, Section 6, Rule VI
of the NLRC Rules of Procedure, as amended, recognized as exception a motion to reduce bond
upon meritorious grounds and upon posting of a bond in a reasonable amount in relation to the
monetary award."30
On the issue31 of the NLRCs dismissal of the appeal on the ground of the respondents failure
to post the additional appeal bond, the CA also found grave abuse of discretion on the part of

the NLRC, explaining that an appeal bond in the amount of P54,083,910.00 was prohibitive and
excessive. Moreover, the appellate court cited the pendency of the petition for certiorari over
the denial of the motion to reduce bond, which should have prevented the NLRC from
immediately dismissing the respondents appeal. 32
Undeterred, McBurnie filed a motion for reconsideration. At the same time, the respondents
moved that the appeal be resolved on the merits by the CA. On March 3, 2009, the CA issued a
Resolution33 denying both motions. McBurnie then filed with the Court the Petition for Review
on Certiorari34 docketed as G.R. Nos. 186984-85.
In the meantime, the NLRC, acting on the CAs order of remand, accepted the appeal from the
LAs decision, and in its Decision 35 dated November 17, 2009, reversed and set aside the
Decision of the LA, and entered a new one dismissing McBurnies complaint. It explained that
based on records, McBurnie was never an employee of any of the respondents, but a potential
investor in a project that included said respondents, barring a claim of dismissal, much less, an
illegal dismissal. Granting that there was a contract of employment executed by the parties,
McBurnie failed to obtain a work permit which would have allowed him to work for any of the
respondents.36 In the absence of such permit, the employment agreement was void and thus,
could not be the source of any right or obligation.
Court Decision dated September 18, 2009
On September 18, 2009, the Third Division of this Court rendered its Decision 37 which reversed
the CA Decision dated October 27, 2008 and Resolution dated March 3, 2009. The dispositive
portion reads:
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP Nos.
90845 and 95916 dated October 27, 2008 granting respondents Motion to Reduce Appeal
Bond and ordering the National Labor Relations Commission to give due course to respondents
appeal, and its March 3, 2009 Resolution denying petitioners motion for reconsideration, are
REVERSED and SET ASIDE. The March 8, 2006 and June 30, 2006 Resolutions of the National
Labor Relations Commission in NLRC NCR CA NO. 042913-05 dismissing respondents appeal for
failure to perfect an appeal and denying their motion for reconsideration, respectively, are
REINSTATED and AFFIRMED.
SO ORDERED.38
The Court explained that the respondents failure to post a bond equivalent in amount to the
LAs monetary award was fatal to the appeal. 39 Although an appeal bond may be reduced upon
motion by an employer, the following conditions must first be satisfied: (1) the motion to
reduce bond shall be based on meritorious grounds; and (2) a reasonable amount in relation to
the monetary award is posted by the appellant. Unless the NLRC grants the motion to reduce
the cash bond within the 10-day reglementary period to perfect an appeal from a judgment of
the LA, the employer is mandated to post the cash or surety bond securing the full amount

within the said 10-day period.40 The respondents initial appeal bond of P100,000.00 was
grossly inadequate compared to the LAs monetary award.
The respondents first motion for reconsideration 41 was denied by the Court for lack of merit
via a Resolution42dated December 14, 2009.
Meanwhile, on the basis of the Courts Decision, McBurnie filed with the NLRC a motion for
reconsideration with motion to recall and expunge from the records the NLRC Decision dated
November 17, 2009.43 The motion was granted by the NLRC in its Decision 44 dated January 14,
2010.45
Undaunted by the denial of their first motion for reconsideration of the Decision dated
September 18, 2009, the respondents filed with the Court a Motion for Leave to Submit
Attached Second Motion for Reconsideration 46 and Second Motion for Reconsideration,47 which
motion for leave was granted in a Resolution 48 dated March 15, 2010. McBurnie was allowed to
submit his comment on the second motion, and the respondents, their reply to the comment.
On January 25, 2012, however, the Court issued a Resolution 49 denying the second motion "for
lack of merit," "considering that a second motion for reconsideration is a prohibited pleading x
x x."50
The Courts Decision dated September 18, 2009 became final and executory on March 14, 2012.
Thus, entry of judgment51 was made in due course, as follows:
ENTRY OF JUDGMENT
This is to certify that on September 18, 2009 a decision rendered in the above-entitled cases
was filed in this Office, the dispositive part of which reads as follows:
xxxx
and that the same has, on March 14, 2012 become final and executory and is hereby recorded
in the Book of Entries of Judgments.52
The Entry of Judgment indicated that the same was made for the Courts Decision rendered in
G.R. Nos. 186984-85.
On March 27, 2012, the respondents filed a Motion for Leave to File Attached Third Motion for
Reconsideration, with an attached Motion for Reconsideration (on the Honorable Courts 25
January 2012 Resolution) with Motion to Refer These Cases to the Honorable Court En
Banc.53 The third motion for reconsideration is founded on the following grounds:
I.

THE PREVIOUS 15 MARCH 2010 RESOLUTION OF THE HONORABLE COURT ACTUALLY GRANTED
RESPONDENTS "MOTION FOR LEAVE TO SUBMIT A SECOND MOTION FOR RECONSIDERATION."
HENCE, RESPONDENTS RESPECTFULLY CONTEND THAT THE SUBSEQUENT 25 JANUARY 2012
RESOLUTION CANNOT DENY THE " SECOND MOTION FOR RECONSIDERATION " ON THE
GROUND THAT IT IS A PROHIBITED PLEADING. MOREOVER, IT IS RESPECTFULLY CONTENDED
THAT THERE ARE VERY PECULIAR CIRCUMSTANCES AND NUMEROUS IMPORTANT ISSUES IN
THESE CASES THAT CLEARLY JUSTIFY GIVING DUE COURSE TO RESPONDENTS "SECOND
MOTION FOR RECONSIDERATION," WHICH ARE:
II.
THE 10 MILLION PESOS BOND WHICH WAS POSTED IN COMPLIANCE WITH THE OCTOBER 27,
2008 DECISION OF THE COURT OF APPEALS IS A SUBSTANTIAL AND SPECIAL MERITORIOUS
CIRCUMSTANCE TO MERIT RECONSIDERATION OF THIS APPEAL.
III.
THE HONORABLE COURT HAS HELD IN NUMEROUS LABOR CASES THAT WITH RESPECT TO
ARTICLE 223 OF THE LABOR CODE, THE REQUIREMENTS OF THE LAW SHOULD BE GIVEN A
LIBERAL INTERPRETATION, ESPECIALLY IF THERE ARE SPECIAL MERITORIOUS CIRCUMSTANCES
AND ISSUES.
IV. THE LAS JUDGMENT WAS PATENTLY VOID SINCE IT AWARDS MORE THAN P60 MILLION
PESOS TO A SINGLE FOREIGNER WHO HAD NO WORK PERMIT, AND NO WORKING VISA.
V.
PETITIONER MCBURNIE DID NOT IMPLEAD THE NATIONAL LABOR RELATIONS COMMISSION
(NLRC) IN HIS APPEAL HEREIN, MAKING THE APPEAL INEFFECTIVE AGAINST THE NLRC.
VI.
NLRC HAS DISMISSED THE COMPLAINT OF PETITIONER MCBURNIE IN ITS NOVEMBER 17, 2009
DECISION.
VII.
THE HONORABLE COURTS 18 SEPTEMBER 2009 DECISION WAS TAINTED WITH VERY SERIOUS
IRREGULARITIES.
VIII.
GR NOS. 178034 AND 178117 HAVE BEEN INADVERTENTLY INCLUDED IN THIS CASE.

IX.
THE HONORABLE COURT DID NOT DULY RULE UPON THE OTHER VERY MERITORIOUS
ARGUMENTS OF THE RESPONDENTS WHICH ARE AS FOLLOWS:
(A) PETITIONER NEVER ATTENDED ANY OF ALL 14 HEARINGS BEFORE THE [LA]
(WHEN 2 MISSED HEARINGS MEAN DISMISSAL).
(B) PETITIONER REFERRED TO HIMSELF AS A "VICTIM" OF LEISURE EXPERTS, INC.,
BUT NOT OF ANY OF THE RESPONDENTS.
(C) PETITIONERS POSITIVE LETTER TO RESPONDENT MR. EULALIO GANZON
CLEARLY SHOWS THAT HE WAS NOT ILLEGALLY DISMISSED NOR EVEN DISMISSED
BY ANY OF THE RESPONDENTS AND PETITIONER EVEN PROMISED TO PAY HIS
DEBTS FOR ADVANCES MADE BY RESPONDENTS.
(D) PETITIONER WAS NEVER EMPLOYED BY ANY OF THE RESPONDENTS.
PETITIONER PRESENTED WORK FOR CORONADO BEACH RESORT WHICH IS
[NEITHER] OWNED NOR CONNECTED WITH ANY OF THE RESPONDENTS.
(E) THE [LA] CONCLUDED THAT PETITIONER WAS DISMISSED EVEN IF THERE WAS
ABSOLUTELY NO EVIDENCE AT ALL PRESENTED THAT PETITIONER WAS
DISMISSED BY THE RESPONDENTS.
(F) PETITIONER LEFT THE PHILIPPINES FOR AUSTRALIA JUST 2 MONTHS AFTER
THE START OF THE ALLEGED EMPLOYMENT AGREEMENT, AND HAS STILL NOT
RETURNED TO THE PHILIPPINES AS CONFIRMED BY THE BUREAU OF
IMMIGRATION.
(G) PETITIONER COULD NOT HAVE SIGNED AND PERSONALLY APPEARED BEFORE
THE NLRC ADMINISTERING OFFICER AS INDICATED IN THE COMPLAINT SHEET
SINCE HE LEFT THE COUNTRY 3 YEARS BEFORE THE COMPLAINT WAS FILED AND
HE NEVER CAME BACK.54
On September 4, 2012, the Court en banc55 issued a Resolution56 accepting the case from the
Third Division. It also issued a temporary restraining order (TRO) enjoining the implementation
of the LAs Decision dated September 30, 2004. This prompted McBurnies filing of a Motion for
Reconsideration,57 where he invoked the fact that the Courts Decision dated September 18,
2009 had become final and executory, with an entry of judgment already made by the Court.
Our Ruling
In light of pertinent law and jurisprudence, and upon taking a second hard look of the parties
arguments and the records of the case, the Court has ascertained that a reconsideration of this

Courts Decision dated September 18, 2009 and Resolutions dated December 14, 2009 and
January 25, 2012, along with the lifting of the entry of judgment in G.R. No. 186984-85, is in
order.
The Courts acceptance of the
third motion for reconsideration
At the outset, the Court emphasizes that second and subsequent motions for reconsideration
are, as a general rule, prohibited. Section 2, Rule 52 of the Rules of Court provides that "no
second motion for reconsideration of a judgment or final resolution by the same party shall be
entertained." The rule rests on the basic tenet of immutability of judgments. "At some point, a
decision becomes final and executory and, consequently, all litigations must come to an end." 58
The general rule, however, against second and subsequent motions for reconsideration admits
of settled exceptions. For one, the present Internal Rules of the Supreme Court, particularly
Section 3, Rule 15 thereof, provides:
Sec. 3. Second motion for reconsideration. The Court shall not entertain a second motion for
reconsideration, and any exception to this rule can only be granted in the higher interest of
justice by the Court en banc upon a vote of at least two-thirds of its actual membership. There
is reconsideration "in the higher interest of justice" when the assailed decision is not only
legally erroneous, but is likewise patently unjust and potentially capable of causing
unwarranted and irremediable injury or damage to the parties. A second motion for
reconsideration can only be entertained before the ruling sought to be reconsidered becomes
final by operation of law or by the Courts declaration.
x x x x (Emphasis ours)
In a line of cases, the Court has then entertained and granted second motions for
reconsideration "in the higher interest of substantial justice," as allowed under the Internal
Rules when the assailed decision is "legally erroneous," "patently unjust" and "potentially
capable of causing unwarranted and irremediable injury or damage to the parties." In Tirazona
v. Philippine EDS Techno-Service, Inc. (PET, Inc.),59 we also explained that a second motion for
reconsideration may be allowed in instances of "extraordinarily persuasive reasons and only
after an express leave shall have been obtained." 60 In Apo Fruits Corporation v. Land Bank of
the Philippines,61 we allowed a second motion for reconsideration as the issue involved therein
was a matter of public interest, as it pertained to the proper application of a basic
constitutionally-guaranteed right in the governments implementation of its agrarian reform
program. In San Miguel Corporation v. NLRC, 62 the Court set aside the decisions of the LA and
the NLRC that favored claimants-security guards upon the Courts review of San Miguel
Corporations second motion for reconsideration. In Vir-Jen Shipping and Marine Services, Inc.
v. NLRC, et al.,63 the Court en banc reversed on a third motion for reconsideration the ruling of
the Courts Division on therein private respondents claim for wages and monetary benefits.

It is also recognized that in some instances, the prudent action towards a just resolution of a
case is for the Court to suspend rules of procedure, for "the power of this Court to suspend its
own rules or to except a particular case from its operations whenever the purposes of justice
require it, cannot be questioned."64 In De Guzman v. Sandiganbayan,65 the Court, thus,
explained:
The rules of procedure should be viewed as mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must always be avoided. Even the Rules of
Court envision this liberality. This power to suspend or even disregard the rules can be so
pervasive and encompassing so as to alter even that which this Court itself has already declared
to be final, as we are now compelled to do in this case. x x x.
xxxx
The Rules of Court was conceived and promulgated to set forth guidelines in the dispensation
of justice but not to bind and chain the hand that dispenses it, for otherwise, courts will be
mere slaves to or robots of technical rules, shorn of judicial discretion. That is precisely why
courts in rendering real justice have always been, as they in fact ought to be, conscientiously
guided by the norm that when on the balance, technicalities take a backseat against
substantive rights, and not the other way around. Truly then, technicalities, in the appropriate
language of Justice Makalintal, "should give way to the realities of the situation." x x
x.66 (Citations omitted)
Consistent with the foregoing precepts, the Court has then reconsidered even decisions that
have attained finality, finding it more appropriate to lift entries of judgments already made in
these cases. In Navarro v. Executive Secretary,67 we reiterated the pronouncement in De
Guzman that the power to suspend or even disregard rules of procedure can be so pervasive
and compelling as to alter even that which this Court itself has already declared final. The Court
then recalled in Navarro an entry of judgment after it had determined the validity and
constitutionality of Republic Act No. 9355, explaining that:
Verily, the Court had, on several occasions, sanctioned the recall of entries of judgment in light
of attendant extraordinary circumstances. The power to suspend or even disregard rules of
procedure can be so pervasive and compelling as to alter even that which this Court itself had
already declared final. In this case, the compelling concern is not only to afford the movantsintervenors the right to be heard since they would be adversely affected by the judgment in this
case despite not being original parties thereto, but also to arrive at the correct interpretation of
the provisions of the [Local Government Code (LGC)] with respect to the creation of local
government units. x x x.68 (Citations omitted)
In Munoz v. CA,69 the Court resolved to recall an entry of judgment to prevent a miscarriage of
justice. This justification was likewise applied in Tan Tiac Chiong v. Hon. Cosico, 70 wherein the
Court held that:

The recall of entries of judgments, albeit rare, is not a novelty. In Muoz v. CA , where the case
was elevated to this Court and a first and second motion for reconsideration had been denied
with finality , the Court, in the interest of substantial justice, recalled the Entry of Judgment as
well as the letter of transmittal of the records to the Court of Appeals.71 (Citation omitted)
In Barnes v. Judge Padilla,72 we ruled:
A final and executory judgment can no longer be attacked by any of the parties or be modified,
directly or indirectly, even by the highest court of the land.
However, this Court has relaxed this rule in order to serve substantial justice considering (a)
matters of life, liberty, honor or property, (b) the existence of special or compelling
circumstances, (c) the merits of the case, (d) a cause not entirely attributable to the fault or
negligence of the party favored by the suspension of the rules, (e) a lack of any showing that
the review sought is merely frivolous and dilatory, and (f) the other party will not be unjustly
prejudiced thereby.73 (Citations omitted)
As we shall explain, the instant case also qualifies as an exception to, first, the proscription
against second and subsequent motions for reconsideration, and second, the rule on
immutability of judgments; a reconsideration of the Decision dated September 18, 2009, along
with the Resolutions dated December 14, 2009 and January 25, 2012, is justified by the higher
interest of substantial justice.
To begin with, the Court agrees with the respondents that the Courts prior resolve to grant ,
and not just merely note, in a Resolution dated March 15, 2010 the respondents motion for
leave to submit their second motion for reconsideration already warranted a resolution and
discussion of the motion for reconsideration on its merits. Instead of doing this, however, the
Court issued on January 25, 2012 a Resolution 74 denying the motion to reconsider for lack of
merit, merely citing that it was a "prohibited pleading under Section 2, Rule 52 in relation to
Section 4, Rule 56 of the 1997 Rules of Civil Procedure, as amended." 75 In League of Cities of the
Philippines (LCP) v. Commission on Elections, 76 we reiterated a ruling that when a motion for
leave to file and admit a second motion for reconsideration is granted by the Court, the Court
therefore allows the filing of the second motion for reconsideration. In such a case, the second
motion for reconsideration is no longer a prohibited pleading. Similarly in this case, there was
then no reason for the Court to still consider the respondents second motion for
reconsideration as a prohibited pleading, and deny it plainly on such ground. The Court intends
to remedy such error through this resolution.
More importantly, the Court finds it appropriate to accept the pending motion for
reconsideration and resolve it on the merits in order to rectify its prior disposition of the main
issues in the petition. Upon review, the Court is constrained to rule differently on the petitions.
We have determined the grave error in affirming the NLRCs rulings, promoting results that are
patently unjust for the respondents, as we consider the facts of the case, pertinent law,

jurisprudence, and the degree of the injury and damage to the respondents that will inevitably
result from the implementation of the Courts Decision dated September 18, 2009.
The rule on appeal bonds
We emphasize that the crucial issue in this case concerns the sufficiency of the appeal bond
that was posted by the respondents. The present rule on the matter is Section 6, Rule VI of the
2011 NLRC Rules of Procedure, which was substantially the same provision in effect at the time
of the respondents appeal to the NLRC, and which reads:
RULE VI
APPEALS
Sec. 6. BOND. In case the decision of the Labor Arbiter or the Regional Director involves a
monetary award, an appeal by the employer may be perfected only upon the posting of a cash
or surety bond. The appeal bond shall either be in cash or surety in an amount equivalent to the
monetary award, exclusive of damages and attorneys fees.
xxxx
No motion to reduce bond shall be entertained except on meritorious grounds and upon the
posting of a bond in a reasonable amount in relation to the monetary award.
The filing of the motion to reduce bond without compliance with the requisites in the preceding
paragraph shall not stop the running of the period to perfect an appeal. (Emphasis supplied)
While the CA, in this case, allowed an appeal bond in the reduced amount of P10,000,000.00
and then ordered the cases remand to the NLRC, this Courts Decision dated September 18,
2009 provides otherwise, as it reads in part:
The posting of a bond is indispensable to the perfection of an appeal in cases involving
monetary awards from the decision of the Labor Arbiter. The lawmakers clearly intended to
make the bond a mandatory requisite for the perfection of an appeal by the employer as
inferred from the provision that an appeal by the employer may be perfected "only upon the
posting of a cash or surety bond." The word "only" makes it clear that the posting of a cash or
surety bond by the employer is the essential and exclusive means by which an employers
appeal may be perfected. x x x.
Moreover, the filing of the bond is not only mandatory but a jurisdictional requirement as well,
that must be complied with in order to confer jurisdiction upon the NLRC. Non-compliance
therewith renders the decision of the Labor Arbiter final and executory. This requirement is
intended to assure the workers that if they prevail in the case, they will receive the money
judgment in their favor upon the dismissal of the employers appeal. It is intended to

discourage employers from using an appeal to delay or evade their obligation to satisfy their
employees just and lawful claims.
xxxx
Thus, it behooves the Court to give utmost regard to the legislative and administrative intent to
strictly require the employer to post a cash or surety bond securing the full amount of the
monetary award within the 10[-]day reglementary period. Nothing in the Labor Code or the
NLRC Rules of Procedure authorizes the posting of a bond that is less than the monetary award
in the judgment, or would deem such insufficient posting as sufficient to perfect the appeal.
While the bond may be reduced upon motion by the employer, this is subject to the conditions
that (1) the motion to reduce the bond shall be based on meritorious grounds; and (2) a
reasonable amount in relation to the monetary award is posted by the appellant, otherwise the
filing of the motion to reduce bond shall not stop the running of the period to perfect an
appeal. The qualification effectively requires that unless the NLRC grants the reduction of the
cash bond within the 10-day reglementary period, the employer is still expected to post the
cash or surety bond securing the full amount within the said 10-day period. If the NLRC does
eventually grant the motion for reduction after the reglementary period has elapsed, the
correct relief would be to reduce the cash or surety bond already posted by the employer
within the 10-day period.77 (Emphasis supplied; underscoring ours)
To begin with, the Court rectifies its prior pronouncement the unqualified statement that
even an appellant who seeks a reduction of an appeal bond before the NLRC is expected to post
a cash or surety bond securing the full amount of the judgment award within the 10-day
reglementary period to perfect the appeal.
The suspension of the period to
perfect the appeal upon the filing of
a motion to reduce bond
To clarify, the prevailing jurisprudence on the matter provides that the filing of a motion to
reduce bond, coupled with compliance with the two conditions emphasized in Garcia v. KJ
Commercial78 for the grant of such motion, namely, (1) a meritorious ground, and (2) posting of
a bond in a reasonable amount, shall suffice to suspend the running of the period to perfect an
appeal from the labor arbiters decision to the NLRC. 79 To require the full amount of the bond
within the 10-day reglementary period would only render nugatory the legal provisions which
allow an appellant to seek a reduction of the bond. Thus, we explained in Garcia:
The filing of a motion to reduce bond and compliance with the two conditions stop the running
of the period to perfect an appeal. x x x
xxxx

The NLRC has full discretion to grant or deny the motion to reduce bond, and it may rule on the
motion beyond the 10-day period within which to perfect an appeal. Obviously, at the time of
the filing of the motion to reduce bond and posting of a bond in a reasonable amount, there is
no assurance whether the appellants motion is indeed based on "meritorious ground" and
whether the bond he or she posted is of a "reasonable amount." Thus, the appellant always
runs the risk of failing to perfect an appeal.
x x x In order to give full effect to the provisions on motion to reduce bond, the appellant must
be allowed to wait for the ruling of the NLRC on the motion even beyond the 10-day period to
perfect an appeal. If the NLRC grants the motion and rules that there is indeed meritorious
ground and that the amount of the bond posted is reasonable, then the appeal is perfected. If
the NLRC denies the motion, the appellant may still file a motion for reconsideration as
provided under Section 15, Rule VII of the Rules. If the NLRC grants the motion for
reconsideration and rules that there is indeed meritorious ground and that the amount of the
bond posted is reasonable, then the appeal is perfected. If the NLRC denies the motion, then
the decision of the labor arbiter becomes final and executory.
xxxx
In any case, the rule that the filing of a motion to reduce bond shall not stop the running of the
period to perfect an appeal is not absolute. The Court may relax the rule. In Intertranz
Container Lines, Inc. v. Bautista, the Court held:
"Jurisprudence tells us that in labor cases, an appeal from a decision involving a monetary
award may be perfected only upon the posting of cash or surety bond. The Court, however, has
relaxed this requirement under certain exceptional circumstances in order to resolve
controversies on their merits. These circumstances include: (1) fundamental consideration of
substantial justice; (2) prevention of miscarriage of justice or of unjust enrichment; and (3)
special circumstances of the case combined with its legal merits, and the amount and the issue
involved."80 (Citations omitted and emphasis ours)
A serious error of the NLRC was its outright denial of the motion to reduce the bond, without
even considering the respondents arguments and totally unmindful of the rules and
jurisprudence that allow the bonds reduction. Instead of resolving the motion to reduce the
bond on its merits, the NLRC insisted on an amount that was equivalent to the monetary award,
merely explaining:
We are constrained to deny respondents motion for reduction. As held by the Supreme Court
in a recent case, in cases involving monetary award, an employer seeking to appeal the Labor
Arbiters decision to the Commission is unconditionally required by Art. 223, Labor Code to post
bond in the amount equivalent to the monetary award (Calabash Garments vs. NLRC, G.R. No.
110827, August 8, 1996). x x x81 (Emphasis ours)

When the respondents sought to reconsider, the NLRC still refused to fully decide on the
motion. It refused to at least make a preliminary determination of the merits of the appeal, as it
held:
We are constrained to dismiss respondents Motion for Reconsideration. Respondents
contention that the appeal bond is excessive and based on a decision which is a patent nullity
involves the merits of the case. x x x82
Prevailing rules and jurisprudence
allow the reduction of appeal bonds.
By such haste of the NLRC in peremptorily denying the respondents motion without
considering the respondents arguments, it effectively denied the respondents of their
opportunity to seek a reduction of the bond even when the same is allowed under the rules and
settled jurisprudence. It was equivalent to the NLRCs refusal to exercise its discretion, as it
refused to determine and rule on a showing of meritorious grounds and the reasonableness of
the bond tendered under the circumstances.83 Time and again, the Court has cautioned the
NLRC to give Article 223 of the Labor Code, particularly the provisions requiring bonds in
appeals involving monetary awards, a liberal interpretation in line with the desired objective of
resolving controversies on the merits.84 The NLRCs failure to take action on the motion to
reduce the bond in the manner prescribed by law and jurisprudence then cannot be
countenanced. Although an appeal by parties from decisions that are adverse to their interests
is neither a natural right nor a part of due process, it is an essential part of our judicial system.
Courts should proceed with caution so as not to deprive a party of the right to appeal, but
rather, ensure that every party has the amplest opportunity for the proper and just disposition
of their cause, free from the constraints of technicalities. 85 Considering the mandate of labor
tribunals, the principle equally applies to them.
Given the circumstances of the case, the Courts affirmance in the Decision dated September
18, 2009 of the NLRCs strict application of the rule on appeal bonds then demands a reexamination. Again, the emerging trend in our jurisprudence is to afford every party-litigant the
amplest opportunity for the proper and just determination of his cause, free from the
constraints of technicalities.86 Section 2, Rule I of the NLRC Rules of Procedure also provides the
policy that "the Rules shall be liberally construed to carry out the objectives of the Constitution,
the Labor Code of the Philippines and other relevant legislations, and to assist the parties in
obtaining just, expeditious and inexpensive resolution and settlement of labor disputes." 87
In accordance with the foregoing, although the general rule provides that an appeal in labor
cases from a decision involving a monetary award may be perfected only upon the posting of a
cash or surety bond, the Court has relaxed this requirement under certain exceptional
circumstances in order to resolve controversies on their merits. These circumstances include:
(1) the fundamental consideration of substantial justice; (2) the prevention of miscarriage of
justice or of unjust enrichment; and (3) special circumstances of the case combined with its
legal merits, and the amount and the issue involved. 88 Guidelines that are applicable in the

reduction of appeal bonds were also explained in Nicol v. Footjoy Industrial Corporation. 89 The
bond requirement in appeals involving monetary awards has been and may be relaxed in
meritorious cases, including instances in which (1) there was substantial compliance with the
Rules, (2) surrounding facts and circumstances constitute meritorious grounds to reduce the
bond, (3) a liberal interpretation of the requirement of an appeal bond would serve the desired
objective of resolving controversies on the merits, or (4) the appellants, at the very least,
exhibited their willingness and/or good faith by posting a partial bond during the reglementary
period.90
In Blancaflor v. NLRC,91 the Court also emphasized that while Article 223 92 of the Labor Code, as
amended by Republic Act No. 6715, which requires a cash or surety bond in an amount
equivalent to the monetary award in the judgment appealed from may be considered a
jurisdictional requirement for the perfection of an appeal, nevertheless, adhering to the
principle that substantial justice is better served by allowing the appeal on the merits to be
threshed out by the NLRC, the foregoing requirement of the law should be given a liberal
interpretation.
As the Court, nonetheless, remains firm on the importance of appeal bonds in appeals from
monetary awards of LAs, we stress that the NLRC, pursuant to Section 6, Rule VI of the NLRC
Rules of Procedure, shall only accept motions to reduce bond that are coupled with the posting
of a bond in a reasonable amount. Time and again, we have explained that the bond
requirement imposed upon appellants in labor cases is intended to ensure the satisfaction of
awards that are made in favor of appellees, in the event that their claims are eventually
sustained by the courts.93 On the part of the appellants, its posting may also signify their good
faith and willingness to recognize the final outcome of their appeal.
At the time of a motion to reduce appeal bonds filing, the question of what constitutes "a
reasonable amount of bond" that must accompany the motion may be subject to differing
interpretations of litigants. The judgment of the NLRC which has the discretion under the law to
determine such amount cannot as yet be invoked by litigants until after their motions to reduce
appeal bond are accepted.
Given these limitations, it is not uncommon for a party to unduly forfeit his opportunity to seek
a reduction of the required bond and thus, to appeal, when the NLRC eventually disagrees with
the partys assessment. These have also resulted in the filing of numerous petitions against the
NLRC, citing an alleged grave abuse of discretion on the part of the labor tribunal for its finding
on the sufficiency or insufficiency of posted appeal bonds.
It is in this light that the Court finds it necessary to set a parameter for the litigants and the
NLRCs guidance on the amount of bond that shall hereafter be filed with a motion for a bonds
reduction. To ensure that the provisions of Section 6, Rule VI of the NLRC Rules of Procedure
that give parties the chance to seek a reduction of the appeal bond are effectively carried out,
without however defeating the benefits of the bond requirement in favor of a winning litigant,
all motions to reduce bond that are to be filed with the NLRC shall be accompanied by the

posting of a cash or surety bond equivalent to 10% of the monetary award that is subject of the
appeal, which shall provisionally be deemed the reasonable amount of the bond in the
meantime that an appellants motion is pending resolution by the Commission. In conformity
with the NLRC Rules, the monetary award, for the purpose of computing the necessary appeal
bond, shall exclude damages and attorneys fees.94 Only after the posting of a bond in the
required percentage shall an appellants period to perfect an appeal under the NLRC Rules be
deemed suspended.
The foregoing shall not be misconstrued to unduly hinder the NLRCs exercise of its discretion,
given that the percentage of bond that is set by this guideline shall be merely provisional. The
NLRC retains its authority and duty to resolve the motion and determine the final amount of
bond that shall be posted by the appellant, still in accordance with the standards of
"meritorious grounds" and "reasonable amount". Should the NLRC, after considering the
motions merit, determine that a greater amount or the full amount of the bond needs to be
posted by the appellant, then the party shall comply accordingly. The appellant shall be given a
period of 10 days from notice of the NLRC order within which to perfect the appeal by posting
the required appeal bond.
Meritorious ground as a condition
for the reduction of the appeal bond
In all cases, the reduction of the appeal bond shall be justified by meritorious grounds and
accompanied by the posting of the required appeal bond in a reasonable amount.
The requirement on the existence of a "meritorious ground" delves on the worth of the parties
arguments, taking into account their respective rights and the circumstances that attend the
case. The condition was emphasized in University Plans Incorporated v. Solano, 95 wherein the
Court held that while the NLRCs Revised Rules of Procedure "allows the *NLRC+ to reduce the
amount of the bond, the exercise of the authority is not a matter of right on the part of the
movant, but lies within the sound discretion of the NLRC upon a showing of meritorious
grounds."96 By jurisprudence, the merit referred to may pertain to an appellants lack of
financial capability to pay the full amount of the bond, 97 the merits of the main appeal such as
when there is a valid claim that there was no illegal dismissal to justify the award, 98 the absence
of an employer-employee relationship,99 prescription of claims,100 and other similarly valid
issues that are raised in the appeal.101 For the purpose of determining a "meritorious ground",
the NLRC is not precluded from receiving evidence, or from making a preliminary determination
of the merits of the appellants contentions.102
In this case, the NLRC then should have considered the respondents arguments in the
memorandum on appeal that was filed with the motion to reduce the requisite appeal bond.
Although a consideration of said arguments at that point would have been merely preliminary
and should not in any way bind the eventual outcome of the appeal, it was apparent that the
respondents defenses came with an indication of merit that deserved a full review of the
decision of the LA. The CA, by its Resolution dated February 16, 2007, even found justified the

issuance of a preliminary injunction to enjoin the immediate execution of the LAs decision, and
this Court, a temporary restraining order on September 4, 2012.
Significantly, following the CAs remand of the case to the NLRC, the latter even rendered a
Decision that contained findings that are inconsistent with McBurnies claims. The NLRC
reversed and set aside the decision of the LA, and entered a new one dismissing McBurnies
complaint. It explained that McBurnie was not an employee of the respondents; thus, they
could not have dismissed him from employment. The purported employment contract of the
respondents with the petitioner was qualified by the conditions set forth in a letter dated May
11, 1999, which reads:
May 11, 1999
MR. ANDREW MCBURNIE
Re: Employment Contract
Dear Andrew,
It is understood that this Contract is made subject to the understanding that it is effective only
when the project financing for our Baguio Hotel project pushed through.
The agreement with EGI Managers, Inc. is made now to support your need to facilitate your
work permit with the Department of Labor in view of the expiration of your contract with Pan
Pacific.
Regards,
Sgd. Eulalio Ganzon (p. 203, Records)103
For the NLRC, the employment agreement could not have given rise to an employer-employee
relationship by reason of legal impossibility. The two conditions that form part of their
agreement, namely, the successful completion of the project financing for the hotel project in
Baguio City and McBurnies acquisition of an Alien Employment Permit, remained
unsatisfied.104 The NLRC concluded that McBurnie was instead a potential investor in a project
that included Ganzon, but the said project failed to pursue due to lack of funds. Any work
performed by McBurnie in relation to the project was merely preliminary to the business
venture and part of his "due diligence" study before pursuing the project, "done at his own
instance, not in furtherance of the employment contract but for his own investment
purposes."105 Lastly, the alleged employment of the petitioner would have been void for being
contrary to law, since it is undisputed that McBurnie did not have any work permit. The NLRC
declared:

Absent an employment permit, any employment relationship that McBurnie contemplated with
the respondents was void for being contrary to law. A void or inexistent contract, in turn, has
no force and effect from the beginning as if it had never been entered into. Thus, without an
Alien Employment Permit, the "Employment Agreement" is void and could not be the source of
a right or obligation. In support thereof, the DOLE issued a certification that McBurnie has
neither applied nor been issued an Alien Employment Permit (p. 204, Records).106
McBurnie moved to reconsider, citing the Courts Decision of September 18, 2009 that reversed
and set aside the CAs Decision authorizing the remand. Although the NLRC granted the motion
on the said ground via a Decision 107 that set aside the NLRCs Decision dated November 17,
2009, the findings of the NLRC in the November 17, 2009 decision merit consideration,
especially since the findings made therein are supported by the case records.
In addition to the apparent merit of the respondents appeal, the Court finds the reduction of
the appeal bond justified by the substantial amount of the LAs monetary award. Given its
considerable amount, we find reason in the respondents claim that to require an appeal bond
in such amount could only deprive them of the right to appeal, even force them out of business
and affect the livelihood of their employees.108 In Rosewood Processing, Inc. v. NLRC,109 we
emphasized: "Where a decision may be made to rest on informed judgment rather than rigid
rules, the equities of the case must be accorded their due weight because labor determinations
should not be secundum rationem but also secundum caritatem."110
What constitutes a reasonable
amount in the determination of the
final amount of appeal bond
As regards the requirement on the posting of a bond in a "reasonable amount," the Court holds
that the final determination thereof by the NLRC shall be based primarily on the merits of the
motion and the main appeal.
Although the NLRC Rules of Procedure, particularly Section 6 of Rule VI thereof, provides that
the bond to be posted shall be "in a reasonable amount in relation to the monetary award ,"
the merit of the motion shall always take precedence in the determination. Settled is the rule
that procedural rules were conceived, and should thus be applied in a manner that would only
aid the attainment of justice. If a stringent application of the rules would hinder rather than
serve the demands of substantial justice, the former must yield to the latter. 111
Thus, in Nicol where the appellant posted a bond of P10,000,000.00 upon an appeal from the
LAs award ofP51,956,314.00, the Court, instead of ruling right away on the reasonableness of
the bonds amount solely on the basis of the judgment award, found it appropriate to remand
the case to the NLRC, which should first determine the merits of the motion. In University
Plans,112 the Court also reversed the outright dismissal of an appeal where the bond posted in a
judgment award of more than P30,000,000.00 was P30,000.00. The Court then directed the
NLRC to first determine the merit, or lack of merit, of the motion to reduce the bond, after the

appellant therein claimed that it was under receivership and thus, could not dispose of its
assets within a short notice. Clearly, the rule on the posting of an appeal bond should not be
allowed to defeat the substantive rights of the parties.113
Notably, in the present case, following the CAs rendition of its Decision which allowed a
reduced appeal bond, the respondents have posted a bond in the amount of P10,000,000.00. In
Rosewood, the Court deemed the posting of a surety bond of P50,000.00, coupled with a
motion to reduce the appeal bond, as substantial compliance with the legal requirements for an
appeal from a P789,154.39 monetary award "considering the clear merits which appear, res
ipsa loquitor, in the appeal from the LAs Decision, and the petitioners substantial compliance
with rules governing appeals."114 The foregoing jurisprudence strongly indicate that in
determining the reasonable amount of appeal bonds, the Court primarily considers the merits
of the motions and appeals.
Given the circumstances in this case and the merits of the respondents arguments before the
NLRC, the Court holds that the respondents had posted a bond in a "reasonable amount", and
had thus complied with the requirements for the perfection of an appeal from the LAs
decision. The CA was correct in ruling that:
In the case of Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees Association,
President Rodolfo Jimenez, and members, Reynaldo Fajardo, et al. vs. NLRC, Nueva Ecija I
Electric Cooperative, Inc. (NEECO I) and Patricio de la Pea (GR No. 116066, January 24, 2000),
the Supreme Court recognized that: "the NLRC, in its Resolution No. 11-01-91 dated November
7, 1991 deleted the phrase "exclusive of moral and exemplary damages as well as attorneys
fees in the determination of the amount of bond, and provided a safeguard against the
imposition of excessive bonds by providing that "(T)he Commission may in meritorious cases
and upon motion of the appellant, reduce the amount of the bond."
In the case of Cosico, Jr. vs. NLRC, 272 SCRA 583, it was held:
"The unreasonable and excessive amount of bond would be oppressive and unjust and would
have the effect of depriving a party of his right to appeal."
xxxx
In dismissing outright the motion to reduce bond filed by petitioners, NLRC abused its
discretion. It should have fixed an appeal bond in a reasonable amount. Said dismissal deprived
petitioners of their right to appeal the Labor Arbiters decision.
xxxx
NLRC Rules allow reduction of appeal bond on meritorious grounds (Sec. 6, Rule VI, NLRC Rules
of Procedure). This Court finds the appeal bond in the amount of P54,083,910.00 prohibitive

and excessive, which constitutes a meritorious ground to allow a motion for reduction
thereof.115
The foregoing declaration of the Court requiring a bond in a reasonable amount, taking into
account the merits of the motion and the appeal, is consistent with the oft-repeated principle
that letter-perfect rules must yield to the broader interest of substantial justice. 116
The effect of a denial of the appeal
to the NLRC
In finding merit in the respondents motion for reconsideration, we also take into account the
unwarranted results that will arise from an implementation of the Courts Decision dated
September 18, 2009. We emphasize, moreover, that although a remand and an order upon the
NLRC to give due course to the appeal would have been the usual course after a finding that the
conditions for the reduction of an appeal bond were duly satisfied by the respondents, given
such results, the Court finds it necessary to modify the CAs order of remand, and instead rule
on the dismissal of the complaint against the respondents.
Without the reversal of the Courts Decision and the dismissal of the complaint against the
respondents, McBurnie would be allowed to claim benefits under our labor laws despite his
failure to comply with a settled requirement for foreign nationals.
Considering that McBurnie, an Australian, alleged illegal dismissal and sought to claim under
our labor laws, it was necessary for him to establish, first and foremost, that he was qualified
and duly authorized to obtain employment within our jurisdiction. A requirement for foreigners
who intend to work within the country is an employment permit, as provided under Article 40,
Title II of the Labor Code which reads:
Art. 40. Employment permit for non-resident aliens. Any alien seeking admission to the
Philippines for employment purposes and any domestic or foreign employer who desires to
engage an alien for employment in the Philippines shall obtain an employment permit from the
Department of Labor.
In WPP Marketing Communications, Inc. v. Galera,117 we held that a foreign nationals failure to
seek an employment permit prior to employment poses a serious problem in seeking relief
from the Court.118 Thus, although the respondent therein appeared to have been illegally
dismissed from employment, we explained:
This is Galeras dilemma: Galera worked in the Philippines without proper work permit but now
wants to claim employees benefits under Philippine labor laws.
xxxx

The law and the rules are consistent in stating that the employment permit must be acquired
prior to employment. The Labor Code states: "Any alien seeking admission to the Philippines for
employment purposes and any domestic or foreign employer who desires to engage an alien
for employment in the Philippines shall obtain an employment permit from the Department of
Labor." Section 4, Rule XIV, Book I of the Implementing Rules and Regulations provides:
"Employment permit required for entry. No alien seeking employment, whether as a resident
or non-resident, may enter the Philippines without first securing an employment permit from
the Ministry. If an alien enters the country under a non-working visa and wishes to be
employed thereafter, he may be allowed to be employed upon presentation of a duly approved
employment permit."
Galera cannot come to this Court with unclean hands. To grant Galeras prayer is to sanction
the violation of the Philippine labor laws requiring aliens to secure work permits before their
employment. We hold that the status quo must prevail in the present case and we leave the
parties where they are. This ruling, however, does not bar Galera from seeking relief from other
jurisdictions.119 (Citations omitted and underscoring ours)
Clearly, this circumstance on the failure of McBurnie to obtain an employment permit, by itself,
necessitates the dismissal of his labor complaint.
Furthermore, as has been previously discussed, the NLRC has ruled in its Decision dated
November 17, 2009 on the issue of illegal dismissal. It declared that McBurnie was never an
employee of any of the respondents.120 It explained:
All these facts and circumstances prove that McBurnie was never an employee of Eulalio
Ganzon or the respondent companies, but a potential investor in a project with a group
including Eulalio Ganzon and Martinez but said project did not take off because of lack of funds.
McBurnie further claims that in conformity with the provision of the employment contract
pertaining to the obligation of the respondents to provide housing, respondents assigned him
Condo Unit # 812 of the Makati Cinema Square Condominium owned by the respondents. He
was also allowed to use a Hyundai car. If it were true that the contract of employment was for
working visa purposes only, why did the respondents perform their obligations to him?
There is no question that respondents assigned him Condo Unit # 812 of the MCS, but this was
not free of charge. If it were true that it is part of the compensation package as employee, then
McBurnie would not be obligated to pay anything, but clearly, he admitted in his letter that he
had to pay all the expenses incurred in the apartment.
Assuming for the sake of argument that the employment contract is valid between them,
record shows that McBurnie worked from September 1, 1999 until he met an accident on the
last week of October. During the period of employment, the respondents must have paid his
salaries in the sum of US$26,000.00, more or less.

However, McBurnie failed to present a single evidence that [the respondents] paid his salaries
like payslip, check or cash vouchers duly signed by him or any document showing proof of
receipt of his compensation from the respondents or activity in furtherance of the employment
contract. Granting again that there was a valid contract of employment, it is undisputed that on
November 1, 1999, McBurnie left for Australia and never came back. x x x. 121 (Emphasis
supplied)
Although the NLRCs Decision dated November 17, 2009 was set aside in a Decision dated
January 14, 2010, the Courts resolve to now reconsider its Decision dated September 18, 2009
and to affirm the CAs Decision and Resolution in the respondents favor effectively restores the
NLRCs basis for rendering the Decision dated November 17, 2009.
More importantly, the NLRCs findings on the contractual relations between McBurnie and the
respondents are supported by the records.
First, before a case for illegal dismissal can prosper, an employer-employee relationship must
first be established.122 Although an employment agreement forms part of the case records,
respondent Ganzon signed it with the notation "per my note." 123 The respondents have
sufficiently explained that the note refers to the letter 124 dated May 11, 1999 which embodied
certain conditions for the employments effectivity. As we have previously explained, however,
the said conditions, particularly on the successful completion of the project financing for the
hotel project in Baguio City and McBurnies acquisition of an Alien Employment Permit, failed to
materialize. Such defense of the respondents, which was duly considered by the NLRC in its
Decision dated November 17, 2009, was not sufficiently rebutted by McBurnie.
Second, McBurnie failed to present any employment permit which would have authorized him
to obtain employment in the Philippines. This circumstance negates McBurnies claim that he
had been performing work for the respondents by virtue of an employer-employee
relationship. The absence of the employment permit instead bolsters the claim that the
supposed employment of McBurnie was merely simulated, or did not ensue due to the nonfulfillment of the conditions that were set forth in the letter of May 11, 1999.
Third, besides the employment agreement, McBurnie failed to present other competent
evidence to prove his claim of an employer-employee relationship. Given the parties conflicting
claims on their true intention in executing the agreement, it was necessary to resort to the
established criteria for the determination of an employer-employee relationship, namely: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees conduct. 125 The rule of thumb remains:
the onus probandi falls on the claimant to establish or substantiate the claim by the requisite
quantum of evidence. Whoever claims entitlement to the benefits provided by law should
establish his or her right thereto.126McBurnie failed in this regard.1wphi1 As previously
observed by the NLRC, McBurnie even failed to show through any document such as payslips or
vouchers that his salaries during the time that he allegedly worked for the respondents were
paid by the company. In the absence of an employer-employee relationship between McBurnie

and the respondents, McBurnie could not successfully claim that he was dismissed, much less
illegally dismissed, by the latter. Even granting that there was such an employer-employee
relationship, the records are barren of any document showing that its termination was by the
respondents dismissal of McBurnie.
Given these circumstances, it would be a circuitous exercise for the Court to remand the case to
the NLRC, more so in the absence of any showing that the NLRC should now rule differently on
the cases merits. In Medline Management, Inc. v. Roslinda, 127 the Court ruled that when there
is enough basis on which the Court may render a proper evaluation of the merits of the case,
the Court may dispense with the time-consuming procedure of remanding a case to a labor
tribunal in order "to prevent delays in the disposition of the case," "to serve the ends of justice"
and when a remand "would serve no purpose save to further delay its disposition contrary to
the spirit of fair play."128 In Real v. Sangu Philippines, Inc.,129 we again ruled:
With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which
dismissed petitioners complaint for lack of jurisdiction. In cases such as this, the Court normally
remands the case to the NLRC and directs it to properly dispose of the case on the merits.
"However, when there is enough basis on which a proper evaluation of the merits of
petitioners case may be had, the Court may dispense with the time-consuming procedure of
remand in order to prevent further delays in the disposition of the case." "It is already an
accepted rule of procedure for us to strive to settle the entire controversy in a single
proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records,
the pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve the
ends of justice instead of remanding the case to the lower court for further proceedings." x x
x.130 (Citations omitted)
It bears mentioning that although the Court resolves to grant the respondents motion for
reconsideration, the other grounds raised in the motion, especially as they pertain to
insinuations on irregularities in the Court, deserve no merit for being founded on baseless
conclusions. Furthermore, the Court finds it unnecessary to discuss the other grounds that are
raised in the motion, considering the grounds that already justify the dismissal of McBurnies
complaint.
All these considered, the Court also affirms its Resolution dated September 4, 2012;
accordingly, McBurnies motion for reconsideration thereof is denied.
WHEREFORE, in light of the foregoing, the Court rules as follows:
(a) The motion for reconsideration filed on September 26, 2012 by petitioner Andrew
James McBurnie is DENIED;
(b) The motion for reconsideration filed on March 27, 2012 by respondents Eulalio
Ganzon, EGI-Managers, Inc. and E. Ganzon, Inc. is GRANTED.

(c) The Entry of Judgment issued in G.R. Nos. 186984-85 is LIFTED. This Courts Decision
dated September 18, 2009 and Resolutions dated December 14, 2009 and January 25,
2012 are SET ASIDE. The Court of Appeals Decision dated October 27, 2008 and
Resolution dated March 3, 2009 in CA-G.R. SP No. 90845 and CA-G.R. SP No. 95916 are
AFFIRMED WITH MODIFICATION. In lieu of a remand of the case to the National Labor
Relations Commission, the complaint for illegal dismissal filed by petitioner Andrew
James McBurnie against respondents Eulalio Ganzon, EGI-Managers, Inc. and E. Ganzon,
Inc. is DISMISSED.
Furthermore, on the matter of the filing and acceptance of motions to reduce appeal bond, as
provided in Section 6, Rule VI of the 2011 NLRC Rules of Procedure, the Court hereby RESOLVES
that henceforth, the following guidelines shall be observed:
(a) The filing o a motion to reduce appeal bond shall be entertained by the NLRC subject
to the following conditions: (1) there is meritorious ground; and (2) a bond in a
reasonable amount is posted;
(b) For purposes o compliance with condition no. (2), a motion shall be accompanied by
the posting o a provisional cash or surety bond equivalent to ten percent (10,) of the
monetary award subject o the appeal, exclusive o damages and attorney's fees;
(c) Compliance with the foregoing conditions shall suffice to suspend the running o the 1
0-day reglementary period to perfect an appeal from the labor arbiter's decision to the
NLRC;
(d) The NLRC retains its authority and duty to resolve the motion to reduce bond and
determine the final amount o bond that shall be posted by the appellant, still in
accordance with the standards o meritorious grounds and reasonable amount; and
(e) In the event that the NLRC denies the motion to reduce bond, or requires a bond
that exceeds the amount o the provisional bond, the appellant shall be given a fresh
period o ten 1 0) days from notice o the NLRC order within which to perfect the appeal
by posting the required appeal bond.
SO ORDERED.

[G.R. No. 152494. September 22, 2004]

MARIANO ONG, doing business under the name and style MILESTONE METAL
MANUFACTURING, petitioner, vs. THE COURT OF APPEALS, CONRADO DABAC,
BERNABE TAYACTAC, MANUEL ABEJUELLA, LOLITO ABELONG, RONNIE HERRERO,

APOLLO PAMIAS, JAIME ONGUTAN, NOEL ATENDIDO, CARLOS TABBAL, JOEL

ATENDIDO, BIENVENIDO EBBER, RENATO ABEJUELLA, LEONILO ATENDIDO, JR.,
LODULADO FAA and JAIME LOZADA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari assailing the decision[1] of the Court of Appeals in
CA-G.R. SP No. 62129, dated October 10, 2001, which dismissed the petition for certiorari for
lack of merit, as well as the resolution, [2] dated March 7, 2002, denying the motion for
reconsideration.
Petitioner is the sole proprietor of Milestone Metal Manufacturing (Milestone), which
manufactures, among others, wearing apparels, belts, and umbrellas.[3] Sometime in May 1998,
the business suffered very low sales and productivity because of the economic crisis in the
country. Hence, it adopted a rotation scheme by reducing the workdays of its employees to
three days a week or less for an indefinite period. [4]
On separate dates, the 15 respondents filed before the National Labor Relations
Commission (NLRC) complaints for illegal dismissal, underpayment of wages, non-payment of
overtime pay, holiday pay, service incentive leave pay, 13th month pay, damages, and attorneys
fees against petitioner. These were consolidated and assigned to Labor Arbiter Manuel
Manasala.
Petitioner claimed that 9 of the 15 respondents were not employees of Milestone but of
Protone Industrial Corporation which, however, stopped its operation due to business
losses.Further, he claims that respondents Manuel Abuela, Lolita Abelong, Ronnie Herrero,
Carlos Tabbal, Conrado Dabac, and Lodualdo Faa were not dismissed from employment; rather,
they refused to work after the rotation scheme was adopted. Anent their monetary claims,
petitioner presented documents showing that he paid respondents minimum wage, 13 th month
pay, holiday pay, and contributions to the SSS, Medicare, and Pag-Ibig Funds.[5]
On November 25, 1999, the Labor Arbiter rendered a decision awarding to the respondents
the aggregate amount of P1,111,200.40 representing their wage differential, holiday pay,
service incentive leave pay and 13th month pay, plus 10% thereof as attorneys fees. Further,
petitioner was ordered to pay the respondents separation pay equivalent to month salary for
every year of service due to the indefiniteness of the rotation scheme and strained relations
caused by the filing of the complaints.[6]
Petitioner filed with the NLRC a notice of appeal with a memorandum of appeal and paid
the docket fees therefor. However, instead of posting the required cash or surety bond, he filed
a motion to reduce the appeal bond. The NLRC, in a resolution dated April 28, 2000, denied the
motion to reduce bond and dismissed the appeal for failure to post cash or surety bond within
the reglementary period.[7] Petitioners motion for reconsideration was likewise denied. [8]

Petitioner filed a petition for certiorari with the Court of Appeals alleging that the NLRC
acted with grave abuse of discretion in dismissing the appeal for non-perfection of appeal
although a motion to reduce appeal bond was seasonably filed. However, the petition was
dismissed and thereafter the motion for reconsideration was likewise dismissed for lack of
merit.[9]
Hence, this petition for review on the following assignment of errors:
I.
PUBLIC RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF
DISCRETION IN AFFIRMING THE DECISION OF THE NLRC DISMISSING THE APPEAL OF
PETITIONERS (sic) FOR NON-PERFECTION WHEN A MOTION TO REDUCE APPEAL BOND WAS
SEASONABLY FILED WHICH IS ALLOWED BY THE RULES OF PROCEDURE OF THE NLRC.
II.
PUBLIC RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF
DISCRETION IN AFFIRMING THE DISMISSAL BY NLRC OF PETITIONERS APPEAL AND IN EFFECT
UPHOLDING THE ERRONEOUS DECISION OF THE LABOR ARBITER AWARDING SEPARATION PAY
TO PRIVATE RESPONDENTS DESPITE THE FINDING THAT THERE WAS NO ILLEGAL DISMISSAL
MADE BY MILESTONE.
III.
PUBLIC RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN AFFIRMING THE
NLRCS DISMISSAL OF PETITIONERS APPEAL AND IN EFFECT UPHOLDING THE ERRONEOUS
DECISION OF THE LABOR ARBITER THAT PETITIONER MILESTONE HAS VIOLATED THE MINIMUM
WAGE LAW AND THAT PRIVATE RESPONDENTS WERE UNDERPAID.
IV.
PUBLIC RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN AFFIRMING THE
NLRCS DISMISSAL OF PETITIONERS APPEAL AND IN EFFECT UPHOLDING THE ERRONEOUS
DECISION OF THE LABOR ARBITER THAT PETITIONER MILESTONE HAS NOT PAID PRIVATE
RESPONDENTS THEIR SERVICE INCENTIVE LEAVE PAY, 13TH MONTH PAY, AND HOLIDAY PAY.
V.
PUBLIC RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN AFFIRMING THE
NLRCS DISMISSAL OF PETITIONERS APPEAL AND IN EFFECT UPHOLDING THE ERRONEOUS
DECISION OF THE LABOR ARBITER THAT THE EVIDENCE SUBMITTED BY PRIVATE RESPONDENTS
IN SUPPORT OF THEIR CLAIMS ARE NOT SELF-SERVING, IRRELEVANT AND IMMATERIAL TO THE
FACTS AND LAW IN ISSUE IN THIS CASE.[10]

The petition lacks merit.

Time and again it has been held that the right to appeal is not a natural right or a part of
due process, it is merely a statutory privilege, and may be exercised only in the manner and in
accordance with the provisions of law. The party who seeks to avail of the same must comply
with the requirements of the rules. Failing to do so, the right to appeal is lost. [11]
Article 223 of the Labor Code, as amended, sets forth the rules on appeal from the Labor
Arbiters monetary award:
ART. 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders. x x x.
xxxxxxxxx
In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary award
in the judgment appealed from. (Emphasis ours)
The pertinent provisions of Rule VI of the New Rules of Procedure of the NLRC, [12] which
were in effect when petitioner filed his appeal, provide:
Section 1. Periods of Appeal. Decisions, awards or orders of the Labor Arbiter and the POEA
Administrator shall be final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions, awards or orders of the
Labor Arbiter x x x.
xxxxxxxxx
Section 3. Requisites for Perfection of Appeal. (a) The appeal shall be filed within the
reglementary period as provided in Section 1 of this Rule; shall be under oath with proof of
payment of the required appeal fee and the posting of a cash or surety bond as provided in
Section 5 of this Rule; shall be accompanied by a memorandum of appeal which shall state the
grounds relied upon and the arguments in support thereof; the relief prayed for; and a
statement of the date when the appellant received the appealed decision, order or award and
proof of service on the other party of such appeal.
A mere notice of appeal without complying with the other requisite aforestated shall not stop
the running of the period for perfecting an appeal.
xxxxxxxxx

Section 6. Bond. In case the decision of the Labor Arbiter, the Regional Director or his duly
authorized Hearing Officer involves a monetary award, an appeal by the employer shall be
perfected only upon the posting of a cash or surety bond, which shall be in effect until final
disposition of the case, issued by a reputable bonding company duly accredited by the
Commission or the Supreme Court in an amount equivalent to the monetary award, exclusive
of damages and attorneys fees.
The employer, his counsel, as well as the bonding company, shall submit a joint declaration
under oath attesting that the surety bond posted is genuine.
The Commission may, in justifiable cases and upon Motion of the Appellant, reduce the amount
of the bond. The filing of the motion to reduce bond shall not stop the running of the period to
perfect appeal. (Emphasis ours)
In the case at bar, petitioner received the decision of the Labor Arbiter on January 6,
2000. He filed his notice of appeal with memorandum of appeal and paid the corresponding
appeal fees on January 17, 2000, the last day of filing the appeal. However, in lieu of the
required cash or surety bond, he filed a motion to reduce bond alleging that the amount of
P1,427,802,04 as bond is unjustified and prohibitive and prayed that the same be reduced to
a reasonable level. The NLRC denied the motion and consequently dismissed the appeal for
non-perfection.Petitioner now contends that he was deprived of the chance to post bond
because the NLRC took 102 days to decide his motion.
Petitioners argument is unavailing.
While, Section 6, Rule VI of the NLRCs New Rules of Procedure allows the Commission to
reduce the amount of the bond, the exercise of the authority is not a matter of right on the part
of the movant but lies within the sound discretion of the NLRC upon showing of meritorious
grounds.[13] Petitioners motion reads:
1. The appeal bond which respondents-appellants will post in this case is
P1,427,802.04. They are precisely questioning this amount as being unjustified and
prohibitive under the premises.
2. The amount of this appeal bond must be reduced to a reasonable level by this
Honorable Office.
WHEREFORE, in view thereof, it is respectfully prayed of this Honorable Office that the appeal
bond of P1,427,802.04 be reduced.[14]
After careful scrutiny of the motion to reduce appeal bond, we agree with the Court of
Appeals that the NLRC did not act with grave abuse of discretion when it denied petitioners
motion for the same failed to either elucidate why the amount of the bond was unjustified and
prohibitive or to indicate what would be a reasonable level.[15]

In Calabash Garments, Inc. v. NLRC,[16] it was held that a substantial monetary award, even
if it runs into millions, does not necessarily give the employer-appellant a meritorious case and
does not automatically warrant a reduction of the appeal bond.
Even granting arguendo that petitioner has meritorious grounds to reduce the appeal
bond, the result would have been the same since he failed to post cash or surety bond within
the prescribed period.
The above-cited provisions explicitly provide that an appeal from the Labor Arbiter to the
NLRC must be perfected within ten calendar days from receipt of such decisions, awards or
orders of the Labor Arbiter. In a judgment involving a monetary award, the appeal shall be
perfected only upon (1) proof of payment of the required appeal fee; (2) posting of a cash or
surety bond issued by a reputable bonding company; and (3) filing of a memorandum of
appeal. A mere notice of appeal without complying with the other requisites mentioned shall
not stop the running of the period for perfection of appeal. [17] The posting of cash or surety
bond is not only mandatory but jurisdictional as well, and non-compliance therewith is fatal and
has the effect of rendering the judgment final and executory. [18] This requirement is intended to
discourage employers from using the appeal to delay, or even evade, their obligation to satisfy
their employees just and lawful claims.[19]
The intention of the lawmakers to make the bond an indispensable requisite for the
perfection of an appeal by the employer is underscored by the provision that an appeal by the
employer may be perfected only upon the posting of a cash or surety bond. The
word only makes it perfectly clear that the lawmakers intended the posting of a cash or surety
bond by the employer to be the exclusive means by which an employers appeal may be
perfected.[20]
The fact that the NLRC took 102 days to resolve the motion will not help petitioners
case. The NLRC Rules clearly provide that the filing of the motion to reduce bond shall not stop
the running of the period to perfect appeal. Petitioner should have seasonably filed the appeal
bond within the ten-day reglementary period following the receipt of the order, resolution or
decision of the NLRC to forestall the finality of such order, resolution or decision. In the
alternative, he should have paid only a moderate and reasonable sum for the premium, as was
held in Biogenerics Marketing and Research Corporation v. NLRC,[21] to wit:
x x x The mandatory filing of a bond for the perfection of an appeal is evident from the
aforequoted provision that the appeal may be perfected only upon the posting of cash or surety
bond. It is not an excuse that the over P2 million award is too much for a small business
enterprise, like the petitioner company, to shoulder. The law does not require its outright
payment, but only the posting of a bond to ensure that the award will be eventually paid
should the appeal fail. What petitioners have to pay is a moderate and reasonable sum for
the premium for such bond. (Emphasis ours)
While the bond requirement on appeals involving monetary awards has been relaxed in
certain cases, this can only be done where there was substantial compliance of the Rules or
where the appellants, at the very least, exhibited willingness to pay by posting a partial

bond.[22] Petitioners reliance on the case of Rosewood Processing, Inc. v. NLRC[23] is misplaced.
Petitioner in the said case substantially complied with the rules by posting a partial surety bond
of fifty thousand pesos issued by Prudential Guarantee and Assurance, Inc. while his motion to
reduce appeal bond was pending before the NLRC.
In the case at bar, petitioner did not post a full or partial appeal bond within the prescribed
period, thus, no appeal was perfected from the decision of the Labor Arbiter. For this reason,
the decision sought to be appealed to the NLRC had become final and executory and therefore
immutable. Clearly, then, the NLRC has no authority to entertain the appeal, much less to
reverse the decision of the Labor Arbiter. Any amendment or alteration made which
substantially affects the final and executory judgment is null and void for lack of jurisdiction,
including the entire proceeding held for that purpose. [24]
WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed decision of the
Court of Appeals in CA-G.R. SP No. 62129, dated October 10, 2001, dismissing the petition for
certiorari for lack of merit, is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

[G.R. No. 126322. January 16, 2002]

YUPANGCO COTTON MILLS, INC., petitioner, vs. COURT OF APPEALS, HON. URBANO C.
VICTORIO, SR., Presiding Judge, RTC Branch 50, Manila, RODRIGO SY MENDOZA,
SAMAHANG MANGGAGAWA NG ARTEX (SAMAR-ANGLO) represented by its Local
President RUSTICO CORTEZ, and WESTERN GUARANTY CORPORATION, respondents.
DECISION
PARDO, J.:

The Case
The case is a petition for review on certiorari of the decision of the Court of
Appeals[1] dismissing the petition ruling that petitioner was guilty of forum shopping and that
the proper remedy was appeal in due course, not certiorari or mandamus.

In its decision, the Court of Appeals sustained the trial courts ruling that the remedies
granted under Section 17, Rule 39 of the Rules of Court are not available to the petitioner
because the Manual of Instructions for Sheriffs of the NLRC does not include the remedy of an
independent action by the owner to establish his right to his property.

The Facts
The facts, as found by the Court of Appeals, are as follows:
From the records before us and by petitioners own allegations and admission, it has taken the
following actions in connection with its claim that a sheriff of the National Labor Relations
Commission erroneously and unlawfully levied upon certain properties which it claims as its
own.
1. It filed a notice of third-party claim with the Labor Arbiter on May 4, 1995.
2. It filed an Affidavit of Adverse Claim with the National Labor Relations Commission (NLRC) on
July 4, 1995, which was dismissed on August 30, 1995, by the Labor Arbiter.
3. It filed a petition for certiorari and prohibition with the Regional Trial Court of Manila, Branch
49, docketed as Civil Case No. 95-75628 on October 6, 1995. The Regional Trial Court dismissed
the case on October 11, 1995 for lack of merit.
4. It appealed to the NLRC the order of the Labor Arbiter dated August 13, 1995 which
dismissed the appeal for lack of merit on December 8, 1995.
5. It filed an original petition for mandatory injunction with the NLRC on November 16,
1995. This was docketed as Case No. NLRC-NCR-IC. 0000602-95. This case is still pending with
that Commission.
6. It filed a complaint in the Regional Trial Court in Manila which was docketed as Civil Case No.
95-76395. The dismissal of this case by public respondent triggered the filing of the instant
petition.
In all of the foregoing actions, petitioner raised a common issue, which is that it is the owner of
the properties located in the compound and buildings of Artex Development Corporation,
which were erroneously levied upon by the sheriff of the NLRC as a consequence of the
decision rendered by the said Commission in a labor case docketed as NLRC-NCR Case No. 0005-02960-90.[2]
On March 29, 1996, the Court of Appeals promulgated a decision[3] dismissing the petition
on the ground of forum shopping and that petitioners remedy was to seek relief from this
Court.

On April 18, 1996, petitioner filed with the Court of Appeals a motion for reconsideration
of the decision.[4] Petitioner argued that the filing of a complaint for accion reinvindicatoria with
the Regional Trial Court was proper because it is a remedy specifically granted to an owner
(whose properties were subjected to a writ of execution to enforce a decision rendered in a
labor dispute in which it was not a party) by Section 17 (now 16), Rule 39, Revised Rules of
Court and by the doctrines laid down in Sy v. Discaya, [5] Santos v. Bayhon[6] and Manliguez v.
Court of Appeals.[7]
In addition, petitioner argued that the reliefs sought and the issues involved in the
complaint for recovery of property and damages filed with the Regional Trial Court of Manila,
presided over by respondent judge, were entirely distinct and separate from the reliefs sought
and the issues involved in the proceedings before the Labor Arbiter and the NLRC. Besides,
petitioner pointed out that neither the NLRC nor the Labor Arbiter is empowered to adjudicate
matters involving ownership of properties.
On August 27, 1996, the Court of Appeals denied petitioners motion for reconsideration.[8]
Hence, this appeal.[9]

The Issues
The issues raised are (1) whether the Court of Appeals erred in ruling that petitioner was
guilty of forum shopping, and (2) whether the Court of Appeals erred in dismissing the
petitioners accion reinvindicatoria on the ground of lack of jurisdiction of the trial court.

The Courts Ruling

On the first issue raised, we rule that there was no forum shopping.
In Golangco v. Court of Appeals,[10] we held:
What is truly important to consider in determining whether forum shopping exists or not is the
vexation caused the courts and parties-litigant by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or grant the same or
substantially the same reliefs, in the process creating possibility of conflicting decisions being
rendered by the different for a upon the same issues.
xxx xxx xxx
There is no forum-shopping where two different orders were questioned, two distinct causes of
action and issues were raised, and two objectives were sought. (Underscoring ours)

In the case at bar, there was no identity of parties, rights and causes of action and reliefs
sought.
The case before the NLRC where Labor Arbiter Reyes issued a writ of execution on the
property of petitioner was a labor dispute between Artex and Samar-Anglo. Petitioner was not
a party to the case. The only issue petitioner raised before the NLRC was whether or not the
writ of execution issued by the labor arbiter could be satisfied against the property of
petitioner, not a party to the labor case.
On the other hand, the accion reinvindicatoria filed by petitioner in the trial court was to
recover the property illegally levied upon and sold at auction. Hence, the causes of action in
these cases were different.
The rule is that for forum-shopping to exist both actions must involve the same
transactions, the same circumstances. The actions must also raise identical causes of action,
subject matter and issues.[11]
In Chemphil Export & Import Corporation v. Court of Appeals,[12] we ruled that:
Forum-shopping or the act of a party against whom an adverse judgment has been rendered in
one forum, of seeking another (and possible) opinion in another forum (other than by appeal or
the special civil action of certiorari), or the institution of two (2) or more actions or proceedings
grounded on the same cause on the supposition that one or the other would make a favorable
disposition.
On the second issue, a third party whose property has been levied upon by a sheriff to
enforce a decision against a judgment debtor is afforded with several alternative remedies to
protect its interests. The third party may avail himself of alternative remedies cumulatively, and
one will not preclude the third party from availing himself of the other alternative remedies in
the event he failed in the remedy first availed of.
Thus, a third party may avail himself of the following alternative remedies:
a) File a third party claim with the sheriff of the Labor Arbiter, and
b) If the third party claim is denied, the third party may appeal the denial to the
NLRC.[13]
Even if a third party claim was denied, a third party may still file a proper action with a
competent court to recover ownership of the property illegally seized by the sheriff. This finds
support in Section 17 (now 16), Rule 39, Revised Rules of Court, to wit:
SEC. 17 (now 16). Proceedings where property claimed by third person. -If property claimed by
any other person than the judgment debtor or his agent, and such person makes an affidavit of
his title thereto or right to the possession thereof, stating the grounds of such right or title, and
serve the same upon the officer making the levy, and a copy thereof upon the judgment
creditor, the officer shall not be bound to keep the property, unless such judgment creditor or
his agent, on demand of the officer, indemnify the officer against such claim by a bond in a sum

not greater than the value of the property levied on. In case of disagreement as to such value,
the same shall be determined by the court issuing the writ of execution.
The officer is not liable for damages, for the taking or keeping of the property, to any thirdparty claimant unless a claim is made by the latter and unless an action for damages is brought
by him against the officer within one hundred twenty (120) days from the date of the filing of
the bond. But nothing herein contained shall prevent such claimant or any third person from
vindicating his claim to the property by any proper action.
When the party in whose favor the writ of execution runs, is the Republic of the Philippines, or
any officer duly representing it, the filing of such bond shall not be required, and
in case the sheriff or levying officer is sued for damages as a result of the levy, he shall be
represented by the Solicitor General and if held liable therefor, the actual damages adjudged by
the court shall be paid by the National Treasurer out of such funds as may be appropriated for
the purpose. (Underscoring ours)
In Sy v. Discaya,[14] we ruled that:
The right of a third-party claimant to file an independent action to vindicate his claim of
ownership over the properties seized is reserved by Section 17 (now 16), Rule 39 of the Rules of
Court, x x x:
xxxxxxxxx
As held in the case of Ong v. Tating, et. al., construing the aforecited rule, a third person whose
property was seized by a sheriff to answer for the obligation of a judgment debtor may invoke
the supervisory power of the court which authorized such execution. Upon due application by
the third person and after summary hearing, the court may command that the property be
released from the mistaken levy and restored to the rightful owner or possessor. What said
court do in these instances, however, is limited to a determination of whether the sheriff has
acted rightly or wrongly in the performance of his duties in the execution of judgment, more
specifically, if he has indeed taken hold of property not belonging to the judgment debtor. The
court does not and cannot pass upon the question of title to the property, with any character of
finality. It can treat of the matter only insofar as may be necessary to decide if the sheriff has
acted correctly or not. It can require the sheriff to restore the property to the claimants
possession if warranted by the evidence. However, if the claimants proof do not persuade the
court of the validity of his title or right of possession thereto, the claim will be denied.
Independent of the above-stated recourse, a third-party claimant may also avail of the remedy
known as terceria, provided in Section 17 (now 16), Rule 39, by serving on the officer making
the levy an affidavit of his title and a copy thereof upon the judgment creditor. The officer shall
not be bound to keep the property, unless such judgment creditor or his agent, on demand of
the officer, indemnifies the officer against such claim by a bond in a sum not greater than the

value of the property levied on. An action for damages may be brought against the sheriff
within one hundred twenty (120) days from the filing of the bond.
The aforesaid remedies are nevertheless without prejudice to any proper action that a thirdparty claimant may deem suitable to vindicate his claim to the property. Such a proper action is,
obviously, entirely distinct from that explicitly prescribed in Section 17 of Rule 39, which is an
action for damages brought by a third-party claimant against the officer within one hundred
twenty (120) days from the date of the filing of the bond for the taking or keeping of the
property subject of the terceria.
Quite obviously, too, this proper action would have for its object the recovery of ownership
or possession of the property seized by the sheriff, as well as damages resulting from the
allegedly wrongful seizure and detention thereof despite the third-party claim; and it may be
brought against the sheriff and such other parties as may be alleged to have colluded with him
in the supposedly wrongful execution proceedings, such as the judgment creditor himself. Such
proper action, as above pointed out, is and should be an entirely separate and distinct action
from that in which execution has issued, if instituted by a stranger to the latter suit.
The remedies above mentioned are cumulative and may be resorted to by a third-party
claimant independent of or separately from and without need of availing of the others. If a
third-party claimant opted to file a proper action to vindicate his claim of ownership, he must
institute an action, distinct and separate from that in which the judgment is being enforced,
with the court of competent jurisdiction even before or without need of filing a claim in the
court which issued the writ, the latter not being a condition sine qua non for the former. In such
proper action, the validity and sufficiency of the title of the third-party claimant will be resolved
and a writ of preliminary injunction against the sheriff may be issued. (Emphasis and
underscoring ours)
In light of the above, the filing of a third party claim with the Labor Arbiter and the NLRC
did not preclude the petitioner from filing a subsequent action for recovery of property and
damages with the Regional Trial Court. And, the institution of such complaint will not make
petitioner guilty of forum shopping.[15]
In Santos v. Bayhon,[16] wherein Labor Arbiter Ceferina Diosana rendered a decision in NLRC
NCR Case No. 1-313-85 in favor of Kamapi, the NLRC affirmed the decision. Thereafter, Kamapi
obtained a writ of execution against the properties of Poly-Plastic Products or Anthony
Ching. However, respondent Priscilla Carrera filed a third-party claim alleging that Anthony
Ching had sold the property to her. Nevertheless, upon posting by the judgment creditor of an
indemnity bond, the NLRC Sheriff proceeded with the public auction sale. Consequently,
respondent Carrera filed with Regional Trial Court, Manila an action to recover the levied
property and obtained a temporary restraining order against Labor Arbiter Diosana and the
NLRC Sheriff from issuing a certificate of sale over the levied property. Eventually, Labor Arbiter
Santos issued an order allowing the execution to proceed against the property of Poly-Plastic
Products. Also, Labor Arbiter Santos and the NLRC Sheriff filed a motion to dismiss the civil case

instituted by respondent Carrera on the ground that the Regional Trial Court did not have
jurisdiction over the labor case. The trial court issued an order enjoining the enforcement of the
writ of execution over the properties claimed by respondent Carrera pending the determination
of the validity of the sale made in her favor by the judgment debtor Poly-Plastic Products and
Anthony Ching.
In dismissing the petition for certiorari filed by Labor Arbiter Santos, we ruled that:
x x x. The power of the NLRC to execute its judgments extends only to properties
unquestionably belonging to the judgment debtor (Special Servicing Corp. v. Centro La Paz, 121
SCRA 748).
The general rule that no court has the power to interfere by injunction with the judgments or
decrees of another court with concurrent or coordinate jurisdiction possessing equal power to
grant injunctive relief, applies only when no third-party claimant is involved (Traders Royal Bank
v. Intermediate Appellate Court, 133 SCRA 141 [1984]). When a third-party, or a stranger to the
action, asserts a claim over the property levied upon, the claimant may vindicate his claim by an
independent action in the proper civil court which may stop the execution of the judgment on
property not belonging to the judgment debtor. (Underscoring ours)
In Consolidated Bank and Trust Corp. v. Court of Appeals, 193 SCRA 158 [1991], we ruled
that:
The well-settled doctrine is that a proper levy is indispensable to a valid sale on execution. A
sale unless preceded by a valid levy is void. Therefore, since there was no sufficient levy on the
execution in question, the private respondent did not take any title to the properties sold
thereunder x x x.
A person other than the judgment debtor who claims ownership or right over the levied
properties is not precluded, however, from taking other legal remedies. (Underscoring ours)
Jurisprudence is likewise replete with rulings that since the third-party claimant is not one
of the parties to the action, he could not, strictly speaking, appeal from the order denying his
claim, but should file a separate reinvindicatory action against the execution creditor or the
purchaser of the property after the sale at public auction, or a complaint for damages against
the bond filed by the judgment creditor in favor of the sheriff. [17]
And in Lorenzana v. Cayetano,[18] we ruled that:
The rights of a third-party claimant should not be decided in the action where the third-party
claim has been presented, but in a separate action to be instituted by the third person. The
appeal that should be interposed if the term appeal may properly be employed, is a separate
reinvindicatory action against the execution creditor or the purchaser of the property after the
sale at public auction, or complaint for damages to be charged against the bond filed by the

judgment creditor in favor of the sheriff. Such reinvindicatory action is reserved to the thirdparty claimant.
A separate civil action for recovery of ownership of the property would not constitute
interference with the powers or processes of the Arbiter and the NLRC which rendered the
judgment to enforce and execute upon the levied properties. The property levied upon being
that of a stranger is not subject to levy. Thus, a separate action for recovery, upon a claim
andprima-facie showing of ownership by the petitioner, cannot be considered as interference.

The Fallo
WHEREFORE, the Court REVERSES the decision of the Court of Appeals and the resolution
denying reconsideration.[19] In lieu thereof, the Court renders judgment ANNULLING the sale on
execution of the subject property conducted by NLRC Sheriff Anam Timbayan in favor of
respondent SAMAR-ANGLO and the subsequent sale of the same to Rodrigo Sy Mendoza.The
Court declares the petitioner to be the rightful owner of the property involved and remands the
case to the trial court to determine the liability of respondents SAMAR-ANGLO, Rodrigo Sy
Mendoza, and WESTERN GUARANTY CORPORATION to pay actual damages that petitioner
claimed.
Costs against respondents, except the Court of Appeals.
SO ORDERED

[G.R. No. 120567. March 20, 1998]

PHILIPPINE AIRLINES, INC., petitioner, vs., NATIONAL LABOR RELATIONS COMMISSION,

FERDINAND PINEDA and GODOFREDO CABLING,respondents.
DECISION
MARTINEZ, J.:
Can the National Labor Relations Commission (NLRC), even without a complaint for illegal
dismissal filed before the labor arbiter, entertain an action for injunction and issue such writ
enjoining petitioner Philippine Airlines, Inc. from enforcing its Orders of dismissal against

private respondents, and ordering petitioner to reinstate the private respondents to their
previous positions?
This is the pivotal issue presented before us in this petition for certiorari under Rule 65 of
the Revised Rules of Court which seeks the nullification of the injunctive writ dated April 3,1995
issued by the NLRC and the Order denying petitioner's motion for reconsideration on the
ground that the said Orders were issued in excess of jurisdiction.
Private respondents are flight stewards of the petitioner. Both were dismissed from the
service for their alleged involvement in the April 3, 1993 currency smuggling in Hong Kong.
Aggrieved by said dismissal, private respondents filed with the NLRC a petition [1] for
injunction praying that:
"I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting respondents
(petitioner herein) from effecting or enforcing the Decision dated Feb. 22, 1995, or to reinstate
petitioners temporarily while a hearing on the propriety of the issuance of a writ of preliminary
injunction is being undertaken;
"II. After hearing, a writ of preliminary mandatory injunction be issued ordering respondent to
reinstate petitioners to their former positions pending the hearing of this case, or, prohibiting
respondent from enforcing its Decision dated February 22,1995 while this case is pending
adjudication;
"III. After hearing, that the writ of preliminary injunction as to the reliefs sought for be made
permanent, that petitioners be awarded full backwages, moral damages of PHP 500,000.00
each and exemplary damages of PHP 500,000.00 each, attorneys fees equivalent to ten percent
of whatever amount is awarded, and the costs of suit."
On April 3, 1995, the NLRC issued a temporary mandatory injunction [2] enjoining petitioner
to cease and desist from enforcing its February 22, 1995 Memorandum of dismissal. In granting
the writ, the NLRC considered the following facts, to wit:
x x x that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were instructed to
attend an investigation by respondents Security and Fraud Prevention Sub-Department
regarding an April 3, 1993 incident in Hongkong at which Joseph Abaca, respondents Avionics
Mechanic in Hongkong was intercepted by the Hongkong Airport Police at Gate 05 xxx the ramp
area of the Kai Tak International Airport while xxx about to exit said gate carrying a xxx bag said
to contain some 2.5 million pesos in Philippine Currencies. That at the Police Station, Mr. Abaca
claimed that he just found said plastic bag at the Skybed Section of the arrival flight PR300/03
April 93, where petitioners served as flight stewards of said flight PR300; x x the petitioners
sought a more detailed account of what this HKG incident is all about; but instead, the
petitioners were administratively charged, a hearing on which did not push through until
almost two (2) years after, i.e. on January 20, 1995 xxx where a confrontation between Mr.
Abaca and petitioners herein was compulsorily arranged by the respondents disciplinary board

at which hearing, Abaca was made to identify petitioners as co-conspirators; that despite the
fact that the procedure of identification adopted by respondents Disciplinary Board was
anomalous as there was no one else in the line-up (which could not be called one) but
petitioners xxx Joseph Abaca still had difficulty in identifying petitioner Pineda as his coconspirator, and as to petitioner Cabling, he was implicated and pointed by Abaca only after
respondents Atty. Cabatuando pressed the former to identify petitioner Cabling as coconspirator; that with the hearing reset to January 25, 1995, Mr. Joseph Abaca finally gave
exculpating statements to the board in that he cleared petitioners from any participation or
from being the owners of the currencies, and at which hearing Mr. Joseph Abaca volunteered
the information that the real owner of said money was one who frequented his headquarters in
Hongkong to which information, the Disciplinary Board Chairman, Mr. Ismael Khan, opined
for the need for another hearing to go to the bottom of the incident; that from said statement,
it appeared that Mr. Joseph Abaca was the courier, and had another mechanic in Manila who
hid the currency at the planes skybed for Abaca to retrieve in Hongkong, which findings of how
the money was found was previously confirmed by Mr. Joseph Abaca himself when he was first
investigated by the Hongkong authorities; that just as petitioners thought that they were
already fully cleared of the charges, as they no longer received any summons/notices on the
intended additional hearings mandated by the Disciplinary Board, they were surprised to
receive on February 23, 1995 xxx a Memorandum dated February 22, 1995 terminating their
services for alleged violation of respondents Code of Discipline effective immediately; that
sometime xxx first week of March, 1995, petitioner Pineda received another Memorandum
from respondent Mr. Juan Paraiso, advising him of his termination effective February 3, 1995,
likewise for violation of respondents Code of Discipline; x x x"
In support of the issuance of the writ of temporary injunction, the NLRC adopted the view
that: (1) private respondents cannot be validly dismissed on the strength of petitioner's Code of
Discipline which was declared illegal by this Court in the case of PAL, Inc. vs. NLRC, (G.R. No.
85985), promulgated August 13, 1993, for the reason that it was formulated by the petitioner
without the participation of its employees as required in R.A. 6715, amending Article 211 of the
Labor Code; (2) the whimsical, baseless and premature dismissals of private respondents which
"caused them grave and irreparable injury" is enjoinable as private respondents are left "with
no speedy and adequate remedy at law'"except the issuance of a temporary mandatory
injunction; (3) the NLRC is empowered under Article 218 (e) of the Labor Code not only to
restrain any actual or threatened commission of any or all prohibited or unlawful acts but also
to require the performance of a particular act in any labor dispute, which, if not restrained or
performed forthwith, may cause grave or irreparable damage to any party; and (4) the
temporary mandatory power of the NLRC was recognized by this Court in the case of ChemoTechnicshe Mfg., Inc. Employees Union,DFA, et.al. vs. Chemo-Technische Mfg., Inc. [G.R. No.
107031, January 25,1993].
On May 4,1995, petitioner moved for reconsideration [3] arguing that the NLRC erred:

1. in granting a temporary injunction order when it has no jurisdiction to issue an injunction or

restraining order since this may be issued only under Article 218 of the Labor Code if the case
involves or arises from labor disputes;
2. in granting a temporary injunction order when the termination of private respondents have
long been carried out;
3. ..in ordering the reinstatement of private respondents on the basis of their mere allegations,
in violation of PAL's right to due process;
4. ..in arrogating unto itself management prerogative to discipline its employees and divesting
the labor arbiter of its original and exclusive jurisdiction over illegal dismissal cases;
5. ..in suspending the effects of termination when such action is exclusively within the
jurisdiction of the Secretary of Labor;
6. ..in issuing the temporary injunction in the absence of any irreparable or substantial injury
to both private respondents.
On May 31,1995, the NLRC denied petitioner's motion for reconsideration, ruling:
The respondent (now petitioner), for one, cannot validly claim that we cannot exercise our
injunctive power under Article 218 (e) of the Labor Code on the pretext that what we have
here is not a labor dispute as long as it concedes that as defined by law, a(l) Labor Dispute
includes any controversy or matter concerning terms or conditions of employment. . If
security of tenure, which has been breached by respondent and which, precisely, is sought to
be protected by our temporary mandatory injunction (the core of controversy in this case) is
not a term or condition of employment, what then is?
xxxxxxxxx
Anent respondents second argument x x x, Article 218 (e) of the Labor Code x x x empowered
the Commission not only to issue a prohibitory injunction, but a mandatory (to require the
performance) one as well. Besides, as earlier discussed, we already exercised (on August
23,1991) this temporary mandatory injunctive power in the case of Chemo-Technische Mfg.,
Inc. Employees Union-DFA et.al. vs. Chemo-Technishe Mfg., Inc., et. al. (supra) and effectively
enjoined one (1) month old dismissals by Chemo-Technische and that our aforesaid
mandatory exercise of injunctive power, when questioned through a petition for certiorari,
was sustained by the Third Division of the Supreme court per its Resolution dated January
25,1993.
xxxxxxxxx

Respondents fourth argument that petitioner's remedy for their dismissals is 'to file an illegal
dismissal case against PAL which cases are within the original and exclusive jurisdiction of the
Labor Arbiter' is ignorant. In requiring as a condition for the issuance of a 'temporary or
permanent injunction'- '(4) That complainant has no adequate remedy at law;' Article 218 (e) of
the Labor Code clearly envisioned adequacy , and not plain availability of a remedy at law as
an alternative bar to the issuance of an injunction. An illegal dismissal suit (which takes, on its
expeditious side, three (3) years before it can be disposed of) while available as a remedy
under Article 217 (a) of the Labor Code, is certainly not an 'adequate; remedy at law. Ergo, it
cannot, as an alternative remedy, bar our exercise of that injunctive power given us by Article
218 (e) of the Code.
xxx xxx xxx
Thus, Article 218 (e), as earlier discussed [which empowers this Commission 'to require the
performance of a particular act' (such as our requiring respondent 'to cease and desist from
enforcing' its whimsical memoranda of dismissals and 'instead to reinstate petitioners to their
respective position held prior to their subject dismissals') in 'any labor dispute which, if not xxx
performed forthwith, may cause grave and irreparable damage to any party'] stands as the sole
'adequate remedy at law' for petitioners here.
Finally, the respondent, in its sixth argument claims that even if its acts of dismissing petitioners
'may be great, still the same is capable of compensation', and that consequently, 'injunction
need not be issued where adequate compensation at law could be obtained'. Actually, what
respondent PAL argues here is that we need not interfere in its whimsical dismissals of
petitioners as, after all, it can pay the latter its backwages. x x x
But just the same, we have to stress that Article 279 does not speak alone of backwages as an
obtainable relief for illegal dismissal; that reinstatement as well is the concern of said law,
enforceable when necessary, through Article 218 (e) of the Labor Code (without need of an
illegal dismissal suit under Article 217 (a) of the Code) if such whimsical and capricious act of
illegal dismissal will 'cause grave or irreparable injury to a party'. x x x " [4]
Hence, the present recourse.
Generally, injunction is a preservative remedy for the protection of one's substantive rights
or interest. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a
main suit. It is resorted to only when there is a pressing necessity to avoid injurious
consequences which cannot be remedied under any standard of compensation. The application
of the injunctive writ rests upon the existence of an emergency or of a special reason before
the main case be regularly heard. The essential conditions for granting such temporary
injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute
a proper basis for injunction and that on the entire showing from the contending parties, the
injunction is reasonably necessary to protect the legal rights of the plaintiff pending the

litigation.[5] Injunction is also a special equitable relief granted only in cases where there is no
plain, adequate and complete remedy at law. [6]
In labor cases, Article 218 of the Labor Code empowers the NLRC"(e) To enjoin or restrain any actual or threatened commission of any or all prohibited or
unlawful acts or to require the performance of a particular act in any labor dispute which, if not
restrained or performed forthwith, may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party; x x x." (Emphasis Ours)
Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of Procedure
of the NLRC, pertinently provides as follows:
"Section 1. Injunction in Ordinary Labor Dispute.-A preliminary injunction or a restraining order
may be granted by the Commission through its divisions pursuant to the provisions of
paragraph (e) of Article 218 of the Labor Code, as amended, when it is established on the bases
of the sworn allegations in the petition that the acts complained of, involving or arising from
any labor dispute before the Commission, which, if not restrained or performed forthwith,
may cause grave or irreparable damage to any party or render ineffectual any decision in favor
of such party.
xxx xxx xxx
The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident
to the cases pending before them in order to preserve the rights of the parties during the
pendency of the case, but excluding labor disputes involving strikes or lockout. [7] (Emphasis
Ours)
From the foregoing provisions of law, the power of the NLRC to issue an injunctive writ
originates from "any labor dispute" upon application by a party thereof, which application if
not granted "may cause grave or irreparable damage to any party or render ineffectual any
decision in favor of such party."
The term "labor dispute" is defined as "any controversy or matter concerning terms and
conditions of employment or the association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of employment regardless of
whether or not the disputants stand in the proximate relation of employers and employees." [8]
The term "controversy" is likewise defined as "a litigated question; adversary proceeding
in a court of law; a civil action or suit, either at law or in equity; a justiciable dispute."[9]
A "justiciable controversy" is "one involving an active antagonistic assertion of a legal right
on one side and a denial thereof on the other concerning a real, and not a mere theoretical
question or issue."[10]
Taking into account the foregoing definitions, it is an essential requirement that there must
first be a labor dispute between the contending parties before the labor arbiter. In the present

case, there is no labor dispute between the petitioner and private respondents as there has yet
been no complaint for illegal dismissal filed with the labor arbiter by the private respondents
against the petitioner.
The petition for injunction directly filed before the NLRC is in reality an action for illegal
dismissal. This is clear from the allegations in the petition which prays for: reinstatement of
private respondents; award of full backwages, moral and exemplary damages; and attorney's
fees. As such, the petition should have been filed with the labor arbiter who has the original
and exclusive jurisdiction to hear and decide the following cases involving all workers, whether
agricultural or non-agricultural:
(1) Unfair labor practice;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
(5) Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
(6) Except claims for employees compensation, social security, medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of persons
in domestic or household service, involving an amount exceeding five thousand pesos (P
5,000.00), whether or not accompanied with a claim for reinstatement. [11]
The jurisdiction conferred by the foregoing legal provision to the labor arbiter is
both original and exclusive, meaning, no other officer or tribunal can take cognizance of, hear
and decide any of the cases therein enumerated. The only exceptions are where the Secretary
of Labor and Employment or the NLRC exercises the power of compulsory arbitration, or the
parties agree to submit the matter to voluntary arbitration pursuant to Article 263 (g) of the
Labor Code, the pertinent portions of which reads:
"(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same to the
Commission for compulsory arbitration. Such assumption or certification shall have the effect of
automatically enjoining the intended or impending strike or lockout as specified in the
assumption or certification order. If one has already taken place at the time of assumption or
certification, all striking or locked out employees shall immediately resume operations and
readmit all workers under the same terms and conditions prevailing before the strike or
lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of

law enforcement agencies to ensure compliance with this provision as well as with such orders
as he may issue to enforce the same.
xxxxxxxxx"
On the other hand, the NLRC shall have exclusive appellate jurisdiction over all cases
decided by labor arbiters as provided in Article 217(b) of the Labor Code. In short, the
jurisdiction of the NLRC in illegal dismissal cases is appellate in nature and, therefore, it cannot
entertain the private respondents' petition for injunction which challenges the dismissal orders
of petitioner. Article 218(e) of the Labor Code does not provide blanket authority to the NLRC
or any of its divisions to issue writs of injunction, considering that Section 1 of Rule XI of the
New Rules of Procedure of the NLRC makes injunction only an ancillary remedy in ordinary
labor disputes"[12]
Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting private
respondents' petition for injunction and ordering the petitioner to reinstate private
respondents.
The argument of the NLRC in its assailed Order that to file an illegal dismissal suit with the
labor arbiter is not an "adequate" remedy since it takes three (3) years before it can be
disposed of, is patently erroneous. An "adequate" remedy at law has been defined as one "that
affords relief with reference to the matter in controversy, and which is appropriate to the
particular circumstances of the case."[13] It is a remedy which is equally beneficial, speedy and
sufficient which will promptly relieve the petitioner from the injurious effects of the acts
complained of.[14]
Under the Labor Code, the ordinary and proper recourse of an illegally dismissed
employee is to file a complaint for illegal dismissal with the labor arbiter. [15] In the case at bar,
private
respondents disregarded
this
rule
and
directly
went
to
the
NLRC through a petition for injunction praying that petitioner be enjoined from enforcing its
dismissal orders. In Lamb vs. Phipps,[16] we ruled that if the remedy is specifically provided by
law, it is presumed to be adequate. Moreover, the preliminary mandatory injunction prayed for
by the private respondents in their petition before the NLRC can also be entertained by the
labor arbiter who, as shown earlier, has the ancillary power to issue preliminary injunctions or
restraining orders as an incident in the cases pending before him in order to preserve the rights
of the parties during the pendency of the case.[17]
Furthermore, an examination of private respondents' petition for injunction reveals that it
has no basis since there is no showing of any urgency or irreparable injury which the private
respondents might suffer. An injury is considered irreparable if it is of such constant and
frequent recurrence that no fair and reasonable redress can be had therefor in a court of
law,[18] or where there is no standard by which their amount can be measured with reasonable
accuracy, that is, it is not susceptible of mathematical computation. It is considered irreparable
injury when it cannot be adequately compensated in damages due to the nature of the injury
itself or the nature of the right or property injured or when there exists no certain pecuniary
standard for the measurement of damages.[19]

In the case at bar, the alleged injury which private respondents stand to suffer by reason of
their alleged illegal dismissal can be adequately compensated and therefore, there exists no
"irreparable injury," as defined above which would necessitate the issuance of the injunction
sought for. Article 279 of the Labor Code provides that an employee who is unjustly dismissed
from employment shall be entitled to reinstatement, without loss of seniority rights and other
privileges, and to the payment of full backwages, inclusive of allowances, and to other benefits
or their monetary equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.
The ruling of the NLRC that the Supreme Court upheld its power to issue temporary
mandatory injunction orders in the case of Chemo-Technische Mfg., Inc. Employees Union-DFA,
et.al. vs. Chemo-Technische Mfg., Inc. et.al., docketed as G.R. No. 107031, is misleading. As
correctly argued by the petitioner, no such pronouncement was made by this Court in said case.
On January 25,1993, we issued a Minute Resolution in the subject case stating as follows:
"Considering the allegations contained, the issues raised and the arguments adduced in the
petition for certiorari , as well as the comments of both public and private respondents
thereon, and the reply of the petitioners to private respondent's motion to dismiss the petition,
the Court Resolved to DENY the same for being premature."
It is clear from the above resolution that we did not in anyway sustain the action of the
NLRC in issuing such temporary mandatory injunction but rather we dismissed the petition as
the NLRC had yet to rule upon the motion for reconsideration filed by peitioner. Thus, the
minute resolution denying the petition for being prematurely filed.
Finally, an injunction, as an extraordinary remedy, is not favored in labor law considering
that it generally has not proved to be an effective means of settling labor disputes. [20] It has
been the policy of the State to encourage the parties to use the non-judicial process of
negotiation and compromise, mediation and arbitration. [21] Thus, injunctions may be issued
only in cases of extreme necessity based on legal grounds clearly established, after due
consultations or hearing and when all efforts at conciliation are exhausted which factors,
however, are clearly absent in the present case.
WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April 3,1995 and
May 31,1995, issued by the National Labor Relations Commission (First Division), in NLRC NCR
IC No. 000563-95, are hereby REVERSED and SET ASIDE.
SO ORDERED.