relationship poses a possible conflict of interest, to resign from the
company.
SECOND DIVISION
G.R. No. 162994 September 17, 2004
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A.
TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with
constitutional overtones, involving the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying
employees of any competitor company.
This is a Petition for Review on Certiorari assailing
the Decision1 dated May 19, 2003 and the Resolution dated March
26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo
Wellcome Philippines, Inc. (Glaxo) as medical representative on
October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which stipulates,
among others, that he agrees to study and abide by existing company
rules; to disclose to management any existing or future relationship by
consanguinity or affinity with co-employees or employees of
competing drug companies and should management find that such
The Employee Code of Conduct of Glaxo similarly provides that an
employee is expected to inform management of any existing or future
relationship by consanguinity or affinity with co-employees or
employees of competing drug companies. If management perceives a
conflict of interest or a potential conflict between such relationship and
the employee’s employment with the company, the management and
the employee will explore the possibility of a "transfer to another
department in a non-counterchecking position" or preparation for
employment outside the company after six months.
Tecson was initially assigned to market Glaxo’s products in the
Camarines Sur-Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with
Bettsy, an employee of Astra Pharmaceuticals3 (Astra), a competitor
of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay. She
supervised the district managers and medical representatives of her
company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders
from his District Manager regarding the conflict of interest which his
relationship with Bettsy might engender. Still, love prevailed, and
Tecson married Bettsy in September 1998.
In January 1999, Tecson’s superiors informed him that his marriage to
Bettsy gave rise to a conflict of interest. Tecson’s superiors reminded
him that he and Bettsy should decide which one of them would resign
from their jobs, although they told him that they wanted to retain him
as much as possible because he was performing his job well.
Tecson requested for time to comply with the company policy against
entering into a relationship with an employee of a competitor
company. He explained that Astra, Bettsy’s employer, was planning to
merge with Zeneca, another drug company; and Bettsy was planning
to avail of the redundancy package to be offered by Astra. With
Bettsy’s separation from her company, the potential conflict of interest
would be eliminated. At the same time, they would be able to avail of
the attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the
problem. In September 1999, Tecson applied for a transfer in Glaxo’s
milk division, thinking that since Astra did not have a milk division, the
potential conflict of interest would be eliminated. His application was
denied in view of Glaxo’s "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-
Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to
reconsider its decision, but his request was denied.
Tecson sought Glaxo’s reconsideration regarding his transfer and
brought the matter to Glaxo’s Grievance Committee. Glaxo, however,
remained firm in its decision and gave Tescon until February 7, 2000
to comply with the transfer order. Tecson defied the transfer order and
continued acting as medical representative in the Camarines Sur-
Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid
his salary, but was not issued samples of products which were
competing with similar products manufactured by Astra. He was also
not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance
machinery level, they submitted the matter for voluntary arbitration.
Glaxo offered Tecson a separation pay of one-half (½) month pay for
every year of service, or a total of ₱50,000.00 but he declined the
offer. On November 15, 2000, the National Conciliation and Mediation
Board (NCMB) rendered its Decision declaring as valid Glaxo’s policy
on relationships between its employees and persons employed with
competitor companies, and affirming Glaxo’s right to transfer Tecson
to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of
Appeals assailing the NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated
its Decision denying the Petition for Review on the ground that the
NCMB did not err in rendering its Decision. The appellate court held
that Glaxo’s policy prohibiting its employees from having personal
relationships with employees of competitor companies is a valid
exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate
court’s Decision, but the motion was denied by the appellate court in
its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of
Appeals erred in affirming the NCMB’s finding that the Glaxo’s policy
prohibiting its employees from marrying an employee of a competitor
company is valid; and (ii) the Court of Appeals also erred in not finding
that Tecson was constructively dismissed when he was transferred to
a new sales territory, and deprived of the opportunity to attend
products seminars and training sessions.6
Petitioners contend that Glaxo’s policy against employees marrying
employees of competitor companies violates the equal protection
clause of the Constitution because it creates invalid distinctions
among employees on account only of marriage. They claim that the
policy restricts the employees’ right to marry.7
They also argue that Tecson was constructively dismissed as shown
by the following circumstances: (1) he was transferred from the
Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-
Agusan sales area, (2) he suffered a diminution in pay, (3) he was
excluded from attending seminars and training sessions for medical
representatives, and (4) he was prohibited from promoting
respondent’s products which were competing with Astra’s products.8
In its Comment on the petition, Glaxo argues that the company policy
prohibiting its employees from having a relationship with and/or
marrying an employee of a competitor company is a valid exercise of
its management prerogatives and does not violate the equal
protection clause; and that Tecson’s reassignment from the
Camarines Norte-Camarines Sur sales area to the Butuan City-
Surigao City and Agusan del Sur sales area does not amount to
constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of
pharmaceutical products, it has a genuine interest in ensuring that its
employees avoid any activity, relationship or interest that may conflict
with their responsibilities to the company. Thus, it expects its
employees to avoid having personal or family interests in any
competitor company which may influence their actions and decisions
and consequently deprive Glaxo of legitimate profits. The policy is
also aimed at preventing a competitor company from gaining access
to its secrets, procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se but
only proscribes existing or future relationships with employees of
competitor companies, and is therefore not violative of the equal
protection clause. It maintains that considering the nature of its
business, the prohibition is based on valid grounds.11
According to Glaxo, Tecson’s marriage to Bettsy, an employee of
Astra, posed a real and potential conflict of interest. Astra’s products
were in direct competition with 67% of the products sold by Glaxo.
Hence, Glaxo’s enforcement of the foregoing policy in Tecson’s case
was a valid exercise of its management prerogatives.12 In any case,
Tecson was given several months to remedy the situation, and was
even encouraged not to resign but to ask his wife to resign form Astra
instead.13
Glaxo also points out that Tecson can no longer question the assailed
company policy because when he signed his contract of employment,
he was aware that such policy was stipulated therein. In said contract,
he also agreed to resign from respondent if the management finds
that his relationship with an employee of a competitor company would
be detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecson’s reassignment to another sales
area and his exclusion from seminars regarding respondent’s new
products did not amount to constructive dismissal.
It claims that in view of Tecson’s refusal to resign, he was relocated
from the Camarines Sur-Camarines Norte sales area to the Butuan
City-Surigao City and Agusan del Sur sales area. Glaxo asserts that
in effecting the reassignment, it also considered the welfare of
Tecson’s family. Since Tecson’s hometown was in Agusan del Sur
and his wife traces her roots to Butuan City, Glaxo assumed that his
transfer from the Bicol region to the Butuan City sales area would be
favorable to him and his family as he would be relocating to a familiar
territory and minimizing his travel expenses.15
In addition, Glaxo avers that Tecson’s exclusion from the seminar
concerning the new anti-asthma drug was due to the fact that said
product was in direct competition with a drug which was soon to be
sold by Astra, and hence, would pose a potential conflict of interest for
him. Lastly, the delay in Tecson’s receipt of his sales paraphernalia
was due to the mix-up created by his refusal to transfer to the Butuan
City sales area (his paraphernalia was delivered to his new sales area
instead of Naga City because the supplier thought he already
transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the
Court of Appeals erred in ruling that Glaxo’s policy against its
employees marrying employees from competitor companies is valid,
and in not holding that said policy violates the equal protection clause
of the Constitution; (2) Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecson’s contract of employment with Glaxo being
questioned by petitioners provides:
…
10. You agree to disclose to management any existing or
future relationship you may have, either by consanguinity or
affinity with co-employees or employees of competing drug
companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from
the Company as a matter of Company policy.
…17
The same contract also stipulates that Tescon agrees to abide by the
existing company rules of Glaxo, and to study and become
acquainted with such policies.18 In this regard, the Employee
Handbook of Glaxo expressly informs its employees of its rules
regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship,
or interest that may run counter to the responsibilities which
they owe Glaxo Wellcome.
 Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial
or otherwise, in any competitor supplier or other
businesses which may consciously or unconsciously
influence their actions or decisions and thus deprive
Glaxo Wellcome of legitimate profit.
b. To refrain from using their position in Glaxo
Wellcome or knowledge of Company plans to advance
their outside personal interests, that of their relatives,
friends and other businesses.
c. To avoid outside employment or other interests for
income which would impair their effective job
performance.
d. To consult with Management on such activities or
relationships that may lead to conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by
consanguinity or affinity with co-employees of competing drug
companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential
conflict of interest, every effort shall be made, together by
management and the employee, to arrive at a solution within
six (6) months, either by transfer to another department in a
non-counter checking position, or by career preparation toward
outside employment after Glaxo Wellcome. Employees must
be prepared for possible resignation within six (6) months, if no
other solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it
ruled that Glaxo’s policy prohibiting an employee from having a
relationship with an employee of a competitor company is a valid
exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information
from competitors, especially so that it and Astra are rival companies in
the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with
employees of competitor companies upon Glaxo’s employees is
reasonable under the circumstances because relationships of that
nature might compromise the interests of the company. In laying down
the assailed company policy, Glaxo only aims to protect its interests
against the possibility that a competitor company will gain access to
its secrets and procedures.
That Glaxo possesses the right to protect its economic interests
cannot be denied. No less than the Constitution recognizes the right
of enterprises to adopt and enforce such a policy to protect its right to
reasonable returns on investments and to expansion and
growth.20 Indeed, while our laws endeavor to give life to the
constitutional policy on social justice and the protection of labor, it
does not mean that every labor dispute will be decided in favor of the
workers. The law also recognizes that management has rights which
are also entitled to respect and enforcement in the interest of fair
play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice
to guard business confidentiality and protect a competitive position by
even-handedly disqualifying from jobs male and female applicants or
employees who are married to a competitor. Consequently, the court
ruled than an employer that discharged an employee who was
married to an employee of an active competitor did not violate Title VII
of the Civil Rights Act of 1964.23 The Court pointed out that the policy
was applied to men and women equally, and noted that the
employer’s business was highly competitive and that gaining inside
information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection
clause of the Constitution as petitioners erroneously suggest. It is a
settled principle that the commands of the equal protection clause are
addressed only to the state or those acting under color of its
authority.24 Corollarily, it has been held in a long array of U.S.
Supreme Court decisions that the equal protection clause erects no
shield against merely private conduct, however, discriminatory or
wrongful.25 The only exception occurs when the state29 in any of its
manifestations or actions has been found to have become entwined or
involved in the wrongful private conduct.27 Obviously, however, the
exception is not present in this case. Significantly, the company
actually enforced the policy after repeated requests to the employee
to comply with the policy. Indeed, the application of the policy was
made in an impartial and even-handed manner, with due regard for
the lot of the employee.
In any event, from the wordings of the contractual provision and the
policy in its employee handbook, it is clear that Glaxo does not
impose an absolute prohibition against relationships between its
employees and those of competitor companies. Its employees are
free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of
interest between the employee and the company that may arise out of
such relationships. As succinctly explained by the appellate court,
thus:
The policy being questioned is not a policy against marriage.
An employee of the company remains free to marry anyone of
his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual.
However, an employee’s personal decision does not detract
the employer from exercising management prerogatives to
ensure maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company
policy which forms part of respondent’s Employee Code of Conduct
and of its contracts with its employees, such as that signed by
Tescon, was made known to him prior to his employment. Tecson,
therefore, was aware of that restriction when he signed his
employment contract and when he entered into a relationship with
Bettsy. Since Tecson knowingly and voluntarily entered into a contract
of employment with Glaxo, the stipulations therein have the force of
law between them and, thus, should be complied with in good
faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners’ contention that Tescon was
constructively dismissed when he was transferred from the Camarines
Norte-Camarines Sur sales area to the Butuan City-Surigao City-
Agusan del Sur sales area, and when he was excluded from attending
the company’s seminar on new products which were directly
competing with similar products manufactured by Astra. Constructive
dismissal is defined as a quitting, an involuntary resignation resorted
to when continued employment becomes impossible, unreasonable,
or unlikely; when there is a demotion in rank or diminution in pay; or
when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee.30 None of these conditions are
present in the instant case. The record does not show that Tescon
was demoted or unduly discriminated upon by reason of such
transfer. As found by the appellate court, Glaxo properly exercised its
management prerogative in reassigning Tecson to the Butuan City
sales area:
. . . In this case, petitioner’s transfer to another place of
assignment was merely in keeping with the policy of the
company in avoidance of conflict of interest, and thus
valid…Note that [Tecson’s] wife holds a sensitive supervisory
position as Branch Coordinator in her employer-company
which requires her to work in close coordination with District
Managers and Medical Representatives. Her duties include
monitoring sales of Astra products, conducting sales drives,
establishing and furthering relationship with customers,
collection, monitoring and managing Astra’s inventory…she
therefore takes an active participation in the market war
characterized as it is by stiff competition among
pharmaceutical companies. Moreover, and this is significant,
petitioner’s sales territory covers Camarines Sur and
Camarines Norte while his wife is supervising a branch of her
employer in Albay. The proximity of their areas of
responsibility, all in the same Bicol Region, renders the conflict
of interest not only possible, but actual, as learning by one
spouse of the other’s market strategies in the region would be
inevitable. [Management’s] appreciation of a conflict of interest
is therefore not merely illusory and wanting in factual basis…31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations
Commission,32 which involved a complaint filed by a medical
representative against his employer drug company for illegal dismissal
for allegedly terminating his employment when he refused to accept
his reassignment to a new area, the Court upheld the right of the drug
company to transfer or reassign its employee in accordance with its
operational demands and requirements. The ruling of the Court
therein, quoted hereunder, also finds application in the instant case:
 By the very nature of his employment, a drug salesman or
medical representative is expected to travel. He should
anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot
even assign its representatives or detail men to new markets
calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments
are part of the employment contract.33

As noted earlier, the challenged policy has been implemented by

Glaxo impartially and disinterestedly for a long period of time. In the
case at bar, the record shows that Glaxo gave Tecson several
chances to eliminate the conflict of interest brought about by his
relationship with Bettsy. When their relationship was still in its initial
stage, Tecson’s supervisors at Glaxo constantly reminded him about
its effects on his employment with the company and on the company’s
interests. After Tecson married Bettsy, Glaxo gave him time to resolve
the conflict by either resigning from the company or asking his wife to
resign from Astra. Glaxo even expressed its desire to retain Tecson in
its employ because of his satisfactory performance and suggested
that he ask Bettsy to resign from her company instead. Glaxo likewise
acceded to his repeated requests for more time to resolve the conflict
of interest. When the problem could not be resolved after several
years of waiting, Glaxo was constrained to reassign Tecson to a sales
area different from that handled by his wife for Astra. Notably, the
Court did not terminate Tecson from employment but only reassigned
him to another area where his home province, Agusan del Sur, was
included. In effecting Tecson’s transfer, Glaxo even considered the
welfare of Tecson’s family. Clearly, the foregoing dispels any
suspicion of unfairness and bad faith on the part of Glaxo.34

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

petitioners.

SO ORDERED.
 Republic of the Philippines Regina M. Astorga (Astorga) was employed by respondent Smart
SUPREME COURT Communications, Incorporated (SMART) on May 8, 1997 as District
Manila Sales Manager of the Corporate Sales Marketing Group/ Fixed
Services Division (CSMG/FSD). She was receiving a monthly salary
THIRD DIVISION of P33,650.00. As District Sales Manager, Astorga enjoyed additional
benefits, namely, annual performance incentive equivalent to 30% of
G.R. No. 148132 January 28, 2008 her annual gross salary, a group life and hospitalization insurance
coverage, and a car plan in the amount of P455,000.00.5
SMART COMMUNICATIONS, INC., petitioner,
vs. In February 1998, SMART launched an organizational realignment to
REGINA M. ASTORGA, respondent. achieve more efficient operations. This was made known to the
employees on February 27, 1998.6 Part of the reorganization was the
x---------------------------------------------------x outsourcing of the marketing and sales force. Thus, SMART entered
into a joint venture agreement with NTT of Japan, and formed
G.R. No. 151079 January 28, 2008 SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was
formed to do the sales and marketing work, SMART abolished the
CSMG/FSD, Astorga’s division.
SMART COMMUNICATIONS, INC., petitioner,
vs.
REGINA M. ASTORGA, respondent. To soften the blow of the realignment, SNMI agreed to absorb the
CSMG personnel who would be recommended by SMART. SMART
then conducted a performance evaluation of CSMG personnel and
x---------------------------------------------------x
those who garnered the highest ratings were favorably recommended
to SNMI. Astorga landed last in the performance evaluation, thus, she
G.R. No. 151372 January 28, 2008 was not recommended by SMART. SMART, nonetheless, offered her
a supervisory position in the Customer Care Department, but she
REGINA M. ASTORGA, petitioner, refused the offer because the position carried lower salary rank and
vs. rate.
SMART COMMUNICATIONS, INC. and ANN MARGARET V.
SANTIAGO, respondents. Despite the abolition of the CSMG/FSD, Astorga continued reporting
for work. But on March 3, 1998, SMART issued a memorandum
DECISION advising Astorga of the termination of her employment on ground of
redundancy, effective April 3, 1998. Astorga received it on March 16,
NACHURA, J.: 1998.7

For the resolution of the Court are three consolidated petitions for
review on certiorari under Rule 45 of the Rules of Court. G.R. No.
148132 assails the February 28, 2000 Decision1 and the May 7, 2001
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831.
G.R. Nos. 151079 and 151372 question the June 11, 2001
Decision3 and the December 18, 2001 Resolution4 in CA-G.R. SP. No.
57065.
The termination of her employment prompted Astorga to file a
Complaint8 for illegal dismissal, non-payment of salaries and other
benefits with prayer for moral and exemplary damages against
SMART and Ann Margaret V. Santiago (Santiago). She claimed that
abolishing CSMG and, consequently, terminating her employment
was illegal for it violated her right to security of tenure. She also
posited that it was illegal for an employer, like SMART, to contract out
services which will displace the employees, especially if the contractor WHEREFORE, judgment is hereby rendered declaring the
is an in-house agency.9 dismissal of [Astorga] to be illegal and unjust. [SMART and
Santiago] are hereby ordered to:
SMART responded that there was valid termination. It argued that
Astorga was dismissed by reason of redundancy, which is an 1. Reinstate [Astorga] to [her] former position or to a
authorized cause for termination of employment, and the dismissal substantially equivalent position, without loss of seniority rights
was effected in accordance with the requirements of the Labor Code. and other privileges, with full backwages, inclusive of
The redundancy of Astorga’s position was the result of the abolition of allowances and other benefits from the time of [her] dismissal
CSMG and the creation of a specialized and more technically to the date of reinstatement, which computed as of this date,
equipped SNMI, which is a valid and legitimate exercise of are as follows:
management prerogative.10
(a) Astorga
In the meantime, on May 18, 1998, SMART sent a letter to Astorga BACKWAGES; (P33,650.00 x 4 = P134,600.00
demanding that she pay the current market value of the Honda Civic months)
Sedan which was given to her under the company’s car plan program,
or to surrender the same to the company for proper UNPAID SALARIES (February 15,
disposition.11 Astorga, however, failed and refused to do either, thus 1998-April 3, 1998
prompting SMART to file a suit for replevin with the Regional Trial February 15-28, 1998 = P 16,823.00
Court of Makati (RTC) on August 10, 1998. The case was docketed March 1-31, [1998] = P 33,650.00
as Civil Case No. 98-1936 and was raffled to Branch 57.12
April 1-3, 1998 = P 3,882.69
Astorga moved to dismiss the complaint on grounds of (i) lack of CAR MAINTENANCE ALLOWANCE = P 8,000.00
jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; (P2,000.00 x 4)
and (iv) forum-shopping. Astorga posited that the regular courts have FUEL ALLOWANCE = P 14,457.83
no jurisdiction over the complaint because the subject thereof pertains (300 liters/mo. x 4 mos.
to a benefit arising from an employment contract; hence, jurisdiction at P12.04/liter)
over the same is vested in the labor tribunal and not in regular TOTAL = P211,415.52
courts.13
xxxx
Pending resolution of Astorga’s motion to dismiss the replevin case,
the Labor Arbiter rendered a Decision14 dated August 20, 1998,
3. Jointly and severally pay moral damages in the amount
declaring Astorga’s dismissal from employment illegal. While
of P500,000.00 x x x and exemplary damages in the amount
recognizing SMART’s right to abolish any of its departments, the
of P300,000.00. x x x
Labor Arbiter held that such right should be exercised in good faith
and for causes beyond its control. The Arbiter found the abolition of
CSMG done neither in good faith nor for causes beyond the control of 4. Jointly and severally pay 10% of the amount due as
SMART, but a ploy to terminate Astorga’s employment. The Arbiter attorney’s fees.
also ruled that contracting out the functions performed by Astorga to
an in-house agency like SNMI was illegal, citing Section 7(e), Rule SO ORDERED.15
VIII-A of the Rules Implementing the Labor Code.

Accordingly, the Labor Arbiter ordered:

Subsequently, on March 29, 1999, the RTC issued an
Order16 denying Astorga’s motion to dismiss the replevin case. In so
ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds no
merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of
possession over a company car assigned to the defendant
under a car plan privilege arrangement. The car is registered
in the name of the plaintiff. Recovery thereof via replevin suit is
allowed by Rule 60 of the 1997 Rules of Civil Procedure,
which is undoubtedly within the jurisdiction of the Regional
Trial Court.
In the Complaint, plaintiff claims to be the owner of the
company car and despite demand, defendant refused to return
said car. This is clearly sufficient statement of plaintiff’s cause
of action.
Neither is there forum shopping. The element of litis
penden[t]ia does not appear to exist because the judgment in
the labor dispute will not constitute res judicata to bar the filing
of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack
of merit.
SO ORDERED.17
Astorga filed a motion for reconsideration, but the RTC denied it on
June 18, 1999.18
Astorga elevated the denial of her motion via certiorari to the CA,
which, in its February 28, 2000 Decision,19 reversed the RTC ruling.
Granting the petition and, consequently, dismissing the replevin case,
the CA held that the case is intertwined with Astorga’s complaint for
illegal dismissal; thus, it is the labor tribunal that has rightful
jurisdiction over the complaint. SMART’s motion for reconsideration
having been denied,20 it elevated the case to this Court, now docketed
as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor
Arbiter in the illegal dismissal case to the National Labor Relations
Commission (NLRC). In its September 27, 1999 Decision,21 the NLRC
sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC
declared the abolition of CSMG and the creation of SNMI to do the
sales and marketing services for SMART a valid organizational action.
It overruled the Labor Arbiter’s ruling that SNMI is an in-house
agency, holding that it lacked legal basis. It also declared that
contracting, subcontracting and streamlining of operations for the
purpose of increasing efficiency are allowed under the law. The NLRC
further found erroneous the Labor Arbiter’s disquisition that
redundancy to be valid must be impelled by economic reasons, and
upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby
reversed and set aside. [Astorga] is further ordered to
immediately return the company vehicle assigned to her.
[Smart and Santiago] are hereby ordered to pay the final
wages of [Astorga] after [she] had submitted the required
supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on
December 21, 1999.23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA
rendered a Decision24 affirming with modification the resolutions of the
NLRC. In gist, the CA agreed with the NLRC that the reorganization
undertaken by SMART resulting in the abolition of CSMG was a
legitimate exercise of management prerogative. It rejected Astorga’s
posturing that her non-absorption into SNMI was tainted with bad
faith. However, the CA found that SMART failed to comply with the
mandatory one-month notice prior to the intended termination.
Accordingly, the CA imposed a penalty equivalent to Astorga’s one-
month salary for this non-compliance. The CA also set aside the
NLRC’s order for the return of the company vehicle holding that this
issue is not essentially a labor concern, but is civil in nature, and thus,
within the competence of the regular court to decide. It added that the
matter had not been fully ventilated before the NLRC, but in the
regular court.
Astorga filed a motion for reconsideration, while SMART sought
partial reconsideration, of the Decision. On December 18, 2001, the
CA resolved the motions, viz.:
WHEREFORE, [Astorga’s] motion for reconsideration is
hereby PARTIALLY GRANTED. [Smart] is hereby ordered to
pay [Astorga] her backwages from 15 February 1998 to 06
November 1998. [Smart’s] motion for reconsideration is
outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for
review assailing the CA ruling, docketed as G.R Nos. 151079 and
151372. On February 27, 2002, this Court ordered the consolidation
of these petitions with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE
VALIDITY OF ASTORGA’S DISMISSAL DESPITE THE FACT
THAT HER DISMISSAL WAS EFFECTED IN CLEAR
VIOLATION OF THE CONSTITUTIONAL RIGHT TO
SECURITY OF TENURE, CONSIDERING THAT THERE
WAS NO GENUINE GROUND FOR HER DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING
THE PENDENCY OF THE APPEAL AS REQUIRED BY
ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA
TO HER SALARIES DURING THE PENDENCY OF THE
APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING
THAT THE REGIONAL TRIAL COURT HAS NO
JURISDICTION OVER THE COMPLAINT FOR RECOVERY
OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER
EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following
issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY
PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION OF THE HONORABLE SUPREME
COURT AND HAS SO FAR DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE
POWER OF SUPERVISION WHEN IT RULED THAT SMART
DID NOT COMPLY WITH THE NOTICE REQUIREMENTS
PRIOR TO TERMINATING ASTORGA ON THE GROUND OF
REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA
AND THE DEPARTMENT OF LABOR AND EMPLOYMENT
ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS.
NATIONAL LABOR RELATIONS COMMISSION FINDS
APPLICATION IN THE CASE AT BAR CONSIDERING THAT
IN THE SERRANO CASE THERE WAS ABSOLUTELY NO
NOTICE AT ALL.28
IV
 WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY
PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION[S] OF THE HONORABLE
SUPREME COURT AND HAS SO FAR DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE
POWER OF SUPERVISION WHEN IT RULED THAT THE
REGIONAL TRIAL COURT DOES NOT HAVE
JURISDICTION OVER THE COMPLAINT FOR REPLEVIN
FILED BY SMART TO RECOVER ITS OWN COMPANY
VEHICLE FROM A FORMER EMPLOYEE WHO WAS
LEGALLY DISMISSED.
V contract for a loan between [Astorga] and [Smart].
WHETHER THE HONORABLE COURT OF APPEALS HAS
FAILED TO APPRECIATE THAT THE SUBJECT OF THE
REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR
PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A
COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS
FAILED TO APPRECIATE THAT ASTORGA CAN NO
LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART
UNDER THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin
case filed with the RTC of Makati City allegedly for lack of jurisdiction,
which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to
repossession of goods or chattels may recover those goods or
chattels from one who has wrongfully distrained or taken, or who
wrongfully detains such goods or chattels. It is designed to permit one
having right to possession to recover property in specie from one who
has wrongfully taken or detained the property.30 The term may refer
either to the action itself, for the recovery of personalty, or to the
provisional remedy traditionally associated with it, by which
possession of the property may be obtained by the plaintiff and
retained during the pendency of the action.31
That the action commenced by SMART against Astorga in the RTC of
Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for
lack of jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by
[Smart] as part of the employment package. We doubt that
[SMART] would extend [to Astorga] the same car plan
privilege were it not for her employment as district sales
manager of the company. Furthermore, there is no civil
Consequently, We find that the car plan privilege is a benefit
arising out of employer-employee relationship. Thus, the claim
for such falls squarely within the original and exclusive
jurisdiction of the labor arbiters and the NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully
assumed jurisdiction over the suit and acted well within its discretion
in denying Astorga’s motion to dismiss. SMART’s demand for
payment of the market value of the car or, in the alternative, the
surrender of the car, is not a labor, but a civil, dispute. It involves the
relationship of debtor and creditor rather than employee-employer
relations.33 As such, the dispute falls within the jurisdiction of the
regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of
the RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is
the return of the property in specie wrongfully detained by
another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property.
The question of whether or not a party has the right of
possession over the property involved and if so, whether or not
the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale
 of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in
the Replevin Case. The respective issues raised in each forum
can be resolved independently on the other. In fact in 18
November 1986, the NLRC in the case before it had issued an
Injunctive Writ enjoining the petitioners from blocking the free
ingress and egress to the Vessel and ordering the petitioners
to disembark and vacate. That aspect of the controversy is
properly settled under the Labor Code. So also with
petitioners’ right to picket. But the determination of the
question of who has the better right to take possession of the
Vessel and whether petitioners can deprive the Charterer, as
the legal possessor of the Vessel, of that right to possess in
addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but
defining avenues of jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the
RTC ruling and ordered the dismissal of the replevin case for lack of
jurisdiction.
Having resolved that issue, we proceed to rule on the validity of
Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the
authorized causes for the dismissal of an employee. The nature of
redundancy as an authorized cause for dismissal is explained in the
leading case of Wiltshire File Co., Inc. v. National Labor Relations
Commission,35 viz:
x x x redundancy in an employer’s personnel force necessarily
or even ordinarily refers to duplication of work. That no other
person was holding the same position that private respondent
held prior to termination of his services does not show that his
position had not become redundant. Indeed, in any well
organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work
of one person. We believe that redundancy, for purposes of
the Labor Code, exists where the services of an employee are
in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is
redundant where it is superfluous, and superfluity of a position
or positions may be the outcome of a number of factors, such
as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.
The characterization of an employee’s services as superfluous or no
longer necessary and, therefore, properly terminable, is an exercise of
business judgment on the part of the employer. The wisdom and
soundness of such characterization or decision is not subject to
discretionary review provided, of course, that a violation of law or
arbitrary or malicious action is not shown.36
Astorga claims that the termination of her employment was illegal and
tainted with bad faith. She asserts that the reorganization was done in
order to get rid of her. But except for her barefaced allegation, no
convincing evidence was offered to prove it. This Court finds it
extremely difficult to believe that SMART would enter into a joint
venture agreement with NTT, form SNMI and abolish CSMG/FSD
simply for the sole purpose of easing out a particular employee, such
as Astorga. Moreover, Astorga never denied that SMART offered her
a supervisory position in the Customer Care Department, but she
refused the offer because the position carried a lower salary rank and
rate. If indeed SMART simply wanted to get rid of her, it would not
have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not
true because there was no compelling economic reason for
redundancy. But contrary to her claim, an employer is not precluded
from adopting a new policy conducive to a more economical and
effective management even if it is not experiencing economic
reverses. Neither does the law require that the employer should suffer
financial losses before he can terminate the services of the employee
on the ground of redundancy. 37
We agree with the CA that the organizational realignment introduced
by SMART, which culminated in the abolition of CSMG/FSD and
termination of Astorga’s employment was an honest effort to make
SMART’s sales and marketing departments more efficient and
competitive. As the CA had taken pains to elucidate:
x x x a careful and assiduous review of the records will yield
no other conclusion than that the reorganization undertaken by
SMART is for no purpose other than its declared objective – as
a labor and cost savings device. Indeed, this Court finds no
fault in SMART’s decision to outsource the corporate sales
market to SNMI in order to attain greater productivity. [Astorga]
belonged to the Sales Marketing Group under the Fixed
Services Division (CSMG/FSD), a distinct sales force of
SMART in charge of selling SMART’s telecommunications
services to the corporate market. SMART, to ensure it can
respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly thereafter
assigned its functions to newly-created SNMI Multimedia
Incorporated, a joint venture company of SMART and NTT of
Japan, for the reason that CSMG/FSD does not have the
necessary technical expertise required for the value added
services. By transferring the duties of CSMG/FSD to SNMI,
SMART has created a more competent and specialized
organization to perform the work required for corporate
accounts. It is also relieved SMART of all administrative costs
– management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business
judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this
Court has inclined towards the worker and upheld his cause in most of
his conflicts with his employer. This favored treatment is consonant
with the social justice policy of the Constitution. But while tilting the
scales of justice in favor of workers, the fundamental law also
guarantees the right of the employer to reasonable returns for his
investment.38 In this light, we must acknowledge the prerogative of the
employer to adopt such measures as will promote greater efficiency,
reduce overhead costs and enhance prospects of economic gains,
albeit always within the framework of existing laws. Accordingly, we
sustain the reorganization and redundancy program undertaken by
SMART.
However, as aptly found by the CA, SMART failed to comply with the
mandated one (1) month notice prior to termination. The record is
clear that Astorga received the notice of termination only on March 16,
199839 or less than a month prior to its effectivity on April 3, 1998.
Likewise, the Department of Labor and Employment was notified of
the redundancy program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel.
— The employer may also terminate the employment of any
employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of notice
because the organizational realignment was made known to all the
employees as early as February 1998 fails to persuade. Astorga’s
actual knowledge of the reorganization cannot replace the formal and
written notice required by the law. In the written notice, the employees
are informed of the specific date of the termination, at least a month
prior to the effectivity of such termination, to give them sufficient time
to find other suitable employment or to make whatever arrangements
are needed to cushion the impact of termination. In this case,
notwithstanding Astorga’s knowledge of the reorganization, she
remained uncertain about the status of her employment until SMART
gave her formal notice of termination. But such notice was received by
Astorga barely two (2) weeks before the effective date of termination,
a period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the
termination of Astorga’s employment illegal. The validity of termination
can exist independently of the procedural infirmity of the
dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the
employees therein valid and for authorized cause even if the employer
failed to comply with the notice requirement under Article 283 of the
Labor Code. This Court upheld the dismissal, but held the employer
liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining
Astorga’s dismissal and at the same time, awarding indemnity for
violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity
awarded by the CA to Astorga, as a sanction on SMART for non-
compliance with the one-month mandatory notice requirement, in light
of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.:
[I]f the dismissal is based on a just cause under Article 282 but
the employer failed to comply with the notice requirement, the
sanction to be imposed upon him should
be tempered because the dismissal process was, in effect,
initiated by an act imputable to the employee, and (2) if the
dismissal is based on an authorized cause under Article 283
but the employer failed to comply with the notice requirement,
the sanction should be stiffer because the dismissal process
was initiated by the employer’s exercise of his management
prerogative.
We deem it proper to increase the amount of the penalty on SMART
to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise,
entitled to separation pay equivalent to at least one (1) month salary
or to at least one (1) month’s pay for every year of service, whichever
is higher. The records show that Astorga’s length of service is less
than a year. She is, therefore, also entitled to separation pay
equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from
February 15, 1998. This assertion was never rebutted by SMART in
the proceedings a quo. No proof of payment was presented by
SMART to disprove the allegation. It is settled that in labor cases, the
burden of proving payment of monetary claims rests on the
employer.44 SMART failed to discharge the onus probandi.
Accordingly, it must be held liable for Astorga’s salary from February
15, 1998 until the effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be
deleted for lack of basis. Backwages is a relief given to an illegally
dismissed employee. Thus, before backwages may be granted, there
must be a finding of unjust or illegal dismissal from work.45 The Labor
Arbiter ruled that Astorga was illegally dismissed. But on appeal, the
NLRC reversed the Labor Arbiter’s ruling and categorically declared
Astorga’s dismissal valid. This ruling was affirmed by the CA in its
assailed Decision. Since Astorga’s dismissal is for an authorized
cause, she is not entitled to backwages. The CA’s award of
backwages is totally inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132
is GRANTED. The February 28, 2000 Decision and the May 7, 2001
Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET
ASIDE. The Regional Trial Court of Makati City, Branch 57
is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and
render its Decision with reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as
G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001
Decision and the December 18, 2001 Resolution in CA-G.R. SP. No.
57065, are AFFIRMED with MODIFICATION. Astorga is declared
validly dismissed. However, SMART is ordered to pay
Astorga P50,000.00 as indemnity for its non-compliance with
procedural due process, her separation pay equivalent to one (1)
month pay, and her salary from February 15, 1998 until the effective
date of her termination on April 3, 1998. The award of backwages
is DELETED for lack of basis.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 143511 November 15, 2010
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner,
vs.
JOEY B. TEVES, Respondent.
DECISION
PERALTA, J.:
For review on certiorari are the Decision1 dated April 24, 2000 and the
Resolution2 dated May 31, 2000 of the Court of Appeals (CA) in CA-
G.R. SP No. 50852, affirming the Decision of the National Labor
Relations Commission (NLRC) which ordered the reinstatement of
respondent Joey B. Teves to his former position without loss of
seniority rights and other privileges appurtenant thereto with full
backwages until actually reinstated.
The antecedent facts are as follows:
Respondent was employed by petitioner Philippine Long Distance
Telephone Company in 1981 as Clerk II until his termination from
service on June 1, 1992. Petitioner terminated respondent through an
Inter-Office Memorandum3 dated May 29, 1992 on account of his
three (3) unauthorized leaves of absence committed within three (3)
years in violation of petitioner’s rules and regulations.
Respondent was absent from August 23 to September 3, 1990 as his
wife gave birth on August 25 but was only discharged from the
hospital on September 2, 1990 due to complications; since they had
no household help, he had to attend to his wife's needs in the
hospital, as well as the needs of their four kids, including bringing
them to school. Respondent called up through a third party to inform
petitioner that he would go on an extended leave. Upon his reporting
for work on September 4, 1990, he wrote petitioner a
letter4 confirming his leave of absence without pay for that period and
stating the reasons thereof, with his wife's medical certificate
attached. Dissatisfied, petitioner required respondent to submit further
explanation which the latter did reiterating his previous explanation.
However, in petitioner's Inter-Office Memorandum5 dated October 3,
1990, it found respondent’s explanation to be unacceptable and
unmeritorious for the latter's failure to call, notify or request petitioner
for such leave; thus, petitioner suspended respondent from work
without pay for 20 days, effective October 8, 1990.
Respondent was absent from May 29 to June 12, 1991. He was sent
a Memorandum6 reminding him of the July 2, 1990 Memorandum
requiring written application prior to a leave of absence without pay
and was directed to report for work on June 13, 1991 at ten o'clock in
the evening lest he be meted a disciplinary action. Respondent
reported for work on even date, and was required to explain in writing
why no disciplinary action should be taken against him for his
unauthorized leave of absence. In a Memorandum7 dated June 17,
1991, respondent explained that his absences were due to the fact
that his eldest and youngest daughter were sick and had to be
confined at the nearby clinic; and the medical certificate confirming
said confinement was to follow. Further, respondent alleged that he
had relayed said message to an officemate, Luis V. Marquez, who
unfortunately did not also report for work. As petitioner found
respondent’s explanation insufficient, respondent was suspended
without pay for 45 days effective July 17, 1991.
Eight months thereafter, respondent availed of a seven-day leave of
absence and extended such leave to complete his annual vacation
leave, which was to end on February 11, 1992. However, respondent
failed to report for work from February 11 to February 19, 1992.
Petitioner then sent him a Memorandum8 dated February 19, 1992,
directing him to report for duty within 72 hours, otherwise, his services
would be terminated for abandonment of work. Respondent reported
for duty and was served another Memorandum requiring him to
explain in writing why no disciplinary action should be taken against
him for his unauthorized absences. In his explanation, respondent
stated that he incurred said absences because he had many accounts
in the office which were already due and demandable and thought of
prolonging such payment by absenting himself. He further stated that
he realized that what he did was wrong and only worsened his
situation and asked for another chance. Petitioner found such
explanation totally unacceptable. Thus, in an Inter-Office
Memorandum9 dated May 29, 1992 addressed to respondent, the
latter was terminated from service effective June 1, 1992 due to his
third unauthorized absence within a three-year period.
On March 9, 1993, respondent filed a Complaint for illegal
suspension, illegal dismissal, payment of two Christmas bonuses and
monthly rice subsidy. Petitioner filed its Position Paper.
On May 13, 1994, Labor Arbiter (LA) Benigno C. Villarente, Jr.
rendered his Decision,10 the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the
dismissal of complainant is LEGAL. Conformably with the preceding
discussions, however, respondent is hereby directed to extend
complainant financial assistance in the amount of TWENTY
THOUSAND PESOS (₱20,000.00).
Complainant's claims for bonuses and rice subsidy have not been
substantiated and are, therefore, hereby DISMISSED. 11
In his decision, the LA found that (1) respondent had committed his
third unauthorized absence within a three-year period and did not
offer an acceptable reason therefor; (2) respondent's repeated
unauthorized absences displayed his irresponsibility and lackluster
attitude towards work; (3) the reasons for his absences which related
to the need to attend to his family cannot mitigate his apparent neglect
of duty to his employer; and (4) his absences were in violation of
petitioner's rules and regulations. The LA found that respondent was
not denied due process, since he was notified of all his infractions and
was allowed each time to submit his explanation. The LA awarded
financial assistance to respondent as a measure of compassionate
justice taking into consideration respondent's 11 years of service and
since the infraction committed did not amount to a serious misconduct
nor did it involve moral turpitude.
Respondent interposed an appeal with the NLRC.
On January 30, 1997, the NLRC rendered its Decision12 reversing the
LA’s Decision, the decretal portion of which reads:
WHEREFORE, the instant appeal is hereby given due course. The
appealed decision is hereby SET ASIDE. Respondent is hereby
declared guilty of illegally terminating complainant Joey B. Teves'
employment. As such, respondent Philippine Long Distance
Telephone Company is hereby ordered to reinstate complainant to his
former position without loss of seniority rights and other privileges
appurtenant thereto with full backwages until actually reinstated.
Respondents are likewise ordered to pay complainant's unpaid wages
for the period covering 15-31 May 1992, 13th month pay, Christmas
Bonuses, accrued rice subsidy of one (1) sack a month, or its money
equivalent of ₱350.00 at the time of his dismissal.13
In reversing the LA, the NLRC found that respondent's absences from
August 23 to September 3, 1990 was brought to petitioner's attention
when respondent called through a third party that respondent would
go on an extended leave. Moreover, the reason for his prolonged
absence, i.e., the unforeseen complications of his wife's condition
after giving birth, supported by a medical certificate, was an
eventuality that needed to be attended to with priority which should
have been accorded credence and favorably considered; and that
dismissing such explanation and placing respondent under
suspension, when his leave of absence was without pay, merely
exacerbated his family's plight.
The NLRC found that respondent's failure to verify whether his
message for petitioner through a co-employee that his (respondent)
two daughters were sick and confined at a nearby clinic was duly
delivered constituted a neglect of duty. However, the NLRC took into
consideration respondent's reason for such absence and stated that
certain leniency should have been accorded respondent and that his
suspension for 45 days was too harsh for the said offense.
While the NLRC found the reason offered by respondent for his
absences from February 11 to 19, 1992 unacceptable and
unreasonable, respondent should have only been penalized
accordingly. The NLRC found that respondent's dismissal from
service was illegal, since he had been heavily punished for each and
every offense imputed to him and that in his eleven years of service,
this was the first time that he was falsely charged.
The NLRC found that petitioner failed to controvert respondent's
claims for unpaid salary from May 15 to 31, 1990, 13th month pay and
Christmas bonuses and rice subsidy for one month or its money
equivalent.
Petitioner's motion for reconsideration was denied by the NLRC in a
Resolution14 dated February 26, 1997.
On May 29, 1997, petitioner filed before us a Petition for Certiorari
with prayer for the issuance of a temporary restraining order and/or
injunction assailing the January 30, 1997 Decision and February 26,
1997 Resolution of the NLRC. Respondent filed his Comment thereto.
Petitioner then filed a Reply.
On November 12, 1997, respondent filed a Manifestation15 stating that
he had already been reinstated by petitioner effective November 10,
199716 in compliance with the NLRC Decision.
Subsequently, in a Resolution17 dated December 9, 1998, we referred
the petition to the CA in accordance with the St. Martin Funeral Home
v. National Labor Relations Commission18 ruling.
On April 24, 2000, the CA rendered its assailed Decision, which
affirmed and reiterated the NLRC decision.
The CA found that (1) petitioner complied with the two-notice
requirement which was essential to respondent's right to due process;
(2) respondent was given a notice to explain in writing why no
disciplinary action should be meted on him for his unauthorized
absences from February 11 to 19, 1992; and (3) when respondent’s
explanation proved unacceptable to petitioner, respondent was sent
another notice informing him of his termination by reason of three
unauthorized absences within a three-year period, a conduct which
was circumscribed in petitioner's rules and regulations.
Notwithstanding compliance with the requirement of due process, the
CA affirmed the illegality of respondent's dismissal finding that
respondent's comportment cannot be characterized as grave so as to
constitute grave misconduct; that his first two leaves of absence were
satisfactorily justified; and that he should not have been suspended
from service by reason of such absences. However, the CA found that
respondent’s failure to report for work on February 11 to 19, 1992
appeared to be the only unauthorized and unjustified leave of
absence during his 11 years of stay with petitioner, and it did not merit
the harsh penalty of dismissal.
Petitioner filed a motion for reconsideration, but was denied by the CA
in a Resolution dated May 31, 2000.
Hence, this petition. Petitioner raises the following arguments in its
Memorandum.
A.
IT IS ALREADY SETTLED THAT RESPONDENT'S
PREVIOUS ABSENCES WERE UNJUSTIFIED AND
UNAUTHORIZED IN LIGHT OF HIS VOLUNTARY
ACCEPTANCE AND COMPLIANCE WITH THE
SUSPENSIONS IMPOSED IN CONNECTION WITH SAID
ABSENCES. HENCE, THE HONORABLE COURT OF
APPEALS GRAVELY ERRED IN RULING THAT
RESPONDENT MERELY COMMITTED ONE INSTANCE OF
UNAUTHORIZED ABSENCE.
B.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ERROR AND ABUSE OF DISCRETION IN FINDING
THAT RESPONDENT WAS ILLEGALLY DISMISSED
CONSIDERING THAT:
1. THE TERMINATION OF RESPONDENT'S
SERVICES IS JUSTIFIED APPLYING THE TOTALITY
OF INFRACTIONS DOCTRINE.
2. THERE IS SUBSTANTIAL AND UNDISPUTED
EVIDENCE ESTABLISHING THAT RESPONDENT IS
AN ABSENTEE EMPLOYEE WHO HAS A
PROPENSITY TO SIMPLY DISAPPEAR WITHOUT
EVEN GIVING HIS EMPLOYER THE COURTESY OF
A PRIOR NOTICE.19
Petitioner contends that the CA erred when it found that (1) what was
involved in this case was merely one instance of an unauthorized
leave of absence as all of respondent's absences where he was
previously sanctioned were unauthorized; (2) the imposition of the
penalty of suspension to respondent was justified and he had long
been estopped from questioning the same; (3) respondent was
suspended not so much for the reason behind the absences, but
because of the manner by which he incurred the absence, i.e., by not
informing petitioner causing undue prejudice to the company's
operations; (4) respondent had a propensity to simply disappear
without giving petitioner the courtesy of a prior notice; and (5)
respondent never questioned the suspensions meted on him, but
instead voluntarily complied with the suspensions without protest.
Petitioner argues that respondent's past infractions could be used as
supporting justification to a subsequent similar offense which would
merit respondent's dismissal; that the CA erred when it did not apply
the totality of infractions doctrine but limited respondent's offenses to
just one offense; and that respondent's acts of absenting himself
without prior notice, despite previous disciplinary actions, should be
considered in its totality and not in isolation from one another.
Petitioner contends that the management's right to prescribe rules
and regulations cannot be denied and that the employer may justly
discharge from employment an employee who violates company rules
and regulations. Petitioner avers that respondent’s length of service in
the company cannot work in his favor, but should be taken against
him.
The issue for resolution is whether or not sufficient ground exists for
respondent's dismissal from service.
Respondent was terminated from employment by reason of his third
unauthorized absence from February 11 to 19, 1992. Respondent
absented himself because he had many accounts in the office which
were already due and demandable, and he thought that absenting
himself from work would prolong the payment of his financial
obligations; and that he realized that his action was wrong which
worsened his situation and asked for another chance. Such
explanation was found by petitioner to be unacceptable; thus,
respondent was terminated effective June 1, 1992 for committing
three unauthorized absences within a three-year period. Petitioner
found respondent to have committed the other two incidents of
unauthorized absences from August 23 to September 3, 1990 and
from May 29 to June 12, 1991.
The LA found that respondent’s dismissal was legal. However, the
NLRC found that the two previous incidents of respondent’s alleged
unauthorized absences were justified, and that while his absence from
February 11 to 19, 1992 was unacceptable and unreasonable, he
should have been penalized therefor accordingly, but not with
dismissal from service. The CA affirmed the NLRC’s findings and
concluded that respondent’s absences from February 11 to 19, 1992
was his first and only unauthorized absences during his 11 years of
stay, and it did not merit the harsh penalty of dismissal.
Petitioner claims that respondent is an absentee employee who has a
propensity to simply disappear without giving his employer the
courtesy of prior notice; and that respondent was not sanctioned for
the reasons given for his absences, but because of his failure to
inform or give prior notice to petitioner.
We find partial merit in this argument.
Respondent’s first alleged unauthorized absences were from August
23 to September 3, 1990, wherein he went on leave without pay. In
his letter dated September 4, 1990 addressed to petitioner, which he
submitted upon reporting for work, as well as in his response dated
September 10, 1990 to petitioner's memorandum dated September 7,
1990, respondent explained that his absences were due to the fact
that his wife gave birth on August 25, but was only discharged from
the hospital on September 2, 1990 due to complications; and that
since they had no household help, he had to attend to his wife's
needs in the hospital, as well as the needs of their four kids, including
bringing them to school. Petitioner found the explanation
unacceptable and unmeritorious as he did not bother to call, notify or
request for a leave of absence; thus, respondent was suspended from
service without pay equivalent to 20 days.
Respondent’s second alleged unauthorized absences were from May
29 to June 12, 1991. When asked to explain his absences during the
said period, respondent explained that his eldest and youngest
daughters were sick and were confined at a nearby clinic; and that he
relayed such emergency and the fact that he would not be able to
report for work to a co-employee, Luis V. Marquez, who unfortunately
did not also report for work. Petitioner noted respondent's negligence
in failing to notify it of his intention to go on leave, or to verify whether
the request for leave, allegedly through a third party, had been
approved. Petitioner suspended respondent for 45 days.
Notably, the alleged two prior incidents of respondent’s unauthorized
absences above-mentioned were due to a family emergency or
sickness. Respondent’s explanations should have been given a kind
consideration by petitioner. An employee cannot anticipate when
sickness or emergencies in the family may happen, thus, he may not
be able to give prior notice or seek prior approval of his absence, but
could only do so after the occurrence of the incident.
However, respondent had shown that he had given petitioner prior
notice of his absences from August 23 to September 3, 1990. As the
NLRC found, petitioner admitted that "on August 23, 1990, he
(respondent) called up through a third party to inform PLDT that he
would go on an extended leave." Such admission was even reiterated
in petitioner’s petition for certiorari filed with us. Notably, when
respondent returned for work on September 4, 1990, he immediately
submitted a letter to petitioner explaining his absence and attaching a
medical certificate thereto to attest to the reason of his absence.
Thus, the suspension imposed on him was not proper.
As to respondent's second unauthorized absence, while respondent
had relayed his inability to report for work on May 29, 1991 to a co-
employee, who unfortunately did not also report for work, he was
negligent in not verifying whether his notice of absence had reached
petitioner, and the duration of his absence. In fact, in petitioner's Inter-
Office Memorandum dated June 12, 1991 sent to respondent, the
former asked the latter to report for duty on June 13, 1991 as he had
been absent since May 29, to which respondent complied. While
respondent offered a justifiable reason for his absences from May 29
to June 12, 1990, i.e., his two daughters were sick and confined at a
nearby clinic, however, we find that he failed to give petitioner prior
notice of his absence, thus, such absence was properly considered as
unauthorized.
Thus, respondent’s absence from February 11 to 19, 1991 which was
made to prolong payment of his demandable financial obligations in
the office, and which absence was found by both the NLRC and the
CA to be unjustified, was respondent’s second unauthorized absence.
We find that respondent's termination for committing three
unauthorized absences within a three-year period had no basis; thus,
there was no valid cause for respondent's dismissal.
Even assuming that respondent's absenteeism constitutes willful
disobedience, such offense does not warrant respondent's
dismissal.20 Not every case of insubordination or willful disobedience
by an employee reasonably deserves the penalty of
dismissal.21 There must be a reasonable proportionality between the
offense and the penalty.22
Petitioner's claim that the alleged previous infractions may be used as
supporting justification to a subsequent similar offense, which would
merit dismissal, finds no application in this case. Respondent's
absence from August 23 to September 3, 1990 was justified and not
unauthorized as there was prior notice. His absence from May 29 to
June 12, 1991, although found to be unauthorized, was not at all
unjustified. Thus, his absence during the period from February 11 to
19, 1991, being the only unauthorized and unjustified absence and his
second unauthorized absence, should not merit the penalty of
dismissal.
While management has the prerogative to discipline its employees
and to impose appropriate penalties on erring workers, pursuant to
company rules and regulations, however, such management
prerogatives must be exercised in good faith for the advancement of
the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws and
valid agreements.23 The Court is wont to reiterate that while an
employer has its own interest to protect, and pursuant thereto, it may
terminate an employee for a just cause, such prerogative to dismiss or
lay off an employee must be exercised without abuse of discretion. Its
implementation should be tempered with compassion and
understanding. The employer should bear in mind that, in the
execution of said prerogative, what is at stake is not only the
employee’s position, but his very livelihood, his very
breadbasket. 241avvphi1
Dismissal is the ultimate penalty that can be meted to an
employee.25 Even where a worker has committed an infraction, a
penalty less punitive may suffice, whatever missteps maybe
committed by labor ought not to be visited with a consequence so
severe.26 This is not only the law’s concern for the workingman. There
is, in addition, his or her family to consider. Unemployment brings SO ORDERED.
untold hardships and sorrows upon those dependent on the wage-
earner.27

Petitioner contends that respondent's length of service in the

company cannot work in his favor but, if to be considered at all,
should even be taken against him relying on the case of Philippine
Airlines, Inc. (PAL) v. NLRC.28 PAL has no application in this case as
it involves a case of a supervisor occupying a position of
responsibility, who used trip passes which were falsified to reflect
higher priority and space classification than what she and her
husband were entitled to on vacation travel in violation of the
company policy which served as PAL's basis for losing its trust and
confidence on the employee. We considered the infraction committed,
together with her twenty years of employment in the company, as
reflecting her regrettable lack of loyalty to the company, which loyalty
she should have strengthened instead of betrayed. In contrast, the
instant infraction committed by respondent during his eleven-year stay
with petitioner did not involve the betrayal of petitioner's trust and
confidence. Moreover, there was no basis for respondent's
termination, on the ground that he had committed his third
unauthorized absence within the three-year period as discussed
earlier in the decision.

Considering that respondent was illegally dismissed from service, he

is entitled to be reinstated, without loss of seniority rights and the
payment of backwages from the time respondent’s compensation was
withheld from him until his reinstatement on November 12, 1997.
However, since we find that respondent's absence from February 11
to 19, 1992 was unjustified and unauthorized, thus, his suspension for
thirty days would be in order. Hence, the amount equivalent to the
thirty-day suspension, which respondent should have served for his
absence on February 11 to 19, 1992, should be deducted from the
backwages to be awarded to him.

WHEREFORE, the Decision dated April 24, 2000 and the Resolution
dated May 31, 2000 of the Court of Appeals in CA-G.R. SP No.
50852, are hereby AFFIRMED with MODIFICATION that the amount
equivalent to respondent’s thirty-day suspension is deducted from the
award of backwages from the time his compensation was withheld up
to his reinstatement on November 12, 1997.
 Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 177114 April 13, 2010
MANOLO A. PEÑAFLOR, Petitioner,
vs.
OUTDOOR CLOTHING MANUFACTURING CORPORATION,
NATHANIEL T. SYFU, President, MEDYLENE M. DEMOGENA,
Finance Manager, and PAUL LEE, Chairman, Respondents.
RESOLUTION
BRION, J.:
In our Decision of January 21, 2010, we granted petitioner Manolo
Peñaflor’s (Peñaflor) petition for review on certiorari and reversed the
Court of Appeals (CA) decision of December 29, 2006 and resolution
of March 14, 2007. We found that Peñaflor had been constructively
dismissed from his employment with respondent Outdoor Clothing
Manufacturing Corporation (Outdoor Clothing). Outdoor Clothing now
seeks a reconsideration of this ruling.
FACTUAL BACKGROUND
Peñaflor was hired as probationary HRD Manager of Outdoor Clothing
on September 2, 1999. On March 13, 2000, more than six months
from the time he was hired, Peñaflor learned that Outdoor Clothing’s
President, Nathaniel Syfu (Syfu), appointed Edwin Buenaobra
(Buenaobra) as the concurrent HRD and Accounting Manager. After
enduring what he claimed as discriminatory treatment at work,
Peñaflor considered the appointment of Buenaobra to his position as
the last straw, and thus filed his irrevocable resignation from Outdoor
Clothing effective at the close of office hours on March 15, 2000. He
thereafter filed an illegal dismissal complaint with the labor arbiter
claiming that he had been constructively dismissed. The labor arbiter
agreed with Peñaflor and issued a decision in his favor on August 15,
2001.
On appeal, the National Labor Relations Commission (NLRC)
reversed the labor arbiter’s ruling in its September 24, 2002 decision.
When Peñaflor questioned the NLRC’s decision before the CA, the
appellate court affirmed the NLRC’s decision. Hence, Peñaflor filed a
petition for review on certiorari with the Court.
The Court’s January 21, 2010 Decision
Our January 21, 2010 decision focused on resolving the issue of
whether Peñaflor’s resignation from Outdoor Clothing was voluntary
or a forced one, the latter making it a constructive dismissal
equivalent to an illegal dismissal. We found it crucial to determine
whether Peñaflor filed his resignation letter before or after the
appointment of Buenaobra as concurrent HRD and Accounting
Manager. If the resignation was submitted before Syfu’s appointment
of Buenaobra, little support would exist for Peñaflor’s allegation of
constructive dismissal, as the appointment would merely be intended
to cover the vacancy created by Peñaflor’s resignation. If however the
resignation was made after the appointment of Buenaobra, then
factual basis exists to consider Peñaflor as constructively dismissed
by Outdoor Clothing, as the resignation would be a response to the
unacceptable appointment of another person to a position he still
occupied.
Peñaflor claimed that he filed his undated resignation letter on the
very same date he made his resignation effective – March 15, 2000.
On the other hand, Outdoor Clothing contended that the letter was
submitted on March 1, 2000. In support of this allegation, Outdoor
Clothing presented three memoranda:
a. the March 1, 2000 memorandum from Syfu to Buenaobra
appointing the latter as the concurrent HRD and Accounting
Manager;
b. the March 3, 2000 memorandum from Buenaobra to Syfu
accepting the appointment; and
c. the March 10, 2000 office memorandum from Syfu informing
all concerned of Buenaobra’s new appointment.
Our analysis of the records led us to conclude that Peñaflor submitted
his resignation on March 15, 2000 as a response to the appointment
of Buenaobra to his post.
We considered suspicious Outdoor Clothing’s above memoranda
because these were only presented to the NLRC on appeal, but not
before the labor arbiter. They were not even mentioned in Outdoor
Clothing’s position paper filed with the labor arbiter. The failure to
present them and to justify this failure are significant considering that
these are clinching pieces of evidence that allowed the NLRC to
justify the reversal of the labor arbiter’s decision.
The surrounding circumstances of the issuance of these memoranda
also cast doubts on their authenticity. Although the memoranda
directly concerned Peñaflor, he was never informed of their contents
nor given copies. While the March 10, 2000 memorandum bore
signatures of its recipients, there were no marks on the March 1 and
3, 2000 memoranda indicating that their intended recipients actually
received them on the date they were issued. It was likewise strange
that Peñaflor’s resignation and Buenaobra’s appointment would be
kept under wraps from the supposed filing of Peñaflor’s resignation
letter on March 1, 2000 up to Syfu’s issuance of the March 10, 2000
office memorandum, since the turnover of responsibilities and work
load alone to a successor in a small company such as Outdoor
Clothing would have prevented the resignation from being kept a
secret.
We also considered the timeliness of Peñaflor’s resignation. It was
highly unlikely for Peñaflor to resign on March 1, 2000, as claimed by
Outdoor Corporation, considering that he would have become a
regular employee by that time. It did not appear logical that an
employee would tender his resignation on the very same day he was
entitled by law to be considered a regular employee, especially when
downsizing was taking place and he could have availed of its benefits
if separated from the services as a regular employee.
Considering the above circumstances, and applying basic labor law
principles, the Court ruled that Peñaflor was constructively dismissed
from his employment with Outdoor Clothing. We thus reversed the
CA’s decision and resolution and reinstated the decision of the labor
arbiter which found the respondents (Outdoor Clothing and its
corporate officers) jointly and severally liable to pay Peñaflor
backwages, illegally deducted salaries, proportionate 13th month pay,
attorney’s fees, moral and exemplary damages.
THE MOTION FOR RECONSIDERATION
Outdoor Clothing now moves for the reconsideration of the Court’s
January 21, 2010 Decision. It alleges that the Court erred in declaring
that Peñaflor was constructively dismissed from his employment
despite his submission of an "irrevocable resignation" letter. It also
claims that the Court erred in holding all the respondents jointly and
severally liable to pay Peñaflor the salaries and damages awarded in
his favor.
Outdoor Clothing maintains that Peñaflor’s resignation was voluntary;
Peñaflor resigned because he wanted to disassociate himself from a
company that was experiencing severe financial difficulty and to focus
on his teaching job. Indeed, Peñaflor’s own letter stating his decision
to irrevocably resign from his employment with Outdoor Clothing was
a clear indication that he was not forced to leave the company.
Outdoor Clothing also relies heavily on the three memoranda it
presented before the NLRC to support its claim of Peñaflor’s voluntary
resignation. Although belatedly filed, Outdoor Clothing claims there is
nothing in the rules which disallows the filing of new documents
before the NLRC. "Submission of additional documents, albeit
belatedly done, should always be looked upon with liberality
especially when the same was important for any factual determination
of the case."1
Since it was Peñaflor who filed the resignation letter, Outdoor Clothing
posits that the burden of proving that the resignation was involuntary
rests on Peñaflor. The evidence presented by Peñaflor simply failed to
overcome this burden and thus, his resignation should be deemed
voluntary and should absolve Outdoor Clothing of any liability for
illegal dismissal.
Additionally, Outdoor Clothing asserts that the Court erred in
reinstating the labor arbiter’s decision which ordered all the
respondents jointly and severally liable for the sums due to Peñaflor.
There was nothing in the decision of the Court or even those of the
CA and the administrative bodies finding Outdoor Clothing’s corporate
officers Syfu, Medylene Demogena (Demogena), and Paul Lee (Lee)
to have personally acted in bad faith or with malice with respect to
Peñaflor’s resignation. Assuming Outdoor Clothing is indeed liable to
Peñaflor for illegal dismissal, it would be legally out of line to consider
its corporate officers solidarily liable with the company without a
finding of bad faith or malice on their part.
THE COURT’S RULING
Other than the issue of solidary liability of the respondents in the
present case, Outdoor Clothing raises no new matter that would merit
a reconsideration of the Court’s January 21, 2010 Decision.
Peñaflor’s resignation letter read:
Mr. Nathaniel Y. Syfu
Chief Corporate Officer
Outdoor Clothing Manufacturing Corporation
Sir:
Please accept my irrevocable resignation effective at the close of
office on March 15, 2000.
Thank you.
Very truly yours,
Manolo A. Peñaflor2
While the letter states that Peñaflor’s resignation was irrevocable, it
does not necessarily signify that it was also voluntarily executed.
Precisely because of the attendant hostile and discriminatory working
environment, Peñaflor decided to permanently sever his ties with
Outdoor Clothing. This falls squarely within the concept of
constructive dismissal that jurisprudence defines, among others, as
involuntarily resignation due to the harsh, hostile, and unfavorable
conditions set by the employer. It arises when a clear discrimination,
insensibility, or disdain by an employer exists and has become
unbearable to the employee.3 The gauge for constructive dismissal is
whether a reasonable person in the employee’s position would feel
compelled to give up his employment under the prevailing
circumstances.4 With the appointment of Buenaobra to the position he
then still occupied, Peñaflor felt that he was being eased out and this
perception made him decide to leave the company.
The fact of filing a resignation letter alone does not shift the burden of
proving that the employee’s dismissal was for a just and valid cause
from the employer to the employee. In Mora v. Avesco,5 we ruled that
should the employer interpose the defense of resignation, it is still
incumbent upon the employer to prove that the employee voluntarily
resigned. To our mind, Outdoor Clothing did not discharge this burden
by belatedly presenting the three memoranda it relied on. If these
memoranda were authentic, they would have shown that Peñaflor’s
resignation preceded the appointment of Buenaobra. Thus, they
would be evidence supporting the claim of voluntariness of Peñaflor’s
resignation and should have been presented early on in the case –
any lawyer or layman by simple logic can be expected to know this.
Outdoor Clothing however raised them only before the NLRC when
they had lost the case before the labor arbiter and now conveniently
attributes the failure to do so to its former counsel. Outddor Clothing’s
belated explanation as expressed in its motion for reconsideration, to
our mind, is a submission we cannot accept for serious consideration.
We find it significant that Peñaflor attacked the belated presentation of
these memoranda in his Answer to Outdoor Clothing’s Memoranda of
Appeal with the NLRC, but records do not show that Outdoor Clothing
ever satisfactorily countered Peñaflor’s arguments. It was not until we
pointed out Outdoor Clothing’s failure to explain its belated
presentation of the memoranda in our January 21, 2010 decision that
Outdoor Clothing offered a justification.1avvphi1
Whatever doubts that remain in our minds on the credibility of the
parties’ evidence should, by the law’s dictate, be settled in favor of the
working man. Our ruling that Peñaflor was constructively dismissed
from his employment with Outdoor Clothing therefore stands.
We modify, however, our ruling on the extent of liability of Outdoor
Clothing and its co-respondents. A corporation, as a juridical entity,
may act only through its directors, officers and employees. Obligations
incurred as a result of the directors’ and officers’ acts as corporate
agents, are not their personal liability but the direct responsibility of
the corporation they represent. As a rule, they are only solidarily liable
with the corporation for the illegal termination of services of
employees if they acted with malice or bad faith. In the present case,
malice or bad faith on the part of the Syfu, Demogena, and Lee, as
corporate officers of Outdoor Clothing, was not sufficiently proven to
justify a ruling holding them solidarily liable with Outdoor Clothing.6

WHEREFORE, we PARTIALLY GRANT respondents’ motion for

reconsideration and MODIFY our Decision dated January 21, 2010.
Respondent Outdoor Clothing is hereby ordered to pay petitioner the
following:

a. backwages computed from the time of constructive

dismissal up to the time of the finality of the Court’s
Resolution;

b. separation pay, due to the strained relations between the

parties, equivalent to the petitioner’s one month’s salary;

c. illegally deducted salary for six days, as computed by the

labor arbiter;

d. proportionate 13th month pay;

e. attorney’s fees, moral and exemplary damages in the

amount of ₱100,000.00; and

f. costs against the respondent corporation.

SO ORDERED.

FIRST DIVISION
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 certiorari1 assailing the 26
March 1999 Decision2 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 Arbiter’s 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 SONZA’s
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 SONZA’s services a monthly talent fee of
₱310,000 for the first year and ₱317,000 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-CBN’s 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. Manager4
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 ABS-CBN 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 employer-employee relationship existed between the parties.
SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s 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 SONZA’s talent fees and other
payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 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 respondent’s 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 Respondent’s Position
Paper with Motion to Expunge Respondent’s Annex 4 and Annex 5
from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s
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 Sonza’s
monthly talent fees amount to a staggering ₱317,000.
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
respondent’s 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 Arbiter’s 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 NLRC’s finding that no employer-
employee relationship existed between SONZA and ABS-CBN.
Adopting the NLRC’s 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 complainant-appellant’s 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 complainant-appellant
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
stocks…with FIVE HUNDRED THOUSAND PESOS
(₱500,000.00).
Similarly, complainant is also entitled to be paid 13th
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 (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s 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-CBN’s 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-appellant’s 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 NLRC’s 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 NLRC’S DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP
EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND
EVIDENCE TO SUPPORT SUCH A FINDING.14
The Court’s 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 Arbiter’s 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
employer’s 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 SONZA’s services to co-host its television and
radio programs because of SONZA’s 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 respondent’s 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 ABS-CBN. 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-CBN’s
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
SONZA’s talent fees, amounting to ₱317,000 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 SONZA’s 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 SONZA’s
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 SONZA’s
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
SONZA’s talent fees during the remaining life of the Agreement even
if ABS-CBN cancelled SONZA’s programs through no fault of
SONZA.25
SONZA assails the Labor Arbiter’s 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. SONZA’s 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-Vélez v.
Corporación De Puerto Rico Para La Difusión Pública
("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 master’s 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." Alberty’s 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." Alberty’s 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 x28 (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.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s
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-CBN’s 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 SONZA’s 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 SONZA’s 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-CBN’s 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 SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows
proves ABS-CBN’s power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not
to broadcast SONZA’s show, ABS-CBN was still obligated to pay
SONZA’s talent fees... Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZA’s 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 SONZA’s show but ABS-CBN must still pay his
talent fees in full.35
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened
as it was by the obligation to continue paying in full SONZA’s talent
fees, did not amount to control over the means and methods of the
performance of SONZA’s 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-CBN’s approval. This proves that ABS-CBN’s control
was limited only to the result of SONZA’s work, whether to broadcast
the final product or not. In either case, ABS-CBN must still pay
SONZA’s 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-CBN’s 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 SONZA’s 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-CBN’s employee
because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBN’s 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 Arbiter’s 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 "labor-only 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 SONZA’s
agent. The Agreement expressly states that MJMDC acted as the
"AGENT" of SONZA. The records do not show that MJMDC acted as
ABS-CBN’s 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 SONZA’s 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-CBN’s 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-CBN’s 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 latter’s 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
Constitution53 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 SONZA’s Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th
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 SONZA’s 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, SONZA’s 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.

SECOND DIVISION
March 6, 2017
G.R. No. 197899
JOAQUIN LU, Petitioner
vs
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS,
SALVADOR BERNAL, SAMUEL CAHAYAG, ALEJANDRO
CAMPUGAN, RUPERTO CERNA, JR., REYNALDO CERNA,
PETER CERVANTES, LEONARDO CO ND ES TABLE, ROLANDO
ESLOPOR, ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO
FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX HUBAHIB,
JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO
MATOBATO, ALFREDO MONIVA, VICTORIANO ORTIZ, JR.,
RENALDO PIALAN, ALFREDO PRUCIA, PONCIANO REANDO,
HERMENIO REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA,
NESTOR SALILI, VICENTE SASTRELLAS, ROMEO SUMAYANG,
and DESIDERIO TABAY, Respondents
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari filed by Joaquin Lu
which seeks to reverse and set aside the Decision1 dated October 22,
2010 and the Resolution2 dated May 12, 2011, respectively, of the
Court of Appeals issued in CA-G.R. SP No. 55486-MIN.
The facts of the case, as stated by the Court of Appeals, are as
follows:
Petitioners (now herein respondents) were hired from January 20,
1994 to March 20, 1996 as crew members of the fishing mother
boat F/B MG-28 owned by respondent Joaquin "Jake" Lu (herein
petitioner Lu) who is the sole proprietor of Mommy Gina Tuna
Resources [MGTR] based in General Santos City. Petitioners and Lu
had an income-sharing arrangement wherein 55% goes to Lu, 45% to
the crew members, with an additional 4% as "backing incentive." They
also equally share the expenses for the maintenance and repair of the
mother boat, and for the purchase of nets, ropes and payaos.
Sometime in August 1997, Lu proposed the signing of a Joint Venture
Fishing Agreement between them, but petitioners refused to sign the
same as they opposed the one-year term provided in the agreement.
According to petitioners, during their dialogue on August 18, 1997, Lu
terminated their services right there and then because of their refusal
to sign the agreement. On the other hand, Lu alleged that the master
fisherman (piado) Ruben Salili informed him that petitioners still
refused to sign the agreement and have decided to return the
vessel F/B MG-28.
On August 25, 1997, petitioners filed their complaint for illegal
dismissal, monetary claims and damages. Despite serious efforts
made by Labor Arbiter (LA) Arturo P. Aponesto, the case was not
amicably settled, except for the following matters: (1) Balansi 8 and 9;
(2) 10% piado share; (3) sud-anon refund; and (4) refund of payment
of motorcycle in the amount of ₱15,000.00. LA Aponesto further
inhibited himself from the case out of "delicadeza," and the case was
raffled to LA Amado M. Solamo.
In their Position Paper, petitioners alleged that their refusal to sign the
Joint Venture Fishing Agreement is not a just cause for their
termination. Petitioners also asked for a refund of the amount of
₱8,700,407.70 that was taken out of their 50% income share for the
repair and maintenance of boat as well as the purchase of fishing
materials, as Lu should not benefit from such deduction.
On the other hand, Lu denied having dismissed petitioners, claiming
that their relationship was one of joint venture where he provided the
vessel and other fishing paraphernalia, while petitioners, as industrial
partners, provided labor by fishing in the high seas. Lu alleged that
there was no employer-employee relationship as its elements were
not present, viz.: it was the piado who hired petitioners; they were not
paid wages but shares in the catch, which they themselves determine;
they were not subject to his discipline; and respondent had no control
over the day-to-day fishing operations, although they stayed in contact
through respondent's radio operator or checker. Lu also claimed that
petitioners should not be reimbursed for their share in the expenses
since it was their joint venture that shouldered these expenses.3
On June 30, 1998, the LA rendered a Decision4 dismissing the case
for lack of merit finding that there was no employer-employee
relationship existing between petitioner and the respondents but a
joint venture.
In so ruling, the LA found that: (1) respondents were not hired by
petitioner as the hiring was done by the piado or master fisherman; (2)
the earnings of the fishermen from the labor were in the form of
wages they earned based on their respective shares; (3) they were
never disciplined nor sanctioned by the petitioner; and, (4) the
income-sharing and expense-splitting was no doubt a working set up
in the nature of an industrial partnership. While petitioner issued
memos, orders and directions, however, those who were related more
on the aspect of management and supervision of activities after the
actual work was already done for purposes of order in hauling and
sorting of fishes, and thus, not in the nature of control as to the means
and method by which the actual fishing operations were conducted as
the same was left to the hands of the master fisherman.
The LA also ruled that the checker and the use of radio were for the
purpose of monitoring and supplying the logistics requirements of the
fishermen while in the sea; and that the checkers were also tasked to
monitor the recording of catches and ensure that the proper sharing
system was implemented; thus, all these did not mean supervision on
how, when and where to fish.
Respondents appealed to the National Labor Relations
Commission (NLRC), which affirmed the LA Decision in its
Resolution5 dated March 12, 1999. Respondents' motion for
reconsideration was denied in a Resolution6 dated July 9, 1999.
Respondents filed a petition for certiorari with the CA which
dismissed7 the same for having been filed beyond the 60-day
reglementary period as provided under Rule 65 of the Rules of Court,
and that the sworn certification of non-forum shopping was signed
only by two (2) of the respondents who had not shown any authority to
sign in behalf of the other respondents. As their motion for
reconsideration was denied, they went to Us via a petition
for certiorari assailing the dismissal which We granted in a
Resolution8 dated July 31, 2006 and remanded the case to the CA for
further proceedings.
Petitioner filed its Comment to the petition. The parties submitted their
respective memoranda as required by the CA.
On October 22, 2010, the CA rendered its assailed Decision reversing
the NLRC, the decretal portion of which reads as follows:
WHEREFORE, premises considered, the assailed March 12, 1999
Resolution of public respondent National Labor Relations Commission
(NLRC), Fifth Division, Cagayan de Oro City, is hereby REVERSED
and SET ASIDE, and a new one is entered.
Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru
its sole proprietor/general manager, Joaquin T. Lu (Lu), is hereby
ORDERED to pay each of the petitioners, namely, TIRSO ENOPIA,
ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL,
SAMUEL CAHAYAG, ALEJANDRO CAMPUNGAN, RUPERTO
CERNA, JR., REYNALDO CERNA, PETER CERVANTES,
LEONARDO CONDESTABLE, ROLANDO ESLOPOR, ROLLY
FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO
FUDOLIN, LEO GRAPANI, FELIX HUBAHIB, JERRY JUAGPAO,
MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO
MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO
PIALAN, ALFREDO PRUCIA, POCIANO REANDO, HERMENIO
REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR
SALILI, RICHARD SALILI, SAMUEL SALILI, VICENTE
SASTRELLAS, ROMEO SUMAYANG and DESIDERIO TABAY the
following:
(1) SEPARATION PAY (in lieu of the supposed reinstatement)
equivalent to one (1) month pay for every year of service reckoned
from the very moment each petitioner was hired as fishermen-crew
member of FIB MG-28 by MGTR until the finality of this judgment. A
fraction of at least six (6) months shall be considered one (l) whole
year. Any fraction below six months shall be paid pro rata;
(2) FULL BACKWAGES (inclusive of all allowances and other benefits
required by law or their monetary equivalent) computed from the time
they were dismissed from employment on August 18, 1997 until
finality of this Judgment;
(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos
(₱50,000.00);
(4) ATTORNEY'S FEES equivalent to 10% of the total monetary
award.
Considering that a person's income or earning is his "lifeblood," so to
speak, i.e., equivalent to life itself, this Decision is
deemed immediately executory pending appeal should MGTR
decide to elevate this case to the Supreme Court.
Let this case be referred back to the Office of the Labor Arbiter for
proper computation of the awards.9
The CA found that petitioner exercised control over respondents
based on the following: (1) respondents were the fishermen crew
members of petitioner's fishing vessel, thus, their services to the latter
were so indispensable and necessary that without them, petitioner's
deep-sea fishing industry would not have come to existence much
less fruition; (2) he had control over the entire fishing operations
undertaken by the respondents through the master
fisherman (piado) and the assistant master fisherman (assistant
piado) employed by him; (3) respondents were paid based on a
percentage share of the fish catch did not in any way affect their
regular employment status; and (4) petitioner had already invested
millions of pesos in its deep-sea fishing industry, hence, it is highly
improbable that he had no control over respondents' fishing
operations.
Petitioner's motion for reconsideration was denied by the CA in its
Resolution dated May 12, 2011.
Aggrieved, petitioner filed the instant petition for review
on certiorari citing the following as reasons for granting the same, to
wit:
I
THE HONORABLE COURT OF APPEALS RENDERED THE
ASSAILED DECISION CONTRARY TO LAW AND LOGIC BY CITING
THE ABSENCE OF PROOF OF REQUISITES OF A VALID
DISMISSAL AS BASIS FOR CONCLUDING THAT THE NLRC
GRAVELY ABUSED ITS DISCRETION.
II
THE HONORABLE COURT OF APPEALS EXCEEDED ITS
JURISDICTION BY TREATING RESPONDENTS' PETITION FOR
CERTIORARI UNDER RULE 65 AS AN ORDINARY APPEAL, AND
BY INSISTING ON ITS OWN EVALUATION OF THE EVIDENCE.
III
THE HONORABLE COURT OF APPEALS RENDERED THE
DECISION DATED 22 OCTOBER 2010 CONTRARY TO LAW AND
THE EVIDENCE ON RECORD.
IV
THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS BY MAKING ITS ASSAILED DECISION
IMMEDIATELY EXECUTORY PENDING APPEAL IN SPITE OF THE
FACT THAT RESPONDENTS DID NOT ASK FOR IMMEDIATE
PAYMENT OF SEPARATION PAY AND OTHER CLAIMS, AND
DESPITE THE CLAIM OF RESPONDENTS THAT MOST OF THEM
ARE CURRENTLY EMPLOYED IN OTHER DEEP-SEA FISHING
COMPANIES.10
Petitioner contends that no grave abuse of discretion can be attributed
to the NLRC's finding affirming that of the LA that the arrangement
between petitioner and respondents was a joint venture partnership;
and that the CA, in assuming the role of an appellate body, had re-
examined the facts and re-evaluated the evidence thereby treating the
case as an appeal instead of an original action for certiorari under
Rule 65.
We are not persuaded.
In Prince Transport, Inc. v. Garcia,11 We held:
The power of the CA to review NLRC decisions via a petition
for certiorari under Rule 65 of the Rules of Court has been settled as
early as this Court's decision in St. Martin Funeral Homes v. NLRC. In
said case, the Court held that the proper vehicle for such review is a
special civil action for certiorari under Rule 65 of the said Rules, and
that the case should be filed with the CA in strict observance of the
doctrine of hierarchy of courts. Moreover, it is already settled that
under Section 9 of Batas Pambansa Blg. 129, as amended by
Republic Act No. 7902, the CA, pursuant to the exercise of its original
jurisdiction over petitions for certiorari, is specifically given the power
to pass upon the evidence, if and when necessary, to resolve factual
issues. Section 9 clearly states:
xxxx
The Court of Appeals shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new
trials or further proceedings.x x x.
However, equally settled is the rule that factual findings of labor
officials, who are deemed to have acquired expertise in matters within
their jurisdiction, are generally accorded not only respect but even
finality by the courts when supported by substantial evidence, i.e., the
amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion. But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily
or in disregard of the evidence on record, they may be examined by
the courts. The CA can grant the petition for certiorari if it finds that
the NLRC, in its assailed decision or resolution, made a factual finding
not supported by substantial evidence. It is within the jurisdiction of
the CA, whose jurisdiction over labor cases has been expanded to
review the findings of the NLRC.12
Here, the LA's factual findings was affirmed by the NLRC, however,
the CA found that the latter's resolution did not critically examine the
facts and rationally assess the evidence on hand, and thus found that
the NLRC gravely abused its discretion when it sustained the LA's
decision dismissing respondents' complaint for illegal dismissal on the
ground of lack of merit.
The judicial function of the CA in the exercise of
its certiorari jurisdiction over the NLRC extends to the careful review
of the NLRC's evaluation of the evidence because the factual findings
of the NLRC are accorded great respect and finality only when they
rest on substantial evidence.13 Accordingly, the CA is not to be
restrained from revising or correcting such factual findings whenever
warranted by the circumstances simply because the NLRC is not
infallible. Indeed, to deny to the CA this power is to diminish its
corrective jurisdiction through the writ of certiorari.14
The main issue for resolution is whether or not an employer-employee
relationship existed between petitioner and respondents.
At the outset, We reiterate the doctrine that the existence of an
employer-employee relationship is ultimately a question of fact.
Generally, We do not review errors that raise factual questions.
However, when there is a conflict among the factual findings of the
antecedent deciding bodies like the LA, the NLRC and the CA, it is
proper, in the exercise of Our equity jurisdiction, to review and re-
evaluate the factual issues and to look into the records of the case
and re-examine the questioned findings. In dealing with factual issues
in labor cases, substantial evidence or that amount of relevant
evidence which a reasonable mind might accept as adequate to justify
a conclusion is sufficient.15
In determining the existence of an employer-employee relationship,
the following elements are considered: (1) the selection and
engagement of the workers; (2) the power to control the worker's
conduct; (3) the payment of wages by whatever means; and (4) the
power of dismissal.16 We find all these elements present in this case.
It is settled that no particular form of evidence is required to prove the
existence of an employer-employee relationship. Any competent and
relevant evidence to prove the relationship may be admitted.17
In this case, petitioner contends that it was the piado who hired
respondents, however, it was shown by the latter's evidence that the
employer stated in their Social Security System (SSS) online inquiry
system printouts was MGTR, which is owned by petitioner. We have
gone over these printouts and found that the date of the SSS remitted
contributions coincided with the date of respondents' employment with
petitioner. Petitioner failed to rebut such evidence. Thus, the fact that
petitioner had registered the respondents with SSS is proof that they
were indeed his employees. The coverage of the Social Security Law
is predicated on the existence of an employer-employee
relationship.18
Moreover, the records show that the 4% backing incentive fee which
was divided among the fishermen engaged in the fishing operations
approved by petitioner was paid to respondents after deducting the
latter's respective vale or cash advance.19 Notably, even
the piado's name was written in the backing incentive fee sheet with
the corresponding vale which was deducted from his incentive fee. If
indeed a joint venture was agreed upon between petitioner and
respondents, why would these fishermen obtain vale or cash advance
from petitioner and not from the piado who allegedly hired and had
control over them.
It was established that petitioner exercised control over respondents.
It should be remembered that the control test merely calls for the
existence of the right to control, and not necessarily the exercise
thereof. It is not essential that the employer actually supervises the
performance of duties by the employee. It is enough that the former
has a right to wield the power.20
Petitioner admitted in his pleadings that he had contact with
respondents at sea via the former's radio operator and their checker.
He claimed that the use of the radio was only for the purpose of
receiving requisitions for the needs of the fishermen in the high seas
and to receive reports of fish catch so that they can then send service
boats to haul the same. However, such communication would
establish that he was constantly monitoring or checking the progress
of respondents' fishing operations throughout the duration thereof,
which showed their control and supervision over respondents'
activities. Consequently, We give more credence to respondents'
allegations in their petition filed with the CA on how such control was
exercised, to wit:
The private respondent (petitioner) controls the entire fishing
operations. For each mother fishing boat, private respondent assigned
a master fisherman (pi ado) and assistant master fisherman (assistant
pi ado), who every now and then supervise the fishing operations.
Private respondent also assigned a checker and assistant checker
based on the office to monitor and contact every now and then the
crew at sea through radio. The checker and assistant checker advised
then the private respondent of the condition. Based on the report of
the checker, the private respondent, through radio, will then instruct
the "piado" how to conduct the fishing operations.21
Such allegations are more in consonance with the fact that, as the CA
found, MGTR had already invested millions of pesos in its deep-sea
fishing industry.
The payment of respondents' wages based on the percentage share
of the fish catch would not be sufficient to negate the employer-
employee relationship existing between them. As held in Ruga v.
NLRC:22
x x x [I]t must be noted that petitioners received compensation on a
percentage commission based on the gross sale of the fish-
catch, i.e., 13% of the proceeds of the sale if the total proceeds
exceeded the cost of the crude oil consumed during the fishing trip,
otherwise, only 10% of the proceeds of the sale. Such compensation
falls within the scope and meaning of the term "wage" as defined
under Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and included the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or
other facilities customarily furnished by the employer to the employee.
x x x23
Petitioner wielded the power of dismissal over respondents when he
dismissed them after they refused to sign the joint fishing venture
agreement.
The primary standard for determining regular employment is the
reasonable connection between the particular activity performed by
the employee in relation to the usual trade or business of the
employer.24 Respondents' jobs as fishermen-crew members
of FIB MG 28 were directly related and necessary to petitioner's deep-
sea fishing business and they had been performing their job for more
than one year. We quote with approval what the CA said, to wit:
Indeed, it is not difficult to see the direct linkage or causal connection
between the nature of petitioners' (now respondents) work visa-
vis MGTR's line of business. In fact, MGTR's line of business could
not possibly exist, let alone flourish without people like the fishermen
crew members of its fishing vessels who actually undertook the fishing
activities in the high seas.1âwphi1 Petitioners' services to MGTR are
so indispensable and necessary that without them MGTR's deep-sea
fishing industry would not have come to existence, much less fruition.
Thus, We do not see any reason why the ruling of the Supreme Court
in Ruga v. National Labor Relations Commission should not apply
squarely to the instant case, viz.:
x x x The hiring of petitioners to perform work which is necessary or
desirable in the usual business or trade of private respondent x x x
[qualifies] them as regular employees within the meaning of Article
28025 of the Labor Code as they were indeed engaged to perform
activities usually necessary or desirable in the usual fishing business
or occupation of private respondent.26
As respondents were petitioner's regular employees, they are entitled
to security of tenure under Section 3,27 Article XIII of the 1987
Constitution. It is also provided under Article 279 of the Labor Code,
that the right to security of tenure guarantees the right of employees
to continue in their employment absent a just or authorized cause for
termination. Considering that respondents were petitioner's regular
employees, the latter's act of asking them to sign the joint fishing
venture agreement which provides that the venture shall be for a
period of one year from the date of the agreement, subject to renewal
upon mutual agreement of the parties, and may be pre-terminated by
any of the parties before the expiration of the one-year period, is
violative of the former's security of tenure. And respondents'
termination based on their refusal to sign the same, not being shown
to be one of those just causes for termination under Article 282,28 is,
therefore, illegal.
An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.29
Respondents who were unjustly dismissed from work are entitled to
reinstatement and backwages, among others. However, We agree
with the CA that since most (if not all) of the respondents are already
employed in different deep-sea fishing companies, and considering
the strained relations between MGTR and the respondents,
reinstatement is no longer viable. Thus, the CA correctly ordered the
payment to each respondent his separation pay equivalent to one
month for every year of service reckoned from the time he was hired
as fishermen-crew member of FIB MG-28 by MGTR until the finality of
this judgment.
The CA correctly found that respondents are entitled to the payment
of backwages from the time they were dismissed until the finality of
this decision.
The CA's award of exemplary damages to each respondent is
likewise affirmed. Exemplary damages are granted by way of example
or correction for the public good if the employer acted in a wanton,
fraudulent, reckless, oppressive or malevolent manners.30
We also agree with the CA that respondents are entitled to attorney's
fees in the amount of 10% of the total monetary award.1âwphi1 It is
settled that where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of attorney's
fees is legally and morally justifiable.31
The legal interest shall be imposed on the monetary awards herein
granted at the rate of six percent (6%) per annum from the finality of
this judgment until fully paid.32
Petitioner's contention that there is no justification to incorporate in the
CA decision the immediate execution pending appeal of its decision is
not persuasive. The petition for certiorari filed with the CA contained a
general prayer for such other relief and remedies just and equitable
under the premises. And this general prayer is broad enough to justify
extension of a remedy different from or together with the specific
remedy sought.33 Indeed, a court may grant relief to a party, even if
the party awarded did not pray for it in his pleadings.34

WHEREFORE, the petition for review on certiorari is DENIED. The

Decision dated October 22, 2010 and the Resolution dated May 12,
2011 of the Court of Appeals in CA-G.R. SP No. 55486-MIN are
hereby AFFIRMED. The monetary awards which are herein granted
shall earn legal interest at the rate of six percent (6%) per annum from
the date of the finality of this Decision until fully paid.

SO ORDERED.

FIRST DIVISION
G.R. No. 215281, March 05, 2018
ROLANDO DE ROCA, Petitioner, v. EDUARDO C.
DABUYAN, JENNIFER A. BRANZUELA, JENNYLYN A.
RICARTE, AND HERMINIGILDO F.
SABANATE, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 seeks to set aside the
June 19, 2014 Decision2 and October 28, 2014 Resolution3 of
the Court of Appeals (CA) dismissing the Petition
for Certiorari4 in CA-G.R. SP No. 127974 and denying herein
petitioner's Motion for Reconsideration,5 respectively.
Factual Antecedents
As found by the CA, the facts are as follows:
In 2012, private respondents filed a complaint6 for illegal
dismissal against "RAF Mansion Hotel Old Management and
New Management and Victoriano Ewayan." Later, private
respondents amended the complaint and included petitioner
Rolando De Roca as [co]-respondent. Summons was sent
through registered mail to petitioner but it was returned.
Thereafter, a conference was set but only complainants
attended. Thus, another summons was issued and personally
served to petitioner by the bailiff of the NLRC as evidenced
by the latter's return dated 14 March 2012. Despite service
of summons, petitioner did not attend the subsequent
hearings prompting the labor arbiter to direct private
respondents to submit their position paper.
On 18 April 2012, private respondents submitted their
position paper. On the same day, petitioner filed his motion
to dismiss7 on the ground of lack of jurisdiction. He alleged
that[,] while he [was] the owner of RAF Mansion Hotel
building, the same [was being] leased by Victoriano Ewayan,
the owner of Oceanics Travel and Tour Agency. Petitioner
claims that Ewayan was the employer of private
respondents, Consequently, he asserted that there was no
employer-employee relationship between him and private
respondents and the labor arbiter had no jurisdiction.
On 29 June 2012, the labor arbiter rendered a decision
directing petitioner, among others, to pay backwages and
other monetary award to private respondents. In said
decision, the labor arbiter also denied the motion to dismiss
for having been filed beyond the reglementary period.
Petitioner received a copy of the decision on 3 August 2012.
On 4 September 2012, petitioner filed a petition8 for
annulment of judgment on the ground of lack of jurisdiction
before the NLRC. However, the petition was dismissed
because it was also filed beyond the period allowed by the
2011 NLRC Rules of Procedure. Petitioner sought
reconsideration but the same was also denied.9
Ruling of the Labor Arbiter
In the above-mentioned June 29, 2012 Decision10 in NLRC-
NCR-Case No. 02-02490-12, Labor Arbiter J. Potenciano F.
Napenas, Jr. held, among others, that -
x x x [R]espondent Rolando De Roca surprisingly filed a
"Motion to Dismiss" on the ground of lack of jurisdiction. In
substance, the motion is anchored on the alleged lack of
employer-employee relationship between the parties thereto.
In support thereof, respondent De Roca further alleged that
it was rather the Oceanic Travel and Tour Agency and
respondent Ewayan in whose favor respondent De Roca
leased the subject Hotel, are the true employers of the
complainants as evidenced by the Contract of Lease of
Buildings (Annex "1" respondent's Motion to Dismiss).
Subsequent thereof [sic], complainants filed an Opposition
with Motion to Implead (to Respondent's Motion to Dismiss),
seeking, among others, that the corporation "Oceanic Travel
and Tour Agency" be impleaded as additional respondent.
xxxx
Anent the Motion to Dismiss, Rule V, Sections 6 and 7 of the
Revised 2011 NLRC Rules of Procedure explicitly provide:
'SECTION 6. MOTION TO DISMISS. - Before the date set for
the mandatory conciliation and mediation conference, the
respondent may file a motion to dismiss on grounds provided
under Section 5, paragraph (a) hereof. Such motion shall be
immediately resolve[d] by the Labor Arbiter through a
written order. An order denying the motion to dismiss, or
suspending its resolution until the final determination of the
case, is not appealable.
SECTION 7. EFFECT OF FAILURE TO FILE. - No motion to
dismiss shall be allowed or entertained after the lapse of the
period provided in Section 6 hereof.'
Clearly, respondent De Roca's Motion to Dismiss, having
been filed long after the date set for the mandatory
conference, should be dismissed on such ground being a
prohibited pleading.
Corning now on [sic] the meat of the controversy, since
respondents obviously failed to controvert the allegations by
the complainants in their Position Papers accompanied with
supporting evidence, We have no recourse but to accord
them credence for being uncontradicted.
xxxx
Obviously, respondents had failed to discharge such burden.
WHEREFORE, premises considered, judgement is hereby
rendered finding all the respondents liable for illegal
dismissal.
Accordingly, all of them are hereby ordered to pay
complainants their full backwages and other monetary claims
computed from date of their dismissal up to the
promulgation of this decision plus 10% of the total monetary
award as attorney's fees.
xxxx
Lastly, the Motion to Dismiss is denied for being filed beyond
the period allowed by the rules, thus, a prohibited pleading.
Also, the Motion to implead Oceanic Travel and Tours Agency
as additional respondent is denied for the same reason.
SO ORDERED.11
Ruling of the National Labor Relations Commission
Instead of filing an appeal before the National Labor
Relations Commission (NLRC), petitioner instituted the
petition for annulment of judgment referred to above, which
the NLRC dismissed in its September 28, 2012
Resolution12 for being tardy, as it was filed beyond the 10-
day reglementary period prescribed under Section 3, Rule XII
of the 2011 NLRC Rules of Procedure.
Ruling of the Court of Appeals
Petitioner filed a Petition for Certiorari before the CA, where
he argued, among others, that he was never an employer of
the respondents, as he was merely the owner of the
premises which were leased out to and occupied by
respondents' true employer, Victoriano Ewayan (Ewayan),
who owned Oceanic Travel and Tours Agency which operated
the RAF Mansion Hotel where respondents were employed as
cook, waitress, and housekeeper; and that his inclusion in
the labor case was borne of malice which is shown by the
fact that when the labor complaint was filed, he was not
originally impleaded as a respondent, and was made so only
after respondents discovered that their employer had already
absconded - in which case he was impleaded under the
pretext that he constituted the "new management of RAF
Mansion Hotel".
On June 19, 2014, the CA rendered the assailed Decision
dismissing the petition, decreeing thus:
At the outset, We note that the issue raised by petitioner is
imprecise because the NLRC did not rule on the propriety of
finding petitioner liable to private respondents. It is obvious
from the assailed resolution that the petition for annulment
of judgment was denied because it was tiled after the lapse
of the period presc1ibed under the 2011 NLRC Rules of
Procedure and this is the issue that this Court will resolve.
xxxx
Record shows that petitioner received the decision of the
labor arbiter on 3 August 2012 but he filed his petition on 4
September 2012 or thirty-one days after such receipt. In this
regard, the NLRC did not commit any error in denying the
petition much more grave abuse of discretion. The rule is
clear and the NLRC may not 'arbitrarily disregard specific
provisions of the Rules which an precisely intended to assist
the parties in obtaining just, expeditious and inexpensive
settlement of labor disputes.'
Similarly, the labor arbiter did not commit any grave abuse
of discretion because he just observed the NLRC rules when
he denied petitioner's motion to dismiss. x x x
In addition, We also cannot attribute grave abuse of
discretion in the labor arbiter's resolution of the motion to
dismiss in the decision itself. While this may seem peculiar, it
must be emphasized that the motion to dismiss was filed at
about the period when the case was about to be submitted
for decision.
xxxx
In the case at bar, the inclusion of the denial of the motion
to dismiss in the decision is not without justification.
Petitioner not only failed to submit the motion to dismiss on
time but also forfeited the right to submit his position paper
because he did not attend the conference and subsequent
hearings. Even if the labor arbiter denied the motion to
dismiss in a separate order, petitioner would still be
precluded from submitting a position paper where he can
buttress his claim of lack of jurisdiction. The labor arbiter,
therefore, could not be said to have committed grave abuse
of discretion in denying the motion to dismiss and in
incorporating its order in the decision.
xxxx
As regards the claim of petitioner on the merits of his
ground, We cannot consider his arguments and assume that
his allegation of lack of employer-employment [sic]
relationship between him and private respondents is true.
First, he did not present any evidence to support his claim
because he lost the opportunity to submit a position paper.
Thus, his allegations will remain mere allegations.
Second, it would transgress fairness if his allegations in this
petition should be given any attention because the private
respondents never had the [opportunity to] present evidence
to meet his claims. Private respondents' arguments were
correctly centered on the provisions of the 2011 NLRC Rules
of Procedure because they were the bases for the denial of
petitioner's motion to dismiss and petition for annulment of
judgment.
Furthermore, petitioner did not submit the position paper of
private respondents where We can find their averments on
the employment relationship between them and petitioner or
lack thereof. This omission not only rendered useless the
evaluation of the asseverations in the petition but also gave
Us another reason to dismiss this petition under Section 3,
Rule 46 of the Rules of Court. Petitioner is well-aware that
this pleading is material to the resolution of his petition and
in neglecting to attach the same to his petition, the same
would warrant the dismissal of this petition.
Lastly, the ultimate aim of petitioner is for Us to review the
findings of the labor arbiter on the employment relationship
between him and the private respondents. 'The basic issue of
whether or not the NLRC has jurisdiction over the case
resolves itself into the question of whether an employer-
employee relationship existed' between them. Thus, it is an
issue which necessitates presentation of evidence on the part
of petitioner and evaluation of the pieces of evidence of each
party. Again, this is not proper in a petition for certiorari.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.13
Petitioner filed a motion for reconsideration, but the CA
denied the same via its October 28, 2014 Resolution. Hence,
the instant Petition, which includes a prayer for injunctive
relief against execution of the judgment pending appeal.
On December 10, 2014 and January 12, 2015, the Court
issued Resolutions14 respectively granting temporary
injunctive relief and issuing in favor of petitioner a
Temporary Restraining Order15 upon filing of a cash or surety
bond.
In a November 9, 2015 Resolution,16 the Court resolved to
give due course to the Petition.
Issue
Petitioner frames the issue in this Petition thus -
Petitioner submits before this Honorable Court that the Court
of Appeals erred in affirming the findings of both the labor
arbiter and the NLRC and in concluding that they did not
abuse their discretion and acted beyond their jurisdiction
when they asserted their authorities and found petitioner DE
ROCA solidarily liable with EWAYAN/OCEANIC TRAVEL AND
TOUR AGENCY to private respondents, despite the patent
lack of employer-employee relationship between the
petitioner and private respondents.17
Petitioner's Arguments
In his Petition and Reply18 seeking reversal of the assailed CA
dispositions as well as the nullification of the decisions of the
labor tribunals, petitioner argues that the Labor Arbiter's
decision is null and void as there was no determination of
facts and evidence relative to his supposed liability to
respondents; that he was not at any time the respondents'
employer, but merely the owner-lessor of the premises
where Ewayan and his Oceanic Travel and Tours Agency
operated the RAF Mansion Hotel where respondents were
employed as hotel staff; that the labor tribunals did not
acquire jurisdiction over him since the element of employer-
employee relationship was lacking; that he was impleaded in
the case only because respondents could no longer trace the
whereabouts of their true employer, Ewayan, who appears to
have absconded - for which reason respondents aim to
unduly recover their claims from him; that the labor tribunals
and the CA strictly applied the labor procedural laws and
rules, when the rule in labor cases is that technical rules of
procedure are not binding and must yield to the merits of the
case and the interests of justice and due process; and that
since the labor tribunals did not have jurisdiction over him as
he was not at any given period the respondents' employer,
their decisions are a nullity.
Respondents' Arguments
In their Comment19 to the Petition, respondents argue that
the Petition should be denied for lack of merit; that the CA's
dispositions are just and correct; that the issue in this case
does not involve the merits of the labor arbiter's decision,
but merely the propriety of the NLRC's dismissal of
petitioner's petition for annulment of judgment; that
nonetheless, they have satisfactorily proved below that
petitioner is their employer, by the evidence they submitted
- consisting of identification cards (IDs) issued to them and
signed by Ewayan, and pay envelopes and advise slips
showing their salaries as the basis for their claims; that since
petitioner owned the building which was a hotel, it follows
that he is their employer; that since he is their employer, the
labor arbiter acquired jurisdiction over him; and that since
the decision of the labor arbiter on the merits became final
and executory for petitioner's failure to appeal the same, the
same may no longer be impugned.
Our Ruling
The Court grants the Petition.
All throughout the proceedings, petitioner has insisted that
he was not the employer of respondents; that he did not hire
the respondents, nor pay their salaries nor exercise
supervision or control over them, nor did he have the power
to terminate their services. In support of his claim, he
attached copies of a lease agreement - a Contract of Lease of
a Building20 - executed by him and Oceanic Tours and Travel
Agency (Oceanic) represented by Ewayan through his
attorney-in-fact Marilou Buenafe. The agreement would show
that petitioner was the owner of a building called the RAF
Mansion Hotel in Roxas Boulevard, Baclaran, Parañaque City;
that on September 25, 2007, Oceanic agreed to lease the
entire premises of RAF Mansion Hotel, including the elevator,
water pump, airconditioning units, and existing furnishings
and all items found in the hotel and included in the inventory
list attached to the lease agreement, except for certain
portions of the building where petitioner conducted his
personal business and which were leased out to other
occupants, including a bank; that the lease would be for a
period of five years, or from October 15, 2007 up to October
15, 2012; that the monthly rental would be P450,000.00;
and that all expenses, utilities, maintenance, and taxes -
except real property taxes - incurred and due on the leased
building would be for the lessee's account.
Petitioner likewise attached to the instant Petition copies of:
1) a January 23, 2012 letter21 of demand to pay and vacate
sent to Ewayan, directing the latter's attention to previous
demand letters sent to him and making a final demand to
pay rentals in arrears; and 2) a written waiver and
acknowledgment22 executed by respondents - except
respondent Herminigildo Sabanate - and other Oceanic
employees to the effect that petitioner should not be held
liable as owner of the premises for the "problems" caused by
Ewayan.
Thus, it would appear from the facts on record and the
evidence that petitioner's building was an existing hotel
called the "RAF Mansion Hotel", which Oceanic agreed to
continue to operate under the same name. There is no
connection between petitioner and Oceanic oilier than
through the lease agreement executed by them; they are not
partners in the operation of RAF Mansion Hotel. It just so
happens that Oceanic decided to continue operating the hotel
using the original name - "RAF Mansion Hotel".
The only claim respondents have in resorting to implead
petitioner as a co respondent in the labor case is the fact
that he is the owner of the entire building called "RAF
Mansion Hotel" which happens to be the very same name of
the hotel which Ewayan and Oceanic continued to adopt, for
reasons not evident in the pleadings. It must be noted as
well that when they originally filed the labor case,
respondents did not include petitioner as respondent therein.
It was only later on that they moved to amend their
complaint, impleading petitioner and thus amending the title
of the case to "x x x, Complainants, versus RAF Mansion
Hotel Old Management and New Management/Victoriano
Ewayan and Rolando De Roca, Respondents."
As correctly observed by petitioner, such belated attempt to
implead him in the labor case must be seen as an
afterthought. Moreover, the fact that respondents recognize
petitioner as embodying the "new management" of RAF
Mansion Hotel betrays an admission on their part that he had
no hand in the "old management" of the hotel under Ewayan,
during which they were hired and maintained as hotel
employees - meaning that petitioner was never considered
as Ewayan's partner and co-employer; respondents merely
viewing petitioner as the subsequent manager taking over
from Ewayan, which bolsters petitioner's allegation that
Ewayan had absconded and left respondents without
recourse other than to implead him as the "new
management" upon whom the obligation to settle the claims
abandoned by Ewayan now fell.
"Contracts take effect only between the parties, their assigns
and heirs, except in case where the tights and obligations
arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law."23 The
contract of employment between respondents, on the one
hand, and Oceanic and Ewayan on the other, is effective only
between them; it does not extend to petitioner, who is not a
party thereto. His only role is as lessor of the premises which
Oceanic leased to operate as a hotel; he cannot be deemed
as respondent's employer - not even under the pretext that
he took over as the "new management" of the hotel operated
by Oceanic. There simply is no truth to such claim.
Thus, to allow respondents to recover their monetary claims
from petitioner would necessarily result in their unjust
enrichment.
There is unjust enrichment 'when a person unjustly retains a
benefit to the loss of another, or when a person retains
money or property of another against the fundamental
principles of justice, equity and good conscience.' The
principle of unjust enrichment requires two conditions: (1)
that a person is benefited without a valid basis or
justification, and (2) that such benefit is derived at the
expense of another.
The main objective of the principle against unjust enrichment
is to prevent one from enriching himself at the expense of
another without just cause or consideration. x x x24
"In rendering justice, courts have always been, as they
ought to be, conscientiously guided by the norm that on the
balance, technicalities take a backseat against substantive
rights, and not the other way around."25 In short,
substantive law outweighs procedural technicalities as in this
case.
Indeed, where as here, there is a strong showing that grave
miscarriage of justice would result from the strict application
of the [r]ules, we will not hesitate to relax the same in the
interest of substantial justice. It bears stressing that the
rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated
to effectively aid the court in the dispensation of justice.
Courts are not slaves to or robots of technical rules, shorn of
judicial discretion. In rendering justice, courts have always
been as they ought to be, conscientiously guided by the
norm that on the balance, technicalities take a backseat
against substantive rights, and not the other way around.
Thus, if the application of the Rules would tend to frustrate
rather than promote justice, it is always within our power to
suspend the rules, or except a particular case from its
operation.26
Taking this to mind, the labor tribunals and the CA should
have considered petitioner's repeated pleas to scrutinize the
facts and particularly the lease agreement executed by him
and Oceanic, which would naturally exculpate him from
liability as this would prove the absence of an employment
relation between him and respondents. Instead, the case
was determined on pure technicality which in labor disputes,
is not necessarily sanctioned - given that proceedings before
the Labor Arbiter and the NLRC are non-litigious in nature
where they are encouraged to avail of all reasonable means
to ascertain the facts of the case without regard to
technicalities of law or procedure.27 Petitioner's motion to
dismiss, though belated, should have been given due
attention.
In arriving at the foregoing conclusions, the Court is guided
by the allegations and arguments of the parties on the
existence of an employment relation between them, which
may be found in their pleadings - even at this stage. In
particular, respondents squarely addressed the issue in their
Comment to the herein Petition. On the other hand,
petitioner has consistently raised the issue and argued
against it all throughout. Since the issue was raised in the
Petition and adequately met by the respondents in their
Comment thereto, the Court is not precluded from ruling
thereon. There is thus no need to remand the case to the
Labor Arbiter for further proceedings. Finally, this resolves
respondents' claim that the issue here involves only the
propriety of the NLRC's dismissal of petitioner's petition tor
annulment of judgment; having argued against petitioner's
claim of absence of an employment relation between them -
and having presented documentary evidence below to prove
their case against petitioner - the issue relative to existence
or non-existence of em employment relation is ripe for
adjudication before this Court.

With the view taken of the case, it necessarily follows that

the decision of the Labor Arbiter must be set aside for being
grossly erroneous and unjust. At worst, it is null and void,
and, as petitioner correctly put it, it is a "lawless thing, which
can be treated as an outlaw and slain at sight, or ignored
wherever it exhibits its head."28 Being of such nature, it
could not have acquired finality, contrary to what
respondents believe - as it "creates no rights and imposes no
duties. Any act performed pursuant to it and any claim
emanating from it have no legal effect."29

WHEREFORE, the Petition is GRANTED. The June 19,2014

Decision and October 28, 2014 Resolution of the Court of
Appeals in CA-G.R. SP No. 127974 are REVERSED and SET
ASlDE. NLRC-NCR-Case No. 02-02490-12 is
ordered DISMISSED, but only as against petitioner Rolando
De Roca.

SO ORDERED.

FIRST DIVISION
G.R. No. 228671, December 14, 2017
EXPEDITION CONSTRUCTION CORPORATION, SIMON
LEE PAZ, AND JORDAN JIMENEZ,*Petitioners,
v. ALEXANDER M. AFRICA, MARDY MALAPIT, JESUS
ESER, JACOB RONGCALES, JONAMEL CARO, ALFREDO
RILES,* REYNALDO GARCIA, FREDDIE DELA CRUZ,
JUNIE AQUIBAN, CRISINCIO GARCIA,* DINO
AQUIBAN, SAMUEL PILLOS, JEFFREY A.VALENZUELA,
ERWIN VELASQUEZ HALLARE AND WILLIAM RAMOS
DAGDAG, Respondents.
DECISION
DEL CASTILLO, J.:
Before us is a Petition for Review on Certiorari with
Application for Temporary Restraining Order and/or Writ of
Preliminary Injunction1 seeking to set aside the March 31,
2016 Decision2 of the Court of Appeals (CA) in CA G.R. SP
No. 142007, which dismissed the Petition for Certiorari3 filed
therewith and affirmed with modification the April 30, 2015
Resolution4 of the National Labor Relations Commission
(NLRC) by ordering the reinstatement and the payment of
full back wages of respondents Alexander M. Africa, Mardy
Malapit, Jesus Eser, Jacob Rongcales, Jonamel Caro, Alfredo
Riles, Reynaldo Garcia, Freddie Dela Cruz, Junie Aquiban,
Crisincio Garcia, Dino Aquiban, Samuel Pillos, Jeffrey A.
Valenzuela, Erwin Velasquez Hallare, and William Ramos
Dagdag (respondents) for having been illegally dismissed.
Likewise assailed is the December 9, 2016 Resolution5 of the
CA denying petitioners' Motion for Reconsideration.6
Factual Antecedents
Petitioner Expedition Construction Corporation (Expedition),
with petitioners Simon Lee Paz and Jordan Jimenez as its
Chief Executive Officer and Operations Manager,
respectively, is a domestic corporation engaged in garbage
collection/hauling. It engaged the services of respondents as
garbage truck drivers to collect garbage from different cities
and transport the same to the designated dumping site.
Respondents filed separate cases7 (which were later on
consolidated) against Expedition for illegal dismissal;
underpayment and non-payment of salaries/wages, holiday
pay, holiday premium, rest day premium, service incentive
leave pay, 13th month pay, separation pay, and Emergency
Cost of Living Allowance (ECOLA); illegal deduction; moral
and exemplary damages and attorney's fees. In their Position
Paper,8 respondents alleged that in August 2013, they were
illegally terminated from employment when they were
prevented from entering the premises of Expedition without
cause or due process. They claimed that they were regular
employees of Expedition; were required to work a minimum
of 12 hours a day, seven days a week, even on holidays,
without rest or vacation; and, were not paid the minimum
wage, holiday or premium pay, overtime pay, service
incentive leave pay and 13th month pay. They also averred
that the costs of repair and maintenance of the garbage
trucks were illegally deducted from their salaries.
Expedition, in its Position Paper,9 countered that respondents
were not illegally dismissed. It averred that it entered into
separate contracts with the cities of Quezon, Mandaluyong,
Caloocan, and Muntinlupa for the col1ection and transport of
their garbage to the dump site; that it engaged the services
of respondents, as dump truck drivers, who were oftentimes
dispatched in Quezon City and Caloocan City; that the need
for respondents' services significantly decreased sometime in
2013 after its contracts with Quezon City and Caloocan City
were not renewed; and, that it nonetheless tried to
accommodate respondents by giving them intermittent trips
whenever the need arose.
Expedition denied that respondents were its employees. It
claimed that respondents were not part of the company's
payroll but were being paid on a per trip basis. Respondents
were not under Expedition's direct control and supervision as
they worked on their own, were not subjected to company
rules nor were required to observe regular/fixed working
hours, and that respondents hired/paid their respective
garbage collectors. As such, respondents' money claims had
no legal basis.
In their Reply,10 respondents insisted that they worked under
Expedition's control and supervision considering that: (1)
Expedition owned the dump trucks; (2) Expedition expressly
instructed that the trucks should be used exclusively to
collect garbage in their assigned areas and transport the
garbage to the dump site; (3) Expedition directed them to
park the dump trucks in the garage located at Group 5 Area
Payatas, Quezon, City after completion of each delivery; and
(4) Expedition determined how, where, and when they would
perform their tasks.
Respondents also adverted to petitioners' counsel's
manifestation during the mandatory conciliation
proceedings,11 regarding Expedition's willingness to accept
them back to work, as proof of their status as Expedition's
regular employees. To further support their claim,
respondents attached in their Rejoinder12 affidavits of Eric
Rosales13 (Rosales) and Roger A. Godoy14 (Godoy), both
claiming to be former employees of Dodge
Corporation/Expedition Construction Corporation and
attesting that respondents were regular employees of
Expedition.
Ruling of the Labor Arbiter
In a Decision15 dated June 26, 2014, the LA dismissed
respondents' complaints and held that there was no
employer-employee relationship between Expedition and
respondents. The LA did not find any substantial proof that
respondents were regular employees of Expedition. First,
respondents had no fixed salary and were compensated
based on the total number of trips made. Next, Expedition
had no power to terminate respondents. More importantly,
respondents performed their work independent of
Expedition's control. The LA ruled that respondents were
independent contractors, contracted to do a piece of work
according to their own method and without being subjected
to the control of Expedition except as to the results of their
work.
Respondents appealed to the NLRC where they insisted that
they were under Expedition's control and supervision and
that they were regular employees who worked continuously
and exclusively for an uninterrupted period ranging from four
to 15 years and whose tasks were necessary and desirable in
the usual business of Expedition.
Ruling of the National Labor Relations Commission
In a Resolution16 dated September 30, 2014, the NLRC
dismissed respondents' appeal and affirmed the ruling of the
LA. The NLRC similarly found no evidence of an employer-
employee relationship between Expedition and respondents.
The NLRC did not consider as evidence the alleged admission
of petitioners during the mandatory conciliation conference
since statements made in these proceedings are regarded as
privileged communication. Likewise, the affidavits of Rosales
and Godoy did not help respondents' cause as the affiants
were not employees of Expedition but of some other
company.
The NLRC opined that respondents were project employees
hired for a specific undertaking of driving garbage trucks, the
completion and termination of which was coterminous with
Expedition’s contracts with the Local Government Units
(LGUs). As project employees, respondents were not
dismissed from work but their employment simultaneously
ended when Expedition's contracts with Quezon City and reinstatement but without the payment of back wages.
Caloocan City expired. There being no illegal dismissal, the However, due to lack of clients where respondents could be
NLRC found no basis in awarding respondents their money re-assigned, the NLRC opted to award separation pay in lieu
claims. of reinstatement. The dispositive portion of the Resolution
reads:
Undaunted, respondents filed a Motion for
Reconsideration17 arguing that they were not project WHEREFORE, complainants-appellants' Motion for
employees because the nature of their work was necessary Reconsideration is hereby PARTLY GRANTED. Our Resolution
and desirable to Expedition's line of business and that their dated 30 September 2014 is MODIFIED finding employer-
continuous and uninterrupted employment reaffirmed their employee relationship between complainants and the
status as regular employees. They averred further that there respondents and concomitantly the latter is hereby ordered
was no written contract evidencing project employment nor to pay complainants' separation pay at the rate of ½ month
were they informed of their status as project employees. salary for every year of service a fraction of at least 6
They stressed that Expedition's right of control over the months to be considered as one (1) whole year in the
performance of their work was apparent when: (1) they were following computed amounts:
made to report everyday at the premises owned by
Expedition; (2) there was an express instruction to report
1. Alexander M. Africa 426 x 13 x 12 = 66,456
from Monday to Sunday; (3) they were not allowed to
2. Jesus Eser 426 x 13 x 10 = 55,380
engage in any other project; (4) they. were mandated to
3. Jonamel Caro 426 x 13 x 12 = 66,456
return the hauling truck and park the same at Expedition's
4. Reynaldo Garcia 426 x 13 x 15 = 83,070
premises after the garbage collection was completed; (5)
5. Mardy Malapit 426 x 13 x 14 = 77,532
Expedition determined how, where, and when they would
6. Jacob Rongcales 426 x 13 x 14 = 77,532
perform their tasks; and, (6) they were not allowed to collect
7. Alfredo Rilles 426 x 13 x 15 = 83,070
garbage beyond the area indicated by Expedition.
8. Freddie Dela Cruz 426 x 13 x 5 = 27,690
9. Junie Aquiban 426 x 13 x 5 = 27,690
In a Resolution18 dated April 30, 2015, the NLRC partly
10. Dino Aquiban 426 x 13 x 4 = 22,152
granted respondents' motion for reconsideration and
11. Samuel G. Pillos 426 x 13 x 5 = 27,690
modified its earlier Resolution of September 30, 2014. This
12. William Dagdag 426 x 13 x 14 = 77,532
time, the NLRC ruled that respondents were employees of
13. Crisincio Garcia 426 x 13 x 12 = 66,456
Expedition in view of Expedition's admission that it hired and
14. Jeffrey A. Valenzuela 426 x 13 x 5 = 27,690
paid respondents for their services. The NLRC was also
15. Erwin V. Hallare 426 x 13 x 9 = 49,842
persuaded that Expedition exercised control on when and
how respondents would collect garbage.
The rest of Our resolution is hereby AFFIRMED.
The NLRC, however, sustained its earlier finding that there
was no illegal dismissal ratiocinating that respondents were SO ORDERED.19
merely placed on a floating status when the contract with
Quezon City and Caloocan City expired and thus were merely Expedition filed a Motion for Reconsideration20 attributing
waiting to be re-assigned to other similar work. As there was error on the NLRC in ruling that there was an employer-
no dismissal to speak of, the NLRC ordered respondents’ employee relationship and in awarding separation pay
despite the finding that there was no illegal dismissal.
Expedition also questioned the NLRC's computation of
separation pay and sought the remand of the case to the LA
for proper determination of the correct amount. This motion,
however, was denied by the NLRC in its Resolution21 of June
30, 2015.
Expedition sought recourse to the CA via a Petition
for Certiorari.22
Ruling of the Court of Appeals
On March 31, 2016, the CA rendered a Decision23 dismissing
Expeditions Petition for Certiorari and ruling in favor of
respondents. The CA affirmed the April 30, 2015 Resolution
of the NLRC insofar as the existence of an employer-
employee relationship between the parties. The CA noted
that respondents were hired and paid by Expedition. Further,
Expedition exercised the power to provide and withhold work
from respondents. Most importantly, the power of control
was evident since Expedition determined how, where and
when respondents would perform their tasks. The CA held
that the respondents needed Expedition's instruction and
supervision in the performance of their duties. The CA
likewise ruled that respondents were regular employees
entitled to security of tenure because they continuously
worked for several years for the company, an indication that
their duties were necessary and desirable in the usual
business of Expedition.
The CA, however, did not agree with the NLRC that
respondents were on floating status since petitioners did not
adduce proof of any dire exigency justifying failure to give
respondents any further assignments. The CA observed that
the irregular dispatch of respondents due allegedly to the
decrease in the need for drivers led to the eventual
discontinuance of respondents' services and ultimately, their
illegal termination. Accordingly, the CA ruled that
respondents were illegally dismissed when Expedition
prevented them from working, and consequently, ordered
their reinstatement with full back wages. The dispositive
portion of the Decision reads:
FOR THESE REASONS, the petition is DISMISSED. The
Decision of the National Labor Relations Commission dated
April 30, 2015 is hereby AFFIRMED with MODIFICATIONS.
The respondents were illegally dismissed, and are thus
entitled to reinstatement with full backwages from the time
of illegal dismissal up to the finality of this Decision and
attorney's fee equivalent to ten percent (10%) of the total
monetary award. The monetary awards herein granted shall
earn legal interest at the rate of six percent (6%) per annum
from the date of the finality of this Decision until fully paid.
The case is remanded to the Labor Arbiter for the
computation of respondents' monetary awards.
SO ORDERED.24
Expedition filed a Motion for Reconsideration25 on the ground
that the CA erred in finding that respondents were its
employees and that respondents were illegally dismissed. It
impugned the award of reinstatement and back wages in
favor of respondents, submitting that an amount of financial
assistance would be the more equitable remedy for
respondents' cause. It, then, manifested its willingness to
offer financial assistance to respondents in the amounts
equivalent to the separation pay awarded to respondents in
the April 30, 2015 NLRC Resolution.
Expedition's motion was, however, denied by the CA in its
Resolution26 dated December 9, 2016.
Issues
Hence, Expedition filed this instant Petition presenting the
following grounds for review:
[1.] THE COURT OF APPEALS GRAVELY ERRED WHEN IT
UPHELD THE NLRC'S FINDING THAT THERE WAS AN
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONER
CORPORATION AND RESPONDENTS.
[2.] EVEN ASSUMING ARGUENDO THAT THERE WAS
EMPLOYER-EMPLOYEE RELATIONSHIP, THE COURT OF
APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS
WERE REGULAR EMPLOYEES.
[3.] THE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT RESPONDENTS WERE ILLEGALLY DISMISSED.
[4.] AGAIN, EVEN ASSUMING THAT RESPONDENTS WERE
REGULAR EMPLOYEES AND THAT THEY HAD BEEN ILLEGALLY
DISMISSED, THE COURT OF APPEALS GRAVELY ERRED
WHEN IT AWARDED REINSTATEMENT WITH FULL
BACKWAGES INSTEAD OF SEPARATION PAY ONLY.27
Expedition maintains that it did not exercise the power of
selection or engagement, payment of wages, dismissal, and
control over respondents. The CA, thus, had no legal basis in
finding that respondents were its employees, much less had
regular employment status with it. Expedition likewise insists
that there was no illegal dismissal and that the CA erred in
awarding reinstatement and backwages instead of separation
pay, which was prayed for by respondents.
Our Ruling
The Petition is partly granted.
Respondents were regular employees of Expedition.
At the outset, it bears emphasis that the question of whether
or not respondents were employees of Expedition is a factual
issue. It is settled that only questions of law may be raised in
a petition for review on certiorari filed under Rule
45.28 However, there are also recognized exceptions to this
rule, one of which is when the factual findings of the labor
tribunals are contradictory to each other,29 such as obtaining
in the case at bar.
Jurisprudence has adhered to the four-fold test in
determining the existence of an employer-employee
relationship, 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 employee's
conduct, or the so-called 'control test'".30
In ruling that respondents were employees of Expedition, the
CA found all the elements of employer-employee relationship
to be present. As shown in the records, Expedition hired
respondents as dump truck drivers and paid them the
amount of P620.00 per trip. The CA held that Expedition
wielded the power to dismiss respondents based on
Expedition's admission that when the dispatch of drivers
became irregular, it tried to accommodate them by giving
trips when the need arose. The control test was likewise
established because Expedition determined how, where, and
when respondents would perform their tasks.
Expedition, however, proffers that the actual findings of the
CA on this matter had no legal basis. It claims that
respondents were never hired but were merely engaged as
drivers; that they worked on their own and were not
subjected to its control and supervision; that they were
compensated based on output or number of trips made in a
day; that they selected their own garbage collectors, chose
their own route and determined the manner by which they
would collect the garbage; and, that they performed their
work at their own pleasure without fear of being sanctioned if
they chose not to report for work.
The Court finds Expedition's position untenable. First, as
clearly admitted, respondents were engaged/hired by
Expedition as garbage truck drivers. Second, it is undeniable
that respondents received compensation from Expedition for
the services that they rendered to the latter. The fact that
respondents were paid on a per trip basis is irrelevant in
determining the existence of an employer-employee
relationship because this was merely the method of
computing the proper compensation due to
respondents.31 Third, Expedition's power to dismiss was
apparent when work was withheld from respondents as a
result of the termination of the contracts with Quezon City
and Caloocan City. Finally, Expedition has the power of
control over respondents in the performance of their work. It
was held that "the power of control refers merely to the
existence of the power and not to the actual exercise
thereof.”32 As aptly observed by the CA, the agreements for
the collection of garbage were between Expedition and the
various LGUs, and respondents needed the instruction and
supervision of Expedition to effectively perform their work in
accordance with the stipulations of the agreements.
Moreover, the trucks driven by respondents were owned by
Expedition. There was an express instruction that these
trucks were to be exclusively used to collect and transport
garbage. Respondents were mandated to return the trucks to
the premises of Expedition after the collection of garbage.
Expedition determined the clients to be served, the location
where the garbage is to be collected and when it is to be
collected. Indeed, Expedition determined how, where, and
when respondents would perform their tasks.
Respondents were neither independent contractors nor
project employees. There was no showing that respondents
have substantial capital or investment and that they were
performing activities which were not directly related to
Expedition's business to be qualified as independent
contractors.33 There was likewise no written contract that can
prove that respondents were project employees and that the
duration and scope of such employment were specified at the
time respondents were engaged. Therefore, respondents
should be accorded the presumption of regular employment
pursuant to Article 280 of the Labor Code which provides
that "employees who have rendered at least one year of
service, whether such service is continuous or broken x x x
shall be considered [as] regular employees with respect to
the activity in which they are employed and their
employment shall continue while such activity
exists."34 Furthermore, the fact that respondents were
performing activities which were directly related to the
business of Expedition confirms the conclusion that
respondents were indeed regular employees.35
Having gained regular status, respondents were entitled to
security of tenure and could only be dismissed for just or
authorized cause after they had been accorded due process.
Thus, the queries: Were respondents dismissed? Were they
dismissed in accordance with law?
There was no illegal dismissal.
In illegal dismissal cases, the employer has the burden of
proving that the termination was for a valid or authorized
cause. However, it is likewise incumbent upon an employee
to first establish by substantial evidence the fact of his
dismissal from employment36 by positive and overt acts of an
employer indicating the intention to dismiss.37 It must also
be stressed that the evidence must be clear, positive and
convincing.38 Mere allegation is not proof or evidence.39
In this case, there was no positive or direct evidence to
substantiate respondents' claim that they were dismissed
from employment. Aside from mere assertions, the record is
bereft of any indication that respondents were barred from
Expedition's premises. If at all, the evidence on record
showed that Expedition intended to give respondents new
assignments as a result of the termination of the garbage
hauling contracts with Quezon City and Caloocan City where
respondents were regularly dispatched. Despite the loss of
some clients, Expedition tried to accommodate respondents
and offered to engage them in other garbage hauling
projects with other LGUs, a fact which respondents did not
refute. However, instead of returning and waiting for their
next assignments, respondents instituted an illegal dismissal
case against Expedition. Note that even during the
mandatory conciliation and mediation conference between
the parties, Expedition manifested its willingness to accept
respondents back to work. Unfortunately, it was respondents
who no longer wanted to return to work. In fact, in their
complaints, respondents prayed for the payment of
separation pay instead of reinstatement.
Here, there was no sufficient proof that respondents were
actually laid off from work. Thus, the CA had no basis in
ruling that respondents' employment was illegally terminated
since the fact of dismissal was not adequately supported by
substantial evidence. There being no dismissal, the status
quo between respondents and Expedition should be
maintained. However, it cannot be denied that their
relationship has already been ruptured in that respondents
are no longer willing to be reinstated anymore. Under the
circumstances, the Court finds that the grant of separation
pay as a form of financial assistance is deemed equitable.
As a measure of social justice, the award of separation
pay/financial assistance has been upheld in some
cases40 even if there is no finding of illegal dismissal. The
Court, in Eastern Shipping Lines, Inc. v. Sedan,41 had this to
say:
x x x We are not unmindful of the rule that financial
assistance is allowed only in instances where the employee is
validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Neither are we
unmindful of this Court's pronouncements in Arc-Men Food
Industries Corporation v. NLRC, and Lemery Savings and
Loan Bank v. NLRC, where the Court ruled that when there is
no dismissal to speak of, an award of financial assistance is
not in order.
In a Manifestation42 submitted before the CA, Expedition
expressed willingness to extend gratuitous assistance to
respondents and to pay them the amounts equivalent to the
separation pay awarded to each respondent in the April 30,
2015 NLRC Resolution. In view of this and taking into
account respondents' long years of service ranging from four
to 15 years, the Court finds that the grant of separation pay
at the rate of one-half (½) month's salary for every year of
service, as adjudged in the April 30, 2015 Resolution of the
NLRC, is proper.
WHEREFORE, the Petition for Review
on Certiorari is PARTLY GRANTED. The assailed Decision
dated March 31, 2016 and Resolution dated December 9,
2016 of the Court of Appeals in CA-G.R. SP No. 142007
are AFFIRMED with MODIFICATION that the awards of
reinstatement, back wages, attorney's fees and legal interest
are DELETED there being no illegal dismissal. The award of
separation pay, as a form of financial assistance, in the
National Labor Relations Commission's Resolution dated April
30, 2015 is REINSTATED.
SO ORDERED.

But we must stress that this Court did allow, in several

instances, the grant of financial assistance. In the words of
Justice Sabino de Leon, Jr., now deceased, financial
assistance may be allowed as a measure of social justice
[under] exceptional circumstances, and as an equitable
concession. The instant case equally calls for balancing the
interests of the employer with those of the worker, if only to
approximate what Justice Laurel calls justice in its secular
sense.

THIRD DIVISION
[G.R. NO. 157214 : June 7, 2005]
PHILIPPINE GLOBAL COMMUNICATIONS,
INC., Petitioner, v. RICARDO DE VERA, Respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a Petition for Review
on Certiorari from the 12 September 2002 Decision1 and the
13 February 2003 Resolution2 of the Court of Appeals in CA-
G.R. SP No. 65178, upholding the finding of illegal dismissal
by the National Labor Relations Commission against
petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom),
is a corporation engaged in the business of communication
services and allied activities, while respondent Ricardo De
Vera is a physician by profession whom petitioner enlisted to
attend to the medical needs of its employees. At the crux of
the controversy is Dr. De Vera's status vis a vis petitioner
when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated
15 May 1981,3 offered his services to the petitioner, therein
proposing his plan of works required of a practitioner in
industrial medicine, to include the following:
1. Application of preventive medicine including periodic
check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a
total of five (5) hours daily for consultation services to
employees;
3. Management and treatment of employees that may
necessitate hospitalization including emergency cases and
accidents;
4. Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
referred which are medical in nature.
The parties agreed and formalized respondent's proposal in a
document denominated as RETAINERSHIP
CONTRACT4 which will be for a period of one year subject to
renewal, it being made clear therein that respondent will
cover "the retainership the Company previously had with Dr.
K. Eulau" and that respondent's "retainer fee" will be at
P4,000.00 a month. Said contract was renewed yearly.5 The
retainership arrangement went on from 1981 to 1994 with
changes in the retainer's fee. However, for the years 1995
and 1996, renewal of the contract was only made verbally.
The turning point in the parties' relationship surfaced in
December 1996 when Philcom, thru a letter6 bearing on the
subject boldly written as "TERMINATION - RETAINERSHIP
CONTRACT", informed De Vera of its decision to discontinue
the latter's "retainer's contract with the Company effective at
the close of business hours of December 31, 1996" because
management has decided that it would be more practical to
provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal
dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by
Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was
designated as a "company physician on retainer basis" for
reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws,
he did not give much attention to the designation as anyway
he worked on a full-time basis and was paid a basic monthly
salary plus fringe benefits, like any other regular employees
of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C.
Reyes came out with a decision7 dismissing De Vera's
complaint for lack of merit, on the rationale that as a
"retained physician" under a valid contract mutually agreed
upon by the parties, De Vera was an "independent
contractor" and that he "was not dismissed but rather his
contract with [PHILCOM] ended when said contract was not
renewed after December 31, 1996".
On De Vera's appeal to the NLRC, the latter, in a
decision8 dated 23 October 2000, reversed (the word used is
"modified") that of the Labor Arbiter, on a finding that De
Vera is Philcom's "regular employee" and accordingly
directed the company to reinstate him to his former position
without loss of seniority rights and privileges and with full
backwages from the date of his dismissal until actual
reinstatement. We quote the dispositive portion of the
decision:
WHEREFORE, the assailed decision is modified in that
respondent is ordered to reinstate complainant to his former
position without loss of seniority rights and privileges with
full backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 =
39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
13th Month Pay:
b) 145,848.75
1/12 of P1,750,185.00
Travelling allowance:
c) 39,330.00
P1,000.00 x 39.33 mos.
GRAND TOTAL P1,935,363.75
The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by
the NLRC in its order of 27 February 2001,9 Philcom then
went to the Court of Appeals on a Petition for Certiorari,
thereat docketed as CA-G.R. SP No. 65178, imputing grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC when it reversed the
findings of the labor arbiter and awarded thirteenth month
pay and traveling allowance to De Vera even as such award
had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a
decision,10 modifying that of the NLRC by deleting the award
of traveling allowance, and ordering payment of separation
pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment
of public respondent, dated 23 October 2000, is MODIFIED.
The award of traveling allowance is deleted as the same is
hereby DELETED. Instead of reinstatement, private
respondent shall be paid separation pay computed at one (1)
month salary for every year of service computed from the
time private respondent commenced his employment in 1981
up to the actual payment of the backwages and separation
pay. The awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was
denied by the appellate court in its resolution of 13 February
2003.11
Hence, Philcom's present recourse on its main submission
that -
THE COURT OF APPEALS ERRED IN SUSTAINING THE
DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION AND RENDERING THE QUESTIONED DECISION
AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH
THE FACTS AND APPLICABLE LAWS AND JURISPRUDENCE
WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING
AGREEMENTS FROM THE EMPLOYER-EMPLOYEE
RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law
may be reviewed by this Court in decisions rendered by the
Court of Appeals. There are instances, however, where the
Court departs from this rule and reviews findings of fact so
that substantial justice may be served. The exceptional
instances are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely
on speculation, surmise and conjecture; (2) the inference
made is manifestly mistaken; (3) there is grave abuse of
discretion; (4) the judgment is based on a misapprehension
of facts; (5) the findings of fact are conflicting; (6) the Court
of Appeals went beyond the issues of the case and its
findings are contrary to the admissions of both appellant and
appellees; (7) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (8) said findings of facts
are conclusions without citation of specific evidence on which
they are based; (9) the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not disputed
by the respondents; and (10) the findings of fact of the Court
of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record."12
As we see it, the parties' respective submissions revolve on
the primordial issue of whether an employer-employee
relationship exists between petitioner and respondent, the
existence of which is, in itself, a question of fact13 well within
the province of the NLRC. Nonetheless, given the reality that
the NLRC's findings are at odds with those of the labor
arbiter, the Court, consistent with its ruling in Jimenez v.
National Labor Relations Commission,14 is constrained to look
deeper into the attendant circumstances obtaining in this
case, as appearing on record.
In a long line of decisions,15 the Court, in determining the
existence of an employer-employee relationship, 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 employee's conduct, or the so-called "control
test", considered to be the most important element.
Applying the four-fold test to this case, we initially find that it
was respondent himself who sets the parameters of what his
duties would be in offering his services to petitioner. This is
borne by no less than his 15 May 1981 letter16 which, in full,
reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company
physician with your corporation if you deemed it necessary. I
have the necessary qualifications, training and experience
required by such position and I am confident that I can serve
the best interests of your employees, medically.
My plan of works and targets shall cover the duties and
responsibilities required of a practitioner in industrial
medicine which includes the following:
1. Application of preventive medicine including periodic
check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a
total of five (5) hours daily for consultation services to
employees;
3. Management and treatment of employees that may
necessitate hospitalization including emergency cases and
accidents;
4. Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
referred which are medical in nature.
On the subject of compensation for the services that I
propose to render to the corporation, you may state an offer
based on your belief that I can very well qualify for the job
having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may
extend on this matter and hoping that it will merit
acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis
of the labor arbiter's finding that there existed no employer-
employee relationship between petitioner and respondent, in
addition to the following factual settings:
The fact that the complainant was not considered an
employee was recognized by the complainant himself in a
signed letter to the respondent dated April 21, 1982 attached
as Annex G to the respondent's Reply and Rejoinder. Quoting
the pertinent portion of said letter:
'To carry out your memo effectively and to provide a
systematic and workable time schedule which will serve the
best interests of both the present and absent employee, may
I propose an extended two-hour service (1:00-3:00 P.M.)
during which period I can devote ample time to both groups
depending upon the urgency of the situation. I shall readjust
my private schedule to be available for the herein proposed
extended hours, should you consider this proposal.
As regards compensation for the additional time and services
that I shall render to the employees, it is dependent on your
evaluation of the merit of my proposal and your confidence
on my ability to carry out efficiently said proposal.'
The tenor of this letter indicates that the complainant was
proposing to extend his time with the respondent and
seeking additional compensation for said extension. This
shows that the respondent PHILCOM did not have control
over the schedule of the complainant as it [is] the
complainant who is proposing his own schedule and asking to
be paid for the same. This is proof that the complainant
understood that his relationship with the respondent
PHILCOM was a retained physician and not as an employee.
If he were an employee he could not negotiate as to his
hours of work.
The complainant is a Doctor of Medicine, and presumably, a
well-educated person. Yet, the complainant, in his position
paper, is claiming that he is not conversant with the law and
did not give much attention to his job title - on a 'retainer
basis'. But the same complainant admits in his affidavit that
his service for the respondent was covered by a retainership
contract [which] was renewed every year from 1982 to
1994. Upon reading the contract dated September 6, 1982,
signed by the complainant himself (Annex 'C' of
Respondent's Position Paper), it clearly states that is a
retainership contract. The retainer fee is indicated thereon
and the duration of the contract for one year is also clearly
indicated in paragraph 5 of the Retainership Contract. The
complainant cannot claim that he was unaware that the
'contract' was good only for one year, as he signed the same
without any objections. The complainant also accepted its
renewal every year thereafter until 1994. As a literate person
and educated person, the complainant cannot claim that he
does not know what contract he signed and that it was
renewed on a year to year basis.17
The labor arbiter added the indicia, not disputed by
respondent, that from the time he started to work with
petitioner, he never was included in its payroll; was never
deducted any contribution for remittance to the Social
Security System (SSS); and was in fact subjected by
petitioner to the ten (10%) percent withholding tax for his
professional fee, in accordance with the National Internal
Revenue Code, matters which are simply inconsistent with an
employer-employee relationship. In the precise words of the
labor arbiter:
"xxx xxx xxx After more than ten years of services to
PHILCOM, the complainant would have noticed that no SSS
deductions were made on his remuneration or that the
respondent was deducting the 10% tax for his fees and he
surely would have complained about them if he had
considered himself an employee of PHILCOM. But he never
raised those issues. An ordinary employee would consider
the SSS payments important and thus make sure they would
be paid. The complainant never bothered to ask the
respondent to remit his SSS contributions. This clearly shows
that the complainant never considered himself an employee
of PHILCOM and thus, respondent need not remit anything to
the SSS in favor of the complainant."18
Clearly, the elements of an employer-employee relationship
are wanting in this case. We may add that the records are
replete with evidence showing that respondent had to bill
petitioner for his monthly professional fees.19 It simply runs
against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his
salary.
We note, too, that the power to terminate the parties'
relationship was mutually vested on both. Either may
terminate the arrangement at will, with or without cause.20
Finally, remarkably absent from the parties' arrangement is
the element of control, whereby the employer has reserved
the right to control the employee not only as to the result of
the work done but also as to the means and methods by
which the same is to be accomplished.21
Here, petitioner had no control over the means and methods
by which respondent went about performing his work at the
company premises. He could even embark in the private
practice of his profession, not to mention the fact that
respondent's work hours and the additional compensation
therefor were negotiated upon by the parties.22 In fine, the
parties themselves practically agreed on every terms and
conditions of respondent's engagement, which thereby
negates the element of control in their relationship. For sure,
respondent has never cited even a single instance when
petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record,
both the NLRC and the Court of Appeals ruled that
respondent is petitioner's regular employee at the time of his
separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent's
written 'retainer contract' was renewed annually from 1981
to 1994 and the alleged 'renewal' for 1995 and 1996, when it
was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
'The provisions of written agreement to the
contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be
deemed to be regular where the employee has been engaged
to perform in the usual business or trade of the employer,
except where the employment has been fixed for a specific
project or undertaking the completion or termination of
which has been determined at the time of the engagement of
the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration
of the season.'
An employment shall be deemed to be casual if it is
not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one (1)
year of service, whether such is continuous or
broken, shall be considered a regular with respect to
the activity in which he is employed and his employment
shall continue while such activity exists.'
Parenthetically, the position of company physician, in the
case of petitioner, is usually necessary and desirable because
the need for medical attention of employees cannot be
foreseen, hence, it is necessary to have a physician at hand.
In fact, the importance and desirability of a physician in a
company premises is recognized by Art. 157 of the Labor
Code, which requires the presence of a physician depending
on the number of employees and in the case at bench, in
petitioner's case, as found by public respondent, petitioner
employs more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made
therein clear that the provisions of a written agreement to
the contrary notwithstanding or the existence of a mere oral
agreement, if the employee is engaged in the usual business
or trade of the employer, more so, that he rendered service
for at least one year, such employee shall be considered as
a regular employee. Private respondent herein has been
with petitioner since 1981 and his employment was not for a
specific project or undertaking, the period of which was pre-
determined and neither the work or service of private
respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate court's premise that regular employees are
those who perform activities which are desirable and
necessary for the business of the employer is not
determinative in this case. For, we take it that any
agreement may provide that one party shall render services
for and in behalf of another, no matter how necessary for the
latter's business, even without being hired as an
employee. This set-up is precisely true in the case of an
independent contractorship as well as in an agency
agreement. Indeed, Article 280 of the Labor Code, quoted by
the appellate court, is not the yardstick for determining the
existence of an employment relationship. As it is, the
provision merely distinguishes between two (2) kinds of
employees, i.e., regular and casual. It does not apply where,
as here, the very existence of an employment relationship is
in dispute.23
Buttressing his contention that he is a regular employee of
petitioner, respondent invokes Article 157 of the Labor Code,
and argues that he satisfies all the requirements thereunder.
The provision relied upon reads:
ART. 157. Emergency medical and dental services. - It shall
be the duty of every employer to furnish his employees in
any locality with free medical and dental attendance and
facilities consisting of:
(a) The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not
maintain hazardous workplaces, in which case the services of
a graduate first-aider shall be provided for the protection of
the workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations
the services that shall be required where the number of
employees does not exceed fifty (50) and shall determine by
appropriate order hazardous workplaces for purposes of this
Article;
(b) The services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not
more than three hundred (300); andcralawlibrary
(c) The services of a full-time physician, dentist and full-time
registered nurse as well as a dental clinic, and an infirmary
or emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees
exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage
the services of a physician or dentist who cannot stay in the
premises of the establishment for at least two (2) hours, in
the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on full-
time basis. Where the undertaking is nonhazardous in
nature, the physician and dentist may be engaged on
retained basis, subject to such regulations as the Secretary
of Labor may prescribe to insure immediate availability of
medical and dental treatment and attendance in case of
emergency.
Had only respondent read carefully the very statutory
provision invoked by him, he would have noticed that in non-
hazardous workplaces, the employer may engage the
services of a physician "on retained basis." As correctly
observed by the petitioner, while it is true that the provision
requires employers to engage the services of medical
practitioners in certain establishments depending on the
number of their employees, nothing is there in the law which
says that medical practitioners so engaged be actually hired
as employees,24 adding that the law, as written, only
requires the employer "to retain", not employ, a part-time
physician who needed to stay in the premises of the non-
hazardous workplace for two (2) hours.25
Respondent takes no issue on the fact that petitioner's
business of telecommunications is not hazardous in nature.
As such, what applies here is the last paragraph of Article
157 which, to stress, provides that the employer may engage
the services of a physician and dentist "on retained basis",
subject to such regulations as the Secretary of Labor may
prescribe. The successive "retainership" agreements of the
parties definitely hue to the very statutory provision relied
upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts
may not construe a statute that is free from doubt. Where
the law is clear and unambiguous, it must be taken to mean
exactly what it says, and courts have no choice but to see to
it that the mandate is obeyed.26 As it is, Article 157 of the
Labor Code clearly and unequivocally allows employers in
non-hazardous establishments to engage "on retained basis"
the service of a dentist or physician. Nowhere does the law
provide that the physician or dentist so engaged thereby
becomes a regular employee. The very phrase that they may
be engaged "on retained basis", revolts against the idea that
this engagement gives rise to an employer-employee
relationship.

With the recognition of the fact that petitioner consistently

engaged the services of respondent on a retainer basis, as
shown by their various "retainership contracts", so can
petitioner put an end, with or without cause, to their
retainership agreement as therein provided.27

We note, however, that even as the contracts entered into

by the parties invariably provide for a 60-day notice
requirement prior to termination, the same was not complied
with by petitioner when it terminated on 17 December 1996
the verbally-renewed retainership agreement, effective at
the close of business hours of 31 December 1996.

Be that as it may, the record shows, and this is admitted by

both parties,28 that execution of the NLRC decision had
already been made at the NLRC despite the pendency of the
present recourse. For sure, accounts of petitioner had
already been garnished and released to respondent despite
the previous Status Quo Order29 issued by this Court. To all
intents and purposes, therefore, the 60-day notice
requirement has become moot and academic if not waived
by the respondent himself.

WHEREFORE, the petition is GRANTED and the challenged

decision of the Court of Appeals REVERSED and SET ASIDE.
The 21 December 1998 decision of the labor arbiter is
REINSTATED.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 109095-109107 February 23, 1995
ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR,
FLORENTINO ESTOBIO, MARCELINO MATURAN, FRAEN
BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO,
SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA,
JOSENIANO B. ESPINA, all represented by MARIANO R.
ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL
RESOURCES EXPLORATION (UNRFNRE) represented by its
operations manager, DR. KYRIACOS LOUCA, OSCAR N.
ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT,
Commissioners of National Labor Relations Commission (NLRC),
Fifth Division, Cagayan de Oro City and IRVING PETILLA, Labor
Arbiter of Butuan City, respondents.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of
Court to set aside the Resolution dated January 25, 1993 of the
National Labor Relations Commission (NLRC), Fifth Division,
Cagayan de Oro City.
We dismiss the petition.
I they may only be questioned through certiorari as a special civil action
Petitioners were dismissed from their employment with private
respondent, the United Nations Revolving Fund for Natural Resources
Exploration (UNRFNRE), which is a special fund and subsidiary organ
of the United Nations. The UNRFNRE is involved in a joint project of
the Philippine Government and the United Nations for exploration
work in Dinagat Island.
Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-
00067-91 to 10-03-00078-91 and SRAB 10-07-00159-91 for illegal
dismissal and damages.
In its Motion to Dismiss, private respondent alleged that respondent
Labor Arbiter had no jurisdiction over its personality since it enjoyed
diplomatic immunity pursuant to the 1946 Convention on the
Privileges and Immunities of the United Nations. In support thereof,
private respondent attached a letter from the Department of Foreign
Affairs dated August 26, 1991, which acknowledged its immunity from
suit. The letter confirmed that private respondent, being a special fund
administered by the United Nations, was covered by the 1946
Convention on the Privileges and Immunities of the United Nations of
which the Philippine Government was an original signatory (Rollo, p.
21).
On November 25, 1991, respondent Labor Arbiter issued an order
dismissing the complaints on the ground that private respondent was
protected by diplomatic immunity. The dismissal was based on the
letter of the Foreign Office dated September 10, 1991.
Petitioners' motion for reconsideration was denied. Thus, an appeal
was filed with the NLRC, which affirmed the dismissal of the
complaints in its Resolution dated January 25, 1993.
Petitioners filed the instant petition for certiorari without first seeking a
reconsideration of the NLRC resolution.
II
Article 223 of the Labor Code of the Philippines, as amended,
provides that decisions of the NLRC are final and executory. Thus,
under Rule 65 of the Revised Rules of Court.
Ordinarily, certiorari as a special civil action will not lie unless a motion
for reconsideration is first filed before the respondent tribunal, to allow
it an opportunity to correct its assigned errors (Liberty Insurance
Corporation v. Court of Appeals, 222 SCRA 37 [1993]).
In the case at bench, petitioners' failure to file a motion for
reconsideration is fatal to the instant petition. Moreover, the petition
lacks any explanation for such omission, which may merit its being
considered as falling under the recognized exceptions to the necessity
of filing such motion.
Notwithstanding, we deem it wise to give due course to the petition
because of the implications of the issue in our international relations.
Petitioners argued that the acts of mining exploration and exploitation
are outside the official functions of an international agency protected
by diplomatic immunity. Even assuming that private respondent was
entitled to diplomatic immunity, petitioners insisted that private
respondent waived it when it engaged in exploration work and entered
into a contract of employment with petitioners.
Petitioners, likewise, invoked the constitutional mandate that the State
shall afford full protection to labor and promote full employment and
equality of employment opportunities for all (1987 Constitution, Art.
XIII, Sec. 3).
The Office of the Solicitor General is of the view that private
respondent is covered by the mantle of diplomatic immunity. Private
respondent is a specialized agency of the United Nations. Under
Article 105 of the Charter of the United Nations:
1. The Organization shall enjoy in the territory of its
Members such privileges and immunities as are
necessary for the fulfillment of its purposes.
2. Representatives of the Members of the United
Nations and officials of the Organization shall similarly
enjoy such privileges and immunities as are necessary
for the independent exercise of their functions in
connection with the organization.
Corollary to the cited article is the Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations, to
which the Philippines was a signatory (Vol. 1, Philippine Treaty
Series, p. 621). We quote Sections 4 and 5 of Article III thereof:
Sec. 4. The specialized agencies, their property and
assets, wherever located and by whomsoever held
shall enjoy immunity from every form of legal
process except insofar as in any particular case they
have expressly waived their immunity. It is, however,
understood that no waiver of immunity shall extend to
any measure of execution (Emphasis supplied).
Sec. 5. The premises of the specialized agencies shall
be inviolable. The property and assets of the
specialized agencies, wherever located and by
whomsoever held, shall be immune from search,
requisition, confiscation, expropriation and any other
form of interference, whether by executive,
administrative, judicial or legislative action (Emphasis
supplied).
As a matter of state policy as expressed in the Constitution, the
Philippine Government adopts the generally accepted principles of
international law (1987 Constitution, Art. II, Sec. 2). Being a member
of the United Nations and a party to the Convention on the Privileges
and Immunities of the Specialized Agencies of the United Nations, the
Philippine Government adheres to the doctrine of immunity granted to
the United Nations and its specialized agencies. Both treaties have
the force and effect of law.
In World Health Organization v. Aquino, 48 SCRA 242, (1972), we
had occasion to rule that:
It is a recognized principle of international law and
under our system of separation of powers
that diplomatic immunity is essentially a political
question and courts should refuse to look beyond a
determination by the executive branch of the
government, and where the plea of diplomatic immunity
is recognized and affirmed by the executive branch of
the government as in the case at bar, it is then the duty
of the courts to accept the claim of immunity upon
appropriate suggestion by the principal law officer of
 the government, the Solicitor General or other officer
acting under his direction. Hence, in adherence to the
settled principle that courts may not so exercise their
jurisdiction by seizure and detention of property, as to
embarrass the executive arm of the government in
conducting foreign relations, it is accepted doctrine that
"in such cases the judicial department of (this)
government follows the action of the political branch
and will not embarrass the latter by assuming an
antagonistic jurisdiction (Emphasis supplied).
We recognize the growth of international organizations dedicated to
specific universal endeavors, such as health, agriculture, science and
technology and environment. It is not surprising that their existence
has evolved into the concept of international immunities. The reason
behind the grant of privileges and immunities to international
organizations, its officials and functionaries is to secure them legal
and practical independence in fulfilling their duties (Jenks,
International Immunities 17 [1961]).
Immunity is necessary to assure unimpeded performance of their
functions. The purpose is "to shield the affairs of international
organizations, in accordance with international practice, from political
pressure or control by the host country to the prejudice of member
States of the organization, and to ensure the unhampered
performance of their functions" (International Catholic Migration
Commission v. Calleja, 190 SCRA 130 [1990]).
is a "political question" and such determination by the executive
branch is conclusive on the courts and quasi-judicial agencies (The
Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No. 101949, Dec. 1,
1994; International Catholic Migration Commission v. Calleja, supra).
Our courts can only assume jurisdiction over private respondent if it
expressly waived its immunity, which is not so in the case at bench
(Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, Art. III, Sec. 4).
Private respondent is not engaged in a commercial venture in the
Philippines. Its presence here is by virtue of a joint project entered into
by the Philippine Government and the United Nations for mineral
exploration in Dinagat Island. Its mission is not to exploit our natural
resources and gain pecuniarily thereby but to help improve the quality
of life of the people, including that of petitioners.
This is not to say that petitioner have no recourse. Section 31 of the
Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations states that "each specialized agency
shall make a provision for appropriate modes of settlement of: (a)
disputes arising out of contracts or other disputes of private character
to which the specialized agency is a party."
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

In the International Catholic Migration Commission case, we held that

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

The diplomatic immunity of private respondent was sufficiently

established by the letter of the Department of Foreign Affairs,
recognizing and confirming the immunity of UNRFNRE in accordance
with the 1946 Convention on Privileges and Immunities of the United
Nations where the Philippine Government was a party. The issue
whether an international organization is entitled to diplomatic immunity